243. Memorandum From the President’s Assistant for National Security Affairs (Kissinger) to President Nixon 1

SUBJECT

  • International Financial Institution Funding

Tab B is a memorandum from Secretary Shultz asking for your help in gaining Congressional support for replenishment of the soft-loan resources of the World Bank and the Asian Development Bank.

The replenishment of these institutions is necessary not only to support our general objective of assisting economic growth in such priority countries as Indonesia but also to give us leverage in getting both the World Bank and Asian Bank to play a major role in funding Indo-China reconstruction, particularly in meeting the critical need for support of the South Vietnam economy.

You have already approved the level and basic strategy of these replenishments (Tab C).2 Secretary Shultz is now carrying out Congressional consultations. He will complete negotiations with other donors in Nairobi this September3 and then submit authorization legislation later this fall.

The Secretary believes it is essential for you to show your personal support in three ways:

  • —A letter from you to him that he can show to key Congressmen supporting the additional funding as essential to your foreign policy;4
  • —A commitment from you to talk with Mr. Passman if such an intervention is needed to get appropriations; apparently the Secretary is worried about this year’s appropriations, not the funding of these [Page 851]institutions in future years; your assistance may be needed to get the necessary funding for the Asian Bank this year.5
  • —Your agreement to a Presidential transmittal of the authorizing legislation this fall.

The Secretary also raises U.S. participation in the African Development Fund. There is a growing movement underway in Congress to provide for such participation, probably $15 million over three years. Funds for the African Fund were removed from the budget request this year because this is the lowest priority international financial institution. Secretary Shultz proposes that he play a passive role neither encouraging nor discouraging a Congressional initiative on the African Bank. This appears to me to be the best posture since our token contribution would not have major foreign policy implications.

Roy Ash, Peter Flanigan and Bill Timmons concur in the above and the following recommendations. Dave Gergen’s office has approved the letter.

Recommendation

That you approve Secretary Shultz’ recommendations. Letter to Secretary Shultz 6

Agree to Presidential transmittal this fall7

Tab B

Memorandum From Secretary of the Treasury Shultz to President Nixon

SUBJECT

  • International Financial Institution Funding

You approved my recent proposals for future funding of the International Development Association and of the Asian Development [Page 852]Bank’s resources for making low-interest, long-term loans, assuming certain policy understandings could be negotiated and adequate indications of congressional support obtained.8

We have met with other donor countries and had numerous contacts with Congress. I am confident that acceptable replenishment packages can be negotiated with reduced U.S. shares and including other policy goals we have sought.

I now plan on carrying out intensive congressional consultations with key committee chairmen in order to obtain, prior to the Nairobi meeting of the World Bank, an indication of congressional willingness to support legislation embodying our proposals. I would then negotiate with other donors at Nairobi to reach a firm international understanding with the expectation that legislation would be submitted to Congress promptly thereafter to authorize formal international commitments by the United States.

I need your help in the following ways:

1.

A letter from you to me endorsing the replenishment proposals for the Association and the Asian Bank, to use as a basis for the congressional consultations and for mobilizing public support. I have attached a draft for your review.9 This approach proved successful in 1958 in the effort to establish the Association, when President Eisenhower wrote a letter to Secretary Anderson.10

Recommendation: That you sign the proposed letter to me.

2.

A Presidential transmittal of the authorizing legislation which we would send up after Nairobi (draft attached).11 This would make it clear that these proposals have your personal endorsement.

Recommendation: That you approve the proposed transmittal.12

3.
A direct intervention by you with Mr. Passman, if and when needed. He is the key factor in obtaining adequate present and future funding of these institutions. Such a need, if it arises at all, would likely come in September close to mark-up time, but it is important that I be able to indicate currently in my consultations with various members [Page 853]of Congress that you stand ready to contact Mr. Passman if the need arises.13

With your support, I believe we can gain Congressional approval for this program.

African Development Fund

Our contacts with Congress also revealed that there is a growing movement underway to move ahead now on authorizing a small contribution ($15 million) to a multilateral Fund of the African Development Bank for making long-term loans at low interest. Although we have stated our support for joining the Fund publicly in the past, we are not now members and have felt that in the light of our difficulties in funding existing programs the timing was not right for asking Congress for authority to join. We had therefore intended to put off any contribution until next year. While I would not encourage the current congressional effort at this time, there is no reason to discourage such an initiative. Accordingly, I propose to take a passive role, unless you wish me to take other steps.

George P. Shultz
  1. Source: National Archives, Nixon Presidential Materials, NSC Files, Box 333, Subject Files, Inter-American Development Bank (IADB) (April 1969–August 1973). Confidential. Sent for action. A stamped notation on the memorandum indicates Nixon saw it.
  2. Attached but not printed. See footnote 4, Document 242.
  3. The IMF and World Bank Boards of Governors held their annual meeting in Nairobi September 24–28.
  4. In a July 30 memorandum to Kissinger, Cooper, noting that "McNamara is concerned with U.S. delays on the World Bank (IDA) replenishment," reported that McNamara wanted to convene the Indochina donors group before the September World Bank meeting in Nairobi, but required "a harder U.S. position on the IDA replenishment to do so." However, Shultz wanted to engage in further Congressional consultation before making the administration’s position public and thus needed the Presidential letter "promptly to contact Congressmen before the August recess." (National Archives, Nixon Presidential Materials, NSC Files, Box 333, Subject Files, Inter-American Development Bank (IADB) (April 1969–August 1973))
  5. In an August 6 memorandum to Kissinger, Cooper discussed Shultz’s belief that Passman would approve ADB funding for the 1974 fiscal year "only if the President tells him such funding is high priority. Treasury is vaguely aware that the White House has in the past told Passman bilateral programs such as supporting assistance have priority over international institution funding. Thus Shultz is nervous that his efforts to get ADB funding will eventually be undone here. It is impossible to tell what the key issues will be in the fall when these choices have to be made. A Presidential intervention with Pass-man may be necessary." Kissinger wrote on the bottom of Cooper’s memorandum: "Pres. will do it but there is no sense making a treaty with him about it." (Ibid.)
  6. Tab A, Nixon’s letter to Shultz, is Document 244.
  7. The President indicated his approval of this option.
  8. See Document 242.
  9. Attached but not printed. For Shultz’s letter as signed by the President, see Document 244.
  10. For the text of President Dwight D. Eisenhower’s August 26, 1958 letter to Secretary of the Treasury Robert B. Anderson, see Department of State Bulletin, September 15, 1958, pp. 412–414. See also Foreign Relations, 1958–1960, volume IV, Foreign Economic Policy, Document 154.
  11. Attached but not printed.
  12. The President did not indicate his approval or disapproval of the recommendation.
  13. The President did not indicate his approval or disapproval of the recommendation.