307. Memorandum by the Ambassador at Large (Thompson)0
LARGE-DIAMETER PIPE
While the wisdom of our original decision attempting to prevent the export of large-diameter pipe to the Soviet Union is debatable, the manner in which the problem has developed makes it clear that failure to hold the line now would be highly damaging to our interests. The pressure we have put upon the Germans, Italians, and Japanese, would probably not successfully be repeated in another case if the British failed to hold the line on large-diameter pipe. Failure could seriously affect NATO cooperation in general and would be certain to have an adverse effect upon relations between Great Britain and the other countries concerned, particularly Germany. Moreover, I should think there would be serious repercussions in the United States, particularly in Congress. It would seem advisable not only to make a strong effort to persuade the British to hold the line, but also to use this incident as a basis for exploring with the British our widely different concepts of trade relations with the USSR.
So far as the original decision is concerned, we can make a good case on military grounds for our policy. Transportation is probably the weakest link in the Soviet military setup and the completion of an oil pipeline to Central Europe and the branch line to the Baltic States would greatly simplify Soviet supply problems, release rolling stock, and increase the capacity of their railroads to handle other traffic. Oil exports constitute one of the Soviet Unionʼs biggest earners of hard foreign exchange and is used by them to pay for imports, many of which contribute to their military potential.
Because of the failure of Soviet agriculture, the leveling off of growth rates, manpower shortages, increased cost of military hardware and space programs, the Soviet Union now has an acute problem in determining the allocation of resources. While they can undoubtedly manufacture the necessary large-diameter pipe themselves, failure to acquire large quantities from abroad will undoubtedly slow down the completion of the pipelines. Moreover, in a highly centralized planned economy like that of the Soviet Union, with its traditional overcommitment of resources, the shift to pipe construction will require extensive changes in economic plans and will probably have a considerable, although temporary, adverse effect upon the development of the economy.
[Page 653]The British argue that a fat Russian is a good Russian, and that it is to our interests to have a continued rise in the Soviet standard of living. While I believe there is something to this argument, there are several factors which should be taken into consideration. One of them is that it does not necessarily follow that increased trade will, in fact, result in increased output of consumers goods, but may in present circumstances merely facilitate further arms expenditures, foreign aid programs, or other objectives adverse to our interests. Furthermore, even if one accepts the British concept, the question of timing is of great importance. Since the death of Stalin, the Soviet Union has been evolving in a direction favorable to our interests. It is important that this process develop far beyond the point it has reached before the Soviet Union is strong enough to devote large sums to foreign aid or other programs to further the spread of communism. We must also keep in mind that should Khrushchev disappear, or be persuaded to change his current policies, it is quite possible that the Soviet Union could suddenly change over to the policies advocated by Communist China.
One argument used by the British that is largely phony is that trade offers an opportunity for contacts and for the development of friendship and understanding. Since the Soviets, however, in general, prevent contacts between their end-users and foreign exporters, and handle trade matters in a few central government offices, this is not, in fact, the case.
Another argument is that our policies have caused the Soviets to develop production capacity in areas which they would not otherwise do. This is, of course, true to some extent, but this has, of course, been accomplished only at the expense of slowing down development in other areas.
It is not suggested that we should follow a deliberate policy of preventing all trade with the Soviet Union, but in cases such as large-diameter pipe, where there is a strong strategic element involved, I believe our decision was sound.
Another fine point to keep in mind is that Ambassador Kohler, in discussing this matter in Moscow, pointed out that there was a relationship between this problem and the general state of US/Soviet relations, particularly on such matters as the Berlin problem. It would be particularly unfortunate if we failed to hold the line at a time when the Soviets seem to be veering toward a tougher policy.
- Source: Kennedy Library, National Security Files, Regional Security Series,NATO, General, Pipe Embargo. Secret. Drafted by Thompson.↩