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125. Memorandum of Conversation1

PARTICIPANTS

  • General Secretary Leonid I. Brezhnev
  • Foreign Minister Andrey A. Gromyko
  • Foreign Trade Minister Nikolay S. Patolichev
  • Civil Air Minister Boris P. Bugayev
  • Ambassador Anatoliy F. Dobrynin
  • Mr. A. M. Alexandrov
  • Mr. G. M. Tsukanov
  • The President
  • Secretary of State William Rogers
  • Secretary of Treasury George Shultz
  • Dr. Henry A. Kissinger
  • Mr. Peter M. Flanigan
  • Mr. Helmut Sonnenfeldt
  • Mr. Sukhodrev, Interpreter

SUBJECT

  • Economic Relations

Brezhnev: Mr. President, I had a very pleasant meeting with some very influential Americans—Senator Fulbright and others, members of the Foreign Relations Committee.2 I am very well aware of the great importance of these bodies of the Congress and of the Congress itself. I myself was the Chairman of the Presidium of the Supreme Soviet and I am still a member. So I am deeply aware of the importance of such bodies. And this is especially true when we are trying to resolve major problems. I expressed to them my appreciation for all your contributions and I thanked Senator Fulbright for bringing the group together. I referred to our relations in a broad way. I stressed the importance of last year’s meeting and the responsibility that rests on us. I stressed that our line enjoys the support of our people and that most Senators seemed to be supporting the President as do a majority of the American people who voted him a second term.

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I talked about trade and, at the initiative of the Senators, about the so-called question of a departure of people from the Soviet Union and I read out some statistics on this. The meeting was very satisfactory and they thanked me for the frank discussion. But I must say it was tiring and quite hot in the room. I spent three and one-half hours with them.

Our start yesterday was very important and I told the Senators that there would be more meetings and some very important decisions to come. I must say they left me with a very pleasant impression.

One of them asked me about my attitude toward the Jackson Amendment.3 He asked a question to the effect whether that amendment could be beneficial to the development of our relations. I told one of them any amendment can have a counter amendment. And one of them said maybe so: I will introduce an amendment to the amendment. But I am sure you will get a fuller report. The meeting was very useful.

President: I greatly appreciate the time you spent and it will be helpful with the legislation, with getting MFN and stopping the Jackson Amendment. I am sorry that it took so long and hope that you will get to bed early tonight at Camp David.

Brezhnev: Thank you. Tiredness always accompanies a visit such as this. It could not have been easy for you last year to adapt to the time difference and so on.

President: Well, welcome to the Cabinet Table. The only such time that I can recall was with Prime Minister Wilson in the first term.

The subject we agreed to discuss is one in which there is total agreement regarding goals. The only question is how to achieve those goals. The General Secretary has often said—last year and this—that our economic systems are complementary. And that we should think big, not small with regard to economic relations, and long term, not short term.

Brezhnev: I certainly reaffirm that and I put it that way to the Senators.

President: I know that Secretary Shultz and Minister Patolichev have been discussing this subject. The problem is how we can take an economy like ours with many private firms and get it to dove-tail with yours which is basically government controlled. I have asked Governor Connally to participate for two reasons. One, he is a former member of the Cabinet, and two, he is now in the private sector and very familiar with the problems of arrangements for private investment, etc.

I think we can look back over the last year and be pleased with the increase in trade and we can also say that in the future the increases can [Page 509]be much greater than what we have achieved so far. The problem we have however, is to find ways so that many American companies can invest in trade with the Soviet Union. It is here where Secretary Shultz has been working with some success with Minister Patolichev and we can do more in the future. As I told the General Secretary yesterday, the attitude on the government side will be positive as issues come up. Yet as practical men we know that there are many practical problems to be worked out.

Brezhnev: That is true. I believe we have things to sell each other and areas for mutually advantageous cooperation. The problem is to find adequate forms of cooperation. We have a broad and positive program fully approved by the last Central Committee Plenum. Some of the members are here—Gromyko, Patolichev, Dobrynin; they and others can all confirm it and also that we have given instructions to our various bodies to depart from old traditions and to work on a broad and long term basis.

In my meeting with U.S. Senators in Moscow,4 the question of gas was raised. But we are not insisting on it. But gas works wonders and one can do amazing things with it that no one dreamt of 20 years ago. I said then that we could offer one trillion cubic meters of gas to the U.S. It is not for me but for the business men of the U.S. to calculate and see how best to solve the problems. If the U.S. wanted 20 to 25 billion cubic meters a year it would last 40 years. But this is all for Secretary Shultz and Mr. Connally to discuss with Patolichev.

There are also other areas for useful agreement. And there is also the question of consumer goods, but this would be smaller in volume than the long term projects. It might help if we speeded it up in the trade center in Moscow and get U.S. business men over for discussions. We will do what we can.

We could set up working groups on power, on mineral resources and on joint projects in technological cooperation for many years. We could make arrangements for repaying credits over a 10, 20 or some other number of years, as our representatives might agree. It is not for me to list specific projects now, but I fully agree with your approach. If Mr. Shultz and Mr. Connally could work out something concrete with Patolichev, our leadership and people would welcome it.

If we are at one on goals, the question remains how we implement these goals. It was not an easy thing to reach agreement on your first visit; yet we managed and now we have experienced it. We agreed on the basis for an economic agreement. I agree that we have already made progress. Trade has grown from 200 to 600 million rubles and we [Page 510]have used 70 to 80% of the credit extended. And we will repay it with interest and it will be profitable for you. We have agreed with Boeing on the YAK–40, with the interior to be provided by the U.S. side. There is also progress on the construction of plants for artificial fertilizer and we will sell you ammonia. Some products we cannot sell you, for example, automobiles, because you are more developed than we. But we could find dozens of areas for trade.

Perhaps Patolichev should add something to what I have said, if that meets your approval. Let me just add that the solution of all these problems will require support with credits which we will repay with interest. We have been working vigorously on deals for the development of Yakutsk oil for use in Japan. We agreed. Then there was the suggestion for the U.S. to cooperate with Japan and we agreed. Then the Kopf Company of the FRG proposed a new metallurgical plant that by-passes the blast furnace stage of making steel. We agreed on the basis of the Kursk metal deposits and we will work out repayments with the FRG company. I also heard recently of a U.S. company that is interested in a similar project. These are just examples of how many firms think in these terms. So we can find new forms of cooperation. Of course the development of that type of cooperation can be achieved on a more durable basis if it gets the support of the President on your side and of us here.

Patolichev: With your permission—as you know, we have a Joint Commission. It has met twice but focused its attention entirely on negotiating the agreement on other legal matters. The agreements involved were signed, that is, the Trade Agreement and the Lend Leasing Agreement, etc.5 Tomorrow we will sign the Tax Convention.6 In short, we have been finalizing all these matters. We discussed with Secretary Shultz today the usefulness of announcing that we will open a trade office here and you will open such an office in Moscow.

President: When?

Patolichev: Perhaps while the General Secretary is here. We gave Secretary Shultz a possible protocol and we think it would have a good effect. We also suggested announcing a Joint Chamber of Commerce. That too would have a good effect. We could set up organizing committees on both sides and make the announcement. They could get together and establish the statutes; then they could have a founding meeting and the Joint Chamber would come into being. It is important for us to establish contacts between our organizations and U.S. firms. U.S. companies and firms have been applying for commissions to set [Page 511]up offices in the Soviet Union and we have given this permission in some cases. It will be easier when the Trade Center is established.

Mr. Shultz and I agreed that once these matters are cleared away our Joint Commission could get together to discuss actual trade. We agreed to have the third session of the Joint Commission in October in Moscow. But if the President and the General Secretary can meet once a year, why should not the trade ministers meet twice a year. We could do important work. In 1971, trade was 200 million, in 1972, 600 million and in 1973 it will be 1.3 billion. But this is not enough for us. We can set up joint working groups for gas and power consuming industries, etc. These are very important matters. We have received offers from many U.S. companies for joint projects on a compensatory basis, that is where investment is to be repaid by finished products. The figures I cited concerning the increase in trade relate basically to increases in imports. The agreement on the automobile plan is being implemented and we have received some agreement with Caterpillar and others and there is a grain deal. The increase for the coming year is also basically in imports. The first large scale agreement with Occidental7 requires very intensive work. There are many other contracts with U.S. firms. On the Yakutsk gas deal we are negotiating with El Paso. On Tyumen there are three companies, Tenneco and two others. So in the course of the year we can do important work on gas. We have also started negotiations with Boeing. These are just a few examples. So I believe we can set up working groups which report to the full committee. Of course, they will come up with problems, for example, on credits, and I discussed this with Secretary Shultz. You have a law dating back to the 1880s long before the Soviet Union came into existence. Under that law a private bank can extend credit to one recipient only to the amount of 10% of its reserves. On our side, of course, the bank is the Foreign Trade Bank. But I think we have managed to find common language and can reach some decisions. The basic point will be that our various trade organizations will act as creditors. But this will require further discussion. So I see a future with a good deal of work and we will require some support to insure greater increases than have occurred so far.

President: I remember my meeting with Mr. Patolichev last year.8 He is a good salesman. Now, let’s hear from our salesman.

Secretary Shultz: First, we met for only 40 minutes and you can see how much we covered. This gives reason to hope that a Joint Commission will continue to be productive.

Brezhnev: Don’t work too long—just give us results.

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Secretary Shultz: I will come to that. The idea of a Commission that meets perhaps twice a year with some rhythm and uses the Trade Agreement as an umbrella and then solves specific problems as they come along is a very good idea.

Brezhnev: There would be various groups on various problems?

Secretary Shultz: Well, we would adapt and see what makes sense as we go along. Mr. Patolichev has shown that there are a variety of problems. You cited the 1880 law and we can clear that up. It illustrates how we can work together also at the staff level on these problems successfully.

Then you mentioned the problem of facilities. We are very gratified to hear what you had to say, but it illustrates one problem—price. Things are very expensive in the Soviet Union and we don’t see why we should pay ten times what the British pay. This is not for you—the President and Brezhnev—to argue about. We will work it out. It is not a question of principle just of money.

President: That’s principle.

Brezhnev: Could you clarify this?

Secretary Shultz: Well, we estimate that if you take a measure like square feet and compare what the British pay we have to pay more. But I don’t mean to argue. It is just a problem. This refers to our office in Moscow.

Brezhnev: I think I can help you.

Secretary Shultz: Well I can use all the help I can get.

Brezhnev: You can rely on me.

Secretary Shultz: There are other illustrations. You mentioned grain. This would be an example of mutual assistance if we can get as much advanced information as possible to avoid disruptions. We discussed this when I was in Moscow.9 We should exchange as much information as possible in our Commission.

Brezhnev: This is a very important problem and I hope you won’t object if the President and I take part in the discussion.

President: This debate is more difficult than the one on missiles.

Brezhnev: I can see that we don’t seem to be able to come to actual trade until we build the Center. But we should do it all together, build the house and trade at the same time. If we succeed in getting mutual information on missiles, surely we can agree on grain. But seriously, the President and I can talk about it and help.

President: As a matter of fact, the General Secretary yesterday told me about the crop situation and it was very interesting.

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Brezhnev: That’s true. We can also agree to exchange information on a long term basis because one year is not enough. I am happy the President wants to discuss it. I am not trying to contradict what you [Sec. Shultz] said.

Secretary Shultz: Then there is gas and oil. We should do what we can to get all the facts to determine whether some project or other is mutually satisfactory. I gather the people involved are going to move shortly.

President: Secretary Shultz suggested that Governor Connally, who is familiar with these problems should say a few words.

Gov. Connally: North Star project10 is further along than the other. The Yakutsk reserves are not large enough to justify contracts, yet North Star has not signed a protocol like the one El Paso signed. So, if there is some kind of a problem, let us know because really North Star is much further along, three years actually.

President: Let us make clear that we are not picking among private companies.

Gov. Connally: There is one other thing we might consider. If you count up oil and gas, even without all the other projects, you are talking 8 to 10 billion dollars. I am not in a position to say what the Government will do. But we have to think of new institutions. I doubt if we can do it through the Exim Bank. At least this is a serious question.

President: For us?

Gov. Connally: Us and them.

President: Is the Commission the proper place to consider this?

Dr. Kissinger: Mr. President, there is a gas sub-group of the Commission.

Gov. Connally: George can handle it directly unless the Commission becomes more active. Twice a year is not enough.

Brezhnev: Maybe Shultz and Connally can talk it over and report to us. Our deposits of gas are enormous. When I mentioned the size of deposits of gas I mentioned the minimum. The size will probably double. In regard to credits they will have to be guaranteed by the State. I don’t know about the level. Anyway, it should be in the mutual advantage and the experts should calculate carefully what the advantages are. The technical experts should take up all of this but in principle we support this and we think it should last 25 to 30 years.

I don’t know about the holdup that Mr. Connally referred to but Patolichev says that representatives of the companies are coming to Moscow and progress will be made.

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President: We have to have individual deals but with a push from the higher level. We must set up the institutions, some of which the minister referred to, to find a way to get a greater complex of U.S. companies into contact with Soviet authorities. That is the problem. When the General Secretary met with business leaders—as I myself have in this room—he will find that they won’t know where to go.

I was going to say that the General Secretary has been kept too long by the Senate and by us here, but I do hope the two ministers will meet tomorrow not only to sign the Tax Treaty, but to discuss other issues.

Brezhnev: No objection.

President: While the General Secretary and I settle easy problems like the Middle East and SALT, they can solve the difficult ones.

Brezhnev: Right.

May I express my satisfaction about this meeting on such an important subject. It convinces me we can and want to cooperate in this important field. It is a good sign.

I listened very attentively to what was said by Secretary Shultz and Gov. Connally and by Patolichev. I see there are certain issues to discuss. But speaking broadly, our systems are not an obstacle. You have companies and we have all our ministries, though they do represent in the final analysis the Soviet Union just as your companies represent the United States. So the difference in systems should not be an obstacle. But the details should be discussed by experts. Let them make mutually beneficial decisions so progress will get ever faster.

President: In summary, we have learned to walk, now we should learn to run.

[The President and the General Secretary and several others then proceeded to the cars to go for a boat ride at approximately 6:30 p.m.]

  1. Source: National Archives, Nixon Presidential Materials, NSC Files, Kissinger Office Files, Box 75, Country Files—Europe—USSR, Brezhnev Visit Memcons, June 18–25, 1973. Top Secret; Sensitive; Eyes Only. The meeting took place in the Cabinet Room. According to the President’s Daily Diary, it lasted until 6:26 p.m. (Ibid., White House Central Files) Brackets are in the original.
  2. Brezhnev hosted a luncheon for 25 Senators and Representatives on June 19. No record of the meeting was found, but for a summary of the discussion, see “Some Senators Not Convinced by Brezhnev on Jews,” The New York Times, June 20, 1973, p. 20.
  3. See Document 76.
  4. See footnote 4, Document 111.
  5. See footnote 6, Document 120.
  6. See Document 129.
  7. See footnote 7, Document 124.
  8. See Document 65.
  9. See Document 84.
  10. See Document 69.