40. Message From the President’s Deputy Assistant for National Security Affairs (Haig) to the President’s Assistant for National Security Affairs (Kissinger) in Moscow1

Tohak 47/WH 29377. There follows the proposal worked out jointly by Secretary Peterson and Peter Flanigan. Both agree that it will meet requirements.

Begin text:

For: Henry A. Kissinger

From: Secretary Peterson

I have reviewed the following message on lend-lease with Flanigan and it represents joint view.

Should you need more prescise computer-type interest rate calculation, please wire back and we will try to get computer operating tonight.

On another subject, there are strong indications of a grain elevator strike by maritime unions. While it is not directed at only Soviet Union grain shipments, Gibson thinks if could have been touched off by delays on maritime deal.2 I asked him to get specific reasons for strike by mid-morning.

In any event, you should know this puts extra pressure on a maritime deal as soon as possible.

[Page 120]

Also, newspaper story here by Kaiser of Post on Jim Lynn’s being with you3 made it necessary for me to meet with bureaucracy today to review situation. It will be very helpful if you can limit announcements on commercial negotiations to most general kind of language and thereby permit us to again reassure bureaucracy that Manzhulo and Alkhimov will be coming back to negotiate in depth.

Warm regards.

To: Henry A. Kissinger

From: Peterson/Flanigan

Subject: Lend Lease

1. We believe that comprehensiveness of trade package is more important than the differences between any of the options. Cannot tell from your telex how you are handling trade aspects but believe lowering of global sum provides requirement and opportunity to get comprehensive trade aspects wrapped up including market disruption, business facilities, arbitration, copyrights, etc. In short we are concerned about settling lend lease prior to getting comprehensive trade aspects settled, particularly at lower global sum. Congress and lobbyists will forget about rather minor differences in lend lease settlement long before they have to deal with specific trade package.

2. You could try again to get $750 million global sum and still be responsive to five year balance of payments problems by suggesting that $25 million additional beyond $725 million be paid in $1 million annual payments for last 25 years only, with none of these extra payments in the first five years of professed balance of payments problems.

3. Do not like your second possibility. Seems very much like grace period concept which is probably hard to sell to Congress, particularly since we could presumably have made available large Ex-In credits long before the regular lend lease payments began in 1976. Remind you that Congressman Moorhead seems to have hangup on grace period concept. We do not have time to get access to a computer at this late hour, but we suspect second possibility also reduces effective interest rate substantially more.

4. As to your first possibility:

A. Can you get the last $11.5 million of pipeline in 1974 since propose handling of this last $11.5 million over remaining years until 2001 is a retreat from what we already are getting on pipeline, or if not, then could you split the last $11.5 million into two payments of about $5.75 million each, payable in 1974 and 1975 which at least completes pipeline payments at same time as current pipeline payments are due.

[Page 121]

B. It would also be obviously very well [received?] if you could negotiate no postponements since we could then say to Congress that we did not yield on two of the important variables, grace period and postponements.

C. Have they accepted the concept of regular lend lease payments starting when MFN actually granted? If so, I remind you that this would also mean doubling up if we get MFN in 1973 or 1974. We propose this since it gives Congress an incentive to hurry up and also gets us more cash earlier. Frankly, with an economy of the size of the Soviet Union doing several billion dollars of trade with the Western world annually, it is rather hard to believe that balance of payments projections are so refined that $11 million one way or the other makes that much difference.

5. There is no way we can compute effective interest at this late hour without a computer. We would estimate your first possibility would turn out to yield effective interest rate of between 2.80 percent and 2.90 percent. If you use only the non-pipeline amount of $454 million as the base and do not compute interest on regular lend lease payments until these payments start, interest rate is about 3 percent. If this is all you can get, we can probably sell it but it does intensify the need for a comprehensive trade deal. Also, lower global settlement makes it all the more necessary that we have freedom to market deal in any way we wish since more than ever it now looks as though the British analogy is far better than talking about interest rates on basis of summit settlement.

  1. Source: National Archives, Nixon Presidential Materials, NSC Files, Kissinger Office Files, Box 24, HAK Trip to Germany, Moscow, London, Paris, Sep 9–15, 1972, TOHAK 1–116. Top Secret; Sensitive; Exclusively Eyes Only.
  2. The Maritime Agreement was signed in Washington on October 14. See Document 61.
  3. A reference to Kaiser’s “Kissinger Arrives for Moscow Talks,” Washington Post, Times Herald, September 11, 1972, p. A5.