Foreign Relations of the United States, 1969–1976, Volume XVI, Soviet Union, August 1974–December 1976

118. Memorandum From the Counselor of the Department of State (Sonnenfeldt) to Secretary of State Kissinger¹

Washington, January 10, 1975.

SUBJECT

• Soviet Rejection of Trade Agreement Note

The operational significance of the attached paper (Tab A)² from Dobrynin is

(1) that the Soviets refuse to exchange notes that would put the 1972 trade agreement into force;

(2) that they will repudiate any statement made by the President in connection with the exercise of his waiver authority that he has received assurances from the USSR. While the Soviet statement refers to “assurances . . . concerning internal legislation,” which would not be the precise phrase used by the President in his waiver justification, this is a quibble and the Soviets would undoubtedly issue a denial that would be interpreted as vitiating the President’s affirmation.

Thus, we seem to have confirmation of Soviet refusal to proceed with the trade agreement and of their decision to forego EXIM credits.

In the remainder of the Soviet statement, Moscow again states that it is relieved of obligations stemming from the “comprehensive complex of the agreements of 1972 on trade and financial questions.” This raises various issues as to the obligations involved and just how the Soviets will give expression in practice to their unilateral assertion. The lawyers, for example, are clear that the 1975 installment on the old pipeline lend-lease account remains a valid Soviet obligation. The first “regular installment” on the lend-lease debt, originally due in 1974, is of course excused by the terms of the lend-lease agreement itself if MFN has not been extended. The broader question is whether the Soviets are calling the whole lend-lease agreement null and void (so that it would not even be reinstituted if the MFN issue were eventually resolved).

Further, the 1972 “complex” of agreements included the original EXIM finding and the subsequent agreement between EXIM and the USSR implementing it. The Soviets have been extended some $480 million of credits on this basis, of which they have drawn some $70 million. Obviously, from our standpoint, Soviet obligations in this regard (e.g., to service the credits so far drawn, even if the remainder is never used) must remain.

The maritime agreement, likewise, was part of the 1972 “complex.”³

To the extent the Soviets have obligations under the 1974 long-term cooperation agreement, their statement appears not to apply.

Our lawyers are currently compiling a list of obligations under existing agreements and the effect upon them of a failure to implement the 1972 agreements.

I have previously pointed out, and the lawyers confirm it, that the Soviets are incorrect in claiming that Jackson–Vanik violates the “unconditionality” clause of the MFN article in the 1972 trade agreement. Unconditionality referred to the treatment of products with respect to certain technical rules of trade. But it probably is not worthwhile to assert a formal US view on this point.

Presumably, before anything further is done we should await Brezhnev’s answer to the President’s latest letter.⁴ But the Soviet position seems firm. Even if we should succeed in getting revised EXIM legislation, we cannot expect to get rid of the waiver requirement. Hence it is doubtful that the Soviet position would change, though we might get some political brownie points for trying to get an EXIM revision. But this, too, has a problem: as soon as it becomes known that the Soviets will in any case repudiate a Presidential assertion concerning “assurances,” Congress will not be likely to change the EXIM law (unlikely, in any case).

The most immediate decision, therefore, seems to be how to inform Congress and the public of these developments. One way would be to include a statement in the State of the Union address.

1. Source: National Archives, RG 59, Lot File 81D286, Records of the Office of the Counselor, Box 8, Trade Bill, 1975. Secret; Sensitive; Exclusively Eyes Only.
2. Printed as Document 117.
3. The U.S.-Soviet Maritime Agreement was signed on October 14, 1972, and renegotiated as of December 19, 1972. For the text of the agreement, along with memoranda of understanding and exchanged letters, see 23 UST 3573; TIAS 7513.
4. Document 115.