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

146. Memorandum of Conversation¹

Washington, November 20, 1980, 12:25–1:20 p.m.

SUBJECT

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

PARTICIPANTS

• President Jimmy Carter
• Secretary of State Edmund Muskie
• Dr. Zbigniew Brzezinski, Assistant to the President for National Security Affairs
• Deputy Secretary of State Warren Christopher
• Ambassador Walter J. Stoessel, Jr.
• Ambassador Henry Owen
• Assistant Secretary of State George Vest
• Mr. Robert D. Blackwill, NSC Staff Member
• Chancellor Helmut Schmidt, Federal Republic of Germany
• Minister of Foreign Affairs Hans-Dietrich Genscher
• Ambassador Peter Hermes
• Mr. Berndt von Staden, Assistant Secretary for Political Affairs, Federal Chancellery
• Dr. Klaus Blech, Chief, Political Division, Ministry of Foreign Affairs
• Mr. Heinz Weber, Interpreter, Ministry of Foreign Affairs

After a 25 minute tete-a-tete, the President and the Chancellor joined the rest of the group in the Cabinet Room to continue their conversation.² In opening this segment of the talks, Ambassador Owen urged Schmidt to impress upon the Republicans the need for Republican support for the IDA–6 appropriation which is now before the Congress. (S)

The President then asked how Schmidt had found Mrs. Thatcher in their meeting earlier in the week and remarked that she was having severe problems with her economy. Schmidt replied that now that Mrs. Thatcher understands that her difficulties at home will not go away quickly, she has become sweeter and sweeter in her contacts with her continental partners. Schmidt continued that the British would not be able to surmount their economic problems only through monetary means. They will have to cut the budget as well. But that will be difficult given the 19th century mentality held by the trade unions and management. Mrs. Thatcher will certainly not be able to reform the British economy in four years and no major progress will be likely if management-union relations are not improved. Schmidt then agreed with Secretary Muskie’s observation that labor-management relations were healthy in the Federal Republic but noted that the German postal workers would be striking this weekend. (S)

The President then asked how serious the strain was between East and West Germany. Schmidt responded that the FRG regarded it as a serious setback. The GDR currency measures had already led to a decrease of 60 percent in the travel of West Germans to the GDR.³ In response to the President’s question as to whether the East German actions were related to Poland, Schmidt said in effect yes, but in a complicated way. The GDR leadership was afraid that strikes in Poland might spill over into East Germany. That had made the GDR have second thoughts about Schmidt’s visit there which had been planned for September or October. But the East Germans were even more nervous about a possible Soviet intervention in Poland and by taking these actions against the FRG, the GDR was trying to reassure Moscow that a domino effect in Eastern Europe was unlikely. (S)

Schmidt continued that the opposition in the FRG was presenting these GDR actions as a breakdown of Ostpolitik. Schmidt disagreed and said the West Germans had had similar experiences in 1974 which had been quickly redressed. Schmidt said he did not believe the Soviets when they asserted they had no part in the GDR decision. The East Germans certainly could not have moved without Moscow’s consent. Schmidt observed that in his State of the Union message next week, he would say that the FRG would not respond to the delimitation policies of the GDR with delimitation policies of its own. The President then said that in effect Schmidt was saying that he would not respond to the East German action. The President asked how inter-German trade had been affected, if at all. Schmidt replied that the President was correct that the FRG had not responded so far. The East Germans were asking for a prolongation of credits, but Bonn would delay. Nonetheless, the Federal Republic would take no action which would make the walls higher or the ditches deeper. Some, Schmidt said, argued that this was a display of weakness. The Chancellor thought it was a display of strength. (S)

The President next asked about FRG economic aid to Poland. Schmidt responded that the West Germans had been helping the Gierek administration and had continued aid to the tune of 1.2 billion DM to the Kania regime. Secretary Muskie asked how much assistance the Poles had asked for, and without answering, Schmidt said that Poland was and would continue to be an economic disaster. It would require $2–3 billion a year of outside assistance to prevent a catastrophe and the Poles would accept no foreign advice about how to run their economy. Things were very bad there and the Polish Government might even have to ration food this winter. (S)

In response to the President’s question as to whether Kania could handle the situation, Schmidt said he hoped so. The Chancellor agreed with the President’s comment that long-term debt rescheduling would undoubtedly be necessary. But, the Chancellor continued, that would not help in 1981 or 1982. The Poles needed food and they needed it now. In response to the President’s comments that we had approved $650 million in food aid to the Poles since the crisis began, Schmidt said that economic assistance to Poland was like dripping water on a hot rock. (S)

The President then asked how the FRG’s relations with the Kania regime were, and Genscher replied that none of the West German leadership had ever met Kania. Genscher continued that he doubted that it would be possible for the Polish Communist Party and the independent trade unions to exist side by side for very long. The Party was trying to gain time but there was no way of knowing whether it would be successful. In any event, Genscher noted, the Madrid CSCE meeting was of positive value since the Soviets would not want to intervene while that meeting was taking place.⁴ (S)

Schmidt went on to say that he believed the Soviets had decided not to intervene militarily in Poland. But, if a civil war occurred there, the Soviet leadership would feel pushed against the wall and despite their desire would feel compelled to send the army in. Schmidt said he had talked to the Pope last Friday⁵ and had found him a man of good judgment and with wide contacts throughout Poland. (S)

The President then asked what we would do if Belgium and Holland decided not to go along with the TNF decision. Would Britain and Italy be enough for the Germans? Schmidt replied that in this case, Italy was much more important than Britain because it was both a continental power and a non-nuclear weapons state. The President noted our presumption that the NATO commitment concerning deployment would be honored and Schmidt said that the German assumption was the same. It was certainly his intention. But if Italy dropped out, it would become very difficult for the FRG. (S)

Moving on, the President said he thought Governor Reagan would find the means of keeping the SALT process moving forward. Schmidt thought this point had to be made to the Soviets quickly because of their Party Congress early next year. The speeches Soviet leaders made at that time could not be taken back and it was important that Brezhnev should know as soon as possible that the U.S. intended to continue SALT; that it was not striving for superiority; but at the same time it would be second to none. In response to Secretary Muskie’s observation that Senator Percy would be leaving for Moscow the next day, the President said Percy would not be a good messenger because he was not particularly in tune with the expressed positions of the Reagan team on arms control and foreign affairs.⁶ Schmidt stressed it was of vital importance for the U.S. and its allies to proceed with arms control in general and the SALT process in particular. There was a danger that the Soviets might pull out of arms control efforts if they took seriously what the Republican signals had been so far. (S)

Secretary Muskie suggested that Schmidt give that message to the Republicans and the President added that Reagan had said during the campaign that allied leaders were privately against the SALT II Treaty. Schmidt noted that of course that was untrue. The President said he hoped that the Reagan administration would indicate it would follow the terms of the SALT II Treaty except for the dismantling schedule while it negotiated the next phase with the Soviets. But he and the Chancellor agreed that it was still unclear what position President-elect Reagan would take toward SALT II. Secretary Muskie added that the key question was whether they would renegotiate SALT II or move on to SALT III. The latter avenue would be time-consuming and difficult and it was far preferable to renegotiate SALT II. In response to Schmidt’s question on how long it would take to negotiate the SALT III treaty, von Staden said “years.” The President noted that it took very little time for an American administration to decide what SALT positions it would prefer, but reaching agreement with the Soviets was another matter. (S)

In response to Schmidt’s statement that the Soviets must have known that SALT II would not be passed by the Senate, the President said that we had gotten the Treaty out of the Senate Foreign Relations Committee with only minor amendments.⁷ Moreover, Ford and Kissinger had both promised that they would support the treaty at the appropriate moment, promises that unsurprisingly had evaporated during the campaign. The President continued that it was the Afghanistan invasion which sabotaged SALT II. In any event, it would have been close as in the vote on the Panama Canal Treaty but the President said he was convinced there were good prospects for ratification a year ago before the Soviets moved into Afghanistan. Moreover, the Carter administration was prepared to move vigorously forward after the election because SALT II was a good treaty. Schmidt strongly agreed and Secretary Muskie expressed his conviction that SALT II would have been ratified by now without Afghanistan. (S)

Schmidt then asked about developments at the CSCE Review Conference at Madrid. The President said he was very pleased with the mutual support and Allied solidarity which had been evidenced at the meeting. The Soviets had been embarrassed by West German, U.S., UK and even some neutrals’ statements concerning the invasion of Afghanistan. In sum, the Madrid meeting was moving in a productive direction. (S)

Schmidt wondered if that included the CDE, and the President said he would let the Chancellor and Governor Reagan work that out. Noting that there would be an SCC meeting on this question this afternoon which would help the President make his decision, Secretary Muskie said the French had come a good way toward the U.S. positions. There was now no Phase II disarmament phase in the proposal and Paris was stressing strongly the need for CBMs that extended all the way to the Urals. Deputy Secretary Christopher added that there was a timing problem and the CDE would probably have to be addressed during the transition period. If the Soviets tabled their proposal amidst a propaganda barrage and the French followed suit, the U.S. might have to make a decision during the interregnum. (S)

Replying to the Chancellor’s question about the TNF negotiation, Secretary Muskie said both sides had laid down their positions.⁸ Final resolution was a good way off. Schmidt thought it was important in order not to damage the TNF deployment decision, that European publics and parliaments be convinced that the West was seriously trying to negotiate on these weapons. That was very important for European psychology. The President noted that he assumed Schmidt was familiar with the Soviet position. They wanted to freeze all deployments and not include SS–20s outside Europe. These were the two main obstacles and they were predictable Soviet positions. (S)

The President then said that as he had mentioned in their earlier private meeting, there was a serious possibility that the Iran–Iraq war would impose a serious oil shortage in the West. The IEA needed to prepare for that possibility now without actually triggering any measures.⁹ The oil companies should make some effort to make sure that those countries particularly hard-hit by the Iran–Iraq war would have their needs met. The President said he understood that Schmidt would prefer to handle the problem through pricing but there was a real danger in a $15–$20 price rise if the war continued. There then ensued an exchange in which Schmidt repeated several times that he was skeptical about this idea. (He did not seem to understand it very well.) The Chancellor said he thought we should be able to handle the problem without international regulations which would lead to national regulations, which would in turn reduce the pressure on our people to save energy. The only way our publics would save energy was if the price went higher. Schmidt thought the crude price was bound to go up to $60; the only question was when. Everything would depend on Western conservation and alternate energy sources. (S)

In response to Ambassador Owen’s statement that we were not suggesting ceilings now but only preparing for them, the Chancellor said it was impossible to try to keep prices artificially low. Owen stressed that was not our purpose. Again Schmidt said he did not believe in these arrangements. They would lead to protectionism and were not appropriate for capitalist societies. Countries must be educated to use less energy and that would require a price rise. However, Schmidt smilingly noted that we would not run into a German veto on this both because the Germans didn’t have such a veto and because they would not exercise it if they did. Nonetheless, the Chancellor was convinced that our people would have to suffer through high energy prices before they would recognize and accept what needed to be done. (S)

1. Source: Carter Library, National Security Affairs, Staff Material, Europe, USSR, and East/West, Box 11, Chron: 11/80. Secret. The meeting took place in the Cabinet Room. Schmidt visited the United States from November 18 to 21. On November 20, President-elect Reagan met with Schmidt, and on November 21, Senator James Baker met with Schmidt. No memorandum of conversation for the Reagan-Schmidt meeting has been found. A record of the Baker-Schmidt meeting is in a memorandum from Cran Montgomery to the file, November 21; Department of State, Stoessel Files, Lot 82D307, Box 3, Ambassador: Classified Chron File, 1980. In a November 18 briefing memorandum to Carter on the meeting with Schmidt, Brzezinski wrote: “Despite the many differences which remain between us and Bonn, I see no point in using this meeting to burrow into the details of the US-German relationship. Such a discussion at this point would have little effect on Schmidt and largely beg the strategic challenges that the West faces in the 1980s.” (Carter Library, National Security Affairs, Staff Material, Office, Box 63, Germany: Visit of Chancellor Helmut Schmidt: Washington: 11/80)
2. Carter met with Schmidt in the Oval Office from 12:07 to 12:26 p.m. (Carter Library, President’s Daily Diary) No memorandum of conversation has been found for Carter’s private meeting with Schmidt.
3. Reference is to GDR currency restrictions introduced on October 5; see footnote 3, Document 212.
4. Reference to the Second CSCE Review Conference in Madrid, which began on November 11.
5. November 14.
6. Percy met Brezhnev in Moscow on November 26. See Anthony Austin, “Brezhnev, in Talk With Percy, Urges Progress on Arms,” New York Times, November 27, 1980, pp. A1, A7.
7. On November 9, the Senate Foreign Relations Committee voted 9 to 6 to send the SALT II Treaty to the full Senate with a recommendation in favor of ratification. (Charles Mohr, “Senate Committee Supports Arms Pact by a Vote of 9 to 6,” New York Times, November 10, 1979, pp. 1, 4)
8. Reference to the first round of U.S.-Soviet negotiations in Geneva on TNF, which ran from October 17 to November 17.
9. In a November 18 memorandum to Carter on economic aspects of Carter’s meeting with Schmidt, Owen wrote that the administration was proposing joint measures to the IEA “to avert sharp increases in world oil prices as a result of the Iraq-Iran war” to be agreed at the IEA Ministers’ meeting on December 8–9, but the Germans and some other European governments were resisting serious joint action. Owen encouraged Carter to tell Schmidt that the United States had concluded that “the IEA members should begin now to agree on a set of contingent national oil-import ceilings, to be made effective as soon as the ministers conclude that the market is getting out of hand.” (Carter Library, National Security Affairs, Staff Material, Office, Box 63, Germany: Visit of Chancellor Helmut Schmidt: Washington: 11/80)