103. Memorandum From the President’s Deputy Assistant for National Security Affairs (Scowcroft) to President Ford1
- Western Credits to the USSR
You asked for a summary of credits extended recently to the USSR by major industrialized countries.
Earlier this month France agreed to provide the Soviets with a $2.5 billion credit for 1975–79. The acknowledged interest rates will vary between 7.25% for orders in excess of $90 million and 7.55% for smaller purchases.
Japan has provided the Soviets with roughly $1 billion in long term credits for the development of Siberian forestry and coal. Interest rates vary with the type of purchases, with machinery and equipment at 6.375%. Recently the Japanese have stiffened their demands on the interest rates.
The West German Government has continually refused to subsidize export credits to the Soviets. German banks frequently subsidize loans but are repaid by the German firms which benefit from the export; such firms then raise the selling price to the USSR to offset this payment to the bank.
Britain has traditionally provided subsidized interest rates to the Soviets, but in October 1974 she raised the rate from 6% to 7%, thereby incurring an unfavorable reaction from the Soviets.
Italy recently rolled over a large debt to the Soviet Union at less than commercial rates of interest.
The U.S. Ex-Im Bank has approved roughly 470 million in credits to the Soviets at 6% interest. New loans, with minor exceptions, vary at between 7% and 8%.
The total outstanding Soviet medium term and long term debt to the West totals roughly $4.2 billion. It is fair to say that a large portion of that credit has been provided at lower than commercial rates of interest. Virtually all Western countries have consented to lower than market interest rates. In October the U.S., Japan, U.K., Italy and France [Page 405] concluded an agreed “minute” on export credits, which included a statement of desirability on policy for a 7.5% floor on interest rates for government support export credits. This should help in avoiding destructive competition among Western countries.
- Source: Ford Library, National Security Adviser, Presidential Country Files for Europe and Canada, 1974–1977, Box 17, USSR (6). Confidential. Ford initialed the memorandum. According to an attached correspondence profile, Scowcroft forwarded the memorandum to Ford on December 24. The memorandum is largely based on an intelligence report, also entitled “Western Credits to the USSR,” prepared by the CIA on December 20. (Ibid.)↩