29. Memorandum From the President’s Assistant for National Security Affairs (Brzezinski) to President Carter1
- Claims/Assets Negotiations with the People’s Republic of China
You requested that State probe the Chinese for their position on the claims/assets issues. This has been done, with the results which Vance summarizes at Tab A. Vance concludes that the Chinese position offers little prospect for successful negotiations at this time. I agree and share in his recommendation that no further probes be conducted. This is a complex issue, however, and I think you would be interested in the details and your options.
While we believe we have legally blocked nearly $76.5 million (1976 value) of Chinese assets, the Chinese do not recognize the legality of our blockage. Our attempts at blockage extended to PRC deposits as of 1950 in third countries (Britain, Belgium, etc.), where we sought to block $23.5 million. PRC has successfully drained $17 million of their assets in third countries. We also blocked $12 million in assets held by third country agents of the PRC (e.g., covertly sponsored PRC corporations in Hong Kong).
In short, of the $76.5 million in blocked assets, only $41.5 million are blocked, directly owned PRC assets here in the U.S.
The difference between $41.5 million and $76.5 million is crucial, given the $196 million in private, U.S. Government certified claims against the PRC, for it is the difference between a 22¢ and 40¢ settlement. (Historically, Congress has tended to accept 40¢ settlements, though it rejected a 42¢ settlement with Czechoslovakia in 1974.)
In 1973, Chou En-lai offered to restore the $17 million which the PRC had drained from third country accounts. Subsequently, the Chinese withdrew this offer. (Neither the offer nor the withdrawal has been made public; in fact, very few people know about it.) Our probe reveals the Chinese have no interest in sweetening the kitty at this time.
This leaves you with three options:
1. Reach a settlement, and accept roughly 20¢ on the dollar. This probably would not be acceptable to Congress.[Page 88]
2. Persist in discussions with the Chinese, to see whether an agreement can be reached which would yield 35¢–45¢ on the dollar. However, there is no sign the Chinese will be flexible.
3. Let the matter rest. An aura of good will, as existed in 1973, probably will be necessary in order to prompt Chinese to contribute to a settlement. Vance recommends this option, and I agree for the time being.
In broader terms, this unsuccessful probe probably underscores the importance the Chinese attach to the Taiwan issue and to wider political accommodation as a precondition for improving formal bilateral relations.
That you approve Secretary Vance’s request to defer this issue.2
- Source: Carter Library, National Security Affairs, Brzezinski Material, Country File, Box 8, China (People’s Republic of): 3–6/77. Secret; Sensitive. Sent for action. A handwritten “C” at the top of page indicates Carter saw the memorandum.↩
- Underneath the recommendation, the President wrote, “OK. J.”↩
- Secret; Nodis.↩
- See Document 27.↩
- During a news conference on May 12, Carter was asked whether he had set a target date for normalization of relations with China. He replied: “Well, it’s very difficult for me to set a target date, because this is a two-way negotiation. We have commenced discussions with the Chinese Government to resolve the first obstacle, and that is the claims settlement. Long years ago, we had roughly $190 million worth of American property and other goods confiscated by the Mao Tse-tung government. We in our country confiscated in return about $80 million, I believe, primarily in Chinese bank deposits. We’ve never been able to work out those differing claims. That would be the first step.” (Public Papers: Carter, 1977, p. 863)↩
- Carter checked the Approve option, under which he wrote: “We should assess before your visit what—if anything—China has done in the last 10 years that was flexible or constructive. I can’t think of anything. J.” In a May 26 memorandum to Vance, Brzezinski stated, “The President has approved the recommendation contained in your memorandum of May 17.” (Carter Library, National Security Affairs, Brzezinski Material, Country File, Box 8, China (People’s Republic of): 3–6/77)↩