Foreign Relations of the United States, 1969–1976, Volume XXIX, Eastern Europe; Eastern Mediterranean, 1969–1972

168. Memorandum From Helmut Sonnenfeldt, Robert Hormats, and Richard T. Kennedy of the National Security Council Staff to the Presidentʼs Assistant for National Security Affairs (Kissinger)¹

Washington, June 22, 1972.

SUBJECT

• Next Steps in US-Polish Economic Relations

As a result of the Presidentʼs discussions with the Polish leaders, we should now take action in three areas of Polish-US economic relations.

The Polish Ambassador has delivered two letters from the Chairman of the Council of Ministers Jaroszewicz to the President (a) requesting for the second time postponement of PL–480 dollar debt repayment; and (b) proposing a new agreement on the sale of US agricultural products to Poland.² (The latter question, the sales agreement, will require extensive staffing by the agencies, should be handled separately, and will be treated in a separate memorandum.)

The three areas in which we can and should act on soon are: 1) EX–IM Bank Credit Facilities, 2) Deferral of Polish PL–480 Debt Repayments, and 3) Polish-American Trade Commission.

A joint memorandum for signature by you and Mr. Flanigan to the President (Tab A)³ reviews these issues and requests his approval for implementing instructions to the Secretaries of State, Treasury and Commerce. The memorandum to the President also forwards a letter, coordinated with Ray Priceʼs office, for the Presidentʼs signature replying to Chairman Jaroszewicz.

Issues

1. EX–IM Bank Credit Facilities

During the Warsaw visit the President told Gierek that while he had the authority to grant EX–IM credits, any action on this score must await a “solution” of the problem of claims of American holders of dollar bonds issued by the pre-war Polish government.⁴ (The claims amount to about $42 million.) Once the Presidentʼs condition has been met by the Poles, the Secretary of State should submit to the President a determination that granting EX–IM is in the national interest.

The language used by the President with Gierek makes the requirement for positive Polish action on the bond debt stricter than that proposed in a memorandum by Secretary Rogers to the President. The Secretary recommended that the Poles be told that we would be willing to extend them the facilities when we were satisfied that Poland had initiated negotiations which, in our judgment, show promise of a reasonable settlement of the dollar bond debt. ⁵

We must treat the precise wording of the Presidentʼs commitment with care, particularly in notifying the agencies of it, because the nature of the commitment will affect the negotiating position of the Bondholders Council. If the Council learns that the requirement for Polish action is in fact stricter than that proposed in Secretary Rogersʼ memorandum, the Council will be encouraged to harden its terms for settlement, which—depending on the degree of hardening—could make a reasonable solution extremely difficult. (The Poles are now planning to send a delegation over in the near future to talk to the bondholders. They claim that the talks will move rapidly.)

We assume you still hold the view that the timing of a Presidential decision should be determined at least as much by the status of a decision on EX–IM for the USSR as on the status of the bond negotiations. For this reason, we presumably can afford to let the bond negotiations drag on a bit.

With these factors in mind, we have prepared a draft NSDM/CIEPDM ⁶ which will inform the agencies that a Presidential decision on EX–IM is tied to “solution” of the bondholdersʼ claims without specifying the nature of that tie or of the “solution.” (This should preserve flexibility for the President in making a final decision on EX–IM for Poland.)

2. Deferral of Polish PL–480 Debt Repayments

It is our understanding that during the Warsaw visit, the President also indicated to Gierek our willingness to defer repayment of the dollar tranches of the PL–480 debt falling due in the next few years. Jaroszewicz, in his letter to the President, committed Poland to purchase in the US during the period 1972–1975 machinery and equipment in amounts equivalent to the total of repayments deferred. We assume that the Presidentʼs intention is to defer for the period requested by the Polish government.

1. Polish-American Trade Commission

The US-Polish communiqué⁷ states that: “In the interest of broadening and facilitating trade relations between the two countries and working out concrete steps toward that end the two sides decided to create a joint Polish-American Trade Commission.”

This can be dealt with separately from the EX–IM and PL–480 debt questions. And we can move rapidly to establish the Commission, which Secretary Peterson should chair.

Recommendations

1. That you and Mr. Flanigan sign the memorandum to the President at Tab A requesting his approval for the US-Polish economic steps outlined above and recommending that he sign the letter to Chairman Jaroszewicz.

2. With the Presidentʼs approval, that you and Mr. Flanigan sign the NSDM/CIEPDM transmitting the Presidentʼs decisions on EX–IM facilities and the PL–480 debt.

3. With the Presidentʼs approval, that you and Mr. Flanigan sign the memorandum to Secretary Peterson instructing him to work with the Poles to establish the Polish-American Trade Commission and to chair it for the US side.⁸

1. Source: National Archives, Nixon Presidential Materials, NSC Files, NSC Institutional Files (H-Files), Box H–234, National Security Decision Memoranda, NSDM 173. Confidential. Sent for very urgent action. Handwritten notations in an unknown hand at the top read: “Thru Haig,” and “Memo sent to Pres. 7/3/72” (see Document 169).
2. Copies are attached to Document 169 but not printed.
3. Not found; apparently a draft of Document 169.
4. See Document 165.
5. On May 18 Rogers made this recommendation in a memorandum to Nixon. The following day, Kissinger replied: “The President has considered your memorandum on this subject [Export-Import Bank facilities for Poland] … He wishes to hold this matter in abeyance until his talks in Warsaw. He may at that time decide to take the step you propose.” Both memoranda are in the National Archives, Nixon Presidential Materials, NSC Files, Box 699, Country Files—Europe, Poland, Vol. II 1972.
6. Not found; apparently a draft of Document 170.
7. See Document 164.
8. See footnote 5, Document 169.