132. Memorandum From the President’s Assistant for National Security Affairs (McFarlane) to President Reagan1
SUBJECT
- Secretary Shultz and Secretary Baldrige Memos on Control Data Joint Venture with Romania
Issue
What needs to be done in the matter of the proposed facility to assemble Control Data 200 megabyte disk drives in Romania?
Facts
Secretary George Shultz has written to you (Tab B)2 arguing that your decision to go ahead with the assembly of Control Data 200 megabyte disk drives (memory units for computers) in Romania is being blocked because of “inter-departmental differences over what might constitute adequate safeguards.”
Mac Baldrige wrote earlier (Tab C),3 urging a favorable decision on a new safeguards plan put forward by Control Data. Mac sent his letter only a few hours before George Bush met with the Romanian Vice-President.
Discussion
George’s account of the reason for the delay is not strictly correct. More precisely, the transaction is not going forward because Control Data does not like the safeguards arrangement that you signed out on September 5. That decision required that “responsible Western representatives of Control Data will be assigned to be at the facility to ensure constant control and monitoring of the assembled and unassembled” disk drives.
Control Data has suggested a different plan. Control Data argues that, “the reliability of the consignee is a key factor in approving any export transaction. ROMCD is a reliable consignee.” They ask for an arrangement in which a Western representative would visit the facility to participate in inventory controls on a monthly basis. This overlooks the [Page 364] established record of Romania’s willingness to use clandestine means to acquire Western technology. Romania simply cannot be treated as an ordinary commercial partner. [less than 3 lines not declassified]
Control Data also argues that the cost of our safeguards is prohibitive, and would bankrupt the deal. $30 million worth of equipment is to be transferred in this transaction. Control Data is arguing that the salaries of the individuals to monitor the facility would make the facility a losing proposition. We cannot guarantee that even the safeguards you have recommended will completely prevent technology loss; but without them, we have no confidence whatsoever that this manufacturing technology will be protected. Given the technology risks and the problems we will face with this transaction, your requirement for tough safeguards is very reasonable.
We are entitled to some skepticism about a facility that is claimed to be tremendously important but which is later claimed to be so economically marginal that it would be put out of business if a few personnel were added. In fact, we have been told by both Defense and Commerce Department representatives that Control Data is itself divided on the wisdom of this facility. And the diplomatic problems with our COCOM allies will be considerable.
Mac Baldrige’s letter has produced some confusion. He wrote that 200 megabyte disk drives will soon be exportable to the Soviet Union without significant controls. That is true, but very misleading. This transaction involves a manufacturing facility, as defined by COCOM rules. Because we do not want to teach the Soviet Union how we make computers, and enable them to upgrade their entire computer industry, we have persuaded COCOM to adopt tighter controls on the export of equipment and information for the manufacturing of computers. This transaction will be a big headache in COCOM. We will be portrayed as breaking a rule that we insisted the other countries adopt. A single COCOM country could veto the license.
Recommendation
That you approve my signing the letter at Tab A4 to George Shultz and Mac Baldrige stating that you continue to support your September 5 decision on safeguards on the Control Data Romanian transaction.5
- Source: Reagan Library, Executive Secretariat, NSC Country File, Europe and Soviet Union, Romania (08/12/1983–08/20/1984). Secret. Sent for action. A copy was sent to Bush. Rosen drafted the memorandum.↩
- Not found attached. See Document 131.↩
- Not found attached. See Document 130.↩
- Reagan checked and initialed the “OK” option.↩
- Not found attached.↩