Foreign Relations of the United States, 1969–1976, Volume E-15, Part 2, Documents on Western Europe, 1973–1976, Second, Revised Edition

277. Memorandum From Denis Clift and Jan Lodal of the National Security Council Staff to Secretary of State Kissinger¹

Washington, February 6, 1974.

SUBJECT

• Guidance for Secretary Shultz on Offset Talks

We are entering the decisive phase of the offset negotiations. Secretary Shultz has asked that you be informed (memorandum at Tab A) that Helmut Schmidt will be arriving in Washington on February 10 authorized by the Chancellor to negotiate the offset agreement—and that this is the FRG’s response to the President’s recent message to Brandt urging a speedy and positive conclusion to the negotiations.

Brandt in his reply to the President’s message on offset conceded that the overriding priority is to maintain U.S. troop levels in Europe. Thus, it is probably safe to assume that Schmidt will be authorized to agree to 100% offset recognizing the need to satisfy the Jackson-Nunn amendment, but the FRG will insist on being allowed to include a substantial amount of soft items in the agreement.

Treasury has now largely abandoned its earlier opposition to inclusion of “soft items”—e.g., barracks, rehabilitation, loans and flowback—in the offset agreement. Thus, there is now a generally agreed U.S. position.

You may wish to touch base with Secretary Shultz before he meets with Schmidt. Your Talking Points:

—You appreciate his letting you know that Schmidt is arriving authorized to negotiate the offset agreement. While you know that Volker and Casey are preparing him for the talks, you want to touch base briefly on the following fundamental considerations.

—As a result of the President’s recent exchange with Chancellor Brandt, the FRG appears ready to satisfy our basic offset requirements.

—In particular, Brandt recognizes, as we do, the overriding political necessity for keeping U. S. troops at their present levels—and the resulting need to satisfy the provisions of the Jackson-Nunn amendment.

—The FRG, accordingly, knows we need 100 percent offset.

—If they are to give us 100 percent offset, we will have to agree to a substantial percentage in soft items.

—With this in mind, it is important that Secretary Shultz work out an accommodation with Schmidt that gives us our 100 percent offset, with soft items included as required.

Recommendation

That you raise the above offset considerations with Secretary Shultz prior to his meetings beginning February 10 with Helmut Schmidt.

1. Summary: Clift and Lodal advised Kissinger to give guidance to Shultz on his upcoming bilateral offset discussion with Schmidt.

   Source: National Archives, Nixon Presidential Materials, NSC Files, Box 290, Agency Files, U.S. Treasury Jan. 1974–, Vol. V. Confidential; Sensitive; Eyes Only. Sent for action. Attached but not published is Tab A, a February 4 memorandum for the record.