Foreign Relations of the United States, 1964–1968, Volume XVII, Eastern Europe

148. Memorandum of Conversation¹

Washington, February 15, 1965, noon.

SUBJECT

• Export-Import Bank Credit Guarantees for Rumania

PARTICIPANTS

• The Under Secretary, Mr. Ball
• Mr. Linder, President, Export-Import Bank
• Assistant Secretary for Inter-American Affairs, Mr. Mann
• Mr. Griffith Johnson, E
• Mr. George Springsteen, U
• Mr. Robert Wright, E/MDC
• Mr. Peter F. Warker, EE

Mr. Linder said that EXIM was at the point of decision regarding the extension of credit guarantees to Rumania for the purchase of synthetic rubber plants and a catalytic cracker valued at $80–90 million. There are three problems remaining:

1. The Rumanians have given EXIM trade data and have agreed to give debt servicing data, provided EXIM agrees beforehand to approve the guarantees upon receipt of the debt data. EXIM cannot agree to this. The Rumanians have refused to provide data on invisibles or gold reserves.

2. EXIM has proposed that the contracts be financed with 15% cash payment and 85% on credit. Of the credit,EXIM would guarantee 85% and the balance was to have been assumed by the suppliers. EXIM would thus guarantee 72–1/4% of the contracts. The suppliers (Firestone and Universal Oil Products) are unwilling to share any of the credit risk. Their position is strengthened by the fact that they presently have no competition for the contracts. The 72–1/4% which EXIM is prepared to guarantee compares favorably with what Rumania is currently receiving from Western Europe.

3. EXIM has indications that the Rumanians are discussing various additional, large-scale equipment purchases with US suppliers, the value of which might be in the neighborhood of $70 to $90 million. This includes a $20 million fertilizer plant. The question is how far EXIM will be expected to go in giving consideration to applications for guarantees on these additional projects. The fertilizer plant might be feasible, but anything more would be very questionable.

The Under Secretary commented that we were seeking in the rubber and cracking plant transaction to establish a commercial relationship with the Rumanians which we hope would develop further. Our purpose is principally political—to help peel Rumania off from the Soviet Bloc. The Rumanians have shown a willingness to give us financial information which they have not given to others, and we should be prepared to ease the Rumanians gradually toward a normal economic relationship with us. Mr. Johnson said he thought we should not at this time go much over $100 million without Rumania having more exports to the US.

It was agreed that EXIM would seek the maximum balance-of-payments information from the Rumanians but would not insist on invisible data as a condition for concluding a deal on the rubber and cracking plants. It would also consider an application for credit guarantees on the fertilizer plant, but would press the Rumanians harder for information on invisibles before approving this transaction.EXIM would hold to its position of guaranteeing a maximum of 72–1/4% of the credit. Mr. Linder was confident this would present no difficulty, since the Rumanians were getting financed or guaranteed somewhat smaller percentages of the total cost in other Western countries. If the rubber, cracking and fertilizer plant transactions are concluded, EXIM would not consider further applications for guarantees for, say, a period of 18 months.²

1. Source: Johnson Library, National Security File, Country File, Rumania, Memos, Vol. 2. Confidential. Drafted by Warker and approved in U on February 25. The meeting was held in Ball’s office.
2. In a memorandum to Bromley Smith of the NSC Staff, February 23, David Klein of the NSC commented: “Our negotiations with the Rumanians are not going very well. EXIM is being quite sticky and unnecessarily so. There is a continual problem here of making Mr. Linder understand what we are about.” (Ibid., Rumania, Memos, Vol. 1)