445. Action Memorandum From Phil Odeen of the National Security Council Staff to the President’s Assistant for National Security Affairs (Kissinger)1

SUBJECT

  • Disposal of Stockpile Tin

Cap Weinberger (Tab D),2 Peter Flanigan (Tab E),3 and George Lincoln (Tab F)4 have written concerning the President’s ban on the disposal [Page 1089]of tin from the Stockpile in deference to our concern for the stability of the Bolivian Government. They would like to see the ban lifted and sales of tin resumed in order to provide additional budget revenues (about $20 million per year).

Background

In April 1971, in direct response to a plea from the Bolivian Ambassador, the President ordered an extension of a prohibition on disposal of surplus tin.5 He recognized the potential revenue gains from the disposal, but the President assessed that the foreign policy repercussions of such action (in Bolivia in particular) would be adverse to U.S. interests.

The State Department (see Tab G)6 is opposed to lifting the ban on tin sales on the grounds that it would undermine the Banzer Government’s attempt to effect fiscal and monetary reforms, specifically the recent currency devaluation, which is crucial to placing the government and economy on a firmer base. There are already riots in the streets of La Paz and the Banzer Government which is under heavy fire has declared a state of siege. At this juncture in Bolivian economic and political development, it would be unwise to take the considerable political risk of tin disposal for a small revenue gain.

Moreover, the world price of tin is now depressed although tin prices were high during 1970-71. Initiating sales would violate our 1966 understanding with the International Tin Council in which we agreed to cooperate with the Tin Council’s efforts to keep the price of tin from falling below a price floor. The current price is only a little above the floor and initiation of U.S. sales might force Malaysia, Indonesia and Thailand as well as Bolivia to adopt export controls and suffer reduced export earnings. Thus the foreign policy considerations at this time extend well beyond Bolivia.

An Alternative Approach

While this is not the time to initiate sales of our surplus tin in a way that would depress the already weak world market, there may be a way to meet the underlying objective of increasing our budget and balance of payments receipts from tin. Japan is a major consumer of tin and has no official stockpile. Japanese purchase of a part of our stockpile to establish its own stockpile would: [Page 1090]

  • —help moderate Japan’s highly favorable trade balance with us;
  • —increase our budgetary receipts;
  • —give the Japanese some reserve supply of a key commodity (Japan in essence has been relying on our stockpile at no cost to it);
  • —permit Japan to purchase tin from us at a favorable price because the tin price is low at the moment.

Although Bolivia and other producer countries would prefer to have Japan establish a stockpile through purchases on the open market, a transfer from one stockpile to another which has no effect on the market should be acceptable to the producers especially if they understand this is an alternative to U.S. sales on the market.

At our request the State Department has initiated discussions with the Japanese on such a tin purchase (Tab H).7 We have no assurance Japan will agree to establishment of a tin reserve. But initiating these discussions allows you to be somewhat positive in responding to Weinberger, Flanigan and Lincoln without upsetting the Bolivian situation.

Recommendation

That you sign the memos at Tabs A, B, and C to Cap Weinberger,8 Peter Flanigan and George Lincoln which state the foreign policy restraint on open market sales of tin is still necessary but that the underlying budgetary objective could be attained if negotiations which the State Department has opened result in a Japanese purchase of some of our surplus tin for a Japanese emergency stock.

  1. Source: National Archives, Nixon Presidential Materials, NSC Files, Subject Files, Box 396, Stockpile (1973). Confidential. Concurred in by Hormats, Jorden, and Holdridge. Attached to a January 19, 1973, typed note by J. Bushnell, that reads: “Note. State has been requested to provide considered opinion on timing of initiation tin sales and issue of sale to potential Japanese stockpile. State is divided between Economic Bureau which wants to negotiate long-term sale agreements with International Tin Council and ARA which wishes to continue the Presidential ban on any tin sales, even to a Japanese stockpile. The issue awaits new arrivals on 7th floor for resolution. Meanwhile the President has reviewed the entire stockpile issue and actions affecting tin as well as other commodities are proceeding separately in a manner which makes these letters OBE. We have consulted informally at the staff level with the authors of the incoming letters who agree that they not be answered and the tin sale issue be treated as part of the larger picture.”
  2. Weinberger’s October 10 memorandum to Kissinger is not printed.
  3. Flanigan’s October 10 memorandum to Kissinger is not printed. He referred to the President’s commitment to a stockpile reduction and noted the possible budget and balance-of-payments benefits of additional sales. He mentioned an ongoing rubber disposal program in which Malaysia had concurred and suggested reevaluation of the political considerations regarding tin sales.
  4. In his November 14 memorandum to Kissinger, not printed, Lincoln noted the legislative authority to sell excess tin and urged reconsideration of the tin disposal program.
  5. See footnote 2, Document 440.
  6. Document 444.
  7. Telegram 212280 to Tokyo, November 22, not printed, reported that on October 27 a Japanese Embassy officer had come in on instructions to explore possible purchases of excess commodities from the stockpile to help redress Japan’s balance-of-payments problem with the United States. The Japanese were particularly interested in nickel and cobalt, but the Department informed the Embassy in Tokyo that there was a strong interest to begin commercial sales of excess tin and asked the Embassy to approach Japanese officials regarding purchases of tin as well as other commodities. The Embassy was informed that Japan would have to agree to hold any tin purchases in a Japanese stockpile until an emergency arose to avoid depressing the tin market, and requested the greatest discretion on the part of U.S. and Japanese negotiators due to the adverse effects that rumors of possible tin sales would have on relations with the tin producers.
  8. None printed; the memoranda were not signed.