Foreign Relations of the United States, 1969–1976, Volume IV, Foreign Assistance, International Development, Trade Policies, 1969–1972

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

Washington, June 2, 1971.

SUBJECT

• French Proposal to Manufacture Transistors in Poland

You decided in March that the U.S. would oppose in COCOM a $20-million French proposal for the manufacture of integrated circuits in Poland.² This was the second stage of the $100 million French/Polish electronic transaction. You had approved the first stage for transistors in 1969.³

Because of our opposition, the French have now pared the second stage in half and requested that we approve only that part relating to the production of transistors and diodes, thus eliminating the manufacturing capacity for integrated circuits. State recommends (at Tab A)⁴ that you approve the new proposal. Commerce and Defense (at Tabs B and C)⁵ recommend that you deny.

Arguments for approval are:

• —Ambassador Lucet, Foreign Minister Schumann, Finance Minister Giscard, and other officials in Paris have indicated that France was deeply disappointed at your previous refusal and that it attaches great importance to approval of this version. Refusal would be viewed as an unfriendly act, but acceptance would soften the blow of Export-Import participation in the El Paso project.⁶
• —The quantity of transistors to be produced is consistent with Polish plans for expansion of their production of civilian communications equipment.
• —The French have previously indicated that if we block the proposal in COCOM, they are likely to go ahead anyway. Schumann has now informed me that he has authorized the signature of the contract.
• —By eliminating the integrated circuit manufacturing aspects and concentrating on the manufacture of transistors and diodes, the transaction is less objectionable from a security viewpoint. Though the French admit that the remaining part could, with some changes, be used to manufacture integrated circuits, they claim that Poland is technologically too backward to do this without Western help.

The Commerce and Defense arguments against the transaction are:

• —This project would significantly increase Polish production of semi-conductors, some of which would be of sufficiently high quality to be useful for the military or for high speed computers.
• —Poland will be able to make the changes that would allow this technology to produce integrated circuits and strategic-type transistors, particularly since there is some evidence that the French are not being completely frank with us on this project and are willing to supply missing elements outside the COCOM controls.
• —Even if the whole production could be used in civilian production, it is obvious that the military will be able to skim off whatever it needs.
• —Approval of this project would threaten the maintenance of effective COCOM controls on transistors and integrated circuits. Specifically it would make it more difficult to resist approval of other similar projects such as a smaller Italo/Romanian transaction and an RCA proposal one-fifteenth the Polish size, to manufacture transistors in Romania. (I do not consider this wholly negative argument because of our special relations with Romania, and Pete Peterson believes that we should approve the RCA case, along with the French one.)

The current reduced French proposal represents less of a security risk than the one you refused in March, though it is not clear by how much. Your decision last time was partially based on a lack of French cooperation with us on Southeastern Asian problems. President Pompidou has not repeated that mistake.⁷ On balance, I believe that the consequences of a refusal on our relations with France outweighs the economic security considerations.

Pete Peterson also recommends approval of the project, but he believes that approval should be contingent upon our concurrent approval of the RCA Romanian proposal.⁸ Though we do not have the case formally for White House decision, the agencies agree in the attached papers that approval of the Polish case would make it very difficult to refuse the much smaller RCA/Romanian case. Approval of the RCA application would indicate an interest in U.S. exports and fit in with our economic cooperation with Romania.

Recommendations

1. That you approve the reduced French proposal for the manufacture of transistors and diodes in Poland.

2. That you also accept Pete Peterson’s suggestion that we approve at the same time the RCA/Romanian proposal.⁹

1. Source: National Archives, Nixon Presidential Materials, NSC Files, Country Files-Europe, Box 678, France, Volume VIII 4/71-12/71. Secret. A stamped notation indicates the President saw the memorandum. It is attached to a June 5 memorandum from Kissinger to Eliot informing him that the President had decided to approve in COCOM the modified French proposal for the manufacture of transistors in Poland, and that approval of the French/Polish case also meant the United States should accept a similar RCA proposal for Romania. A draft of the memorandum printed here was proposed to Kissinger in a May 28 memorandum from Johnston and Sonnenfeldt. (Ibid.) Sonnenfeldt outlined the genesis and tactics of the revised French proposal in an April 9 memorandum to Kissinger. (Ibid.)
2. See footnote 1, Document 371.
3. Document 365.
4. Tab A, a May 19 memorandum from Eliot to Kissinger, is not printed.
5. Tab B, a May 26 memorandum from Acting Assistant Secretary of Commerce Harold B. Scott to Davis, is not printed. Tab C, the Defense Department paper, was not found.
6. The El Paso project was a liquefied natural gas project in Algeria.
7. The May 28 memorandum from Johnston and Sonnenfeldt (see footnote 1 above) noted that “our previous problem over Pompidou’s Vietnam statement has faded.”
8. Peterson’s recommendations are in a May 28 memorandum to Kissinger. Kissinger initialed his approval for the French/Polish and RCA/Romanian proposals. (National Archives, Nixon Presidential Materials, NSC Files, Country Files-Europe, Box 678, France, Volume VIII 4/71-12/71)
9. The President initialed the Approve options for both recommendations.