151. Memorandum From the Presidentʼs Assistant for National Security Affairs (Kissinger) to President Nixon1
SUBJECT
- Exports of Catalytic Cracking Technology to Poland and Czechoslovakia
The Secretary of Commerce, with the concurrence of State and OST, proposes at Tab A that you agree to his approval of five licenses for the export of petroleum catalytic cracking technology, equipment and catalysts [Page 363] to Poland and Czechoslovakia. Defense opposes approval. Interior would approve the Polish, but not the Czech case, on grounds that other factors override the security consideration.
In September you decided to defer decision on the Polish case, and you approved a somewhat similar application for shipments to Romania.
Two U.S. companies have made competing applications to furnish U.S. technology for a Polish catalytic cracking plant with a capacity of 33,000 barrels a day. These companies estimate receipts from the transaction and additional follow-on supplies at about $15 million. Three competing U.S. companies have applied to furnish U.S. technology for a 12,000–22,000 barrel a day plant in Czechoslovakia. U.S. fees would be about $2 million plus $600 thousand annually. The U.S. developed the catalytic cracking process in the early 1940s and has made considerable improvement in it in recent years. The British also have significant technology in this area.
The arguments in favor of approval are:
- —The products of the plant would be used for motor gasoline, a civilian product, since the Soviet military tanks and trucks depend largely on diesel fuel, and aviation fuel is largely made by other processes.
- —The Soviets have already built catalytic plants of these sizes. They are less efficient than our plants but produce similar products. There is no evidence the Soviets have even tried to obtain the technology of the similar 1965 U.S. sale to Romania.
- —Even if the Soviets got the technology for these plants, they would not be able to use it to build larger plants before the process is obsolete in the United States. (Some U.S. plants are four times the size of the Polish project.) Dr. David has written at Tab B that the security significance is minimal since even if the whole Eastern bloc had free use of the U.S. processes, they would cut their operating costs only one percent by 1980.
- —The USSR has a sufficient supply of petroleum products.
- —Approval would provide a basis for trade relations to help the U.S. balance of payments. Denial would force these countries to depend on USSR for their petroleum plants and block our future trade opportunities in this field.
- —The Poles have stressed the importance of this case. Approval would signal some recognition of their recent actions to improve U.S. relations such as their abatement of their support for North Vietnam, their recent high level visits to the United States, their granting of civil air permits to Pan Am, their decrease of hostile propaganda, their stepped-up approval of the U.S. cultural program and their recent stress on the need to shift resources to consumers.
The arguments against approval are:
- —The products of the refinery would be useful in a conventional war.
- —The U.S. still has effective control on the more advanced types of this refining technology.
- —If it wishes, the USSR can get the technological data from the Poles and the Czechs and would be able to make their own refining capacity more efficient.
- —The process is still sufficiently advanced over what the Soviets have that approval would make a contribution to their military industrial complex.
The difference between the Polish and Czech applications hinges on:
- —The importance of the refinery to Polish plans to develop their civilian petroleum industry.
- —The recent moves by Poland to improve relations with the United States.
In the light of the recent decisions to license new exports to the USSR, the minimal security consequences of this transaction and the U.S. commercial interest in being involved in future industrial development in Eastern Europe, I believe that the licenses should be approved for Poland.
However, the sad state of the internal Czech regime and the general state of its relations with us do not seem to me to justify approving the Czech licenses at this time. In fact, because of two late July cases of arrests of U.S. citizens, State is now trying to persuade Commerce to delay until the fall announcing approval of the Czech licenses even if you now approve their issuance.
Pete Peterson, on the other hand, believes that our balance of payments situation, the difficulty of defending differential treatment on security grounds, and lack of business sympathy for lost export opportunities argue for approving the Czech cases (Tab C).
Recommendation
That you authorize Secretary Stans to approve the catalytic cracker licenses for Poland but delay consideration of the licenses for Czechoslovakia.
Approve2
[Page 365]Disapprove, prefer to allow licenses for Czechoslovakia as well as Poland, though delaying announcement of the Czech decision until the arrest cases are settled this fall.
Disapprove, prefer to continue delaying all the catalytic cracker applications.
- Source: National Archives, Nixon Presidential Materials, NSC Files, Box 698, Country Files—Europe, Poland, Vol. I 1969–1971. Secret. Sent for action. A notation on the memorandum indicates the President saw it. Tabs A–C are not printed.↩
- Nixon initialed this option but also underlined “delaying announcement of the Czech decision until the arrest cases are settled this fall” in the second option. In a subsequent memorandum to Stans, August 23, Kissinger wrote: “The President has decided that you should approve the pending licenses for the export of petroleum catalytic cracking technology, equipment, and catalysts to Poland. Announcement of the approvals should be made in the usual routine fashion without special fanfare. No decision has been reached on the applications for licenses for similar equipment for sale to Czechoslovakia.” (Ibid.)↩