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

76. Information Memorandum From the Chairman of the Policy Planning Council (Bosworth) to Secretary of State Shultz¹

Washington, August 4, 1983

SUBJECT

• US-Soviet Grain Agreement

A number of press accounts have treated the signing of the new grain agreement as a concession by Moscow.² While the negotiations did go very smoothly, we believe this interpretation is mistaken and will put us on the wrong footing, both domestically and in our continuing dialogue with the Soviets.

Two kinds of evidence suggest that the Soviet readiness to raise the LTA’s purchase floor was not a political signal: first, the state of the international grain market; second, unfolding Soviet needs.

—In the world market, US stocks have become a much-larger factor in the past several years and now exceed 60% of world supplies. Without returning to near-exclusive purchases from the US, the Soviets may well also want to avoid buying too small a share of their imports from us. (The old floor—6 million tons—was barely 15% of the 35–40 million ton annual average of total Soviet grain imports over the past 4 years.) Driving down the US share only increases the leverage of other suppliers, with most of whom the Soviets will also be renegotiating their LTA’s during the next several years. Finally, Soviet buyers have expressed concern that our PIK program will reduce American grain output; if this was in fact their worry, a higher floor in the US-Soviet LTA would serve the Soviet interest by encouraging US production and thereby helping to keep the world market glutted.

—A glutted market, always valuable to the world’s largest grain importer, is probably of increasing importance to the Soviet leadership now, for the level of imports has extremely sensitive political implications. With the reduction in Soviet grain imports in 1982 came a measurable drop in per capita consumption of meat and dairy products; particularly during a succession, this is a potentially dangerous course, as food riots in the past few years have made all too obvious. And in fact the most recent information we have suggests that the drop in food supplies for consumers is now being turned around; if the leadership has made a decision that these should continue to increase, the Soviets are almost certainly going to have to increase grain imports as well.

None of this is an argument for trying to use grain sales for political leverage against the Soviets; we have been down that road already. But on balance the evidence suggests that the Soviet stake in imports is still larger than ours; moreover, it reflects one of their most severe systemic weaknesses.

In this light, it would be especially unfortunate if it appeared that the Soviets had sent us a signal that we were now obliged to reciprocate. We need, especially in the coming period, to avoid giving undue weight and attention to Soviet gestures on the minor parts of the agenda, and even more to avoid imagining concessions where none have been made. Our credibility both at home and in Moscow will depend on this. The Soviet decision was almost certainly made on economic grounds, as was ours. Our policy interest is best served by keeping the issue in this perspective.

1. Source: Department of State, S/P, Memoranda/Correspondence from the Director of the Policy Planning Staff, Lot 89D149, S/P Chrons PW 8/1–15/83. Confidential. Drafted by Sestanovich; cleared by Azrael and Boeker. An unknown hand initialed for Sestanovich, Azrael, and Boeker.
2. On July 28 in Vienna, the United States and Soviet Union reached agreement on a new long-term grain agreement to commence on October 1. “Under its terms, the USSR will purchase from the United States 9 million metric tons of grain annually, in approximately equal quantities of wheat and corn.” (Telegram 212275 to all OECD capitals, July 28; Department of State, Central Foreign Policy File, Electronic Telegrams, D830431–0073) In telegram 10884 from Moscow, August 26, the Embassy reported on Secretary of Agriculture John Block’s trip to Moscow and the signing of the agreement on August 25. (Department of State, Central Foreign Policy File, Electronic Telegrams, D830492–0760)