Foreign Relations of the United States, 1964–1968, Volume XII, Western Europe

114. Memorandum of Conversation¹

Washington, July 22, 1965, 10:30 a.m.

SUBJECT

• Review of Professor Valletta’s Discussions with Kosygin in Moscow

PARTICIPANTS

• United States
  • The Secretary
  • Mr. Franklin D. Roosevelt, Jr., Director, Office of Economic Opportunity
  • Mr. Herbert Spielman, WE
  • Mr. Jose De Seabra, Interpreter
• Italy
  • Professor Vittorio Valletta, President of Fiat
  • Mr. Carlo Cavalli, Assistant to Professor Valletta
  • Mr. Vincent A. Garibaldi, Fiat Representative, New York
  • Mr. Oscar Cox, American attorney for Fiat

In welcoming Professor Valletta, Secretary Rusk said he understood the Professor had been traveling recently, and he would enjoy receiving his impressions. Professor Valletta noted two impressions which had emerged from his discussions with Chairman of Council of Ministers Kosygin in Moscow: First, that Kosygin desired to reduce his defense costs and, with the resulting savings, to shift from the production of armaments and nuclear weapons to more intensive development of consumer goods. Secondly, that with respect to Vietnam, Kosygin had indicated he generally desired a solution but he could not act because he was faced with “independent nations” against which it was difficult to bring pressure; Professor Valletta, who said he had initially raised the Vietnam issue with Kosygin, observed that he understood this to be a reference to Communist China.

The Secretary remarked that the USSR exercises no effective control over the Hanoi regime’s actions. Hanoi, in turn, was under pressure from Peiping to achieve military results. This created difficulties for Moscow and also for us in that we had no one with whom to discuss a peaceful solution. The Secretary continued that the Vietnamese issue had become a formidable barrier in US-Soviet relations. Until that problem was solved there would continue to be considerable strain in US-Soviet relations. These remarks, he added, reflected also the recent Harriman Kosygin discussions,² which conveyed similar impressions on Vietnam to those expressed by Professor Valletta.

Professor Valletta said that in his modest opinion if some form of US-Soviet contact could be continued as a result of the Harriman talks, this would be all to the good. He guessed that Kosygin would like to intervene usefully in the Vietnamese situation. Indeed, Kosygin had accepted the reconvening this month of the Eighteen Nation Disarmament Conference at Geneva. The Secretary interjected that it would be interesting to see what emerged from the current meeting of Communist party leaders in Bucharest, where the Soviet and Chinese leaders would be in contact.³ The Professor noted that, in any event, it would be well for the United States to continue to retain a position of strength. Agreeing, the Secretary said that if Moscow and Peiping were to come together on the basis of the Soviet thesis of “co-existence” that would be all right, but if, on the other hand, they agreed on Peiping’s terms, that would involve very grave dangers not only for the United States but for Europe as well.

Mr. Cox said he assumed the informal contacts between Valletta and Kosygin would continue in view of the agreement in principle for Fiat to provide technical guidance in automobile production to the Soviet Union. Professor Valletta observed that it was during the discussion of this that Kosygin had expressed the desire to better satisfy the Soviet people’s needs for a better life. The Secretary noted we always emphasized to the Russians our mutual “unfinished business” in building our own societies. For example, in the United States we required about a million new classrooms, and that we could accordingly think of better ways to spend $50 billion each year than for defense.

Referring to the Soviet-Fiat agreement in principle to cooperate in automobile production,⁴ Mr. Roosevelt said that Professor Valletta had discussed this with Admiral Raborn at the CIA, with Secretary Connor at Commerce, and Deputy Defense Secretary Vance.⁵ The Professor had made clear to them that if Fiat’s undertaking with the Soviet Union to construct an automobile factory was not in accord with United States policy, he would disengage Fiat. Mr. Roosevelt felt that Professor Valletta would wish to make the same point to Secretary Rusk. Professor Valletta said this was correct, but he wished to point out that enhancing Soviet automobile production involved important long-range considerations.

The Secretary asked Professor Valletta for his impression of the time-table for cooperation between Fiat and the Soviets. The Professor replied that the Moscow talks had only touched on general aspects of the problem, and that he anticipated the USSR would send a mission to Italy to work out more precise details. In essence, Fiat would assist in the construction of a new Soviet automobile plant which would produce from 1000 to 2000 cars per day of the American compact type. In addition, Fiat would help the USSR to modernize existing plants which now turn out about 200,000 cars per year. The Secretary asked whether Fiat would be able to carry out this program itself, or would expect some kind of American participation. Professor Valletta replied that he had told the Soviet officials that if they desired an up-to-date automobile plant, some machinery would be required from the United States. The Secretary then noted that in the broadest sense we were sympathetic toward making more consumer goods available to the Soviet people. Indeed, we were exploring legislation to permit American business to participate more actively in trade with Eastern Europe. However, he wished to add a note of caution concerning possible US participation in Fiat’s undertaking with the USSR. He would wish to convey something more precise on this particular point and would be in touch with Professor Valletta after consulting with his colleagues, especially Secretary Connor.

Mr. Cox observed that Secretary Connor had made the same point. Indeed, an officer from Commerce’s office of export controls had been present and had indicated that he foresaw no problems. The Soviets would apparently require three to five-year credits, however. The Secretary asked how the Soviets would pay, by increased oil exports to Italy? Professor Valletta noted that the present balance of trade between Italy and the USSR favored the latter. If the automobile project went forward, credit terms would have to be arranged. In setting up a modern automobile industry, the Soviet Union would not only have to utilize their technical resources but would also have to import machinery, perhaps from France, Britain, and Germany, among others.

In concluding the discussion, the Secretary reiterated that we would wish to give this project some thought and would convey our reaction shortly. He added jokingly that perhaps it would help if we could obtain Soviet machinery to destroy old and discarded American automobiles. Laughingly agreeing, Professor Valletta expressed appreciation for his having had the opportunity to discuss his visit to Russia with the Secretary.

1. Source: National Archives and Records Administration, RG 59, Central Files 1964-66, POL 7 IT. Limited Official Use. Drafted by Spielman and approved in S on July 27.
2. See Foreign Relations, 1964–1968, vol. III, Document 59.
3. July 19-24.
4. On May 4 Fiat and the Soviet Government announced agreement for joint planning and construction of an automobile factory in Togliattigrad. The agreement was signed on August 15.
5. No record of these conversations has been found.