Foreign Relations of the United States, 1981–1988, Volume IV, Soviet Union, January 1983–March 1985

351. Memorandum From the President’s Assistant for National Security Affairs (McFarlane) to President Reagan¹

Washington, January 4, 1985

SUBJECT

• U.S.-USSR Economic Working Group of Experts Meetings in Moscow

Issue

Whether to approve a set of U.S. positions for the U.S.-USSR Economic Working Group of Experts meetings in Moscow (January 8–10) and to sign an NSDD which would establish specific guidelines for the U.S. delegation to Moscow.

Facts

In May 1984, you renewed for 10 years the U.S.-USSR Long-Term Agreement for Economic, Industrial and Technical Cooperation and approved resurrecting, under Article III of the agreement, periodic meetings of a bilateral working group of experts to exchange information and forecasts of basic economic, industrial and commercial trends. The meetings in Moscow scheduled for January 8–10 would be the first meeting of the working group of experts in six years. A major objective of these working level meetings is to determine if there are sufficient grounds for a meeting of the U.S.-USSR Joint Commercial Commission (JCC) which would be chaired on the U.S. side by Secretary Baldrige and on the Soviet side by Trade Minister Patolichev. The SIG-IEP has been responsible for coordinating preparations for the working group meetings, identifying potential opportunities for expanding non-strategic trade relations with the USSR, and coordinating recommended agency positions for the U.S. delegation on five issues likely to be raised by the Soviets. In addition, it was agreed at the SIG that the U.S. delegation to Moscow should seek changes in discriminatory Soviet practices against U.S. firms.

The SIG-IEP concurred that the delegation should express a U.S. willingness to discuss possible resolution of five specific issues in the appropriate fora if there is a reciprocal Soviet willingness to improve prospects for expanded U.S. non-strategic exports to the USSR. These five issues are: the ban on Soviet furskins, a Cuban nickel certification arrangements, aeroflot landing rights, port access regulations, and the bilateral protocol tax treaty.

Discussion

The SIG-IEP has been effective in developing a consensus among the agencies on the positions the U.S. delegation should take on each of these five issues. Commerce, State, Treasury, NSC, Agriculture, Transportation, and USTR all concurred that the U.S. delegation should:

• Indicate to the Soviets a willingness to discuss options with the U.S. Congress to lift the furskins ban if the Soviets are prepared to improve business conditions and prospects for U.S. firms.

• Reiterate a recent Treasury offer to resolve the Cuban nickel certification issue.

• Indicate a U.S. willingness to begin discussion of civil aviation matters, but only after receiving a favorable Soviet response to U.S.-Japan proposals on North Pacific safety measures, and with the understanding that any restoration of Aeroflot service would have to be part of a package offering a true balance of concessions for U.S. carriers.

• Respond to any Soviet inquiry on port access procedures by informing them of our willingness to discuss this question in our traditional maritime framework. (Transportation stressed that the Soviets must be told such discussions would have to encompass U.S. maritime industry interests.)

• Indicate to the Soviets a U.S. willingness to move forward on the unsigned 1981 tax protocol, but noting that changes may have to be made.

Defense did not provide specific views on these five issues. Instead, Secretary Weinberger sent a separate letter to Secretary Regan, in his capacity as Chairman of the SIG-IEP, expressing serious reservations about the merit of a U.S. trade mission to Moscow at this time. A number of valid cautionary points are made in Cap’s correspondence in which he:

• Agrees with the general concept of promoting non-strategic trade but strongly doubts that the Soviets are really interested in aspects of trade other than strategic technology and that they will seek to turn this non-strategic U.S. trade initiative against us.

• Claims that a U.S. trade mission to Moscow is likely to stimulate political pressures, particularly among the allies, for more strategic trade despite the stated objectives of this mission.

• Indicates that even the prospects of U.S.-Soviet trade talks has already triggered a reaction among our COCOM partners unhelpful to our interest in strengthening the COCOM process and enforcement measures against the diversion of strategic technology.

• Expresses strong support for the U.S. delegation taking a firm position on human rights issues in its meetings with Soviet officials in Moscow.

In the initial planning stages for these Moscow meetings, Commerce, with the support of some other agencies, was interested in actively promoting expanded sales of U.S. oil and gas equipment to the USSR. This objective is being aggressively pursued by the Soviets as well as the U.S.-Soviet Trade and Economic Council (USTEC). Over the course of the preparatory meetings, it was pointed out to Commerce that we are walking a very fine line in the energy area between expanding U.S. energy equipment sales to the USSR and preserving the integrity of our security-minded allied consensus on the strategic aspects of East-West economic relations including a strict limit on Soviet gas deliveries to Western Europe (to interrupt the Soviet strategy of dominating European gas markets while earning large amounts of hard currency), the termination of subsidized terms on credits, and an overall strengthening of COCOM. It was agreed that to avoid sending inconsistent signals to the allies and the USSR, oil and gas equipment will not be an area in which the U.S. should agree to an active program of trade expansion pending further policy clarification by you. My staff is now preparing a policy assessment of a comprehensive CIA study on the strategic implications of the Soviet energy strategy toward the West as well as other key aspects of East-West economic relations. Finally, a strong U.S. position on human rights issues has been formulated for inclusion in the U.S. delegation’s discussion in Moscow. It should be recalled that controls on U.S. oil and gas equipment sales to the USSR have traditionally been linked to human rights conditions in the Soviet Union.

Recommendation

That you approve the U.S. positions on the five issues likely to be raised by the Soviets during the Moscow meetings (furskins ban, nickel certification arrangement, aeroflot landing rights, port access regulations and the protocol tax treaty). Commerce, State, NSC, Agriculture, Transportation, Treasury and USTR support approval. Defense takes no specific position.

That you sign the NSDD at Tab A which provides specific instructions and guidelines for the U.S. delegation to the Moscow meetings on January 8–10.²

1. Source: Reagan Library, Roger Robinson Files, Chronological File, Robinson Chron January 1985–February 1985; NLR–487–11–29–3–5. Sent for action. Prepared by Robinson. Poindexter initialed the memorandum for McFarlane.
2. Reagan approved both recommendations. He signed NSDD 155, “U.S.-Soviet Economic and Commercial Relations,” on January 4. (Reagan Library, Executive Secretariat, NSC National Security Decision Directives, NSDD 155, [U.S.-Soviet Economic and Commercial Relations])