Foreign Relations of the United States, 1981–1988, Volume X, Eastern Europe

130. Letter From Secretary of Commerce Baldrige to the President’s Assistant for National Security Affairs (McFarlane)¹

Washington, September 28, 1984

Dear Bud,

On Monday² I met with Romanian State Council Vice President Manescu who conveyed President Ceausescu’s personal request that we approve the CDC 200 megabyte license for Romania. This license is vital to the continued success of the Control Data Corporation’s (CDC) joint venture in Bucharest, which celebrates its 10th anniversary next month. Manescu said that Ceausescu views the joint venture as the prime symbol of U.S.-Romanian economic cooperation and a key element of our support for his political independence from the Soviet Union. He also said the Soviets would like to see the joint venture fail as they would use this as an example of what happens when small CEMA members try to act independently and cooperate with the West.

Manescu also raised the case directly with Acting Secretary of State Dam yesterday and alluded to it during his brief meeting with the President on Tuesday.³

In a September 5, 1984 memorandum you recommended approval subject to several conditions including the requirement that Control Data place on-site a representative to “ensure constant control and monitoring of the assembled and unassembled 9780 disc drive units.”⁴

For the following reasons, on-site residency is not necessary to assure control and monitoring of the disc drives and would jeopardize the success of the venture:

• On July 12, 1984 COCOM reached agreement on a new control regime for computers. Under this agreement the CDC disc drives will be exportable to the Soviet Union under the Note 9 Administrative Exception procedure. This agreement is expected to become effective sometime in the next three months.

Placing disc drives under the Note 9 procedure signifies that their export poses limited strategic risks. Moreover, approval of Note 9 exports is virtually assured since member nations cannot veto a proposed export.

Since the Soviet Union will be able to legally buy these disc drives within a few months, it is unlikely that the Romanian Government will divert these drives and risk jeopardizing U.S.-Romanian relations.

• Control Data will provide the joint venture only enough parts to assemble a specified number of drives. In addition, all critical components are pre-assembled before shipment to Romania.

• The assembled drives are made only for export to the West. This can be adequately monitored by the procedures described later in this memorandum and agreed to by CDC. The strict inventory controls described below will assure that all critical parts are incorporated into finished products that will be returned to the West.

Since the Romanian Government is not likely to divert equipment with limited strategic value that can be sold legally to the Soviet Union, I strongly recommend that the license be approved with the conditions listed below. These conditions will effectively protect our national security without undermining the continued existence of the joint venture:

1. For the first six months, Control Data will furnish 100% of the piece parts. Critical components will be supplied by Control Data for the life of the contract.

2. ROM/CDC will only build units for contracts that have been signed and Control Data will not furnish parts to ROM/CDC without first having orders for the drives.

3. Only the quantity of parts necessary to satisfy the production schedule will be furnished. No critical manufacturing or design technology will be transferred. All critical components will be pre-assembled by Control Data before shipment to Romania.

4. The storage area for all components will be off limits to all but the inventory specialists and the plant management, who are financially responsible for parts storage.

5. A monthly inventory of the most critical items—magnetic heads and actuators—will be prepared.

6. All defective parts will be returned to the West.

7. All finished drives will be returned to the West approximately every three weeks in a special bonded van sent from West Germany.

8. Production will be limited to 75 units per month.

9. A Western representative of ROM/CDC will be present during the monthly inventory and during the loading and unloading of the bonded van that takes completed drives back to the West.

I feel very strongly that requiring residency will, in effect, terminate the joint venture and force Romania and other Eastern European countries to turn exclusively to the Soviet Union for their technology needs. I understand that Vice President Bush is meeting with Manescu today at 5:00 p.m.⁵ That may be the opportune time to communicate our approval of the license with the above conditions to the Romanians.

Sincerely,

Mac

1. Source: Reagan Library, Executive Secretariat, NSC Country File, Europe and Soviet Union, Romania (08/12/1983–08/20/1984). Secret. A copy was sent to Shultz. A stamped notation indicates that it was received on September 28 at 1:17 p.m.
2. September 24. A memorandum of conversation of this meeting was not found.
3. September 25.
4. See Document 128.
5. A memorandum of conversation of this meeting was not found.