Foreign Relations of the United States, 1977–1980, Volume XXVII, Western Europe

118. Memorandum of Conversation¹

Washington, June 6, 1979, 1:10–2:50 p.m.

SUBJECT

• Summary of the President’s Meeting with Chancellor Helmut Schmidt

PARTICIPANTS

• President Jimmy Carter
• Secretary of State Cyrus Vance
• Secretary of the Treasury W. Michael Blumenthal
• Ambassador Walter Stoessel
• Dr. Zbigniew Brzezinski, Assistant to the President for National Security Affairs
• Ambassador Henry Owen
• Mr. David Aaron, Deputy Assistant to the President for National Security Affairs
• Mr. George Vest, Assistant Secretary of State for European Affairs
• Mr. Robert Hunter, National Security Council, Notetaker
• Chancellor Helmut Schmidt
• Dr. Manfred Schüler, State Secretary, Federal Chancellery
• Mr. Klaus Bölling, State Secretary, Press and Information
• Mr. Günther van Well, State Secretary, Federal Foreign Office
• Ambassador Berndt von Staden
• Professor Dr. Alex Möller, Former Federal Minister of Finance
• Countess Marion Grafin Dönhoff, Editor, Die Zeit
• Dr. Jürgen Ruhfus, Assistant Secretary for Political Affairs, Federal Chancellery
• Dr. Horst Schulmann, Assistant Secretary for Economic, Financial and Social Affairs, Federal Chancellery
• Dr. Gerhard Konow, Assistant Secretary for Internal Affairs, Federal Chancellery
• Mr. Heinz Weber, Interpreter

The Chancellor began by saying that he had been told this morning by some Americans that Harry Truman was the greatest of the 20th century Presidents. Others said it was FDR.

The President said that Truman is his favorite. He understands that the Chancellor had a good meeting with a group of Senators on SALT last night.² He wants to thank him for his support for him (the President) and for SALT. He is pleased to have the opportunity to see the Chancellor. It is good that he is here. He (the President) is feeling like an elder statesman, with the attrition rate among their colleagues! He is glad the two of them will be at Tokyo.

The Chancellor said that at Tokyo he and Valery and the President will be the only old hands.

The President said he hoped Andreotti would be there.

The Chancellor said he was not sure he would be.

Secretary Vance said that Andreotti told him that he would in all likelihood be there.

The Chancellor said he hoped so.

Secretary Vance agreed.

The President said that they will meet here in the Cabinet Room for a few minutes, then meet privately with notetakers, and then have a tete-à-tete.³ They have a large agenda, as is always true between close friends and Allies. He will defer to the Chancellor on the agenda, but would suggest talking about energy (including oil and nuclear), the Vienna Summit (including SALT II and preparations for SALT III), TNF (where their consultations are both constant and close), and other areas of action for both their countries, and where he would welcome the Chancellor’s advice, including the Middle East, Saudi Arabia, China, southern Africa, inflation, monetary and budgetary issues in the United States, and Turkish aid—in carrying out the Guadeloupe agreement. The rest of the agenda is some confidential items. MBFR needs to be pursued between the two of them. Some of this will come up at the Vienna summit, but the U.S. will be constrained by guidance from the FRG. What are the Chancellor’s views?

The Chancellor said that these are the points that they have and which he has prepared for. On the Middle East, there are several questions. On southern Africa, two or three questions. He has never seen so benevolent a June in Washington. It is cooler than Hamburg was over Whitsuntide.

The President said it is very pleasant now.

The Chancellor said a recent Soviet visitor had told him it is very warm in the Soviet Union, such that it is likely to have bad crops.

The President said that we have had reports about dry areas, wind storms, and some parching of crops. And last year they made large grain purchases.

The Chancellor said that is a pity that parching has no effect on Soviet hardware!

The President said that that doesn’t figure very large in their consciousness! The Chancellor has been talking about oil with other officials.⁴ We are increasingly concerned with the oil situation. In the U.S. political realm, there are several problems: shortages, price rises, spot shortages in tractor fuel and home heating oil. This is our number one political issue. Congress, however, is now more willing to act. OPEC has increased its prices by 30% so far this year, and the price may go up more during 1979. The spot market on some products has actually risen to $52 a barrel. There is a one- to two-million barrel a day shortage in the world, made more difficult by an uncertain system of global distribution.

The Chancellor said that all governments are having trouble convincing their public of the necessities in this area, and thus the troubles are compounded. Some want to believe that there are no shortages, that it is a conspiracy by the companies. Others want to believe that nuclear power will destroy mankind’s environment. And still others believe that no extra energy is needed while maintaining full employment. We need to bundle our efforts together and convince public opinion. This will be easier if we act jointly.

The President agreed. He hopes they can reach a common approach on limiting imports, dealing with price distortions, and limiting competition in the spot market. If we can agree, this will work, and some responsible OPEC countries might join in. With the Iranian situation, there has been some cut in production by other OPEC countries, increasing their incomes through pushing up the price in an indiscriminate way. Our costs for oil this year will go up $20 billion, even if there is no further price increase.

Secretary Blumenthal said that last year the cost was $42 billion, and it will be in excess of $52 billion this year. If the price rises from $18 a barrel, then the cost will be $54–55 billion.

The President said that the oil companies buy products at much higher prices.

The Chancellor said that there is a need to see the energy field from two angles: first, on decisions to take now. Some are medium and long term, some are stop-gap. To make the policy credible, to impress the producer countries, and to channel restructuring efforts in economies, then we need a second approach: long-term answers. He would like some of these to come out at Tokyo. The long-term necessity includes the role of conservation, and the role of nuclear power—which will be needed for two to three decades (and on which we need jointly to prepare public opinion). On fast breeders, there are perhaps ten years in which to decide, but the option should not be foreclosed. Also there is coal, lignite, shale. We should jointly urge putting regularly great sums into research and development for new technologies, in effect to use coal and develop inexhaustible resources like geothermal, etc. Otherwise there will be economic disaster: in the first instance for the developing countries, in the second instance for the industrial countries. This order of events is not understood in developing countries, nor was it at the Manila UNCTAD meeting. We are heading to an economic crisis, deeper than that of 1974–77, because of oil.

The President said that this was an excellent analysis. There is a package before Congress. Oil price decontrol started here on June first, and will bring prices up to the world level. He has proposed a windfall profits tax, taking 50% plus OPEC price increases over $16 a barrel. This will go into a fund for research and development and for rapid transit. We also need to explore an agreement not to bid above the OPEC price on the spot market, and to minimize the role of the spot market to establish prices in OPEC minds. OPEC profits go up as the spot market goes up. Even though it is only 3% of the global market, it affects prices severely. We all would be more at ease in accepting this approach if there were an IEA distribution system. We also need to get the help of the developing countries. Before, they saw us as enemies.

The Chancellor said that they have now had second thoughts. He has worked on this for two years. With regard to the spot market and allocation, some countries (not Germany) would have reservations. He is not sure it would function well, or in a year or so. It could only be a stop-gap.

The President agreed. It could not be long term. But the spot market is now out of control. This approach could be done without confrontation with OPEC; they have called for conservation, and asked us to minimize the use of the spot market price. This is tongue in cheek, but we can use their statements as a basis for action.

On Three-Mile Island, our analysis is nearly done. We will share it with West Germany and others.

The Chancellor said that this will be welcome. Publics need to be convinced that all is being done that is possible. We will not really learn very much, but will show that we are learning what is possible.

The President said that he doubts the report will assugge U.S. concerns about nuclear power. In London (May 1977) he had said that the U.S. was aroused on this issue; now Europe is, as well.

The Chancellor said that all social diseases come from the U.S.!

The President said we also keep them!

The Chancellor disagreed. Campus unrest, for example, came to an end here first.

The President said that while he was campaigning back in 1976, 22 out of 50 states had already placed referenda on the ballot on nuclear power. Most were defeated; but the issue will stay with us. There is a need now for light water reactors. In his budget proposal there is $500 million on breeder research, and we are committed to this R and D. No pilot plant is needed now, since we have sufficient light water reactor fuel. We do have a light water breeder, under Rickover. They can talk about this subject at Tokyo. They should assess the oil issue before the OPEC meeting.

The Chancellor said that he had talked with Secretaries Blumenthal and Schlesinger; our countries are on a converging track. It may not be necessary to go into those issues now. But they had not dealt with economic policy going beyond energy. His view is that the U.S. has been very successful (though perhaps too much in too short a time) on stabilizing the dollar.

The President joked that this is what the Chancellor had asked for!

The Chancellor said that he wasn’t criticizing.

The President said that the Chancellor had been an important help.

The Chancellor said that the U.S. was more successful than many observers had expected. He hoped we would not lapse back. If we look to the results of U.S. monetary and fiscal policies, we had done better than expected. He is fully satisfied we would not see the dollar go too high. Perhaps we could flatten its volatility, but it is healthy for the U.S. and for the world to see a powerful and respected dollar again. This is appreciated.

The President said that we will continue to address the underlying causes of inflation. His goal in the 1981 budget is a balanced budget. He has cut a $66 billion deficit to close to $25 billion now. If economic circumstances do not drastically change, he will be able to balance the budget.

The Chancellor said that this alone will not end inflationary trends. With monetary policy restrictions, there will be some hardships for firms and workers. In Germany, they had a drop in the inflation rate from 7.9% to 2.6% in five years.

The President said he tries to get the American people to learn patience on this.

The Chancellor said that it is a problem of sweating it out. They faced price increases from deficits incurred by the United States government and others. The FRG now has 3.5% of its GNP in deficit public spending; the U.S. is about half that rate. The FRG had a 2.5% inflation rate, and now it is 3.9%. This may reach 5% by the end of 1979. This is the proof of what he had told the President last year, that he would be pressing Germany to reinflate. This leads to inflationary pressures, which are also nourished by the dollar’s rise and the fall of the Deutschmark.

(The President then adjourned the plenary session at 1:35 p.m. The President took the Chancellor into the Oval Office for lunch where they were joined by Juergen Ruhfus and Robert Hunter as notetakers for the private meeting. The rest of the group went to the Roosevelt Room for lunch.)

(The President and the Chancellor Schmidt reconvened in the Oval Office for lunch at 1:40 p.m., the Chancellor joking to the notetakers that he had pressed a button in the lavatory, and “now you have an emergency declared, I guess”.)

The President asked Chancellor Schmidt if he is a fisherman.

The Chancellor replied that he is only a sailor. At Guadeloupe he did manage to catch one fish, however.

The President said that maybe the Chancellor is a fisherman without knowing it.

The Chancellor said that many politicians fish for compliments. Has the President had the Oval Office redecorated, it looks different?

The President said that the changing light at different seasons and times of the day makes it look different.

The Chancellor asked about Mrs. Carter.

The President said that she is great. She has been touring Georgia and New Hampshire, making 7 speeches, and a number of dedications.

The Chancellor said that Mrs. Carter is now becoming a full-time professional.

The President said that she has always been; though most people don’t know that. He continued that he has been studying the character and attitudes of President Brezhnev, and is looking forward to their summit in Vienna.⁵ They have asked for, and we have agreed to, a strenuous schedule. They will have meetings for four hours each day, and talks at social events in the evenings. This was a surprise to us. They proposed a communique that was remarkably acceptable to us. It is primarily about SALT II, and is general on other areas.

TNF

On TNF, he (the President) would like to hear the Chancellor’s views. They have exchanged letters recently.

The Chancellor thanked the President for his reply.⁶

The President asked whether his letter accorded with the Chancellor’s views.

The Chancellor said that he told Harold Brown this morning that he (the Chancellor) as a person is not satisfied with a publicly set deadline. He hopes it can be fulfilled, but it could lead to superficial decisions on some important details. He would hate for them to have to be amended, after the effort in getting public and parliamentary agreements, in Holland, Belgium, etc.

The President said that if we find that the deadline is too rigid, we can delay it.

The Chancellor said that we shouldn’t water it down now, but not commit ourselves too strongly to it now, either. The parliamentary process will be as difficult for them (the Germans) as the SALT II ratification process is for the President.

The President said that SALT ratification will indeed be very difficult (and the Chancellor agreed). He asked the Chancellor about the possibility that other Allies would agree on the deployment of cruise missiles or the Pershing II Extended Range missile. And how best can the two of them work together to get the cooperation of other Allies? If they (other Allies) reject deployments, politically, this would be a terrible signal to send to the Soviets, that we could not meet the challenge of the SS–20.

The Chancellor agreed. Therefore, he asks that we not let ourselves be hamstrung by timing, in order to permit trying out different mixes of weapons and deployment options. If the other Allies refuse, then it (i.e. TNF deployments) will not be done.

The President said he understood. He hopes by then that talks will have started with the Soviets on SALT III.

The Chancellor asked if that meant by the end of 1979.

The President agreed; and there will be preliminary discussions at Vienna, not including TNF, but on RV and missile limits. He thinks the Soviets will be reluctant to discuss specifics at Vienna, but we will explore with them some specific suggestions. There is a necessity for decisions taken by European countries on deploying cruise missiles and Pershings to be tied in with common decisions on TNF arms control. This is not a rigid tying, but an association of the two subjects. Therefore, he has wanted movement on this in 1979.

The Chancellor said that acceptance of a mix of weapons—what he calls Eurostrategic weapons, to offset the SS–20 and Backfire—in the minds of parliaments and public opinion in Europe, depends in part on the credibility of the United States’ undertaking to include mutual limitations of Eurostrategic weapons in SALT III. There is some danger, that is not taken seriously by some opponents in Western Europe, that at the end one will say one has to deploy new long range TNF even without an idea of optimum limits on Eurostrategic weapons.

The President said that we will be in the forefront on this issue, and will assume the leadership role, working with ‘‘you.” We will make a commitment to spending on the development and deployment of Pershing II and cruise missiles. If SALT III is successful, then we can decide accordingly; if the Soviets agree on limits, then we can cut back on TNF deployments. The only cost in that case would be in terms of U.S. spending that would already be done. We are ready to move, cooperating closely with the FRG. We need early guidance and responses from European nations. If we cannot meet the December schedule, then we can modify it. In July, after Tokyo, David Aaron will go to Europe with an outline of our TNF ideas.⁷ Bonn will be the first stop, if the Chancellor agrees. Aaron will get the FRG response before he goes to the other Allies. He will discuss the level of potential deployments, and how to deal with the issue politically.

There is a problem to be faced—where the President and Chancellor may disagree—concerning how much emphasis to place on sea-based weapons. Some nations may not want Pershings or GLCMs on their soil, and therefore will focus only on sea-based weapons. However, if we open this up as a viable option, then all will say they want U.S. ships cruising offshore with TNF, and have no land-based deployments.

The Chancellor agreed that these countries should not be provided with an easy way out.

The President agreed.

The Chancellor said that this is not to say that sea-based weapons will not at the end be in the total mix.

The President agreed.

The Chancellor said that ships involved could use various ports, and that it might be possible to induce Denmark, then Norway, to let them in. But they should not be given this way out in the first instance.

The President said absolutely.

MBFR

At Vienna, he will talk with Brezhnev about MBFR, but will not get separated from the Allies.

The Chancellor said that Zbig had told him about Soviet overtures, but now they are silent.

The President said there had been overtures, and he understands they have stopped their Warsaw Pact allies from coming forward with information on the data base. He doesn’t know the attitude the Soviets will take on MBFR at the Summit. Indications are that Brezhnev wants to discuss it; and indications are that he wants to break the impasse. Some of his (the President’s) advisors, based on low-level talks with the Soviets, believe they have lied on their deployment figures.

The Chancellor said that he would not say “lied” in the first instance. Perhaps they later found that their figures were in fact higher, and this became a prestige matter.

The President said he would give them the benefit of the doubt. [less than 1 line not declassified] The problem now is to find a way for them to get their numbers up without embarrassment. On the definition of an armed soldier, they say we include men in their forces we would call civilians in ours.

How does the Chancellor feel about the paper Zbig had given him on Associated Measures?⁸

The Chancellor said he is not sure about the latest developments. He seems to be informed that Cy Vance and others, and Genscher, thinking on a reply to the Budapest communique of the Warsaw Pact of a couple of weeks ago,⁹ seem to be tentatively agreed that, in the future, they should divide a line between purely confidence-building measures—which would then be in accordance with Budapest—which would be discussed at CSCE in Madrid and, number two, verification measures, which should be under MBFR. This seems to him to make sense. It also seems to be acceptable to the Soviet Union. Therefore this leaves associated measures in MBFR as far as verification is concerned. We have used up too much time to come forward on this. In the first instance, some U.S. aides have too generously disposed of the pathological impact of some associated measures on his people. Germany is the size of Oregon with 61 million people. Some U.S. officials seem disposed to see 150 Soviet teams; this would be difficult to digest by his people. Could we see this in Oregon? This is difficult to see. Therefore, there is a need to redress the order of magnitude in a qualitative way: such as inspection on challenge.

The President said that the question is whether we can agree on how to accommodate the Chancellor’s concerns, and to find a way to make the Soviet Union comply with an agreement.

The Chancellor said that they cannot have 150 inspection teams.

The President said he had never heard of this. He thought there would be about 20 inspections a year, in a small area, so that it would be a year and a half before any particular area was covered. He has not gone into the detailed analysis; the Chancellor is more familiar with it.

The Chancellor said that he still feels, to get MBFR is in the interests of all, and especially of Germany. His position in the FRG is the most favorable. Others are more skeptical, as the President’s officials will have noted.

The President said that the question is how to proceed before Vienna. We have a paper, and will give it to the Germans.¹⁰ He will be cautious not to go beyond “your” view.

The Chancellor said there is a need not to push the data dispute into a corner.

The President agreed.

The Chancellor said that if the Soviets ask for an agreement covering U.S. and Soviet forces as a first step, nevertheless the Soviet basic figures on deployments there must be cleared up. There is a divergence of 130–150 thousand: mostly Polish, but some Soviet. Assuming 50–80 thousand Soviet, this would prejudice Western interests if it is not cleared up but the U.S. agreed to reductions.

The President said we will not make a unilateral agreement with the Soviets; we will only explore ideas ad referendum (to the Alliance). He wants to understand “your” position before Vienna. General Jones and Harold Brown will be there, having discussions in parallel to those he will attend with Brezhnev, with Zbig and Cy.

The Chancellor asked whether Ustinov¹¹ will be there.

The President said he doesn’t know; we have told them that Brown will be there.

The Chancellor said that he has never met Ustinov. He feels that time is running out on MBFR. When Brezhnev is gone, what will his successors think of it?

The President said that we have two intelligence items that conflict: do the Soviets want to make progress on MBFR? There could be bureaucratic complications (their bureaucracy is as bad as the President’s own). Maybe it hasn’t described (the situation) to Brezhnev.

The Chancellor said he thinks that Brezhnev wants to go forward; for the record, the Chancellor also wants to go forward.

Turkey

The President asked whether the Turkey aid package¹² looks good.

The Chancellor said that he is satisfied for now. But by next year, Turkey will have used it up without correcting its problems—this is his feeling.

The President said that we have a terrible political fight here every time we try to help Turkey. The Greek population opposes all aid to Turkey. The argument now is a debate on $50 million in outright grant military aid, as opposed to repayment on concessional terms. This is the only issue left.

The Chancellor said that their (FRG) grant element is twice that of the U.S. The fight between Greece and Turkey is involved here. To help Karamanlis and the Greeks, they have now officially included Greece in the EC last week.

The President said good.

The Chancellor said that the Greeks at home see this as a great leap forward in their competition with the Turks, who can never join the EC. Therefore, what we are doing for the Turks is only a temporary set-off. But he can’t overstress the strategic importance of Turkey.

The President asked whether we can have “your” help with Turkey on Greek-Turkish problems on NATO lines of operation in the Aegean.

The Chancellor said that they have tried several times. But it is easier to approach Ecevit after the money is sent.

The President asked whether it would really be easier.

The Chancellor said he was about to correct himself and say it was the opposite! Last May Ecevit promised that after German aid were provided, he would withdraw from Varosha. But then he didn’t. He took the money, however.

The President said that this has been our experience. They are a very difficult people.

[Omitted here is discussion of Southern Africa and the Middle East.]

(The notetakers then withdrew at 2:30, and the two leaders continued talking privately until 2:50.)

1. Source: Carter Library, National Security Affairs, Staff Material, Office, Box 83, Sensitive XX: 6/7–30/79. The meeting took place in the Cabinet Room and the Oval Office. Secret; Sensitive. Prepared by Hunter. Schmidt visited the United States from June 5 to 9. On June 5, he held a dinner at the German Embassy for a number of U.S. Senators, and on June 6 he met with Brzezinski (8:30–9:30 a.m.), Harold Brown (starting at 9:45 a.m.), Blumenthal, Schlesinger, and Owen (time unknown), and then Carter. A record of his June 5 meeting with the Senators is in Department of State, Stoessel Papers, Lot 82D307, Box 3, Chron Memos for the Record, 1979. No memorandum of conversation for his meeting with Brzezinski has been found; a German record is in AAPBD 1979, Document 161. A memorandum of conversation for his meeting with Blumenthal and Schlesinger is in Department of State, Stoessel Papers, Lot 82D307, Box 3, Chron Memos for the Record, 1979. Department of State and Department of Defense records of his meeting with Brown are ibid. and in Carter Library, National Security Affairs, Brzezinski Material, Country File, Box 24, German Federal Republic: 6/79.
2. For Schmidt’s June 5 meeting with Senators, see footnote 1, above.
3. According to the President’s Daily Diary, the meeting in the Cabinet Room lasted from 1:10 to 1:37 p.m., after which Carter and Schmidt had lunch in the Oval Office from 1:37 to 3:53. (Carter Library, President’s Daily Diary)
4. For Schmidt’s June 6 meeting with Blumenthal, Schlesinger, and Owen, see footnote 1, above.
5. See footnote 3, Document 117.
6. On June 1, Carter sent a letter about TNF to Schmidt that responded to Schmidt’s May 23 letter on the same subject. (Carter Library, National Security Affairs, Brzezinski Material, Country File, Box 24, German Federal Republic: 6/79)
7. During the week of July 16, Aaron visited Bonn, London, Brussels, The Hague, and Rome for consultations on TNF. (Telegram 178826 to all NATO capitals; National Archives, RG 59, Central Foreign Policy File, P840150–1722)
8. Not found.
9. Reference is to the May 15 communiqué of the Warsaw Pact’s Foreign Ministers’ Budapest meeting, which included proposals for CBM and a conference on European security that would include all European states, the United States, and Canada. (Telegram 129607 to USNATO, May 21; National Archives, RG 59, Central Foreign Policy File, D790231–0657)
10. Not found.
11. Reference is to Dmitri Ustinov, Soviet Defense Minister.
12. On May 30, the OECD countries agreed to a $1.45 billion aid package for Turkey that included $198 million from the United States and $200 million from West Germany. (Paul Lewis, “Industrial Allies Offer Turkey $1.45 Billion,” New York Times, May 31, 1979, p. D1)