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21. Memorandum From C. Fred Bergsten of the National Security Council Staff to the President’s Assistant for National Security Affairs (Kissinger)1

SUBJECT

  • German Offset Agreement

Our new offset agreement with Germany was signed and released publicly today. It is far better than its two predecessors. In my judgment it is the best we have ever had, but this depends on the criteria used and views will differ on such a sweeping conclusion. The result fully justified your judgment that we would get a better agreement if we did not push the Germans too hard (The press release is at Tab A).2

The main features of the agreement, which make it so good for us and which should sell it well to Congress, are:

1. More than half the offset will be through German military purchases in the United States, compared with 10–15 percent in the last two agreements.

2. The German loans to us have maturities of 8–10 years compared with a maximum of 4½ years in the past.

3. The loans carry concessional interest rates of 3½–4 percent compared with market rates in all past agreements, which would be at least 6 percent now.

4. The agreement is for two years, for the first time since Erhard fell.

5. The total agreement exceeds $1.5 billion.

We had to swallow two unpalatable items:

1. Creation of a fund in the U.S. to encourage German direct investment here. This is a Strauss 3 favorite which we had to include though it is ludicrous economically. In practice it will probably have little effect and the money will essentially be another loan to us.

2. German government purchase of non-military items in the U.S. including uranium for stockpile purposes, railroad couplers, and components for the prototype of the “European” airbus.

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Nat Samuels did an excellent job in the final round of the negotiations after a shaky start.4 Treasury maintained a negative attitude throughout the talks but made no effort to subvert them. I stayed very close to the situation this week and helped to resolve a few of the issues.

I have submitted an item on this to Al Haig for the President’s morning brief tomorrow. The Under Secretaries Committee will undoubtedly submit a full report within a few days.

  1. Source: National Archives, Nixon Presidential Materials, NSC Files, Box 682, Country Files—Europe, Germany, Vol. III. Limited Official Use. Sent for information.
  2. Not printed. The joint statement is printed in Department of State Bulletin, August 4, 1969, p. 92.
  3. Franz Joseph Strauss, West German Finance Minister.
  4. Reports of the negotiations are in memoranda Richardson wrote to the President on May 29 (National Archives, RG 59, Central Files 1967–69, FN 12 GER W) and July 7 (ibid., Executive Secretariat, National Security Council National Security Decision Memorandums, 1969–1977, Lot 83D305, NSDM 12–4/14/69–NATO). See also Foreign Relations, 1969–1976, volume III, Foreign Economic Policy, 1969–1972; International Monetary Policy, 1969–1972, Document 24.