114. Information Memorandum From the Acting Assistant Secretary of State for Inter-American Affairs (Bosworth) to Secretary of State Haig1
SUBJECT
- Possible Reversible Pressure Points on Argentina
In considering political/military and economic measures we might take to exercise leverage on Argentina to moderate its position, we must recognize that the most effective measures are also the most drastic, the most likely to do permanent damage to our long-term relations with Argentina and Latin America, the least likely to have broad Congressional support, and the most likely to affect interests not presently involved in the Falkland Islands problem. The more moderate steps will annoy but not seriously affect Argentina and may well increase its nationalistic resistance to foreign pressure. Our leverage is therefore extremely limited.2
POLITICAL/MILITARY
OPTION 1—Suspend deliveries under the pre-1978 FMS pipeline. This would affect primarily spare parts that are useful but not immediately essential to the GOA. In the long run, it could force cannibalization or abandonment of US equipment such as the A–4s, but even if the Western European cutoff holds, Argentina could turn to the Soviet Union for new combat aircraft.3
OPTION 2—Inform Argentina we will not make the certification necessary for new military sales or resumption of IMET training. This would have little practical significance as long as any other country remained willing to supply them.
OPTION 3—Deny new requests for Munitions List licenses to export arms and ammunition to commercial gunshops and other private end-users. Sales to private users were not halted by the Kennedy-[Page 244]Humphrey amendment. Again, this would be little more than an inconvenience for the GOA.4
OPTION 4—Cancel pending high-level US visits, such as Deputy Secretary Carlucci and General Allen, and withdraw the invitation for Argentina to participate in UNITAS (as Carter Administration did for Chile) and other joint exercises and planning talks. Other than as a clear signal of US displeasure, this would have little impact on Argentina. However, it might well add to Argentina’s support among other Latins, including Chile.
OPTION 5—Announce that we are supplying fuel to UK at Ascension and/or to UK ships in the South Atlantic from US tankers. This would be most effective step we could take to maintain military pressure on GOA, but it would be a clear taking of sides and would probably prevent any future Argentine acceptance of US good offices or mediation.
OPTION 6—Seek further UN Security Council action. The voting situation in the UN is favorable to the US and UK, but the Latin states will accuse us of violating a position for which we argued forcefully in the Nicaragua debate, namely that OAS should be the forum of first instance on Western Hemisphere matters.
ECONOMIC
TRADE
—Our exports to Argentina in 1982 are estimated to reach $2.2 billion, representing 28 percent of Argentine imports. Imports are estimated at $1.4 billion, representing 14 percent of Argentine exports. Nearly 25 percent of Argentina’s exports to the US enter duty free under GSP. Sugar comprises over $200 million of Argentina exports to the US.
OPTION 1—Embargo imports from and/or exports to Argentina. US authority to restrict all exports and imports is very limited. The International Emergency Economic Powers Act (IEEPA) confers broad power on the President to regulate economic relations with foreign countries in times of declared national emergency. Once invoked, the IEEPA would permit a ban on exports and imports as well as freezing of Argentine assets. Use of the IEEPA, however, would require the President to find that the Falkland situation constituted an unusual and extraordinary threat to the national security, foreign policy or economy of the United States. Moreover, invocation of IEEPA is a matter of great concern to foreign investors and could disrupt US [Page 245] financial markets. This authority has been used only in the case of Cuba, North Korea, Vietnam and Kampuchea.
OPTION 2—Restrict some or most exports. There is legal authority under the Export Administration Act to restrict most exports to Argentina. The Secretary of Commerce, in consultation with the Secretary of State, has the authority to impose these restrictions. All exports to Iran except food and medicine were restricted under this authority. This authority is used in most cases, however, to restrict export of security items.
OPTION 3—Graduate some or all of products exported to the US now receiving benefit of GSP. While the nominal cost is difficult to calculate, Argentina has indicated concern over prospective graduation of products currently on the list and has expressed interest in having the present 1985 expiry date of GSP extended.
OPTION 4—Argentina has expressed its concern over the provisions in the CBI concerning sugar. As an enticement, we could offer a duty free quota equivalent to their current export level of sugar. However, such an action could undermine our sugar support program, and severely detract from the unique CBI package.
MULTILATERAL DEVELOPMENT BANKS
—Argentina is a major borrower from the Inter-American Development Bank (IDB) and the World Bank. Proposed projects in the IDB pipeline amount to $194 million, and $505 million in the World Bank. An $84 million loan at the IDB for Agricultural Vocational Education Training is the only loan likely to be submitted for approval in the near future.
OPTION 1—Seek to delay presentation to the Board of Executive Directors of any loans likely to come forward in the near future. This can only be accomplished by behind the scenes pressures on the Banks. This tactic has been successful in several cases but may be difficult in this case if Argentina wins significant Latin American support.
OPTION 2—Permit loans to be submitted for approval and vote against them. In the case of the IDB loan mentioned above, a portion of the loan ($26 million) can be vetoed by the US. The Congress is very sensitive to political actions in the Banks by the USG. It also undermines the independence of the Banks in addressing development problems and alienates both borrowers and donors of the Banks.
FINANCIAL
—Argentina’s exposure to US banks totals $17 billion. Of this, $11 billion must be rolled over this year, a large part of which is held by US concerns. Argentina will need additional borrowings of $7.6 billion for balance of payments support this year. Eximbank exposure in [Page 246] Argentina totals $1.2 billion, with another $130 million in preliminary commitments outstanding.
OPTION 1—US financial leverage on Argentina is quite limited. We could jawbone banks on lending to Argentina, but this would be antithetical to the Administration’s free market approach to international financial matters (we have not even approached banks on the Polish situation). On the assumption that anything said to the banking community will be repeated to the GOA, we can respond to banking queries by arguing that while current political/economic circumstances are not such that new lending is indicated once the Falkland Islands issue is resolved, the long term Argentine outlook is good.
OPTION 2—The next level of leverage would be to freeze Argentine assets. This would require invocation of the IEEPA (see TRADE). Such a move would cripple the Argentine economy, especially given the British freeze. Invoking the IEEPA to freeze Argentine assets puts us clearly in the UK camp and eliminates any potential role for the US as mediator. It might also redound to our own detriment, however, by forcing the Argentines into a default/moratorium/freeze and by shaking international confidence (already damaged by the Iranian freeze) in the US as a secure repository for investments. We have no real financial carrots to offer Argentina.
OPTION 3—There are no Eximbank direct credits for Argentina in the pipeline. There are several small $1½ to $5 million insurance cases now pending in the Bank. These could be indefinitely delayed by the Bank without fanfare since the economic situation is now cause for pause. Should any applications for loans be received, the Chafee Amendment in Eximbank’s statute prohibits denial of loans for other than commercial or financial reasons unless the President determines that such action would clearly and importantly advance US policy in such areas as international terrorism, nuclear proliferation, environmental protection and human rights. Such determination has only been made for Chile.
- Source: Department of State, Executive Secretariat, S/S Special Handling Restrictions Memos 1979–1983, Lot 96D262, ES Sensitive April 10–19 1982. Secret; Nodis. Sent through Eagleburger. Drafted by Carolyn Allen (ARA/ECP) and George F. Jones (ARA/ECP); cleared by Haass and Ryan and in draft by Glen R. Rase (EB/OMA) and Alberti. Jones initialed for Haass; Allen initialed for Rase and Alberti. At the top of the memorandum, Haig wrote: “Tom [Enders]: Structure sensitive game plan in event of worst case scenario, drawing from this. AMH.”↩
- Haig underlined this sentence.↩
- Haig underlined the phrases “as the A–4s” and “for new combat aircraft” in this sentence.↩
- Haig underlined the phrases “to private users” and “for the GOA” in this sentence.↩