Foreign Relations of the United States, 1969–1976, Volume XXXVIII, Part 2, Organization and Management of Foreign Policy; Public Diplomacy, 1973–1976

69. Letter From Secretary of the Treasury Simon to Director of Central Intelligence Bush¹

Washington, February 4, 1976.

Dear George:

I have felt for some time that U.S. intelligence could take a more active role in preparing estimates of future developments important to our foreign economic policy. While I have found many national estimates helpful in providing background material relevant to our interests—particularly in the scientific, political and military fields—I have observed that these estimates rarely focus on important international economic issues. Although the various policy offices of the EPB departments and agencies will continue to do the lion’s share of this work—with the help of contributions from your Office of Economic Research—I would hope that we could work together to strengthen the national estimates process in economic areas.

The trend of Soviet economic relations with Eastern Europe is an example of the type of estimate we might consider in view of the possibilities these trends may offer to the United States and the West for involving Eastern Europe more with the non-Communist world. While we obviously must be cautious and realistic in our expectations regarding these possibilities, they do seem worth exploring.

We have seen a number of recent developments in the pattern of Soviet economic ties with Eastern Europe which suggest that in coming years several Eastern European countries will have less assurance that they can depend on the Soviet Union as a major source of foodstuffs, energy and raw materials. For example, as a consequence of recent Soviet crop disasters Moscow has told the Eastern European countries not to depend on the USSR for grain import needs during the 1975–76 period, stating flatly that they must fend for themselves. As you know, the Soviets also recently raised the price of oil and other raw materials to Eastern Europe, although not yet to the level of world prices. Thus, as these countries look to the future, they probably conclude that the Soviets will have continuing difficulty in meeting East Europe’s future import needs.

On the export side East European industries have emphasized sales to the USSR. As they shift their purchases to other areas, the Eastern Europeans must find ways to earn the necessary foreign exchange to pay for these imports by selling in hard currency markets, a difficult task since most of their current exports are not now attractive to Western buyers. Their trade must expand if these regimes in Eastern Europe are to achieve their modernization plans and meet the rising expectations of their citizenry. All of this presents a very real political and economic dilemma.

I believe it is important that we improve our perception of future prospects in this area and that we have a better understanding of the practical alternatives open to the countries of Eastern Europe. If the dilemmas described above develop, as we think they might, what trade and financing opportunities would the Eastern Europeans offer to the United States, other Western countries, Japan, and certain countries in the Middle East? What might the political and economic consequences be for our own interests if we were to more actively seek a strengthening of East Europe’s economic relations with non-Communist countries? How might this best be done? Many other issues should be considered which have a bearing on our policy deliberations—issues which we would be happy to discuss with representatives of the intelligence community.

If you agree that there is some merit in giving further consideration to the possibility of an estimate on this subject, please let me know. I hope, incidentally, that we can get together before long and discuss some of the more important aspects of intelligence support for foreign economic policy and negotiations.²

Sincerely,

William E. Simon³

1. Source: Central Intelligence Agency, Executive Registry, Job 79M00467A, Box 31, Department of Treasury. Confidential. Attached to a February 5 covering memorandum from William N. Morell, Jr., Treasury Representative on the USIB, to Bush.
2. Bush replied to Simon on February 18 that he agreed “wholeheartedly with your observations on the desirability of a strong economic ingredient in our national estimates.” He invited Treasury Department participation in an ad hoc study of the Eastern European economic outlook undertaken “under the joint aegis of the NIO/USSR and the NIO/Economics, with talent drawn from OER, OPR, State/INR, and the academic community.” (Ibid.)
3. Simon signed “Bill” above this typed signature.