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

150. Minutes of Meeting of the Export Control Review Board¹

Washington, April 1, 1965, 4:15 p.m.

SUBJECT

• Determination of Policy Regarding Proposed Exports of Petroleum Exploration and Refining Equipment and Technology to Rumania

PARTICIPANTS

• Members
  • Secretary Connor, Chairman
  • Secretary Rusk
  • Deputy Secretary Vance, for Secretary McNamara
• Invitees
  • Secretary Udall
  • Deputy CIA Director Cline
• In Attendance
  • Assistant Secretary Wyman
  • Deputy Assistant Secretary Trezise
  • OEC Director Hockersmith
  • Executive Secretary, ECRB, T.L. Thau

Secretary Connor opened the meeting by summarizing the cases before the Board.² They concern:

(a) Advanced catalyst material for use in making high octane gasoline. Formerly this catalyst was approved for export to bloc countries, but in 1964 technicians found that the U.S. catalyst is superior to foreign material, and since then it has been denied. In October 1964, State concurred in denying a quantity to the USSR.

(b) Advanced catalyst technology in written and oral form, to teach Rumania how to make most efficient use of the catalyst material. Commerce technicians find this technology goes well beyond normal operating and maintenance instructions; would contribute significantly to fund of technical knowledge of catalysts generally.

(c) Advanced petroleum exploration equipment—Nine cases involving various kinds, all containing extractable technology, and important to help Rumania conduct deep drilling operations. Vastly superior to anything available abroad, and would enable Rumania to deep drill for needed additional supplies of oil.

(d) Anti-knock compound. Available abroad in comparable quality and ample quantity. However, important to increase octane rating of gasoline. Rumania supplies North Viet Nam with 20% of its gasoline, and other petroleum products.

Secretary Connor noted that at the ACEP (Assistant-Secretary-Level committee), Defense, Interior, and Commerce had recommended denial. State had recommended approval and appealed to the ECRB. He, accordingly, asked Secretary Rusk to state his position.

Deputy Secretary Vance interjected at this point that he and Secretary McNamara do not necessarily agree with the position taken by the Defense representatives at the earlier meeting.

Secretary Rusk began by observing that none of these cases concern COCOM embargo items. Accordingly, the question is whether the U.S. should be more restrictive toward Rumania than the other COCOM countries.

He does not believe it is in our national interest to be so restrictive in trade matters. There have in the last year been many changes in Rumania’s relations with the USSR and the West. They have gone to the edge of the cliff in showing their independence of Moscow. Evidences of this nature are as follows:

1. Rumania has undertaken an educational program to bring home to its people their 15 years of exploitation by the USSR.

2. The Russian language is no longer being taught in the schools.

3. Rumania has raised the issue of recovering Bessarabia from the USSR, a sensitive point to the latter.

4. Rumania has granted a major amnesty to political prisoners.

5. Rumania has promised to respect a U.S. passport as assurance of safe exit for U.S. visitors, regardless of claims of dual nationality, old political crimes, etc.

6. Rumanian officials have made official visits to most major West European countries in pursuit of friendly trade and other relations.

7. Rumanian officials did not attend the recent Moscow conference.

8. On U.S. actions in Viet Nam, Rumania has been as quiet as any Communist State. No demonstrations have occurred; protests have been restrained.

9. The new Rumanian prime minister is anti-USSR and pro-Rumanian nationalism, apparently following the course of his recently deceased predecessor, Gheorghe Maurer.

10. In Secretary Rusk’s own dealings with the Rumanian foreign minister, the latter has shown in outstanding ways his country’s desire to be independent of the USSR—even to the point of wanting to have the same number of talks with Secretary Rusk as the USSR’s representative.

11. Rumania is allowing an American hotel to be built.

This is the kind of trend that was very noticeable at one period in Yugoslavia, and in another period in Poland. We should be ready to respond favorably to that trend here as we did in the cases of Yugoslavia and Poland. On this basis, it is in our interest to take a forthcoming attitude on trade relations with Rumania.

If we seem to close the door to them in areas like this where we have discretion—even before any Congressional problems have to be faced on such necessarily legislative matters as MFN treatment—then we will be injecting an unrequired negative element. That would not be in our interest, especially as the same kinds of items, even though with less sophistication, are available. Thus it is our interest to license these cases as a means of keeping the doors open, of stimulating their favorable responses toward our policies, and of encouraging normal relations between our two countries.

Secretary Connor observed that foreign deep drilling equipment is not of the same kind as ours; that our technicians have found ours to be vastly superior.

Secretary Udall said that the U.S. drilling equipment is substantially better in quality than that made in other countries. We would be giving Rumania here something not available to them elsewhere.

Secretary Connor asked Mr. Cline to inform the members regarding Rumania’s shipping of petroleum products to North Viet Nam, Communist China, and Cuba.

Mr. Cline replied, as follows:

In 1963, Rumania supplied somewhat less than 20% of North Viet Nam’s petroleum products, with the USSR providing the balance. In 1964, the Rumanian share was 17%. For 1965, we have only one report to date, 500 tons of lubricants in one February shipment. The Rumanian shipments were primarily of motor and diesel fuels, but there is no evidence of kerosene or jet fuels. It was shipped by sea to North Viet Nam. There is no evidence the Rumanian shipments have ceased.

Some free world countries do supply North Viet Nam substantial amounts of other kinds of goods, but no free world country is known to be supplying petroleum products to North Viet Nam.

Rumania also shipped substantial amounts of petroleum products to Communist China, including 160,000 tons in 1964. This was primarily motor gas, kerosene, lubricants, and jet fuel.³ The only free world shipments of petroleum to Communist China were by Iran in 1964.

Rumania ships very little petroleum products to Cuba, but did send Cuba substantial amounts of oil drilling equipment, about $2 million by the end of 1964. Oil exploration work is proceeding there, but not with much success. the Rumanian equipment is for drilling to about 3,500 meters.

Deputy Secretary Vance said the key issue to him is whether Rumania has promised not to copy or reexport our equipment.

Secretary Rusk replied that Rumania did so promise us in the negotiations last summer.

Secretary Connor observed that the Rumanian promises do not appear to go all the way. Rumania has promised the U.S. products, designs and technology will not be transshipped or reexported, and that U.S. products will not be copied. However, Rumania’s promise does not bar it from using our designs and technology to make products and sell them abroad. Also Rumania can incorporate into its own oil drilling equipment advanced features of U.S. equipment without actually copying same, and then sell their equipment anywhere.

Secretary Udall added that U.S. oil industry representatives believe that the USSR is very much in need of advanced deep drilling equipment and that Rumania could not hold our equipment and technology away from the USSR, even if Rumania desired to live up to its promise to us. The U.S. oil industry is very much concerned about the effects of increased free world sales of Rumanian and Soviet petroleum products and takes a hard line against our supplying them with our best technology and equipment. Accordingly, he could not support an approval decision in these cases against the objections of the U.S. oil industry unless he could tell them that the Rumanian assurances can safely be relied on.

The members at this point generally discussed the question of how long it would take Rumania to produce and export equipment based on copying or adopting ideas from our equipment. Deputy Secretary Vance thought it would take them 2 or 3 years, by which time we would have even better equipment in production. Mr. Hockersmith said that the length of time would vary, depending on the particular kind of equipment. Secretary Udall agreed.

Mr. Cline, in response to a question, said that the equipment the Rumanians are seeking from us is more advanced than anything the USSR and other bloc countries presently have. He also noted that in 1964 Rumania signed a new agreement with the USSR to exchange technical know-how in oil, chemical and other industrial fields. Rumania’s 1965 Trade Agreement with Communist China includes exports of petroleum equipment.

Secretary Connor asked whether Rumania could or would attempt to hold U.S. technology and products against demands by the USSR, to the extent of resisting force.

Secretary Rusk replied that the Rumanians have been behaving toward the USSR generally as though they are sure the time is past in which a country like Hungary would be held by Russian force. We have good reason to believe the Rumanians consider it is in their national interest to adhere to their assurances to us. After all, they want from us much more than the items involved in these cases. However, it is, of course, possible that the USSR could go in openly or otherwise and try to get our technology and equipment, and it could not be guaranteed that Rumania would resist or be successful in such effort.

Secretary Rusk went on to say that Rumania is not taking an active role in carrying out CEMA agreements.

In response to a question from Secretary Connor, Secretary Rusk agreed that none of the items in question was on the Shopping List of last summer.⁴ However, he said, we expected they would be adding other things from time to time.

Secretary Udall asked how, if these cases were approved, we could describe to Rumania the meaning of our approval from a diplomatic standpoint. Could we say that you are on trial; that more will be approved, if you show you are trustworthy.

Secretary Rusk replied that we have reason to trust Rumania already. They are the most independent of all Communist countries relative to CEMA requirements, and they are most interested in increasing their trade with the West. However, he agreed that we could explain to Rumania that we consider these items important and are counting on their assurances being kept. He reiterated that Rumania has an interest in having much larger trade with us than in just these items.

Secretary Connor observed that it is hard to call Rumania’s desire to buy these items “trade”. The variety of items is so small, and the quantities are limited to a few. This suggests they are only interested in samples to acquire our technology. If we approve these cases, we will be helping them to update their oil industry with the best U.S. technology, and at a cheap price.

In response to a question from Secretary Rusk, Secretary Connor agreed that we license this same equipment for use in oil fields throughout the free world. However, he noted that in most of those areas the companies engaged in the exploration and drilling are affiliated with U.S. interests.

In response to Secretary Connor’s request for his views, Secretary Udall said that the U.S. petroleum industry and officials of his department take a hard line on selling Rumania and other bloc countries our advanced technology and advanced equipment containing extractable technology. “Maybe I’m softer“, he said, “but I tend, on the basis of the discussion so far, to defer to State, if State feels so strongly about these cases for foreign policy reasons.”

Secretary Connor replied that this is not his attitude. He would, before favoring approval, wish to know what effects our approval would have on Rumania’s oil industry, as well as its relations with both the Soviet bloc and the West. What course would our equipment enable Rumania to pursue? What avenues of independence would it open for Rumania that it presently does not have? “I see arguments on both sides“, he said. “I would not vote yea with enthusiasm as I presently have reservations about Rumania’s intentions.”

Deputy Secretary Vance then expressed the views of his department. He said that Secretary McNamara and he generally favor sales unless there are strong reasons against. On the drilling equipment he saw no strong reason for denial and would vote yea. The same for the catalyst material and anti-knock compound. As to the catalyst technology he said he was still uncertain, believing that a few more questions needed to be answered.

Secretary Rusk then expressed his Department’s views. He said that he would not have recommended approval of these cases two years ago, but so much has happened in Rumania in the last year regarding its relations with the USSR and the West. Therefore he would now “nudge the Rumanian development along” by approving these cases since they are among the several kinds of items Rumania is looking for from us.

Responding to a question about whether MFN is one of the items that Rumania wants from us, and whether we would ask Congress to allow MFN to be given to Rumania if she pays her debts to us, Secretary Rusk said he hoped the U.S. would be able to give MFN treatment to imports from particular countries after we settle with them whatever has to be settled.

Secretary Connor then said that he was opposed to approving the oil field equipment and the catalyst technology. He also did not like the implications regarding possible use by North Viet Nam of Rumanian gasoline that might be upgraded with the U.S. anti-knock compound, but he would approve it in a spirit of compromise, to give Rumania some of the items they have ordered. He would also approve the catalyst material.

Deputy Secretary Vance asked about the importance of the U.S. catalyst technology. Mr. Wyman explained that Mr. Englehart had admitted to him that the U.S. catalyst material is superior to that available from France and other countries, and that the U.S. technology regarding its use is the best. Mr. Englehart was really not interested in selling Rumania the technology, but only the material. He had filed the application for the technology only because his competitor had applied to sell the technology too.

At this point there was a general discussion of the catalyst use technology and the reason for its importance, and regarding the technology extractable from the petroleum drilling equipment.

Secretary Rusk asked Secretary Connor whether his indicated opposition to approval of the drilling equipment and the catalyst technology applied only to Rumania, or extended to any country that might be a competitor of the U.S.

Secretary Connor replied that he drew a distinction between free world and Soviet bloc competitors of the U.S., noting that this distinction is called for by Section 3(a) of the Export Control Act. Regarding Rumania, he asked Mr. Cline for pertinent figures and then emphasized that Rumania exports half the petroleum products it produces, and over half of that goes to other Soviet bloc countries. Next to the USSR, Rumania is the largest supplier of oil products to the bloc, with the USSR receiving most of Rumania’s exports to the bloc.

Secretary Connor asked Secretary Rusk whether we would supply oil directly to North Viet Nam. Secretary Rusk replied that we have no trade with North Viet Nam, but that if we were to take sanctions against Rumania because she sells oil to North Viet Nam we would have to do the same regarding a number of free world countries that also ship to North Viet Nam.

Secretary Connor asked Mr. Cline whether the free world countries are known to be shipping oil or other militarily important materials to North Viet Nam. Mr. Cline replied that there is no evidence of free world shipments of petroleum products or commodities which would make a direct contribution to the military.

Secretary Udall read from a report showing that Rumania’s sales of oil to the free world are important to enable Rumania to earn the funds with which to buy machines and other items from the West. He suggested that from this standpoint helping Rumania increase its sales of oil to the West is beneficial to our interests.

Secretary Rusk said that the U.S. has since 1945 been trying to get the Soviet bloc to learn to live peacefully with the West. The late Secretary Dulles in 1953–54 had dreamed of the day when we would have the kind of opportunity we have today to encourage a bloc country like Rumania to loosen its ties to the USSR and make friendly ties with us. If we give up the opportunity that approval of these cases gives us, we may lose the chance to help break the tight control of the USSR over the bloc countries, and may thus impair the prospects for long-term peaceful coexistence. He noted that other free world countries like West Germany are moving now to improve their relations with the various East European Communist countries.

Secretary Connor said he still did not believe that as the official charged with responsibility for administering the Export Control Act he could properly approve the catalyst technology and drilling equipment cases. However, he said, “I can, of course, be overruled by the President.”

Secretary Rusk replied that he would ask the President to consider this matter.

Deputy Secretary Vance asked whether the French would be likely to sell their catalyst technology and catalyst to Rumania if we refuse to sell our technology along with the catalyst material. Secretary Connor replied that this would not necessarily occur.

The discussion then turned to the question of what limits, if any, Secretary Rusk would put on exports to Rumania. Secretary Rusk indicated that, with possibly some exceptions, he would approve everything not on the COCOM embargo list. Secretary Connor observed that he could not think of anything not on the COCOM list, but which we control, which could be more important than advanced equipment and technology for oil exploration and production.

Secretary Connor then concluded the discussion by saying he would approve the catalyst material case (Englehart) and the Ethyl anti-knock case, and would deny the catalyst technology and petroleum exploration equipment cases.

Mr. Thau asked if the cases to be approved could be acted on by BIC without waiting the Presidential review of the other cases. Secretary Connor approved and the other members concurred.

Mr. Hockersmith called attention to a recent application by Universal Oil Products Co. (Case No. 65378) to sell a quantity of catalyst material to Rumania. He asked if this could also be approved. Secretary Connor agreed and the others concurred.

(The meeting adjourned at 5:10 p.m.)

The following day Secretary Connor determined to hold up approval of the anti-knock case for Presidential consideration along with the others because of the Viet Nam possibilities. This change was communicated informally to the interested departments.

1. Source: Johnson Library, National Security File, Memos to the President, McGeorge Bundy, Vol. 10. Secret.
2. The cases are more specifically listed in the Executive Secretary’s Summary of Facts and Arguments, dated February 4, 1965. [Footnote in the source text.]
3. At the meeting Mr. Cline inadvertently said there was a “relatively small amount of jet fuel.” This is now corrected as the amount was fairly substantial. [Footnote in the source text.]
4. See Documents 142–144.