Foreign Relations of the United States, 1969–1976, Volume XXII, Panama, 1973–1976

65. Memorandum From Secretary of State Kissinger to President Ford ¹

Washington, undated.

SUBJECT

• Panama Canal Negotiations

The negotiations have progressed to a critical point at which certain trade offs are necessary to reach agreement on a treaty which safeguards our basic interests. If Ambassador Bunker is to make such tradeoffs, certain flexibility in the Presidential instructions is required. Without those trade offs Panama will not agree to a treaty. Serious confrontation, possibly involving violence against the Canal Zone, would ensue, plus a consequent deterioration of our relations with Latin America and mounting world censure. Granting this flexibility to Bunker could produce a treaty by the late Spring.

Status of the Negotiations

Areas of Agreement:

Bunker has reached agreement in principle with the Panamanians on three major issues. ² Those agreements are well within existing negotiating instructions:

—Jurisdiction: The Zone as an entity will disappear, and the Zone Government will be disestablished upon entry into force of the treaty. Jurisdiction over the Zone area will pass to Panama over a period of 3 years. The U.S. will be afforded the use of those areas necessary for the operation, maintenance and defense of the Canal, and unimpeded movement between them. U.S. Government employees will be granted immunity from Panamanian jurisdiction while performing official duty. U.S. Government agencies and entities will have immunity from Panamanian jurisdiction.

—Canal Operation: During the treaty’s lifetime the U.S. will have the primary responsibility for the operation of the Canal. The Panama Canal Company will be disestablished and replaced by a new entity which operates the Canal. There will be a growing participation of Panamanian nationals at all levels in day-to-day operations, including policy formulation. This is in preparation for Panama’s assumption of total responsibility for Canal operation upon the termination of the treaty.

—Canal Defense: The U.S. will have primary responsibility for the defense of the Canal during the life of the treaty. Panama will confer upon the U.S. “use rights” for defending the waterway including (1) rights to maintain land, air and sea forces on locales in Panama and (2) a Status of Forces Agreement for effective operation of these forces. A Combined Board of Panamanian and U.S. military representatives will coordinate U.S.-Panamanian plans and actions in defending the Canal. Panama will participate in Canal defense in accordance with its capabilities. The question of residual U.S. Defense rights upon expiration of the treaty is not fully settled, but we do have agreement that the two countries will jointly guarantee—perpetually—the Canal’s neutrality as well as free access to it by world shipping. More importantly, Bunker has secured for the U.S. the right to defend the Canal unilaterally for the treaty’s lifetime—against Panamanian incursion, if need be.

Issues Pending:

During the course of this month the negotiators will be seeking agreement on our compensation to Panama and on our use of lands and waters in the Zone:

—On compensation the Panamanians, as an opening gambit, have indicated they expect far more than we are prepared to give. We shall offer an annual payment of about $35 million (we now pay $2.3 million), based on tonnage passing through the Canal, to be funded from tolls collected.

—On lands and waters to be returned to Panama, their initial request is also too large. How far we can accommodate Panamanian desires is now being reviewed by State and Defense.

In March, Bunker and Tack will address the remaining—and toughest—issues: duration of the treaty, and whether we retain an exclusive right to expand Canal capacity through a sea level canal or another set of locks. On these points, the Panamanians have indicated that they will not accept:

—a treaty covering the present Canal that goes beyond the year 2000;

—any formula that would commit them now to extend the treaty’s duration to cover an expanded Canal;

—exclusive rights for the U.S. to expand the Canal without Panama’s agreement and without its participation in operation and defense, and

—a 25-year option to decide whether to expand the Canal (Panama has suggested 5 years).

Adequacy of Present Instructions

Existing Presidential instructions—now almost four years old—permit us to offer Panama less favorable terms on treaty duration and Canal expansion than we did in 1967. Bunker is certain the Panamanians would reject what we can agree to under present guidance on those two key issues—as they did flatly in the 1971–72 negotiations.

Present guidance covering these areas is satisfactory:

—Jurisdiction: U.S. jurisdiction is to be phased out over a minimum of 20 years, but the U.S. negotiator is authorized to negotiate a shorter time period if he deems such action necessary to achieve our non-negotiable objectives on operation and defense.

—Operation: first preference is to maintain exclusive U.S. control of Canal operations, but with a fall back position of Panamanian participation in the Canal management.

—Defense: our non-negotiable position is to gain specific treaty rights to defend the Canal unilaterally for the duration of the treaty. The negotiators are also to seek rights to conduct important military and research activities in canal areas.

—Land and Water Areas: we should be as forthcoming as possible in terms of what is essential for the defense and operation of the Canal, its supporting facilities, and the agreed upon U.S. Government activities. U.S. defense bases should be located in the Canal area with conventional SOFA arrangements.

—Compensation: There should be substantially increased income for Panama from Canal operations, even though this may involve a significant increase in tolls, and from the opening up of commercial opportunities to Panama in the Canal area.

Existing Presidential guidance on which Bunker needs flexibility relate to:

—Duration: a fixed period of at least 50 years—with provision for an additional 30–50 years if Canal capacity is expanded.

—Canal Expansion: we should retain definitive rights, without obligation, to add a third lane of locks to the existing Canal, or to construct, operate and defend a sea-level canal.

Required Changes in Instructions

With flexibility on duration and expansion, Bunker believes he can get the Panamanians to come to an accommodation on the length of the treaty; land and water areas essential for defense and operation of the Canal; some rights covering expansion; and a reasonable level of payment to be made to Panama.

Bunker asks that the guidance be changed as follows:

—Duration (Existing Canal)

1. Seek to obtain the longest possible period between 25 and 50 years, applicable to both operation and defense of the Canal.

2. Alternatively, propose separate duration periods for operation and for defense, neither to fall below 25 years nor to exceed 50 years, and seek to obtain the longest possible periods in each case.

3. Seek also to obtain, in the course of negotiating the duration or any other issue, a right in principle for the United States to have a limited military presence in Panama following the expiration of the treaty period applicable to defense, of a nature and under terms to be agreed upon between the parties not less than 1 year prior to the treaty’s expiration, for the purpose of providing Panama assistance in the defense of the Canal or for such other purposes as Panama may desire.

4. As a fallback, if deemed necessary to achieve the objective of a more extended period for Canal defense than 25 years and/or the objective of a right in principle to have a limited military presence in Panama following the treaty’s expiration, offer a reduction of the duration period applicable to Canal operation to a period less than 25 years but no less than 20 years.

—Canal Expansion

1. Seek to obtain the longest possible period up to 25 years for a United States option to exercise definitive rights to expand the Canal’s capacity, whether by addition of a third lane of locks or the construction of a sea-level canal.

2. As a fallback, seek to obtain—either in lieu of or in combination with definitive rights—commitments that:

(a) Panama will not permit the construction of a sea-level canal in its territory during the period of United States control of the existing Canal unless it has first offered to the United States the option to construct such a canal. That option should be under terms and conditions which would accord to the United States rights relating to operation and defense commensurate with the due protection and enjoyment of a United States investment of that magnitude;

(b) No country other than the United States or Panama shall have responsibility for operation and defense of an interoceanic canal in Panama; and

(c) The neutrality guarantee applicable to the existing Canal will apply to any new canal built in Panama.

Congressional Outlook

For the past year Bunker has systematically consulted with key leaders in both Houses. The consultations have been along general lines, awaiting agreement on the package as a whole before talking specifics. He believes that with a treaty which clearly safeguards our rights to operate and defend the Canal, is demonstrably fair to both Panama and the U.S., and is backed by a carefully orchestrated public and Congressional educational campaign, the necessary support can be obtained in the Senate and House. It is not going to be an easy fight, and it will require mobilization of strong advocacy by State, Defense and the White House.

A major difficulty now confronting us on the Hill are initiatives by Senator Thurmond and Congresswoman Sullivan to sign up colleagues on Resolutions opposing the negotiation of a new treaty. Senator Thurmond did this last summer and collected some 34 signatures. We are now contacting key members of both Houses asking them to help us counter the Thurmond-Sullivan campaign by counseling their colleagues to take no stand until they have a chance to examine the full scope of the agreements reached.

Once we have these agreements in hand, we will:

—In consultation with the majority and minority leadership, mount a campaign to gain support for the treaty in both Houses, particularly among the “non-committed” membership.

—Launch a campaign with the media (particularly those which have influence on Congressional attitudes) in an effort to educate the general public on the new treaty as a reasonable solution to the Panama problem.

—Establish a Citizens Committee to organize public support.

—Step up the schedule of public speeches on Panama by Ambassador Bunker, Assistant Secretary Rogers and other Department officials.

—Pay particular attention to the labor movement and to church organizations—two potentially strong supporters of our efforts.

In the event it becomes clear that there is insufficient support in the Senate for the treaty, the Panamanians still want us to conclude and present it. They reason that it is better to have a treaty which lies in the Senate whether or not it is acted on. The Executive would then have demonstrated it had done all it could for Panama.

Recommendation:

That you issue the attached new negotiating instructions as a National Security Decision Memorandum.³

1. Source: Library of Congress, Manuscript Division, Kissinger Papers, Box CL 204, Geopolitical, Panama Chronological, Sept 1973–1975. Secret; Exdis. In a February 6 covering memorandum to Kissinger, Bunker and Rogers urged him to forward the memorandum, as well as a public relations strategy, to the President. Kissinger wrote: “This should be discussed interdepartmentally including Defense. Let Brent start urgently.” Regarding the coordination with the Defense Department, see footnote 1, Document 66.
2. See Document 57.
3. Attached but not printed. Ford did not approve or disapprove the recommendation. In a February 7 meeting with Ford, Kissinger stated that briefing material had been prepared and added: “We have asked for 50 years [duration]. We can’t get it if you want a treaty. We have asked for a perpetual option for a second canal. We will have to compromise that.” Ford then asked to see the paper, and Kissinger replied he would send it to Camp David. (Ford Library, National Security Adviser, Memoranda of Conversations, Box 9, February 7, 1975—Ford, Kissinger) No new NSDM was issued until August 18; see Document 95.