172. Telegram From the Department of State to the Mission to the United Nations 1

212454. Subject: UN Financial Situation. Ref: USUN 4361.2

Malik’s action reported reftel in dragging PRC and Chinese arrearages into UN financial problem seems to us a fair indication that [Page 320]the Soviet Union and its Eastern European allies are not about to make the kind of massive voluntary contribution (say $40 million) which would make at least feasible the kind of over-all solution envisaged by Hambro. Rather it is likely that Soviets are attempting to becloud the issue so that when the UN runs out of money in the next few weeks or months the finger of blame is deflected as much as possible from the U.S.S.R
If an over-all solution to UN finances is not possible the problem remains what to do about the real present liquidity crisis. This crisis in its simplest terms is a matter of the UN’s spending more than it takes in. This cash problem could be solved either if the UN were to take in more money or spend less. Because the old arrearages and recent short-falls in contributions from Members both stem in great part from positions of principle on the part of the Soviet bloc and the French, it is unlikely that appreciable revenue will be derived from this source. The best that could be hoped is that the Soviet bloc could be pressured to make up for regular budget withholdings since 1963 (roughly $26 million) by a voluntary contribution like that made last month by the French. Alternatively the UN could estimate its cash income and spend only at that rate. This could be done by cancellation of programs, by not filling vacancies, by not holding conferences, by cancelling document runs, and the rest of the austerity measures set forth in State 17325 (Notal).3
To maximize pressure on Soviets we have been exploring means of thwarting Soviet maneuver of dragging Red Chinese herring across UN financial problem. In this connection we suggest that United Nations Controller follow up on Stavropolous inquiry (USUN 4407)4 and ask PRC representatives what their intentions are regarding the Chinese debt, particularly regarding the regular budget arrearages of more than $18 million. If debt is disavowed by PRC and no possibility whatever of a compensating voluntary PRC contribution emerges, we believe UN Secretariat should accord ROC the courtesy of ascertaining either directly or through an appropriate intermediary the intentions of the ROC toward payment at least of its regular budget arrearages up to the time of expulsion. If as indicated reftel, there then appears to be no practical possibility of getting the UN to ascribe the Chinese arrearages to the PRC and no way at all of getting either the PRC or the ROC to pay them, we would like your views on possibility that UN membership could be induced to forgive ROC arrearages of $30.2 million. For tactical reasons, we assume initiative would have to come [Page 321]from Group of 77 which has interested itself in UN financial problem (USUN 4340 NOTAL)5 or LDC’s body with equivalent clout. ROC forgiveness would have to be done very carefully so as not to encourage forgiveness of arrearages of other members; perhaps through GA resolution keyed to unique conditions under which ROC departed organization. Example might be: “in view of circumstances under which representatives of ROC left organization, the General Assembly has decided to cancel the indebtedness incurred by those representatives in the name of China.”
Were UN to pursue “forgiveness” initiative we would have to be sure that United States was in no way associated with an effort that relieved PRC of any fiscal responsibilities.
  1. Source: National Archives, RG 59, Central Files 1970–73, UN 10. Secret. Drafted by Hennes; cleared by Perry, O’Connor, McNutt, Winthrop Brown, von Peterffy, Kerley, and Armitage; and approved by Assistant Secretary De Palma. Repeated to Moscow, Taipei, and Tokyo.
  2. Document 171.
  3. The reference should be to telegram 173125, Document 169.
  4. Dated November 20. (National Archives, RG 59, Central Files 1970–73, UN 22–2 CHICOM)
  5. Dated November 18. (Ibid., UN 10)