164. Memorandum From the President’s Assistant for International Economic Policy (Peterson) to the President’s Assistant for National Security Affairs (Kissinger)1
- U.S. Policy in Cases of Expropriation
I. General U.S. Policy
Of the three options presented in your memorandum,2 my recommendation would be for a combination of Options 1 and 2.
The third option does not strike me as a practical approach since whatever positive impact withholding new benefits can have, the advantage would be defused if the response does not closely follow the expropriation act. Option 2, as stated, does not in my opinion, afford the new, tougher policy approach which is needed for both foreign and domestic consumption, and which we have in fact been following for the past two months. Operationally, it would be more difficult to manage than Option 1 since ad hoc decisions would have to be reached in regard to each expropriation issue and each new commitment before any action were possible.
Option 1, with an appropriate public policy announcement, would signal a tougher U.S. stance in expropriations matters, although in reality, if applied primarily to new loan obligations, it would merely formalize the policy we have recently been following. Since, the presumption of withholding pertains only to new commitments, Option 1 would not entail the rigidity or danger inherent in a policy of automatically suspending existing agreements (although cut-off of the latter is not precluded). Option 1 would, however, provide an effective interim policy pending settlement of an expropriation issue as well as the flexibility to waive the withholding and proceed with further new commitments, if appropriate.
In recommending Option 1, however, I would suggest that the presumption of withholding should be applied only to significant new loan commitments. For minor changes in existing loans, grant assistance and operations of a quasi-commercial nature, the reverse presumption of Option 2 appears more suitable. This need could be [Page 430]accommodated in Option 1 by addition of a de minimus provision with delegation of authority to operating agencies, thus eliminating the time-consuming process of inter-agency review for grant assistance and for minor matters, the withholding of which would represent a petty irritant or more injury to U.S. commercial interests than to those of the expropriating country.3 Obviously the inter-agency group dealing with expropriation cases could decide to reduce or eliminate grant assistance, etc. just as in some circumstances it might decide to proceed with a certain loan. A suggested draft decision memorandum to illustrate this approach is attached.4
2. Multilateral Institutions
Of the three voting options presented, I would recommend the second. However, this should not be followed in isolation from bilateral policy. In general, I think the same presumption should apply to multilateral institutions as recommended for bilateral programs, that is, abstention or negative vote unless the circumstances of the particular loan warrant otherwise.
On both bilateral and multilateral, if there is inter-agency disagreement, review of the case could be considered by my office and, if necessary, the decision be made by the President. At that point, I would send you a copy of whatever was going to the President and seek your counsel and concurrence.
Incidentally, I’d like a guy on the inter-agency group who reviews these cases so I can be kept up to date on impending problems.