Foreign Relations of the United States, 1969–1976, Volume XVIII, China, 1973–1976

51. Memorandum From John A. Froebe, Jr., of the National Security Council Staff to the President’s Assistant for National Security Affairs (Kissinger)¹

Washington, August 25, 1973.

SUBJECT

• Chinese Representation in the International Financial Institutions (IFI’s)

At Tab A² is a State cable, concurred in by Treasury, directing the 36 action posts to seek the support of the host governments in the event that the ROC position in the IFI’s (the World Bank and International Monetary Fund) is challenged at the annual meeting of these organizations planned for September 24–28 in Nairobi. The cable was sent without either NSC clearance or that of the seventh floor of State—which we had asked to clear the cable with us. We have put a hold on any implementation of the cable instruction.

I agree with the State position that it continues to be in our interest to support the ROC’s continued participation in the IFI’s—both because of its importance to the ROC’s diplomatic position and to its international financial position, and because of our desire to avoid injecting political issues into the operations of the IMF/IBRD.

As State notes, however, we have no indication that the PRC either wants to join the Bank or Fund or that it wants to have the ROC expelled. A preliminary sounding with selected posts a month ago turned up no evidence of any such PRC inclination. Speculatively, it would seem unlikely that the PRC is interested in making such a challenge at this juncture:

• —Peking is unlikely to want to assume the financial obligations of membership in the Bank and Fund, which include divulging their reserves, undertaking to make their currencies convertible into other currencies, and providing gold to the IMF.
• —Even short of wanting to seek membership for itself, it is less than likely to want to have the ROC expelled at this juncture: this would risk another contretemps with us (in addition to that which may possibly occur at the U.N. General Assembly on the Korean question), and would run counter to its current campaign for a peaceful reconciliation with Taiwan.

The possibility remains that another state such as Algeria might make a challenge on Peking’s behalf, but independent of PRC guidance. On balance, however, this eventuality also seems improbable. As last year, the great majority of Bank and Fund members, so far as we know, strongly want to avoid having to face the issue. State’s strategy approach is essentially the same as that used at the Bank and Fund annual meeting last September: if the ROC position is challenged, another member (Saudi Arabia has already indicated its willingness to do so) would propose that the question be referred to the Bank and Fund’s Executive Directors for consideration after the annual meetings. Our role would be strictly supportive of initiatives taken by others. I have no problem with this basic approach. State argues that this is the least contentious method for handling a challenge which also would seem effective in parrying the challenge. The Bank and Fund’s management support this approach.

I believe that this is a preferred approach. The alternatives either would probably not be effective—as with a ruling from the Chair that attempted to refer the matter for study—or would probably be more contentious—as a proposal that the matter be shelved until the PRC had indicated its willingness to accept the obligations of membership.

State’s recommended representations in support of this strategy

The State cable would instruct the 36 posts to take more definitive soundings, reiterate U.S. support for continued ROC participation in the IFI’s, and seek the host governments’ support for our strategy in the event of a challenge. Peace representations would also be aimed at acquainting the considerable number of new Bank/Fund governors from these countries with our strategy.

In my view, State’s proposed representations carry too high profile: both in the number of posts involved and in the tenor of the substance of the proposed representations the State approach would risk stimulating that which it is designed to avoid. I recommend that the number of posts making representations be reduced to 21 (particularly in view of the weighted system of voting used in the Bank and Fund), and that the substance of the approach be pitched in a somewhat lower key. I have amended the State cable at Tab A to reflect both of these objections.

Recommendation:

That you approve the State cable at Tab A as amended.³

1. Source: National Archives, Nixon Presidential Materials, NSC Files, Box 527, Country Files, Far East, People’s Republic of China, Vol. 8, July 10–Dec 31, 1973. Secret. Sent for action.
2. Attached but not printed is a revised draft of telegram 166065, August 21, which was sent to 36 posts.
3. Kissinger initialed the Approve option. The cable was sent as revised as a telegram, and posts were instructed to disregard telegram 166065. (Memorandum from Davis to Pickering, September 1; National Archives, Nixon Presidential Materials, NSC Files, Box 527, Country Files, Far East, People’s Republic of China, Vol. 8, July 10–Dec 31, 1973)