MEETING OF THE POLAND SIG

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP84B00049R000400940003-7
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 21
• Document Creation Date: December 20, 2016
• Document Release Date: January 9, 2008
• Sequence Number: 3
• Publication Date: January 28, 1982
• Content Type: MEMO

SECRET/SENSITIVE
January 28, 1982
Senior Interdepartmental Group No. 15
Subject:
8202063
OVP -
P4s .
Nancy Bearg Dyke
NSC -
Mr.
Michael O. Wheeler
Agriculture -
Mr.
Raymond Lett
AID -
Mr.
Gerald Pa ano
CIA -
Commerce -
Ms.
Jean Jones
OSD -
COL
John Stanford
JCS -
LTC
Edward Bucknell
OMB -
Mr.
William Schneider
Treasury -
Mr. David Pickford
Energy -
Mr. Henry E. Thomas
Meeting of the
Poland SIG
A meeting of the SIG on Poland will convene on Friday,
January 2~?, at 3:00 p.m. in Room 7228 of. the Department of
State. Acting Secretary Stoessel will chair. Attendance
will be Principal Only. Addressees are requested to
furnish the name of their representative to Sheila Lopez,
532-5804.
The attached paper will be the subject of discussion.
..-~ ~ /
L. Paul Bremer, III
Executive Secretary
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STRATEGY ON POLAND:
POSSIBLE NEXT STEPS AGAINST THE U.S.S.R.
I. ANALYSIS OF THE SITUATION ?
We are approaching a crossroads over Poland, and our
handling of the situation will have far reaching implictions
for U.S. foreign policy, particularly the future of our rela-
tions with the Soviets, the Poles, and the Western Alliance.
Unless we continue clearly to demonstrate our seriousness in
this crisis, the Soviets may draw conclusions that could lead
them to test our resolve at other critical points over the next
three years.
The Soviet Stake in Poland:
The Soviets consider a "friendly" Poland absolutely critical
to the U.S.S.R.'s vital security interests. Poland has his-
torically been an avenue for invasion of Russia, and, since the
war, it has been the essential line of communication to Soviet.
ground forces in Germany. From the political perspective, main-
tenance of the status quo in Poland preserves the Bost-war
division of Germany and ensures the continued existence of a
"world socialist community'?.
Although the Soviets have historically been willing to
tolerate some deviations from the Poles, the Soviet-instigated
Polish crackdown demonstrated that Moscow remains prepared to
risk bloodshed and increased international tension in order to
retain control over events in Poland. This was true after
Yalta; it is still true after Helsinki.
West European Dimension:
In defending what it sees as its critical interests in
Poland, Moscow seeks to play upon divisions of the West. The
Soviets see West Europeans as inclined to accept Soviet hegemony
in Eastern Europe and less willing than the United States to
forego the benefits of "detente." These divisions in the West
were one among many reasons why the USSR rejected the option of
a direct invasion--which would have united us and the allies--
instead pressuring the Polish Government into brutal repression.
This suggests that allied support for U.S. policy toward Poland
can have an important effect on Soviet conduct.
The Outlook in Poland:
Moscow will continue to press the Polish martial law regime
to crush Solidarity and restore the kind of orderly, if economi-
cally inefficient, Polish dictatorship the Soviets feel they
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can comfortably control. The martial law regime has achieved
its initial objective of suppressing active resistance, but is
perplexed as to where to go from there. Even regime spokesmen
admit privately that the generals in charge have neither a
policy for solving the country's problems nor the political
talent to develop and implement one. Despite the decapitation
of Solidarity, passive resistance continues and there are signs
that it could become active. The economy was in shambles before
December 13j it has steadily worsened since. Little or no
gress has been made in rebuilding the shattered Polish communist
party, and conflict continues between orthodox hardliners and
more pragmatic elements within the leadership. The regime has
been moving to fend off resistance and further Western sanctions
by cosmetic adjustments of the martial law regime, but the gen-
erals know they have not yet begun to deal with Poland's over-
whelming problems..
The short-term (12-18 months). future in Poland is uncertain,
but there are at least three possible scenarios:
--One is large-scale bloodshed, which could bring a Soviet
invasion that would rip apart what is left of the fabric of
East-West relations. This could result from increased repres-
sion, but it could also result from open acts of resistance
that triggered the release of all the pent-up bitterness and
frustration of the Polish masses. In this case Western
leverage would be least effective.
--A second possibility, which appears to be suggested by
Jaruzelski's January 25 speech, would be for the situation to
remain unchanged--at least on the surface. Martial law restric-
tions would remain in place, and while economic deterioration
would continue, the government might succeed in keeping the lid
on by heavy reliance on its security organs. Despite its poten-
tial instability, such an outcome would represent a victory,
albeit perhaps temporary for the Soviets. At the same time,
it would be a situation of maximum vulnerability to Western
leverage.
--A third possible outcome is a partial return to dialogue
and reform, holding open the possibility for further evolution.
This would require that the Polish regime (and the Soviets) see
no viable long-run alternative to developing a relationship with
the Church and the working class that preserves a significant
number of the gains made since August 1980, while guaranteeing
the Soviets basic interests. If popular pressure and Western
leverage created real latitude for trade unions and the Church,
this outcome would best preserve the possibility of future
peaceful change in Poland and other East European countries.
The record of the last 18 months suggests that the restoration
of such liberties in Poland would not be likely to stimulate or
precipitate Soviet intervention, but instead might revive a
period of calculated Soviet pressure.
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It is becoming clear that the Soviets now foresee a lengthy
process with an uncertain outcome. Whatever the next year
brings for Poland, the Soviets face inevitable long-term pres-
sure for change throughout Eastern Europe. However, recent
events in Poland suggest that the Soviets will continue to
react to such pressures by taking whatever steps are necessary,
including the use of force, to preserve their hegemony in
Eastern Europe. Gromyko's categoric rejection of Secretary
Haig's presentation on Poland at their Geneva meeting is further
evidence of Soviet determination to implement this view of its
security interests in Eastern Europe. Thus, Poland in the near
term, and the entire region over time will remain a source of
tension in East/West relations.
II. U.S. OBJECTIVES
Poland relates to so many fundamentals [the future of Eastern
Europe, the Alliance, Soviet security, American political and
moral leadership) that our objectives must be placed in the con-
text of our overall foreign policy. Our overall objective is to
maintain U.S. capacity for world leadership by halting and if
possible reversing adverse trends in the world power balance
over the last decade or more. But we recognize that~we must
navigate through a period of some vulnerability as we rebuild
our strength.
Thus we seek to establish a sense that the U.S, is prepared
to accept the responsibilities of political and moral. leadership
--without provoking confrontations with the USSR which could
carry unacceptable risks in the nuclear age. Since our response
to the Polish crisis will inevitably be regarded as a critical
test of our ability to meet this longer-term challenge, our
policy must be both prudent and effective. In this sense, we
face an historic juncture in Poland, and our. actions will have
profound consequences for the future across a broad front of
basic.U.S. interests.
This strategic objective and the analysis of the concrete
situation set forth in Section I dictate the following specific
objectives for the U.S. response to the Polish crisis:
-- Toward the situation within Poland, to secure the
agreed Western objectives of lifting martial law,
release of detainees, and restoration of a minimum
of freedom (e.g. for trade union activity), without
creating a public perception that we are responsible
should there be a violent ending.
-- Toward the Soviet Union, to drive home that the USSR
will pay a heavy price in U.S.-Soviet relations if it
continues on its present course in Poland, without
seeming to threaten vital Soviet security interests to
the point of direct confrontation.`
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Toward the Alliance, to exert strong pressures and
leadership for concrete measures, without pushing so
hard that we tear the Alliance apart (recognizing that
a divided alliance deprives us of much of our ability
to affect Soviet behavior).
Toward the American people, to demonstrate that we are
living. up to our moral and political responsibilities,
without creating expectations that cannot be fulfilled
given the present balance of forces, Poland's geo-
graphical situation,.the State of the Alliance, our
economy, etc.
III. ACTIONS AND IMPACT TO DATE
We must view the situation to date both in terms of our own
actions and the overall situation facing the .USSR and Poland.
A? SPecific Actions
The specific actions we and our Allies have taken to date
represented a measured response which has imposed a cost on the
USSR.
-- The package of economic and political measures against.
the Soviet Union announced on December 29 was deliberately re-
strained`in order to send a primarily political signal to Moscow
of our readiness to impose more substantial costs if the repres-
sion was not brought to an early end. Specifically, we: (1)
suspended Aeroflot service; (2) closed the Soviet Purchasing
Commission; (3) suspended issuance of licenses for high-tech-
nology exports; (4) halted exports for the oil and
(5) suspended talks on a new maritime agreement andgimposedstry,
strict controls on Soviet access to U.S. ports; (6) refused to
set a date for talks on a new long-term grains agreement; (7)
decided not to renew three bilateral cooperation agreements
that expire this year. We also have stepped up VOA broadcasting
to the U.S.S.R. by the introduction of medium-wave frequencies.
-- At the January 11 Ministerial and follow-up meeting on
January 23, the Allies moved closer to getting on board with
modest political actions versus the Soviets. A number of Allies,
under EC-10 aegis, are prepared to limit selected imports of manu-
factured and luxury goods from the USSR (although not oil or other
raw materials). The EC Foreign Ministers have decided to recom-
mend to the OECD amore restrictive status for the USSR, effect-
ively raising the interest rate for credits to that country.
Several Allies are considering tightened travel controls on Soviet
diplomats and nonrenewal of exchange agreements. On the most pro-
minent economic issue, the. Siberian Pipeline Project, the Italians
have advocated "a pause" in negotiations, but French companies on
January 23 signed a major contract with the Soivets for purchase
of natural gas from the future pipeline. Meanwhile, the Allies
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have agreed to suspend rescheduling of the Polish debt, as well
as to suspend all export credits to Poland.
B. IMPACT
This listing of specific actions misses the larger consequences
for the Soviets. Prior to the December~l3th repression, US-Soviet
INF negotiations were moving ahead, it appeared that a be
date for START might be announced at the Hai ginning
were massive demonstrations in Euro a g/Gromyko meeting, there
U.S. nuclear deployments, and the SovietsmarPeace?roffensivelthreat-
ened to drive a wedge between the Allies. Since then, START has
been postponed indefinitely and another burden added to INF, there
have been significant demonstrations against the repression, the
"peace movement" in Western Europe is, at least for the moment,
less effective, and the Allies have been moving albeit slowly and
unevenly in an anti-Soviet direction. Allied Ministers will be at
our side condemning the Soviets when the CSCE meeting resumes.
In terms of Poland itself, pre-.December 13th the West was
committed to helping Poland deal with its massive economic prob-
lems. Tdow the future of Western aid is much more problematical,
thus adding to the economic drain of the Polish crisis on the
Soviet Union. It is clear that the Polish regime is~already
feeling pain as a result of this stance.
do everything possible to maximize these economiclandopolitical
costs to the Soviet Union.
Witfiin Poland, even our modest response has given heart to
those who wish to save as much of the achievements of the past
year and a half as can be saved. The Polish Council of Bishops
and leading Polish intellectuals denounced the regime over the
weekend in language that reads like an echo of the President's
December 23 statement and the January 11 NATO declaration.
On the other hand, the Soviets have achieved their minimum
objectives in Poland.-- restoring order and Soviet control over
the situation -- without having to resort to direct military in-
tervention. Thus they have staved off, at least for the pre-
sent, a strategic loss in Poland at the cost of exposing the
bankruptcy of the Soviet-imposed system, as well as a potenti-
ally serious turn-down in East-West relations, and a new crisis
in relations with the largest communist party in Western Europe.
IV. OPTIONS
The following general considerations will have to be taken
into account as we-review our options:
1. It is possible that nothing we can do in the short term will
be enough to induce Moscow to back away from its determination
to crush Polish renewal. However, over the longer term there
is a chance that, by imposing real costs on Moscow, we can
exert some leverage in inducing Soviet and 'Polish moderation.
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2. There is no reason to hold tough economic measures in
reserve pending direct Soviet military intervention. Once a
Soviet decision to intervene is made, we will not be able to
reverse it by imposing additional economic and political
sanctions.
3: We will also be under considerable domestic pressure to
move forward with more energetic measures in the near future.
If Lane Kirkland should follow through on his threat to create
a de facto embargo through labor action (which he may not be
able to do), the costs to the domestic economy would be as
great as if we had instituted an de jute embargo but we would
have gained little or no leverage vis a vis our allies or the
Soviets. The result would be a blow to our international
credibility which could have far reaching implications. -
4. The primary, although still marginal, leverage available to
the West is economic, but the U.S. alone cannot do enough to
produce an effective response (although leverage can be exer-
cised unilaterally on the debt issue). If we cannot bring the
Allies along, we may well not be able to achieve the objectives
outlined above.
5. There is no hope of getting European agreement on tough and
painful action, unless they believe we are making corresponding
sacrifices ourselves. Specifically, they see a direct relation-
ship between the kind of tough European sanctions we are asking
for and-our grain sales -- without a grain embargo we have no
hope of stopping or even suspending the pipeline or of gaining
European agreement to other tough measures, such as a partial
embargo. At the same time, while tough U.S. action is necessary
to achieve comparable European measures, it still may not be
sufficient. We may also have to express our willingness to
share the costs of sanctions. that penalize our Allies
disproportionately.
6. We will have to wrestle with the thorny question of
reversibility. Our sanctions are linked to Soviet behavior
toward Poland and should be reversible, to give the U.S.S.R.
an incentive to moderate its repression, but the sorry
post-Afghanistan experience suggests that erosion is almost
inevitable over time, whether or not the Soviets change the
behavior which caused sanctions to be imposed. We and the
Allies are certain to disagree on when the lifting of sanctions
is justified, and these differences undoubtedly will be exacer-
bated by Soviet and Polish adjustments of the martial law regime
designed to create an appearance of improvement. Moreover, ero-
sion of sanctions over time could force us to consider a rever-
sal of our policy without evidence of real improvement in
Poland, thus acknowledging the defeat of our strategy.
7. It may not serve our interests to suggest that all sanctions
should be reversible. This is particularly true of the pipe-
line, since we would continue to oppose the project (while
working to develop energy alternatives) independent of the
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Palish situation. On balance, however, the Europeans will only
agree to sanctions if they are linked explicitly to Poland, and
we will have to accept the principle of reversibility if we are
to obtain the cooperation of Europeans -- and Americans -- who
will be asked to sacrifice. Thus, we have to be prepared to
accept a reversible halt to the pipeline.
Polish Debt:
Two possibilities which should be considered whatever else
we choose to do are to continue to refuse to reschedule Poland's
1982 debt and to use implicitly our ability to call in the debt
to the United States at any time as leverage with the Soviets
and our Allies.
The act of calling in Poland's debt would have highly
negative consequences. The Soviets may have to choose between
paying off the Polish debt or permitting a default that could
trigger a formal-default on Poland's other loans and thereby
undermine the credit position of the entire Eastern Bloc. How-
ever, an SSG paper (at TAB A) concludes that the Soviets in all
likelihood would be affected only indirectly (through reduced
availability of Western credit) by a Polish default and that
the international monetary system would suffer a severe blow
if the default spread to other Eastern European countries.
The irreversible step of calling in Poland's debt or an overt
threat to do so would also provoke a serious fissure in the
Alliance. An overt threat carries the additional risks of
panicl-sing private creditors into precipitating default and
encouraging the Allies to settle with the Polish Government
as preferred creditors.
The implicit recognition by our Allies that the USG could
precipitate default unilaterally gives us important leverage in
our efforts to induce the Europeans to take tough measures like
cancellation of the Siberian pipeline project or a partial
export embargo. We should be aware, however, that this is an
imperfect instrument for generating leverage, since some allies
may regard it as a bluff. Therefore, to make this prospect
seem credible and responsible, the U.S. would need to consider
means of containing the problems created by default, and in
particular to share the burdens that this would pose on
European Central Banks. Individual banks must not be allowed
to exploit such a system by declaring a default on their own,
but default may occur in any event and safeguarding mechanisms
could assure that it did not spread throughout the Eastern
Bloc. The NSC should commission, on an urgent basis, a study
of the means for creating such alliance safeguarding and burden
sharing mechanisms.
policy that
Government1tonGovernmentrdebtncannotrbesreschshed
internal conditions in Poland warrant and useeofltheuleverage
created by our ability to precipitate default should be
considered as an adjunct to the following specific options.
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OPTION 1
Continue with our current efforts to gain Allied agreement
to take specific actions against the USSR, while for the present
holding in abeyance new unilateral U.S. steps. Our interim
objective would be to bring the Allies as close as possible to
the point we reached with our December 29 measures, while hold-
ing open our options for future U.S. actions either with or
without the Allies. At the same time, we would use events such.
as Poland Solidarity Day and the resumed Madrid meeting, on
which we have already achieved a considerable degree of Allied
unity, to keep public pressure on the Soviets.
This course would build upon the degree of Allied unity
already achieved, and thus maximize the likelihood of united
Western action against the Soviets and the Polish military.
It would avoid the political fire we would come under if we
announced another series of "half-measures." It would not
preclude our taking more severe steps at a later stage, if
conditions in Poland warrant.
This option would expose us to further charges that we are
long on rhetoric but short on action.. It might also lead to
increased pressure or unilateral action by Kirkland. Depending
on how long we delayed and on the course of events in Poland,
this course could have profound consequences for our credibility
with the Poles, the Soviets, the Allies and the American people.
OPTION 2:
Further intermediate measures against the U.S.S.R.. There
are several actions we could take short of a total export
embargo to follow-up on our December 29 actions. (Because of
the provisions of the new farm bill, any measures affecting
grain trade, even partially, would require compensation to
grain producers unless we imposed a full embargo on exports).
A list and brief discussion of a number of such measures is at
Tab C.. In order to make clear that U.S. policy is Steadily
building, these could be implemented almost immediately and
accompanied by a Presidential reiteration of the existing
policy to suspend Polish debt rescheduling. They include:
-- embargoing all industrial exports to the U.S.S.R. or
at a minimum imposing more selective economic
sanctions, such as a ban on chemical exports
(especially phosphates), revoking already-issued
licenses for exports such as International
Harvester/Combine technology, suspending
joint-venture fishing operations, etc.
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declaring a state of national emerge-racy and imposing
of an embargo on all non-strategic imports from the
Soviet Union;
discouraging tourism-to the USSR;
reducing Soviet commerical representation in the U.S.
to a skeletal force;
suspending activities under existing bilateral
exchange agreements, or even abrogation of all
remaining agreements;
not setting date for grain consultations scheduled
this spring. Up to now we have avoided violating any
existing agreements with the USSR. This step and the
one above would be a departure from this policy.
Pros:
An embargo on all industrial exports, particularly on
chemicals, would impose significant costs on the Soviets,
although it would not affect the item that accounts for.
two-thirds of our exports to the U.S.S.R., grain. The other
measures would enhance the political impact of this step and
would involve only minimal costs to us. Taken together,
however, these steps would seem to foreshadow a full embargo,
thus possibly increasing our leverage.
Cons:
Singling out industrial exports would be a departure from
the President's position that all sectors should share equally
the burden of any future economic sanctions against Moscow. At
the same time this would not entail U.S. sacrifices sufficient
to induce the Allies to curtail their own far mare extensive
exports to the U.S.S.R. Cuts in exchanges and commercial
representation migh*_ be emulated by the Allies, but these
steps could be criticized by the U.S. public as inadequate
half-measures that fail to live up to our rhetorical
condemnation of Soviet actions in Poland.
Option 3:
A ban on all exports to the USSR not covered by existing
contracts either covering all items or exempting agricultural
trade. Exempting agricultural trade would involve less
domestic costs, but would make our action less credible_to
allies, who allege that the U.S. is only taking actions which
don t hurt itself. Including agricultural trade, however,
could trigger the legal obligation to compensate producers
under the Farm Bill, which is not clear on this point.
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This would impose substantial ecomomic costs on the Soviets
(particularly if agricultural trade were included) by grinding
U.S. trade with the USSR slowly to a halt without forcing
suppliers with signed contracts to abrogate legal obligations.
It would be consistent with our early 1981 discussions with the
Allies in NATO, and thus easier for them to accept. If followed
by Allies this would give real meaning to their pledge not to
undercut U.S. restrictions.
It would not have an immediate impact because of the
exemption for deliveries under exist-ing contracts. If it
included grains, they would be affected faster than industrial
goods. It could encourage our allies to increase pressure on
us to exempt existing contracts from our previously announced
oil and gas sanctions. Though this step would have a real bite
over time, it might not be seen as forceful enough by our
.domestic critics. It could trigger the obligation to
compensate producers under Section 1204 of the Farm Bill.
OPTION 4; -
Total export embargo against the Soviets. One bold action
would be for the U.S. to embargo all exports, including grain,
to the_iJ.S.S.R. Under current legislation, in order to embargo
grain without triggering USG parity price payments (30 billion
dollars per year), there must be a total export embargo. (see
Tab B) .
This would impose the greatest economic costs on the
Soviets of any option available to us. By demonstrating our
readiness to make substantial economic sacrifices (especially
in grain sales), it could help induce the Europeans to take
comparably tough measures against Moscow such as suspension of
the pipeline project or a partial but significant embargo on
their own industrial trade with the Soviets. Taken together,
the U.S. and Allies actions might be costly enough to the
Soviets, if sustained over time, to influence them to ease the
repression in Poland.
A total export embargo may not be enough to bring the
Europeans along, and if implemented unilaterally, could
exacerbate severe strains in the Alliance. Even if the
Europeans did take parallel action,. the Western embargo could
begin to erode quickly with the Europeans undercutting or
circumventing the restrictions as they did after Afghanistan,
and with U.S. farmers ending up sacrificing billion of dollars
in grain sales without comparable sacrifices by the Europeans.
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This is certain to amplify already growing anti-European
sentiments in the U.S., leading to demands for U.S. troop
withdrawal and ulitmately weakening the Alliance to the point
of irrevelancy. Moreover, to be fully effective, other grain
exporting countries would have to join in. This may be
.possible with Australia, but unlikely with Canada and
Argentina. Finally, a grain embargo could cost thousands of
jobs in the U.S., and increase USG farm price support payments
by 3 billion dollars per year.
OPTION 5: .
Actions to hit the Soviets in other regions. Recognizing
that even the most serious sanctions may not work, we may want
to consider actions in other regions. These could be an
alternative to the most severe economic sanctions under Option
4, as a complement to them or to the more modest measures under
options 1, 2, and 3. This would punish the USSR for its
actions in Poland and elsewhere. Possibilities include (some
already being addressed separately):
--
Sharply increased military assistance to the Afghan
resistance, in coordination with the Pakistanis.
--
Military pressure against Cuba. Compress the
two actions in the Cuban scenario by imposing
immediate embargo or naval blockade.
phase
an
--
Stepped-up action against Libya.
Proceed simultaneously with the imposition of an embargo
upon the importation of Libyan oil and all U.S. trade with
Libya. Early conduct of a new naval exercise in the Gulf of
Sidra.
Pros:
These actions would have the advantage of not requiring
direct NATO cooperation, which could be difficult to achieve in
the case of a total export embargo or an effort to call in
Poland's debt. The option might therefore pose fewer risks of
creating profound fissures within NATO {depending on their
severity), and would drive up the cost to the Soviets. more than
the modest measures of option 1 and 2, without dismantling the
framework of the U.S.-Soviet bilateral relationship (in effect,
challenging the Soviets to take a dose of their own "no-linkage"
medicine). These actions are very likely to be required in any
event, on their respective merits. In the case of Cuba we have
been restrained by lack of public support., The anti-Soviet
sentiment aroused by the Polish situation would ensure greater
public understanding and support for actions against Cuba.
Cons:
These actions would entail the dangers/costs of the actions
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themselves, risks of a wider confrontation with Moscow, and a
backlash on the part of Allied publics and Governments. By
acting against Cuba and Libya, we could shift attention from
Polish and Soviet repression to "U.S. military aggression"
(this would not be true of actions toward Afghanistan, but in
this case our actions could not be publicly linked to Poland);
an6 such actions could be seen more as an attempt to exact
retribution than to moderate Soviet behavior in Poland.
Because these actions may be justifiable on other grounds, they
could be difficult to reverse and thus questionable as
effective levers on Soviet behavior regarding Poland.
This disadvantage would be compounded because we could not,
as a legal matter, rely on an asserted linkage to Poland to
justify our actions against other countries. Moreover, a
blockade of Cuba would, as a legal matter, be regarded as an
unlawful use of force absent a Cuban use of force against the
U.S, or authorization from the U.N. security council of the
OAS.
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Report of the SSG Working Grou on Polish Debt
Background
When the group of fifteen creditor governments agreed to
reschedule the interest and principal payments. due during 1981 by
Poland on its official debt, it was agreed that any one of the
signatory q_overnments could unilaterally (although after a
priate consultations) rescind its agreement to the rescheduling
if "exceptional circumstances" occured. It was understood that
this referred to foreign intervention (obviously with the Soviet
Union in mind) or domestic repression of the Polish people.- This
is commonly referred to as the "Tank Clause". The legal effect
of the invocation of the Clause by the creditor government would
be to have the 1981 Polish debt service obligation to that
government become due and payable immediately in accordance with
the. terms of the original loan contracts. That government would
then legally be in a preferential position vis-a-vis the other
creditor governments unless they also invoked the Clause.
One practical effect of these developments would be a de jure
declaration of .the present fact that Poland is in default on its
debts. Under these circumstances, it is likely that some of the
private banks would declare Poland in default of its private debt
and attempt to seize Polish assets through court action (assuming
that there are available assets to be seized), which they can do
no=a, if they wish. Experience has shown that chances of success.
in doing so would be very small in foreign jurisdictions. Another
effect would be for the Poles to stop payment to official or
private entities declaring default. If the default were
widespread, it would precipitate total cessation of interest
payments to the West. There would be no effect on Poland's
ability to borrow, since it cannot borrow now. Palish trade,
hocaever, would be hampered in the short run.
In sum, no action that could be taken after the invocation of
the Tank Clause cannot be taken now by any public or private
creditor. The use of the Tank Clause would thus have political
effect only, with no attendant adverse effects on Poland or
significant adverse effects on other Soviet Bloc countries.
Probable Implications
Obviously there are many imponderables with reference to the
after-effects of a step such as the invocation of t:~e Tank Clause.
The major creditor governments agree that conditions exist for
invoking the Clause. The same governments have stated that they
oppose doing so at this time. Whether the USG should invoke the
Clause must be assessed in the light of the following
considerations: -
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{1) Is the implicit possibility of the USG unilaterally
invoking the Clause at any time or the threat of doing so a
more powerful weapon to influence events in Poland than
actually invoking it?
~ The fact that we have not yet invoked the Clause keeps Poland and
to some extent the USSR under pressure to continue to make some
payments. It also provides leverage with our Western European
allies, in such meetings as NATO, COCOM, G-5, etc. durinq_ the next
few weeks in order to induce greater cooperation by them with our
post-martial law sanctions.
(2) What would be the probable effects of invoking the Clause
on the financial system of the Western world?
If default were to be declared against Poland ,. the impact on the
Western financial system would be severe, but containable. Budget
and financial effects in certain countries, especially West Germany,
could be substantial. If technical. default were to spread to other
Eastern European countries, the costs to the Western financial
system increase, with potentially long-term consequences.
(3) What. would be the impact of invoking the Tank Clause on
the Soviet Union?
All pressure to assist Poland to make at least token payments would
be removed. The USSR would be unlikely to pay off the Polish debt
because of its own financial considerations. Our invocation of the
Clause-would be declared by them a "political act."
(4) Are there other steps which could be taken which would
permit us to exert similar or stronger leverage 'on Poland, the
Soviet Union and some of our allies without effects on us and
our allies as pernicious as those which might follow invocation
of the Clause?
A refusal on our part to participate in a rescheduling of Poland's
official 1982 debt at this time would have much the same effect in
reducing the availability of Western credit to the Soviet Bloc
while not forcing private bank action on default. This would give
the appropriate signal to the financial markets, while making a
ripple effect much less likely and permitting the banks to deal
with the situation in amore orderly manner.
Recommendations
(1) That the USG not invoke the Tank Clause at the present time.
(2) That our ability to do so at any time be used as leverage
with our allies and with the Soviet Bloc in various negotiations
over the next few weeks.
(3) That we refrain from participating in negotiations on the
rescheduling of the Polish official 1982 debt at this time. ?
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SECRET/SENSITIVE Tab B
Under section 1204 of the Agriculture and Food Act of 1981, any
controls on grain except as part of ?a suspension or
restriction of all" U.S. exports ~`~uire compensation to
producers through 100% parity or direct payments -- with an
initial budgetary price tag of $30 billion or more.
-- The most certain legal ground for suspending all U.S.
exports to the USSR would be for the President to declare
a national emergency and use the resulting Presidential
emergency powers under the International Emergency Economic
Powers Act ("IEEPA"). Declaring an emergency would require
the President to find that the Polish situation is an
unusual and extra-ordinary threat to U.S. national security
or foreign policy. The law requires prior consultation
with Congress "in every possible instance," and a report to
Congress explaining the President's action.
-- If required, IEEPA could also be used to authorize such
additional measures as bans on Soviet imports; bans on
financial transactions with the USSR; or even bans on
expenditures for U.S. citizens' travel to the USSR.
-- Under the President's action, exports contracted for but
not yet delivered could be stopped. This would halt the
shipment of some 5 million tons of grain that the Soviets
have purchased but which will not have been delivered.
Since the bilateral Grain Agreement guarantees the Soviets
8 million tons and by the end of January they will have
shipped only about 6 million tons, the embargo would
violate the Agreement. However, since the agricultural
exports would be banned only as part of a substantially
complete embargo, compensation to farmers would not be
required under the 1981-Farm Bill.
POSSIBLE ADDITIONAL MEASURES
-- US ports could be closed completely to Soviet commercial
vessels. Af ter the December sanctions some Soviet
commercial ships were still allowed to call on US ports.
In particular ships loading US~grain were to be allowed in.
-- All Soviet commercial representatives (diplomatic and
non-diplomatic) in the US will be instructed to leave.
Soviet commercial organizations would close and the
joint-venture fishing operation on the Pacific Coast would
stop. Presently there are seventy-two non-diplomatic
Soviet commercial representatives in the US operating the
following seven organizations: Aeroflot, Amtorg, Intourist,
3elarus, Sovfracht, US-USSR Marine Resources, and US-USSR
Trade and Economic Council. There are also twenty-one
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Soviet officials operating the Office of Trade
Representative. We do not have domestic legal authority to
compel the closing of some of the purely commercial
organizations but the Soviets are likely to obey our
directive for their personnel to depart. [ve would also
take the initiative in closing the US Commercial Office in
Moscow and withdrawing our diplomatically accredited staff.
-- We would refuse to issue visas to Soviet businessmen to
the extent permitted by law. While our legal basis is
restricted by the McGovern Amendment, the Soviets are not
likely to challenge us and the domestic legislative mood
might well facilitate a change in or elimination of that
Amendment.
Initially we should limit the embargo to the movement of
goods and services and not extend it to include the seizure of
Soviet assets in the US. Such a step would be so extreme as to
jeopardize diphomatic relations and to panic other foreign
investors..
Implementation of any embargo would involve detailed
regulations and a variety of subsidiary policy decisions
regarding sanctity of existing contracts and retro-
activity, extraterritoriality, regulation of financial
transactions,-etc. Accordingly, a full analysis should be
undertaken as soon as possible.
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,SECRET/SENSITIVE Tab C
POLAND: POSSIBLE MEASURES AGAINST THE USSR
SHORT OF A TOTAL EXPORT BAN OR EMBARGO
A. Near-Term Measures
The following are possible measures which we could take
against the Soviets in a matter of weeks, and which would have
a greater political than economic impact. Of course, measures
taken against the Poles can also impose costs on the Soviets.
1. Embargo on export of all industrial products. Under the
Export Administration Act we could prohibit the export of
all US manufactured commodities or technology. This would
have an economic impact on the Soviets and add to our
credibility in our efforts to .gain similar sanctions .from
our Allies.
2. mbar o on chemical ex orts This step would hurt Soviet
fertilizer production;
~ This combined with an import embargo
wo~rpedo the twenty year $20 billion deal Occidental
has with the Soviet Union.
3. Embargo on all imports from the Soviet Union. This step
would require a declaration bf national emergency by the
President.. It would cut off.a source of hard currency that.
earned the Soviets $453 million in 1980 and $312 million
through October in 1981. Imports consisted mainly of-
petroleum and products, agricultural chemicals, and
metals. Our greatest dependency on the USSR for imports is
in palladium and titanium Alternative supplies could be
arranged to replace these imports.
4. Revoke already issued licenses for export of high-technology
items to the USSR, including the license for transfer of
International Harvester combine technology. This step is
parallel to the actions we hope the Allies will take in
regard to their pipeline companies' contracts, but would be
inconsistent with our earlier NATO agreement on the sanctity
of contracts. Foreign firms could pick up the deal unless
we had firm commitments from the Allies not to undercut
us. Revoking the International Harvester license would
cost the firm earnings of $300 million, and could send it
into bankruptcy.
5. Suspend Soviet-American joint-venture fishing operations.
There is at present one such joint venture on the Pacific
Coast; its suspension would be a low-cast gesture and wou13
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' have a financial impact on the Soviets. However, the U.S.
fishermen are having a difficult year already and suspension
of-this joint venture would hurt them. Soviet purchases
under-this arrangement were $4 million in 1980.
6. Not set dates for semi-annual q_rain consultations. Under
the US-USSR Grains Agreement we are required to consult
with the Soviets on further grain availability
semi-annually and whenever either party requests
consultations. Curbing Soviet grain purchases through
refusing consultations might trigger law suits from?farmers
demanding compensation under the Farm Bill. However the
Soviets have never requested consultations and are not
likely to now. The semi-annual consultations are due to
take place this spring. She should take no steps to set
dates at this time. We should simply let the meeting slide
until we receive a request from the Soviets to hold the
consultations. This decision should not be publicly
announced; a public announcement could trigger claims for
compensation under the Farm Bill. By not setting dates we
are able to put off an untimely meeting with the Soviets on
grain sales.
7. Abroq_ate existing exchange agreements.- Our December 29
announcement means that three of the eleven technical
agreements will be allowed to lapse during the first half
of 1982. The others are not up for renewal until muct-i
later. Abrogating them would send a tough signal, but
would not seriously hurt the Soviets in a practical way.
It would also violate our legal obligations, since the
agreements have no provision for unilateral termination.
8. Suspend activities under existinq_scientific and technical
agreements. Such activities .were cut to the bone after
Afghanistan, but full suspension would be feasible and
would further underline our outrage over the Soviet role
in Poland. The cost to the Soviets of such a step, on the
other hand, would be relatively minor.
9. Seek U.N. condemnation of the Poles and Soviets. Security
Council consideration of the Polish crisis, or.General
Assembly action under the Uniting for Peace Resolution,
would not be possible except in the event of Soviet
military intervention.
10. Further reduce Soviet commercial representation in the U.S.
(See also Tab B)
Explusion would have primarily ,a political impact, but it
would be appropriate for us to eliminate those commerical
representatives whose economic activities have been cur-
. tailed by other sanctions. There are three Soviets here
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with the shipping organi2ation;:Sovfracht and some represen-
tatives at Amtorg who work on Maritime and shipping affairs.
Also, Aeroflot staff is still present in the U.S. and there
is one representative who works with the fishing joint ven-
ture. Reciprocal cuts in diplomatically-accredited commer-
cial representatives could be considered later. If thz
Soviets retaliate by expelling U.S. private commercial
representatives, a loss of $10-15 million in investments
and the loss of some export sales is likely.
11. Discourage tourism to the USSR. A public USG statement
urging Americans not to visit the USSR could reduce Soviet
hard-currency earnings and would tend to brand Moscow an
international pariah. Such a move, however, cauld spur
domestic and foreign criticism as an attempt to interfere
with the free movement of persons.
12. Seek discussion of Polish and Soviet actions in the U.N.
:3uman Rights Commission. Initial soundings indicate that
it would not be difficult to get the Polish crackdown on
to the UNHRC agenda. (This would not necessarily lead to
further consideration by other U.N. bodies, which may not
be feasible short of direct Soviet military intervention.)
13. Reciprocal cuts in diplomatic representation in Moscow and
WashincLton. We and the Soviets presently have about the
same numbers of diplomatic personnel in our respective
Embassies. Large-scale staff cuts would hurt our Embassy
more because of the closed nature of Soviet society, the
Soviets' large U.N. presence in New York, and our Embassy's
greater vulnerability to retaliation due to our reliance on
Soviet-employees-for non-sensitive support functions. The
Embassy could endure cut s. in certain sections -- e.g.,
culture, science, commercial -- where activities have been
reduced because of our other sanctions..
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