319. Action Memorandum From the President’s Assistant for National Security Affairs (Kissinger) to President Nixon 1

SUBJECT

  • Export Controls: Refinery Technology for Romania and Poland

Issue

The Acting Secretary of Commerce has requested permission to issue export licenses for the sale of petroleum refining technology and engineering services to Romania and Poland (Tab A).2 State and Dr. DuBridge support his proposal. Defense and Interior oppose.

Romania

The Romanians want a $6 million hydrocracking plant with a capacity of 33,000 barrels per day. We have approved sales of refinery technology to Romania since 1965.

State and Commerce urge approval because:

  • —After your trip, we are obliged to show special economic treatment for Romania.3
  • —The new plant will not increase Romania’s jet fuel capacity by any significant amount, and will therefore not be detrimental to our national security. Dr. DuBridge agrees.

Defense and Interior urge denial because:

  • —The Romanians could produce the products they wish with more conventional and less expensive equipment.
  • —The hydrocracker would allow them to make a fast conversion to jet fuel production in case of a war.
  • —There is no overriding foreign policy reason for approval of the licenses.

Poland

Poland wants a modern catalytic cracker, worth $8 million and similar to equipment which we sold Romania in 1965.

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Commerce and State again urge approval:

  • —Despite its fall from the high levels of 1956 liberalization, Poland is still more open in many respects than the other countries of Eastern Europe.
  • —If Poland does not use our technology, she will erect the same refining capacity with less efficient Russian technology.

Interior and Defense urge denial for the following reasons:

  • —Neither Poland nor the USSR can now duplicate our catalytic cracking process, which is very efficient.
  • —The equipment could turn out products useful to the Communists in case of war.

Conclusions

In the case of Romania, whatever minimal strategic costs might exist seem clearly outweighed by your commitment to economic cooperation. This case is particularly important, since we have so far not been able to do much about implementing the commitment. Denial would set back our Romanian effort significantly.

In the Polish case, the national security aspects are not sufficient to justify a refusal. Our denial would not prohibit Poland from constructing equivalent capacity to turn out precisely the same products; our technology merely allows them to be more efficient. The Poles claim that the USSR is pressing to have Poland buy Soviet rather than U.S. equipment.

The key is the signaling effect. The Poles have made strong pleas for approval, describing the project as an important test case in our relations. It is clear that our decision on the license will be a major signal to them on two levels: (a) U.S. interest in participating in Poland’s new industrialization plans, and (b) our attitude toward overall U.S.-Polish relations. Approval of the license would give a positive signal on both counts. Refusal of the license would be negative on both, particularly if coupled with approval for Romania. Deferral of the decision would be a middle course, which would be read as negative on (a) but leaving (b) essentially open.

As long as we base our relations with Poland largely on its attitude toward Vietnam, which has not changed, I do not believe that approval is justified. They could read approval as a relaxation of our concern about their attitude on Vietnam. At the same time, our relations do not require a flat denial. I would therefore prefer to defer the decision, although in fact the Poles have informed the applicant that unless we approve by August 31 they will seek the equipment elsewhere.

Bill Timmons recommends that, from a Congressional standpoint, both transactions would raise questions and that neither should be [Page 823]approved before the November elections. Timmons believes, however, that there would be less opposition to the Romanian than to the Polish sale. (Delaying our decisions beyond the election is not an option, because both countries have informed us that they must proceed on their refinery projects—soon whether or not with U.S. equipment.) Peter Flanigan concurs in my recommendations.

Recommendations:

1. That you approve the application for export of technology and engineering services for the construction of a hydrocracking plant in Romania (endorsed by State, Commerce, and Dr. DuBridge—opposed by Defense, Interior and Bill Timmons).

Approve4

Disapprove, prefer to deny the application

2. That you defer a decision on the application for export of technology and engineering services for the construction of a catalytic cracking plant in Poland (thus satisfying Defense, Interior, and Timmons—but not State, Commerce, and Dr. DuBridge, who support approval now).

Approve5

Disapprove, prefer to deny application altogether

Disapprove, prefer to approve application

  1. Source: National Archives, Nixon Presidential Materials, NSC Files, Agency Files, Box 213, Commerce, Volume I. Confidential. Attached to a September 2 memorandum to the Secretary of Commerce reporting the President’s decisions.
  2. Not printed. Acting Secretary Siciliano’s memorandum to Kissinger is dated July 8. On August 14 Under Secretary Siciliano sent a follow-up memorandum to Kissinger with additional argumentation in support of the Poland license application. (Ibid.)
  3. President traveled to Romania August 2-3, 1969.
  4. The President initialed this option.
  5. The President initialed this option, and below the options is the handwritten date of August 26.