Foreign Relations of the United States, 1969–1976, Volume E–11, Part 1, Documents on Mexico; Central America; and the Caribbean, 1973–1976

278. Memorandum From Acting Secretary of State Rush to the Assistant Secretary of State for Inter-American Affairs (Kubisch)¹

Washington, January 21, 1974.

SUBJECT

• “U.S.-Cuban Policy—Effects of Sanctions on Our Third Country Relations”

At my request, S/PC has coordinated the preparation of several “Issues Papers” in ad hoc study groups outside the normal channels of the Department.

I attach the most recent of these, “U.S.-Cuban Policy—Effects of Sanctions on Third Country Relations,” which was prepared by a group of officers under Brandon Grove’s chairmanship.

The paper proposes several options. I would like to be able to forward it to the Secretary along with ARA’s recommended position with respect to these options. I would therefore appreciate ARA’s preparing a companion paper recommending a position, and relating it, if appropriate, to the Secretary’s meeting in Mexico next month. This paper should be completed and forwarded to me by January 28, in time for the Secretary’s consideration prior to the Mexico Conference.

Kenneth Rush

Attachment

Issue Paper Prepared by the Policy Coordinating Staff

Washington, January 18, 1973.

U.S. CUBAN POLICY: EFFECTS OF SANCTIONS ON OUR THIRD COUNTRY RELATIONS

Introduction and Summary

While we continue to have long-term problems with the Castro regime, and with the Soviets over their important military presence in Cuba, the difficulties arising out of our Cuban policy that are currently most pressing are those which constitute harmful irritants in our relations with third countries.

These irritants result from the continued strict enforcement of our economic denial program against Cuba and from our continued strong support of the companion OAS sanctions policy. They stem from the restrictions we impose (a) on third countries in their relations with Cuba; and (b) on dealings with Cuba by subsidiaries of U.S. firms operating in third countries and subject to their laws.

This paper examines this situation and concludes that, with appropriate preparation and consultation, the time is right for the U.S.:

1) to move to eliminate the extraterritorial reach of its sanctions against Cuba, including seeking necessary changes in legislation; and

2) to move with other members of the OAS to relax mandatory aspects of OAS sanctions against Cuba, while enabling countries like ourselves to continue to apply their own sanctions on a voluntary basis.

The paper suggests that the Foreign Ministers’ meeting in Mexico, scheduled in February, provides a convenient, timely and appropriate setting for the Secretary to inform the Latins that we are prepared, moving in tandem with them, to take these actions.

I. CURRENT POLICY FACTORS

A. Background

The United States has no vital interests in Cuba. We have not had diplomatic relations since January 1961.

Our naval base at Guantanamo is an important deep-water training facility, but could not easily be defended. Its limited strategic value lies in its location astride the sea lines of communication between the U.S. East Coast and Panama.

Castro is entrenched in Cuba, and a successor regime would probably pursue some variant of his brand of socialism.

We are a haven for some 650,000 Cuban refugees. Although their emotional and family ties to Cuba remain strong, their hopes of repatriating to Cuba diminish as they recognize the permanence of Castro’s regime and become assimilated in American communities.

Operationally, the heart of U.S. policy toward Cuba is our economic denial program, a comprehensive body of legislation and regulation covering every aspect of our commerce with Cuba, and much of that of third countries.²

When we failed in the early 1960s to accomplish our original policy objective—the overthrow of the Castro regime—we took the lead in the Organization of American States in 1964 in imposing mandatory economic and diplomatic sanctions against Cuba as a means of maintaining pressure on Castro, and of keeping him isolated in the hemisphere. We still strongly enforce our denial program and consider ourselves largely responsible for the enforcement of OAS sanctions.

This Administration, in line with its policy of dealing with governments as they are, has emphasized Cuban behavior toward us and other hemisphere nations, rather than the existence of a communist regime in Cuba, as the rationale for U.S. policy. This emphasis has not, of course, abated our concern over the Soviet military role in Cuba.

B. OAS Sanctions

Our economic denial program is separable from, and antedates, the mandatory multilateral sanctions voted by the OAS in 1964. Earlier the OAS, in 1962, had excluded the Castro regime from participation in the inter-American system. In 1967, it also approved strong recommendations urging non-member nations to refrain from trading with Cuba.

Under the Rio Treaty, the OAS sanctions are to remain in effect until the Foreign Ministers or the Permanent Council of the OAS, “by an affirmative vote of two-thirds of the members,” determine that Cuba has “ceased to constitute a danger to the peace and security of the hemisphere.”

From July 1964 until November 1970, Mexico was the only Latin American country to maintain diplomatic relations with Cuba, but it too suspended commercial relations.

In recent years, support for mandatory sanctions has declined as Latin perceptions of the threat posed by Cuba have diminished.

In November of 1970 relations with Cuba were reestablished by the Allende government—to be broken again when Allende was overthrown. Chile was followed by Peru, Barbados, Guyana (not an OAS member), Jamaica, Trinidad and Tobago, and Argentina. At the non-diplomatic level, e.g., in culture, information and sports, contacts have increased steadily, particularly in Panama and Venezuela.

During the last half of 1973, the outgoing Venezuelan Government pressed for a majority vote in the OAS on a resolution that would, in effect, render sanctions voluntary by freeing each member of the OAS to establish relations with Cuba if it so wished. Costa Rica has suggested the removal of sanctions altogether.

As of late 1973, of the 23 active members of the OAS only 8 (including Brazil) remained fully committed to sanctions. Eleven countries overtly favored relaxing or lifting the sanctions. Several others leaned toward abstention on a sanctions vote, an indication of non-support.

A majority vote (12) in favor of making sanctions voluntary would have the practical effect of ending the mandatory aspect of OAS sanctions, notwithstanding the requirement for a two-thirds vote under the Rio Treaty.

The competing Venezuelan and Costa Rican formulas delayed a vote. More recently, events in Chile caused both formulas to be put aside temporarily. The recent Venezuelan elections have further clouded the voting picture by bringing into office leaders critical of Castro in the past.

While the issue of Cuban sanctions is thus not now a pressing item on the OAS agenda, its temporary eclipse provides an opportunity to review the U.S. position, to choose among options should we decide on change, and to influence positively the course of future OAS deliberations.

Important trade-offs are involved. U.S. support of a voluntary sanctions formula would remove some of the restraints on the expansion of Castro’s relations in the hemisphere. This can be offset, however, by the favorable atmosphere our move would create elsewhere in Latin America. On the other hand, Castro’s reincorporation into the Latin American community over U.S. opposition—another possibility—would of course be damaging to us.

The current debate over the Rio Treaty itself gives the problem an added dimension. An OAS Special Committee to reform the inter-American system is considering, inter alia, proposals for radical and undesirable modifications of the treaty. These could probably be headed off by U.S. support for a compromise on what many Latins see as a key problem: a voting system under which one-third of the membership can block the modification or lifting of OAS sanctions (e.g., the case of Cuba)—against the will of a majority.

C. Soviet Interests

The Soviets attach importance to the political benefits of their position in Cuba: a presence they view as a factor, albeit small, in the world balance of power; a symbol of their great power status; and a visible counterpart to the U.S. military position on Soviet borders.

Cuba also has a real if limited military value to the USSR as a base for naval reconnaissance aircraft, a replenishment and maintenance facility for naval ships and submarines and, potentially, as a forward base for ballistic missiles and attack submarines.

In an all-out war situation such facilities would be highly vulnerable and thus of questionable value beyond the strategic build-up period prior to the outbreak of hostilities. Despite this, the Soviets will seek to retain their military presence in Cuba, even though it does not appear to be an essential element of their strategic posture.

Modification of this presence would be primarily a function of U.S.-Soviet and not U.S.-Cuban relations. The Soviets might even view variations in their Cuban presence as potential bargaining chips in bilateral negotiations with the U.S.

Chairman Brezhnev’s visit to Cuba illustrates the strengthening of Soviet-Cuban ties over the past four years. Cuba’s economy is intimately linked to the Soviet economy. Cuba’s accession to membership in COMECON in 1972 suggests closer economic ties with Eastern Europe.

Keeping Castro in business has become increasingly costly to the Soviet Union. Moscow’s expenditures are now estimated to be well over $1.5 million a day. Our economic denial program has had little direct bearing on current Soviet costs, which derive mainly from Cuba’s balance of payments needs. Our policy has had no apparent effect on Soviet determination to continue to bear these and other costs in Cuba.

The Soviets would welcome relaxation of OAS sanctions against Cuba. They would presumably also welcome a U.S. decision to seek improvement in relations with Cuba as this would diminish the potential for conflict in the area, slightly ease the Soviet economic burden, and promote acceptance of a communist state in the hemisphere.

Cuba’s dependency now appears to be such that Moscow perceives no immediate threat to Soviet military and political interests in Cuba from the prospect of better U.S.-Cuban relations.

II. ASSESSMENT OF THE POLICY

A. Policy Accomplishments

The U.S. economic denial program has contributed somewhat toward:

—complicating Cuban attempts at subversion abroad, thereby inhibiting the export of revolution which has declined markedly in recent years;

—making more difficult Cuba’s efforts to increase commercial and financial relationships with non-Communist countries outside the Western Hemisphere, e.g., in Western Europe and Japan;

—discouraging some Latin American countries from reestablishing relations with Cuba;

—increasing Soviet costs of maintaining the Cuban economy; and

—demonstrating to Cuban refugees in the U.S. our support of their cause.

Despite this, Castro has not only survived: he has consolidated his position in Cuba, strengthened his ties to the Soviet Union, and has become increasingly acceptable in the hemisphere and in international councils.

B. Policy Costs

1. Third Country

In an ever more nationalistic Latin America, where U.S. pressure has been primarily responsible for keeping mandatory OAS sanctions alive, many Latins view our Cuban policy as contradicting our advocacy of a more mature partnership.

The consistent application of our economic denial program interferes, sometimes seriously, with the conduct of our relations with OAS and other third countries who wish to carry on normal commercial and other relations with Cuba.

The extraterritorial reach of our economic denial program in recent years has impinged upon the sovereignty of, and come into direct conflict with, foreign and commercial policy interests of Argentina, Australia, Belgium, Canada, France, Italy, Japan, Mexico, the Netherlands, Peru, Spain, the UK, Venezuela, and other nations.

In an important spillover, our policy is increasingly affecting the operations of U.S. business subsidiaries abroad.

Argentina: A Critical Example

In August of 1973, the Argentine Government (GOA) extended to Cuba a one-year $200 million line of credit for Argentine capital goods, potentially renewable for five successive years. It did so to stimulate Argentina’s economy and to demonstrate political independence of the U.S.

Subsidiaries of U.S. firms (including Ford, General Motors, Chrysler, Borg-Warner, Clark Equipment Company, and Goodyear Tire) are now under GOA pressure to sell to Cuba under this credit. They have expressed strong concern over possible penalties against them if they are prevented by our Cuban Assets Control Regulations from exporting to Cuba. Our decision on license applications from GM, Borg-Warner and Chrysler is pending.

Although fully informed about our economic denial program, the GOA shows no signs of exempting U.S. subsidiaries from participation. It has told us that U.S. companies which seek the advantages of incorporating subsidiaries as Argentine companies must also subject themselves to Argentine laws or face unfortunate consequences. Our investment stake in Argentina amounts to about $1.3 billion, mostly in manufacturing.

Our Embassy commented on December 13, 1973 as follows:

“Argentina is committed, as a matter of high national priority, to expanding its exports of manufactured goods. The GOA’s attempt to enlarge its share of the market in Cuba is a part of that effort. U.S. sanctions will not deter the GOA from carrying out its Cuba policy, though their application by the U.S. may succeed in embittering our relations.”

In addition to complicating our relations with Argentina, this problem carries broader implications for us. Forced participation of U.S. subsidiaries in Argentine exports to Cuba will make it considerably more difficult for U.S. companies to resist similar pressures on subsidiaries elsewhere, e.g., in Peru, Mexico, and Canada. The affected companies, and others, will be less likely to continue to adhere to our economic denial program—and more likely to press for further relaxation in its application.

Venezuela: Another Example

Shortly before its hotly contested Presidential election last December 9, Venezuela purchased 5,000–6,000 tons of sugar from Cuba and sent a Venezuelan naval vessel to Havana to effect shipment.

Our Embassy in Caracas was instructed to inform the GOV that under the Foreign Assistance Act of 1961, as amended, shipping Cuban sugar in Venezuelan vessels would make Venezuela ineligible for further U.S. assistance—including MAP training for which $1 million is programmed for FY 1974. Ineligibility can be waived only by the President, but no such waiver has previously been given for violations of the Cuban sanctions.

Managing this problem, as yet unresolved, is a difficult undertaking for us. During the election campaign the matter was handled discreetly by both our Embassy and the GOV, which chose not to make our representations public. However, the issue could easily become public—unavoidably so if we should apply sanctions—and thus complicate our relations with both outgoing and incoming Venezuelan administrations, the latter manifestly more in tune with our foreign policy objectives than the former.

2. Bilateral

U.S. policy toward Cuba, and Cuban policy toward the U.S., have assured that relations between us remain hostile, subject to continuing tensions that reinforce this hostility and sometimes affect other countries.

We have exerted the strongest diplomatic and economic pressures against Castro without securing either his downfall or acceptable behavior toward us.

Our policy in effect tends to freeze both our options and Castro’s. At the same time, it continues to provide him a scapegoat to alibi Cuba’s economic performance and a convenient target for his propaganda abroad. An atmosphere of mutual suspicion and distrust all but ensures Castro’s continued dependence on the Soviet Union.

C. Conclusions

Our sanctions policy has now become a net liability to the United States:

1) It has not prevented Castro from consolidating his power in Cuba, strengthening his ties to the Soviet Union, or becoming increasingly acceptable in the hemisphere and elsewhere.

2) It carries the potential for damage to important bilateral relations with other countries, adversely affects U.S. business interests abroad, and weakens the effectiveness of the Rio Treaty.

3) It deprives Castro of a viable alternative to his close ties to the Soviet Union.

III. OPTIONS FOR CHANGE

A. Rationale

The three options of this paper primarily address those aspects of our policy toward Cuba that affect third countries, because our most pressing and time-sensitive problems lie in this area.

Under all of these options, our bilateral policy toward Cuba would not change.

The options are predicated on the assumption that continued good relations with third countries, particularly in the hemisphere, are more important to us now than improving our bilateral relations with Cuba.

They also assume that relevant legislation can be amended at acceptable domestic political costs.

With regard to timing: the current temporary respite from Latin pressures in the OAS makes it easier now for us to shift our stance on OAS sanctions, and to modify our own economic denial program as it affects third countries. We can do this as a positive and unforced contribution to the new dialogue that will begin in Mexico.

Operationally, as long as our bilateral relationship with Cuba remains unchanged, a voluntary OAS sanctions formula (rather than outright lifting of the sanctions) would best serve U.S. interests. It would retain the international legal basis for the continuance of sanctions by us and others wishing to maintain them.

While even a U.S. abstention in a vote on sanctions in the OAS might give us limited influence in determining the kind of resolution to be adopted, we could probably assure a two-thirds vote (per current Rio Treaty provisions) for a resolution satisfactory to us by making known in advance that we would vote for voluntary sanctions.

Tactics aside, we would under each option continue to implement our own economic denial program as it affects Cuba directly, but would waive application of (or amend, as necessary) legislation or regulations affecting dealings with Cuba by third countries or by U.S. commercial entities in and subject to the laws of third countries.

We would cease pressuring third countries that are not subject to U.S. legislation or regulation, e.g., Japan, against dealings with Cuba.

Also implicit in the following three options is the requirement that we meet our oft-repeated commitment to consult OAS countries on any decision to modify our policy toward Cuba before implementing such a decision. The Mexico meeting provides a unique opportunity to begin such consultations.

Finally, the domestic as well as foreign policy repercussions of these options require consultation with key congressional leaders, perhaps even before Mexico. Any movement on Cuba will generate both positive and hostile public reactions.

In terms of our bilateral relations with Cuba, the varying degrees of movement inherent in these options can serve to:

—open possibilities for an improvement in the tone of our relationship with Cuba; and

—clear away underbrush impeding possible future moves to improve the relationship itself.

Lessened tension and hostility would, if opportunities arose, permit the exploration of such moves.

In considering changes in U.S. policy, the following possible options have been rejected:

—a unilateral “stand pat” option, because it is inconsistent with the findings of this paper;

—a bilateral “rapprochement” option, because it would be premature, it would be inconsistent—and in conflict—with our commitments to OAS countries, and it would exaggerate the importance we attach to Cuba per se;

—a trilateral “Soviet good offices” option, because it would be undesirable to accord the USSR the role of “honest broker” in the Western Hemisphere, and because such an approach might convey the impression that we are more tolerant of Soviet military presence in Cuba than is the case.

B. The Options

1. The “Acquiescence” Option

Under this option, the U.S. would acquiesce passively in moves by OAS countries and others to carry on activities they deem to be in their interest with regard to Cuba. The Secretary would inform the Latins at Mexico that we would lobby neither for nor against efforts to modify OAS sanctions, that we would abstain on any vote on this issue in the OAS, but that we would seek to eliminate applicability of the U.S. economic denial program to third countries, and to U.S. subsidiaries in third countries.

This option would:

—give us some limited influence over the manner in and degree to which change in OAS policy toward Cuba would take place;

—remove serious irritants in our relations with Latin American and some other countries;

—ease the propaganda effect of an eventual public defeat of our present position in the OAS;

—prevent issues arising out of our Cuba policy from clouding the proposed new dialogue between the U.S. and Latin America;

—remove a complication in U.S.-Soviet relations by enabling us to permit Soviet vessels in the Cuban trade to bunker in U.S. ports;

—provide potential incentive for Castro to modify his attitude toward us;

—show that we are willing to let the Latins take the lead on an important hemispheric matter; and

—facilitate further movement away from our current bilateral policy when and if conditions become appropriate.

It would also:

—represent a shift in the U.S. position perhaps significant enough to impel the OAS toward an early modification of sanctions, though not necessarily by a two-thirds vote;

—remove constraints on some Latin American governments wishing to reestablish diplomatic relations with Cuba, and on other third countries wishing to expand commercial relations with Cuba;

—be interpreted by Castro and others as at least partial “capitulation” by us without necessarily lessening the hostility between the U.S. and Cuba or enhancing our ability to deal with practical problems between us;

—perhaps signal the Soviets an acceptance of their presence and military activity; and

—generate momentum toward the removal of sanctions altogether, either in the initial OAS vote or later.

2. The “Move With” Option

Under this option, we would actively move with the sentiment to make OAS sanctions voluntary. We would attempt to assure a two-thirds vote on the issue by making it known to the Latins in Mexico that we would vote with the OAS majority in order to facilitate our third country relations as these are affected by our Cuban policy, and to preserve the integrity of the Rio Treaty. We would also indicate our intent to eliminate applicability of the U.S. economic denial program to third countries and to U.S. subsidiaries in third countries.

This option would:

—give us strong influence over the manner in and degree to which change in OAS policy toward Cuba would take place;

—enhance the other advantages of the previous option;

—be an earnest of our resolve to engage in a fruitful new dialogue with Latin America;

—endow us with greater flexibility in dealing with proposed modifications of the Rio Treaty;

—transfer the onus for isolation of Cuba from U.S. pressure to Castro’s own behavior;

—contribute to potential improvement in the general atmosphere between Cuba and the U.S., leading to a possible easing of the hostility between us; and

—provide the Soviets with an opening to nudge Castro, if they wish, toward a less hostile relationship with the U.S.

It would also:

—remove international constraints on Latin America and third countries wishing to establish or expand relations with Cuba;

—afford Castro the short term propaganda advantage of claiming that we had finally been forced to accept the Cuban revolution;

—antagonize anti-Castro and anti-Communist sentiment in the U.S. and Latin America, e.g., in Brazil, Chile, Paraguay and Haiti; and

—encourage immediate pressures from within the U.S., including from business groups, to move toward normalization of our bilateral relations with Cuba.

3. The “Take the Lead” Option

Under this option, we would take the lead in the OAS by proposing to the Latins in Mexico that the Organ of Consultation be convoked under the Rio Treaty and offering our own draft resolution to make OAS sanctions voluntary. We would also seek to eliminate the applicability of the U.S. economic denial program to third countries and U.S. subsidiaries in third countries.

This option would:

—enhance most of the advantages of the previous two options; and

—provide Castro with an unequivocal signal of a positive policy change by the U.S. which could facilitate a future decision to move gradually toward improvement in our bilateral relations.

It would also:

—be subject to the interpretation that we have fully accepted Castro and his revolution, as well as the Soviet presence in Cuba;

—enhance other disadvantages of the previous options; and

—encourage Castro to sit back and await further “concessions” from us.

1. Summary: Rush submitted a paper prepared by the Policy Planning Staff presenting options for reducing the negative impact that sanctions against Cuba had on U.S. relations with other countries.

   Source: National Archives, RG 59, Central Foreign Policy File, P850053–0117. Secret; Limdis. An attached list of supporting documentation and an annex on the legislation and regulations constituting the U.S. program of economic denial against Cuba are not published. In a February 2 memorandum to Rush, Kubisch ageed that “our present sanctions policy has become a net liability to the United States” but noted that Kissinger had made clear “that he is not contemplating any change in our policy on Cuba at this time.” Kubisch stated that of the options presented in the paper, ARA favored either the “acquiescence” option or the “move with” option. (Ibid., P850051–2424)

2. See Annex. [Footnote in the original. The annex is not published.]