364. Draft Memorandum for President Nixon Prepared in the Department of Defense1

SUBJECT

  • French Desire to Sell Transistor Production Line to Poland

We are at the point where we must take a position for or against a proposal by the French to sell to Poland a silicon transistor production line. The contract would include certain machines as well as transistor production technology (for general purpose transistors used in communications equipment) that are subject to the international strategic embargo maintained by the fifteen countries (NATO plus Japan) in the Coordinating Committee (COCOM). The rules of the COCOM permit exceptions to the embargo provided all the member countries agree.

The French submitted such an exception request on September 152 but in the COCOM discussions thus far the United States has reserved [Page 914]its position, as has the United Kingdom. The Netherlands has been the only country to file an objection, on the grounds that it is inconsistent to permit exports of machinery to produce transistors unless the transistors themselves are removed from the embargo list. The Dutch, whose motivations are probably largely commercial, have indicated that their final position would be strongly influenced by the United States position. The case is to be discussed again in COCOM on October 14.

The French have made it clear from the outset that they attach great political and economic importance to this project. While the transistor contract is valued at only $2 million, the French state that it is part of a larger French/Polish industrial venture which is still being negotiated totaling some $50 million. Foreign Minister Shumann described the case and sought United States support during Mr. Kissinger’s conversation with him in August.3 He referred to it again when he was in Washington at the end of September.4 Ambassador Lucet here and the Foreign Ministry in Paris have continuously kept the Foreign Minister’s interest before us and have pressed us to take a favorable position in Tuesday’s meeting.

Early in September a French Delegation came to Washington to discuss the project in technical detail.5 (It should be noted that this is the second time this year that the French have attempted to get the US outside of COCOM to approve a contract to ship embargoed technology to Eastern Europe. The first case was for a production facility to make the French IRIS-50 computer in Romania.) Our first objective in agreeing to these discussions was to persuade the French to submit their case to COCOM, because their initial intention seemed to be to proceed without such consultation. They agreed to submit their case and we agreed to give a prompt response.

The following considerations are pertinent:

a.
The equipment and technology in this case as well as their product are currently covered by COCOM embargo. The U.S., and other PC’s, have consistently denied many applications for exports of such machinery, technology, and the products in the past. For example, the UK, without coming to COCOM has turned down a proposal from a UK company similar to the French request and has a similar proposal now before UK licensing authorities.
b.
U.S. Intelligence estimates state that, while there has been a limited number of silicon planar transistors listed in Bloc catalogs, there is [Page 915]no evidence that they have sufficiently mastered the production process to satisfy their basic strategic needs. The U.S. information was detailed during the course of the recently finished list review. The continuing stream of COCOM exceptions cases for silicon planar devices attests to the shortage.
c.
The basic planar production process used (epitaxy, successive maskings and diffusions, wafer probing, bonding, etc.) is that now employed in strategic transistor and integrated circuit production.
d.
The production facility in this case, even with the masks being sent by France, could be used to produce military grade transistors of types currently being used in U.S. military equipment production. In view of Bloc deficiencies in this area there is reason to believe they might well be so used.
e.
Despite a French assertion to the contrary, the equipment and technology in this case, while insufficient by themselves to produce integrated circuits, would all be usable for such production. Equally important, the acquisition of skills in planar transistor production is a necessary prerequisite for integrated circuit production, and the additional equipment for such production would be minimal.
f.
The French have suggested that since they would only supply three basic masks they would retain some control over the products produced. As noted before the masks can produce excellent military grade transistors. The French, during the Washington discussions, also said the USSR, Hungary, and Czechoslovakia have a mask-making capability. While mask making is not an easy task, it is basically a high precision adaptation of photolithographic techniques. It is a problem that can be more easily solved than that represented by the epitaxy, diffusion, and bonding technology and equipment which are to be ex-ported.
g.
The French, during Washington bilateral discussions, did not supply technical specifications of the equipment but have recently supplied limited data on the diffusion furnace and the mask aligners. Equipment technical specifications are of little consequence, in any event, since equipment which is adequate for the production of the specified products would be usable for the production of a variety of strategic devices.
h.
The French Delegation emphasized that the equipment to be exported was limited to manually operated devices. Only one U.S. company employs a significant degree of automation in transistor production and the quality of the transistors produced is degraded by the changes required to effect this automation.
i.
CIA says that approval of this case would be of major importance not only to Poland but also to the USSR.

[Page 916]

There are three possible choices as set forth below with considerations pro and con.

Option 1

Express no objection to the exception request in COCOM.

Advantages

1.
Would be responsive to a French request made at high levels concerning a project to which they attach major economic and political importance.
2.
Would be helpful in developing closer relations with the present French Government, particularly since this is likely to be viewed by the French as the first significant bilateral issue to be dealt with by the present Governments in both countries.
3.
Would increase Western relations with Poland.

Disadvantages

1.
Would incur an important security risk since the technology and machinery would enhance Polish and probably Soviet capability to produce silicon transistors and integrated circuits.
2.
Would probably put an end to the multilateral embargo in COCOM of the transistors in question and would make more difficult a continued embargo on related manufacturing equipment.
3.
Would penalize the UK for its adherence to COCOM rules and regulations.
4.
Would undermine the whole COCOM structure since it could be interpreted as demonstrating a lack of U.S. concern for COCOM regulations.

Option 2

Express no objection provided certain additional safeguards are met.

We might say that we will not object provided the French add such additional safeguards as: no copying, transshipment, or re-export of machinery; no improvements in the machinery to be provided by the French without COCOM approval; only French production masks will be used; French would discontinue technical assistance when a certain quality standard is achieved.

Advantages

1.
Would reduce risk of diversion or manufacture of more advanced semi-conductors.
2.
Would provide precedent for very strict conditions relating to any future sale of production technology to Eastern Europe.

Disadvantages

1. Would be very disappointing and possibly unacceptable to the French since it would require re-negotiation and major changes in the [Page 917]contract terms (which were agreed more that a year ago and suspended until now because of the invasion of Czechoslovakia).

Option 3

Register objection to COCOM to French request.

Advantages

1.
Would avoid a significant security risk if in fact French did not proceed with sale anyway.
2.
Would continue embargo on silicon transistors and technology and would not provide assistance to Eastern Europe for production integrated circuits.
3.
Would strengthen COCOM by reassuring all members that the U.S. will not abet a flagrant disregard by any COCOM member of security factors in pursuit of commercial advantage.

Disadvantages

1.
Would be resented by the French Government and embarrass personally Foreign Minister Schumann.
2.
If French should complete the transaction despite disapproval by COCOM, COCOM’s value as a facility for coordinating a Western embargo policy would be somewhat undermined.

Recommendation

The Department of Defense recommends Option 3, on the basis that a) the security factors are overriding, b) the effect on COCOM will be to strengthen it and, c) the French method used both in this case and the earlier IRIS-50 case of attempting to evade COCOM rules by presenting a contract fait accompli should be given no further encouragement.

  1. Source: National Archives, Nixon Presidential Materials, NSC Files, Country Files-Europe, Box 675, France, Volume III Jan 69-10/31/69. Secret.
  2. See Document 363.
  3. See Document 360 and footnote 2 thereto.
  4. Possibly a reference to the meeting Kissinger agreed to on August 27; see footnote 5, Document 362.
  5. See Document 363.