262. Memorandum From the Acting Assistant Secretary of Defense for International Security Affairs (Eagleburger) to Secretary of Defense Richardson1
- US–FRG Bilateral Offset, FY 74–75 (U)
(C) DOD preparations began last summer for bilateral US–FRG offset negotiations scheduled to be completed prior to the 30 June 1973 expiration of the current agreement. The current agreement contains three basic elements: (1) FRG procurement in the US, (2) Bundesbank loan and payment of interest on the loan, and (3) direct support payments to rehabilitate US troop facilities. A background paper on previous agreements is attached.
(C) Mr. Laird reached an informal understanding with FRG Ministers Helmut Schmidt (Finance) in July 1972, and Georg Leber (Defense) in October that the next agreement would be similar in form to the current one and could include completion of the troop barracks rehabilitation program and some new family housing.
(C) Word from Embassy Bonn is that the FRG expects to conclude a new agreement with the US along the lines of the current one, and that the direct support component could involve completion of barracks rehabilitation and other projects, such as renovation of troop operating facilities.
(C) DOD expenditures in the FRG during FYs 74–75 are estimated at $1.815 billion for FY 74 and $2.0 billion for FY 75. Sales to the FRG, optimistically, will be about $500 million for each of the two years. Following are ideas for FRG-funded items surfaced by Defense for consid[Typeset Page 817]eration in this year’s round of negotiations, principally to add to the direct support component of the offset:
—Completion of troop facilities rehabilitation program ($117.5 million).
—Construction of new family housing ($301 million maximum).
—Recurring costs for two years (taxes, rent, aircraft landing fees, etc.) ($168.2 million).
—Ammunition storage safety projects ($33.0 million).
—Environmental protection projects ($36.0 million).
—Rehabilitation of family housing and community support facilities ($342.0 million).
—Responsibility for maintaining US prepositioned equipment.
—FRG takeover of US heavy ordnance rebuild plants.
—FRG operation of supply depots.
—FRG takeover of air defense facilities.
(C) With the issuance of NSSM 170, Offsetting Costs of US Forces in Europe, 13 February 1973, the US–FRG offset is now being handled as part of a study covering both bilateral and multilateral burdensharing issues, under the direction of the NSC staff. We are actively involved in all phases of this effort.
Summary: Eagleburger reported the status of U.S.–FRG offset.
Source: Washington National Records Center, OASD/ISA Files: FRC 330–76–117, 121 Germany 22 Feb 73. Confidential. Drafted by Arthur Chapa in ED/NATO on February 20. Attached but not published is an undated paper entitled, “US/FRG Bilateral Offset.” NSSM 170 is Document 8. On February 22, Eliot sent Kissinger the position paper on U.S.–FRG bilateral offset requested in NSSM 170; the paper recommended that the Embassy in Bonn engage the West German Foreign Office in a preliminary discussion of offset. (National Archives, Nixon Presidential Materials, NSC Files, NSC Institutional Files (H-Files), Box H–196, Study Memorandums, 1969–1974, NSSM,–170)↩