269. Briefing Memorandum From the Director of the Bureau of Intelligence and Research (Saunders) to Secretary of State Kissinger1

Economic Leverage on the USSR

You are confronted with a great deal of simplistic talk about the “leverage” which our economic arrangements with the USSR give us in trying to change Soviet policy on whatever issue is being discussed at the moment.

As the principal architect of our policy, you do not need any help with the broad political response to those who take this line.

However, as a complement to the basic response, I thought you would be interested in the attached analysis of the economic limits of economic “leverage.”2

What this boils down to is a series of simple statements that can be made about the economics of the relationship, bearing in mind that such statements about the economic limits in the relationship must always be read also in a larger political context:

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—The Soviet economy is still almost completely economically independent of the United States.

—Almost anything we supply them, such as grain, they could obtain sooner or later from other sources or, if need be, could do without altogether. The latter might be painful for them, but not so much so as to cause them to change any important policy or embarrass themselves with a reversal under obvious pressure.

—Under current circumstances, economic leverage can be effective when tactfully used to gain lesser accommodations in a given negotiation or situation, as in the case of the grain freight-rate premium. Thus, we are now in a position where economic agreements must be negotiated on the basis of mutual economic advantage.

—However, whenever the issue is of real importance, any attempt to apply economic leverage to the USSR directly is more likely to get their backs up than to force concessions.

—A positive offer of something the Soviets want has a better chance of success than attempts to deprive them of something they have. There are somewhat differing views within this building of the extent to which this will be true over time. Some feel that US leverage will increase over time if the Soviets remain committed to the policy of modernizing their economy through importation of advanced Western technology and increasing Soviet meat consumption. Others agree that rising Soviet demand for US advanced technology and other products may over time contribute to a spirit of accommodation, but they believe this would be unlikely to increase our capacity to influence Soviet policies by withholding or threatening to withhold goods, services, or benefits the Soviets need and want.

Most of these points are more fully developed in the attached analysis. We will see what we can do to push the analysis on the last issue further.

  1. Source: National Archives, RG 59, Lot File 81D286, Records of the Office of the Counselor, Box 7, Soviet Union, Jan–April 1976. Secret. Drafted by Saunders and Lawrence J. Kennon in INR/REC on February 28. Forwarded through Sonnenfeldt. In a March 6 memorandum to Kissinger, Sonnenfeldt commented: “The attached paper from Hal Saunders on economic leverage does not deal at all with the more fundamental issue of how we and other industrialized countries use economic assets to affect the longer term evolution of Soviet domestic and foreign policy. That is a much more complex subject than the simple issue of specific ‘leverage.’ Indeed the arguments over leverage, real and alleged, obscure the real issue in economic relations with the USSR: what impact can the outside world have on Soviet economic priorities, how can the outside world expand areas of interrelatedness between the Soviet and other economies, to what degree can Soviet reliance on the outside world be fostered, what policies, procedures and mechanisms are needed to permit non-market economies like ours to have a strategy toward market economies at all, specifically how can the U.S. do this vis-à-vis the USSR? Despite its lack of larger focus, the paper is a useful compendium of debating points that can be used in the ongoing discussion.” (Ibid.)
  2. INR Report No. 325; not attached.