534. Memorandum From the Deputy Secretary of Defense (Packard) to the President’s Assistant for National Security Affairs (Kissinger)1 2

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  • NSSM 86—Panama Canal

This memorandum responds to your request for our comments on the response to NSSM 86 enclosed with your memorandum of April 14th.

By way of general background, we believe that there are two basic considerations that should be taken into account when examining the specific issues covered in the response to NSSM 86. First, we must expect that the Panamanian Government will try to reopen, from time to time, whatever new treaty arrangements might be reached now, with a view towards gaining additional concessions. (I have in mind particularly the duration provisions of any new arrangements.) Second, there are essentially three points that should be considered nonnegotiable: (1) effective U.S. control over Canal operations, (2) effective U.S. control over Canal defense, and (3) the continuation of these controls for the indefinite future (a departure from the 1967 negotiations).

As a practical matter, it would seem wise to hold preliminary discussions with the Panamanians before entering formal negotiations. The preliminary talks would give us an opportunity hopefully to develop a conducive negotiating climate and, more importantly, a chance to determine whether the Panamanians’ negotiating posture is such that we could expect to achieve new treaty arrangements acceptable to both sides (including the U.S. Congress).

Our views on the specific issues identified in the response to NSSM 86 are attached as Enclosure 1.

The Joint Chiefs of Staff are in general agreement with the views expressed herein. In accordance with your request, their views are attached.

My staff has informed me that a Memorandum to the President may be forwarded without a meeting of the National Security Council being necessary. I am reserving the option of requesting a meeting of the National Security Council to consider the NSSM 86 study until after we have had the opportunity to review the comments submitted by the other agencies.

David Packard

Enclosure 1

Paper Prepared in the Department of Defense

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I. Expanding Canal Capacity

Comment. Preliminary discussions would be a useful way to explore what price the Panamanians would demand for definitive rights to construct a third set of locks or a sea level canal. A firm decision on whether to press forward on these points could be made later when we would have the benefit of the Panamanian reaction and the report of the Canal Study Commission which should be ready by the end of the year.

II. Sovereignty

Comment. The exercise of Panamanian limited sovereignty in the Zone is negotiable, except for US retention of effective control of Canal operations and defense.

III. Control of Canal Operations

Comment. Option A (exclusive US control) should be our objective. Option B (joint US-Panamanian control as agreed in the 1967 drafts) would give the US the control it needs but could become a serious source of irritation if the Joint Board’s operations were marked by continued disagreement along national lines (i.e., 5–4 splits). The net result would be greater Panamanian pressures for greater control (and the US would not be able to move back to Option A). Option C (multinational control) would raise more problems than it would resolve.

IV. Defense

A. Canal Defense

Comment. Option A (maximum US control) would be the best to assure the defense of the Canal. Option B (Panamanian participation) would be acceptable with the Panamanians exercising routine security and protective functions and with the US retaining effective control.

B. Hemispheric Defense

Comment. Option A (specific treaty rights to conduct hemispheric defense functions from Panama) would best assure the availability of Canal facilities for training, contingency and other operations related to hemispheric defense. Option B (a non-specific but understood permissive clause similar to the 1967 draft treaty) would give rise to serious misunderstandings with the Panamanians if they choose at a later time to reject our interpretation of the permissive clause. Option C (agreements separate from the Canal Treaty for hemispheric defense functions) would be the least desirable since they would probably encounter the greatest opposition within Panama.

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V. Jurisdiction

Comment. Option A (giving up non-essential lands and facilities, with Panamanian jurisdiction over commercial activities and government functions not essential to the operation and defense of the Canal) would be acceptable. Option B (joint US-Panamanian administration, under US majority control, exercising jurisdiction over all activities related to the operation of the Canal, including basic administration of jurisdiction and provision of municipal services—Panamanian jurisdiction over the remainder) would be less desirable because of the difficulties inherent in joint administration noted in III above. Option C (ceding all jurisdiction over Panamanian territory other than the Canal itself and related defense activities, coupled with treaty guarantees against interference with Canal operations) would be risky, and even less desirable, since Canal operations would be too susceptible to harassment by the Panamanian Government.

VI. Perpetuity

Comment. Option A (an open-ended arrangement with the new treaty continued indefinitely unless changed by mutual agreement, coupled with specific provision for periodic review) is the only way we can achieve essential elements of control over Canal operations and defense for the indefinite future. Option B (specific date for termination of US control) has the dual drawback of apparently limiting our control to the earliest termination date in the 1967 drafts and subjecting us to Panamanian future efforts to achieve an even earlier termination date.

VII. Economic Benefits to Panama

Comment. Substantial increases in revenues to Panama from the Canal could prove to be a bargaining counter for those elements of control we wish to retain. Raising Canal tolls to increase revenues may be the means of achieving the controls we wish to retain but could open the door for future pressure for further increases.

  1. Source: National Archives, Nixon Presidential Materials, NSC Files, NSC Institutional Files (H-Files), Box H–216, NSDM files, NSDM 64. Secret. Attached but not published is an April 23 memorandum from Moorer to Laird.
  2. The Department of Defense recommended that the U.S. Government maintain exclusive control over the Canal and assume total responsibility for defense of the Canal. Attached is a 2 page paper titled “Views of the Department of Defense on the Issues Outlined in the Response to NSSM 86.”