312. Memorandum From Secretary of State Rogers to President Nixon 1

SUBJECT

  • Economic Relations with the USSR

The National Security Council in May 1969 decided that Commerce should not issue a license for the sale of a truck foundry to the Soviet Union “in view of overall U.S.-USSR relations.”2 That decision is being cited as a probable basis for holding up approval of a $20-odd million sale to the USSR of gear making equipment by the Gleason Works of Rochester, New York. Moreover, there may be other possibilities for expanding our economic relations with the Soviets which could be affected by a literal reading of this portion of the National Security Council ruling.

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Meanwhile, some new factors have entered into the picture:

  • —The Export Control Act (now the Export Administration Act) was liberalized by the Congress.3 We are now directed to “encourage trade” rather than focus primarily on defense against the communist threat.
  • —The Soviets are showing serious interest in some substantial purchases from the United States.
    a)
    The Gleason organization has a firm contract for the gear making machines and hopes for $75 million more in future orders. (The Soviets, by the way, have given a signed statement that the gear equipment would be used only for peaceful production.)
    b)
    Ford and Chrysler have had feelers from Soviet officials about taking part in the very large planned expansion of Soviet automobile and truck capacity.
    c)
    Cooper-Bessemer, an Ohio manufacturer of valves and compressors, has been in what appear to be serious talks with the Soviets on the development of transmission lines for natural gas from Siberia to Western Russia and Western Europe. The Cooper-Bessemer people talk in terms of an initial $50 million export sale, and there are prospects for cross-licensing of Soviet and American equipment.
  • —Finally, in a different area of economic relations, Pan American tells us that the USSR may be interested in extending our aviation route exchange to give Aeroflot a route to our West Coast in return for a Pan American route east across the USSR to Tokyo or south to South Asia.4 If so, it would be quite a dramatic step, since the normal high political value attached to air routes would be raised by several powers when United States and Soviet commercial aircraft begin flying across the two continental land masses.

We believe that we ought to take a positive view of these prospects.

There is nothing to suggest that we could in fact prevent, or even seriously impede, the Soviets from expanding truck capacity or from building a natural gas pipeline. Our producers presumably have some advantages to offer to the USSR, but there is no absence of other suppliers who would be ready to do the business. The international embargo agreement is not applicable.

If we do not sell, the Soviets will find other sources readily. Moreover, I believe it is worth giving serious consideration at this juncture [Page 810]to the positive impact on our relations with the USSR provided by the opportunity for favorable action on these important trade transactions.

I thus conclude that it is in our interest to reduce controls on our trade with the Soviet Union. Such a positive step, in line with recently expressed Congressional attitudes on East-West trade, would provide tangible benefits to our export interests at a particularly opportune moment and have a favorable impact on our relations with the USSR. It could also have the effect of easing the way for an improvement of our relations with other Eastern European countries, whose Western associations are inevitably a source of apprehension to the Soviets.

Recommendation:

That in light of the Export Administration Act and the prospect of improving trade relations with the Soviet Union you agree to a broader interpretation of the National Security Council decision on East-West Trade Policy (NSDM-15).5

WPR
  1. Source: National Archives, RG 59, S/S Files: Lot 83 D 305, NSDM 15. Secret. Drafted by R. B Wright (E/ITP/EWT) on January 12 and cleared by Dubs and Colbert (EUR/SOV), Lisle (EUR/EE), Hillenbrand (EUR), and Ambassador Beam. Attached but not printed is a January 6 memorandum from Trezise and Hillenbrand to Secretary Rogers informing him of the substance of this memorandum and recommending he find an early opportunity to discuss with the President relaxing the interpretation of NSDM 15.
  2. Reference is to NSDM 15, Document 299.
  3. See Document 311.
  4. In his February 20 Evening Report to the President, Elliot Richardson reported that the Soviet Embassy had delivered an aide-memoire proposing negotiations in late March regarding landing rights in cities such as Washington, Chicago, and San Francisco, and onward flight rights across the United States to third countries. The Soviet Union offered to discuss any questions of interest to the United States “on the basis of reciprocity.” (National Archives, RG 59, S/S Files: Lot 74 D 164, Box 410, President’s Evening Reading Items)
  5. There is no indication of the President’s approval or disapproval, but a February 6 memorandum from Kissinger to the Secretaries of State, Defense, and Commerce reads: “The President has decided that he does not wish to approve the applications for export of Gleason machinery to automotive plants in the USSR.” (Ibid., S/S Files: Lot 83 D 305, NSDM 15) The issue remained active, however, and on September 28 Kissinger again reported the President’s decision in a memorandum to Secretary Stans, which reads: “The President has decided to refuse the application by the Gleason Works for licenses to export 311 gear-making machines to the Soviet Union for truck production.” (Ibid., Nixon Presidential Materials, NSC Files, Subject Files, Box 402, Trade, Volume IV 7-12/71)