Foreign Relations of the United States, 1969–1976, Volume XV, Soviet Union, June 1972–August 1974

9. Memorandum From the President’s Assistant for National Security Affairs (Kissinger) and the Executive Director of the Council for International Economic Policy (Flanigan) to President Nixon¹

Washington, undated.

SUBJECT

• CCC Regulations Affecting US-Soviet Grain Sale and Maritime Agreement

In accordance with NSAMs 220² and 340³ of February 5, 1963 and January 25, 1966, Commodity Credit Corporation regulations include the provision that any commodity exported under a financing agreement shall not be shipped from the United States on a vessel which has called at a Cuban port or a North Vietnamese port. The Secretaries of State, Commerce and Agriculture have sent you the joint memorandum at Tab A⁴ reviewing the dangers this presents to the new $.75 billion US-Soviet grain sale and the related US-Soviet maritime agreement.

Our best estimate is that approximately 90% of the Russian ships which could be utilized to carry the grain have been to Cuban or North Vietnamese ports since the effective dates of NSAMs 220 and 340. Thus, Soviet agreement to shipping arrangements consistent with NSAMs 220 and 340 is improbable.

The specific problem is that of having Soviet tankers call first at Cuban ports to deliver oil, then at US ports to pick up CCC-financed grain shipments—an arrangement that would be prohibited by NSAM 220 policy. The underlying problem that thus arises is an indirect relaxation of our shipping sanctions against Cuba.

The 1971 US–USSR grain deal⁵ provided for carriage in third-flag ships, avoiding this problem. As noted in the joint memorandum, the maritime negotiations to date are premised on a targeted one-third US and one-third Soviet participation in bilateral shipping (the provision for US participation being essential for ILA/maritime unions’ willingness to work Soviet ships in US ports).⁶

The carriage of oil to Cuba makes grain shipments to Russia an economically attractive round trip for the Soviet vessels. Unless these ships can be so employed, the entire US-Soviet maritime agreement may be unacceptable to the USSR.

State, Commerce and Agriculture believe that, if the grain sale is not to be jeopardized, there will have to be a change to the policy of applying NSAM 220 to CCC commercial export credit sales. The Departments note that any such change would pose substantial foreign policy and domestic political problems:

—The availability of major US grain shipments would make Soviet shipping to Cuba more attractive to the Soviets—this would indirectly benefit Cuba.

—The US has urged other nations not to trade with Cuba; resistance to this policy has increased significantly; any change in US policy—even on a one-time basis or only in recognition of the realities of Russian bulk ship operations—will undoubtedly be read as a softening of our position and be seized upon by others as justifying a broadening of their ties with Cuba, including resuming or expanding trade. Thus, our difficulties in holding the line on existing policy will be sharply increased by the proposed action.

—Any such relaxation in the economic blockade of Cuba by the United States and others would raise strong objections among anti-Cuban and anti-Communist elements in the United States.

In light of these problems, the State Department recommends that the minimum relaxation necessary in NSAM 220 policy be made—i.e., a one-time exception for the US-Soviet grain sale, an exception applying only to Soviet, not third-flag ships. Further, State recommends that this decision be carefully conveyed to OAS member states before it is made public knowledge.

Because commercially financed US exports are prohibited from being shipped on Soviet ships, Commerce and Agriculture believe a broader relaxation exempting CCC commercial export sales from NSAM 220 policy is preferable. They believe this can be justified because of the short-term credit, largely commercial nature of the program. They note that NSAM 220 does not apply to EX-IM, and they suggest that it should not apply to CCC.

There are two significantly different interpretations and resultant courses of action, one favored by Henry Kissinger and the other favored by Peter Flanigan.

Kissinger’s Position

In my opinion, we have not yet sufficiently tested the Soviets to see if they can be pressured into agreeing to shipping arrangements consistent with our NSAM 220 policy. It is conceivable, considering, for example, the philosophy underlying the Summit Declaration of Principles on unacceptability of unilateral advantage and the very great interest the Soviets have in US grain, that the Soviets might agree to carry this grain in Soviet ships not engaged in the Cuban trade. Accordingly, Secretary Peterson should be instructed to press the Soviets hard on this issue. If you agree, I will personally review the importance of this approach with Pete Peterson before his Moscow trip.

If this does not succeed, the foreign policy and domestic risks of changing NSAM 220 policy have to be weighed against the risk of jeopardizing the grain sale to the Soviets. I believe that the grain sale is of sufficient importance to take the risks that may be involved with making a one-time NSAM 220 policy exception solely for purposes of the sale. I agree with State that the one-time exception will pose lesser problems from the foreign policy viewpoint. Most important it would avoid giving the impression that there has been a general relaxation in our policy toward Cuba.

I do not concur with the Commerce/Agriculture recommendation that CCC export sales be exempted from NSAM 220 policy at this time, because this complex subject has not yet received sufficient study—the overall implications for US policy toward Cuba and North Vietnam have not yet been fully thought through. A prompt interagency study on this issue is required.

I recommend that you approve guidance that would:

—Instruct the Peterson Delegation to make a determined effort to obtain Soviet agreement to shipping arrangements consistent with NSAM 220;

—If this effort fails, authorize the Delegation in the maritime negotiations to agree to shipping arrangements solely for purposes of the grain deal based on a one-time exception to NSAM 220 policy; and

—At the same time, instruct the US agencies concerned to undertake a detailed review of the overall CCC exemption issue for consideration by the SRG.

Accordingly, I recommend that you approve the NSDM at Tab B⁷ transmitting the above instructions.⁸

Flanigan’s Position

In my opinion, Peterson will be put in an untenable position if he insists that they, after buying $750 million of US grain, are directed after the fact not to use their ships for its transport. Ninety percent of the Soviet fleet has been to Cuba, and the economies of the grain deal demand use of two ships. I do not believe Secretary Peterson should be asked to take this unreasonable position.

It is agreed that the grain agreement and the shipping agreement are of sufficient importance to warrant taking the foreign policy and political risks involved in changing the NSAM 220 policy only in regard to shipping. Although we must expect similar policy changes by other OAS members, we can still maintain our overall policy of economic denial to Cuba.

I recognize that this rationale can also be applied to NSAM 340 and North Vietnam, but I view even indirect relaxation of that policy as politically untenable.

I believe that a one-time exception is more damaging to our position than waiving the CCC prohibition. The immediate risks of criticism and relaxation of economic sanctions by other OAS nations are no greater in exempting all CCC commercial export sales than a “one-time” exception, and in addition is more rationally defensible. In addition, it obviates the necessity of subsequent “one-time exceptions” when the next grain deal, or another commercial deal, is consummated, which deals are the purpose of the Peterson visit.

I do concur that State should carefully convey the decision to OAS member states before it is made public knowledge.

I recommend that you approve guidance that would instruct the Peterson Delegation to agree to shipping arrangements based on a change in the interpretation of NSAM 220 to the CCC regulations.

Accordingly, I recommend that you approve the NSDM at Tab C⁹ transmitting the above instructions.

1. Source: National Archives, Nixon Presidential Materials, NSC Files, NSC Institutional Files (H-Files), Box H–235, Policy Papers, NSDM 179. Secret; Exdis. Sent for action. Sonnenfeldt forwarded the memorandum to Kissinger under a covering July 15 memorandum with the recommendation that he sign it. According to an attached routing memorandum, it was sent to the President for decision on July 17.
2. For NSAM 220, “U.S. Government Shipments by Foreign Flag Vessels in Cuban Trade,” see Foreign Relations, 1961–1963, volume XI, Cuban Missle crisis and Aftermath, Document 277.
3. NSAM 340, “U.S. Government Shipments by Foreign Flag Vessels in North Vietnam Trade,” is in the Johnson Library, NSC File, National Security Action Memoranda, NSAM 340.
4. Attached but not printed is the undated memorandum from Peterson, Butz, and Acting Secretary Johnson.
5. On June 10, 1971, the White House announced the removal of export controls on agricultural products, among other things. The restriction that required that half of all grain shipped to the USSR be on American vessels was lifted, and longshoremen, who initially protested loading the grain on non-American ships, eventually consented to loading American grain on Soviet ships. See Seymour M. Hersh, The Price of Power: Kissinger in the Nixon White House (New York: Summit Books, 1983), pp. 343–349.
6. On July 9, the Washington Post reported with regard to the grain agreement (see Document 7) that “all but one maritime union—the International Longshoremen’s Association, headed by Thomas W. (Teddy) Gleason, have agreed to a compromise U.S. government proposal under which one-third of the cargo would be hauled in U.S. flag ships, one-third in Soviet ships and one-third in ships of other countries.” (Carroll Kirkpatrick, “Russia to Buy $750 Million in U.S. Grain,” Washington Post, July 9, 1972, p. A1)
7. Printed as Document 11.
8. Kissinger initialed the Approve option on behalf of Nixon.
9. Attached but not printed.