166. Memorandum From the Assistant Secretary of the Treasury for International Affairs (Petty) to Secretary of the Treasury Connally1


  • Expropriation Policy

Henry Kissinger has forwarded his memo to the President setting forth the options on expropriation policy.2 The paper contains two basic options:

The Treasury option—There would be a presumption of a cut off of assistance to countries that expropriate without compensation unless it was decided that the country was taking reasonable steps to provide compensation or that there were major economic, political, or military factors which require continuance of benefits.
The State Department option—This would assume continuance of benefits to an expropriating country unless at some subsequent time it was decided to cut them off.

Moreover we understand that the Kissinger memo contains three options directed exclusively towards multilateral institutions:

  • Option 1—always vote no in the case of loans to countries that expropriate without compensation;
  • Option 2—decide on a case-by-case basis; and
  • Option 3—always vote yes.3

In addition, the President is requested to decide whether the Secretary of State should be required to concur in all decisions on voting no in multilateral lending.

The multilateral options and the option on the Secretary of State’s concurrence went to the President over our strong protest. We argued that the multilateral options were not needed since we should follow the same policy multilaterally as we would bilaterally and that there should be no changes in the institutional arrangements for instructing the U.S. Executive Directors to the multilateral institutions.

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You may wish to contact the President on this matter. Attached is a memorandum which you could send to the President4 or use as talking points in your conversation with him.

There are three procedural points which should be emphasized:

That the President should make a policy statement. This is an essential feature of achieving a framework for deterrence.
That decision making should be in the CIEP framework with operations carried out either by utilizing the NAC as an arm of the CIEP or through a CIEP-chaired interagency group; and
That there should be no change, formal or informal, in the arrangements for instructing the U.S. Executive Directors to the multilateral financial institutions.

  1. Source: Washington National Records Center, Department of the Treasury, Files of Under Secretary Volcker: FRC 56 79 A 15, NAC. Confidential. Drafted by Bradfield and cleared by Hennessy. Sent through Under Secretary Walker, who wrote at the top of the memorandum: “JBC—I strongly concur with this cover memo and urge you to go directly to Pres & [illegible].” This memorandum was a covering memorandum for a copy of Document 167.
  2. Not found.
  3. No other reference to this Option 3 has been found.
  4. Document 167.