414. Letter From Secretary of the Treasury Kennedy to the Director of the Office of Emergency Preparedness (Lincoln)1

Dear General Lincoln:

By way of confirmation of our telephone conversation on the subject,2 9,000,000 pounds of nickel held in the Bureau of the Mint inventory will be released to GSA for disposal at the direction of the Office of Emergency Preparedness. Consumption, I understand, will be defense-related. Because this nickel is held as a monetary asset on the books of the Treasury, it will be necessary to reimburse the Coinage Metal Fund of the Bureau of the Mint.

Your letter of October 27, 1969, requested comments on a proposed Memorandum to the President on measures which could be taken to alleviate the existing nickel shortage. In light of the decision to release some nickel at this time, I understand that you do not intend to transmit this Memorandum to the President.3

Even though the Memorandum will not be transmitted, I wish to comment upon its content. In discussing the Mint stockpile, the draft of the Memorandum proceeds assuming that the Mint nickel inventory is adequate for ten years based on the present rate of consumption.

However, the Treasury-sponsored legislation authorizing production of the Eisenhower cupro-nickel dollar has passed the House.

The Senate has passed a bill providing for the minting of a cupro-silver dollar. A conference between the House and Senate will be necessary [Page 1025]to work out the differences, but it would appear that a coinage bill greatly increasing nickel consumption rates will be enacted during this Congress.

Therefore, Treasury must manage its nickel inventory so as fully to allow for and meet such contemplated consumption rate increases.

Accordingly, in light of (1) release of 9,000,000 pounds of nickel at this time and (2) anticipated passage of cupro-nickel coinage legislation, planning projections must be predicated on a three-year supply with current inventory, instead of the ten-year supply related in the Memorandum.

In your letter of October 22, 1969,4 you asked that Treasury make certain changes in its nickel certification arrangements with France. You indicated that the Department of State supports your request that arrangements be made whereby Societe Le Nickel, S.A. will be allowed to export nickel of non-Cuban origin to the United States.

While we share your concern with respect to the existing nickel shortages, we seriously doubt the wisdom of this proposal.

The Department of State, in a letter dated October 17, 1969,5 makes clear that its recommendation is limited to nickel of non-Cuban origin and indicates that anything further would immediately confront us with much broader problems with respect to our policy towards Cuba.

However, even the limited change proposed by the Department of State would raise these same problems, in our view. The basic thrust of the French certification procedure is to permit innocent French steel producers to purchase non-Cuban nickel from SLN and export their nickel-bearing steel products to the United States. At the same time, the procedure precludes SLN itself from marketing any of its French nickel production in the United States. Were it not for this provision, the embargo would be toothless. SLN could readily purchase Cuban nickel, market it in Europe, and sell its non-Cuban nickel in the United States.

If that were permissible, there would be no reason for nickel users in Germany, Austria, Finland, the United Kingdom, or other European countries, to refrain from purchasing Cuban nickel either directly from Cuba or indirectly via SLN, and marketing the product thereof in Europe while maintaining their United States market by use of non-Cuban nickel.

The fact is that our restrictions on SLN’s ability to market its non-Cuban nickel in the United States have successfully deterred those European countries from buying Cuban nickel, and have deterred other nickel consumers (e.g., certain Swedish mills) from doing so. To remove the restrictions on SLN, as now proposed, would vitiate this entire effort.

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In this connection, I want to make clear that the restrictions on SLN as a purchaser of Cuban nickel are equally applicable to the U.S.S.R. which is also a purchaser of Cuban nickel, wherever this can legally be accomplished. According to technical advice furnished to the Treasury, SLN markets nickel oxide, refined nickel, and other nickel products produced from Caledonian ores; markets nickel oxide of Cuban origin; and markets fire refined nickel and nickel products produced from Cuban nickel oxide. Thus, nickel products imported from France may be made either from Cuban or Caledonian materials, and the Treasury therefore embargoes all such SLN products.

On the other hand, we have not embargoed SLN-produced ferro-nickel imported directly from New Caledonia into the United States, because no Cuban nickel exists in the Pacific and it would be impossible to contend that there is any risk of Cuban material entering the United States in this manner.

A parallel situation exists with respect to Russia, and our policy has been applied consistently. Specifically, Russia markets nickel cathodes and nickel salts. We have been informed that it is not presently believed possible for Russia to produce cathode nickel from Cuban material. Accordingly, we have not embargoed Russian cathode nickel under the Regulations, any more than we have embargoed Caledonian ferro-nickel.

On the other hand, we have embargoed nickel sulfate from Russia since this material could readily be produced by Russia from Cuban nickel oxide or Cuban nickel sulfide. Equally, Czechoslovakia markets various forms of nickel which can be produced in Czechoslovakia either from Russian or Cuban materials. We have therefore embargoed all such nickel materials from Czechoslovakia.

Quite apart from the considerations discussed above, which in my view militate against the proposal to change the certification arrangements with France, there is a most practical objection as well. It is my understanding that an approach to SLN would be virtually futile in any event, since SLN has already indicated its output is fully committed elsewhere and it would have little, if any, French nickel available for defense-rated needs in the United States.

I am sending copies of this letter to the Secretaries of State, Commerce and Defense, in view of their interest. I understand the Department of Defense plans to inform you of its views on this subject shortly.

Sincerely,

David M. Kennedy 6
  1. Source: Washington National Records Center, Department of the Treasury, Secretary’s Memos/Correspondence: FRC 56 74 A 7, Classified OEP 1969. Confidential. Drafted by W.L. Dickey on November 6. Forwarded to Kennedy, along with a letter to Congressman Gerald Ford (not found), under cover of a November 6 memorandum from Eugene T. Rossides. Rossides reported that on August 18 Congressman Ford had suggested release of Mint nickel to help meet the needs of domestic industry, and on August 28 Acting Secretary Volcker had informed Ford it was not feasible at that time. The letter to Ford was intended to provide advance clarification of what was being done and to point out that the current action was not inconsistent with Volcker’s letter.
  2. Not further identified.
  3. Attached to Lincoln’s brief letter is a draft memorandum to the President and Kendall’s October 27 memorandum to Lincoln, Document 413. (National Archives, Nixon Presidential Materials, NSC Files, Agency Files, Box 267, OEP Volume I through 11/69) In a November 7 memorandum to Kissinger, Bergsten reported that the preparation of the draft interagency memorandum to the President had helped persuade Treasury to release 9 million pounds of nickel from its coinage stockpile without going to the President, and that this release more than covered defense requirements for November, increasing supplies for the commercial market and easing the shortage caused by the Canadian strike. (Ibid.)
  4. Document 412.
  5. See footnote 3, Document 412.
  6. Printed from a copy that indicates Kennedy signed the original.