SIG-IEP MEETING ON THURSDAY, MARCH 31, 1983

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP85-01156R000200200004-0
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 13
• Document Creation Date: December 22, 2016
• Document Release Date: September 3, 2010
• Sequence Number: 4
• Publication Date: March 29, 1983
• Content Type: MEMO

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 FIED
(With Secre t
MEMORANDUM FOR THE VICE PRESIDENT
THE SECRETARY OF STATE
THE SECRETARY OF DEFENSE
THE SECRETARY OF AGRICULTURE
THE SECRETARY OF COMMERCE
THE DIRECTOR, OFFICE OF MANAGEMENT
AND BUDGET
CHAIRMAN, COUNCIL OF ECONOMIC ADVISORS
ASSISTANT TO THE PRESIDENT FOR
NATIONAL SECURITY AFFAIRS
ASSISTANT TO THE PRESIDENT FOR
POLICY DEVELOPMENT
Uf1ITED STATES TRADE REPRESENTATIVE
VjIRECTOR OF CENTRAL INTELLIGENCE
CHAIRMAN, EXPORT-IMPORT BANK
SUBJECT SIG-IEP Meeting on Thursday,
March 31, at 3:00 p.m.
---IJJ
/, 9 p>
DDI- 7,^6 a.J
Attached for the meeting of the SIG-IEP scheduled for
Thursday, March 31, at 3:00 p.m., in the Roosevelt Room, are
background papers on Export-Import Bank credits to Angola.
Consideration of Agenda Item 4, Netherlands Antilles Tax
Treaty, is being postponed.
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EXIMBANK PRELIMINARY COMMITMENT TO ANGOLA:
TAKULA OIL FIELD DEVELOPMENT PROJECT
Issue:
Eximbank received a request from Gulf Oil to support $300
million of U.S. exports for the Takula oil field development
project in Angola. Should the President deny this application
on foreign policy grounds?
Options
(1) Deny the application on foreign policy grounds.
(2) Determine that there are no foreign policy objections
to Eximbank support of a first tranche ($60 million) for
this project, and authorize Eximbank to tell U.S. exporters
that the remainder will be considered at an appropriate
time.
(3) Determine that there are no foreign policy objections
to Eximbank support for $300 million of U.S. exports for
this project.
Discussion
-- The issue is fleshed out in the attached papers: (1) the
Eximbank summary of the deal; (2) the NSC recommendation to
defer approval; and (3) State's recommendation that Eximbank
offer a first tranche ($60 million) at this time.
-- The Export-Import Bank Act provides that Eximbank should
not "deny applications for credit for nonfinancial or noncom-
mercial considerations" except in cases where the President
determines that such action "would be in the national interest"
(the "Chafee amendment"). The Eximbank Board is awaiting a
determination by the Secretary of State that there are no
political objections to this application.
-- The equipment to be exported is not unique. U.S. suppliers
face intense competition on this sale primarily from France.
Eximbank support will not be a determining factor on whether
the project goes forward, but will significantly affect the
competitiveness of U.S. exporters.
-- A decision must be made quickly; equipment awards of $60
million will be made soon, and U.S. suppliers have been short-
listed for such procurement. Treasury and Eximbank staffs
feel that the deal offers reasonable assurance of repayment on
technical, financial and economic grounds. Direct credit
support would be at the Bank's 10.0 percent interest rate for
relatively poor countries.
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-- The NSC recommends deferring approval and, if necessary,
invoking the Chaffee amendment. NSC argues that approval
would vitiate the strategy of requiring concessions from Third
World Marxist-Leninist regimes before offering new U.S. bilateral
assistance. The United States should not provide our limited
"carrots" to the MPLA regime, when there is no indication that
Cuban combat forces will be withdrawn.
-- Since the approval of the entire project at this time might
cause foreign policy difficulties, State recommends approval
of a first $60 million tranche as a reasonable balance between
our commercial and political interests. This would avoid a
contentious Chaffee amendment decision and erosion of our
commercial competitive position. Eximbank is prepared to
consider the first tranche now and to tell exporters it will
consider the remaining portion at an appropriate time.
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EXPORT-IMPORT BANK OF THE UNITED STATES
WASHINGTON. D.C. 20571
PRESIDENT
AND
CHAIRMAN
MEMORANDUM March 25, 1983
To: Mr. Donald T. Regan
Secretary of the Treasury
From: Mr. William H. Draper III
President and Chairman
CABLE AODRESE' Y%IMSANK"
TLLEX 0-Y1
Eximbank received in early December 1982, a preliminary commitment request to
support $300 million of U.S. goods and services for the Takula oil field
development project located offshore Cabinda, Angola. The applicants and proposed
borrowers for the undertaking are the joint venture partners, Sociedade Nacional de
Combustiveis de Angola (Sonangol), the Angolan national oil company, for 51%, and
Cabinda Gulf Oil Co. (Cabgoc), a wholly owned Gulf Oil Corporation subsidiary, for
49%. The transaction would be guaranteed by the Government of Angola, through
Banco National de Angola, the central bank, for the Sonangol 51% share, and Gulf
Oil Corporation, for the Cabgoc 49% share. Total project costs are estimated to be
$589 million. U.S. suppliers face intense foreign competiton on this sale
primarily from France, which has already received $125 million of equipment awards
on the project (Phases I and II).
Gulf Oil Corporation reports that $60 million of equipment awards are due to
be imminently awarded (Phase III), and that one or more U.S. suppliers have been
shortlisted for such procurement. The balance of equipment awards are expected to
take place between September 1983 (Phase IV in the amount of $95 million) and June
1984 (Phase V for the balance of $145 million).
The Eximbank Board has not yet acted on the $300 million request, however the
Eximbank staff does feel that the transaction offers a reasonable assurance of
repayment on technical, financial and economic grounds and would be prepared to
recommend offering several financing options. The first option would consist of an
Eximbank credit of $195,000,000 (65% of U.S. Costs) with interest rate at 10% per
annum, the second option would consist of an Eximbank credit of $225,000,000 (75%
of the U.S. Costs) at 10% interest in conjunction with a loan from the U.S.
supplier of $30,000,000 (10% of the U.S. Costs), and the third option would be
comprised of an Eximbank Guarantee of a loan for $255,000,000 (85% of the
U.S.Costs).
 Page Two
Because of current political circumstances involving Angola, the State
Department indicated that approval of the entire project at this time might cause
serious foreign policy difficulties but that a smaller amount might be a reasonable
balance between our commercial and political interests. In response to this
suggestion, Eximbank is prepared to consider financing for a portion of the amount
requested ($60 million for Phase III) and to indicate to the applicant, without
making a commitment, that it will be prepared to consider the remaining portion at
an appropriate time in the future.
Section 2(b)(1)(B) of the Export-Import Bank Act of 1945, as amended (the
"Chafee Amendment"), provides in part that Eximbank should not "deny applications
for credit for nonfinancial or noncommercial considerations" except in cases where
the President determines that such action "would be in the national interest."
(This authority has been delegated by the President to the Secretary of State.)
We believe that the proposed action by Eximbank would be in compliance with the
Chafee Amendment.
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NATIONAL SECURITY COUNCIL
WASHINGTON. D.C. 20506
MEMORANDUM FOR NORMAN A. BAILEY
Executive Secretary
SIG-IEP
The state proposal that in response to a request by Gulf Oil
and the Angolan parastatal firm Sonangol (an arm of MPLA
regime) for Export-Import Bank financing of a $300 million
dollar package to develop a major new oil field over the next
few years is that this application be approved in tranches,
with approval for a first tranche of $60 million. This
proposal has several serious disadvantages. These are in
brief:
-- Such an approval would vitiate the strategy of requiring
some concession on the part of Third World Marxist-Leninist
regimes in parallel with any new commitment of U.S. bilateral
assistance. This is in fact implicitly acknowledged by State
in rejecting approval of the entire $300 million request. In
point of fact, while we are currently pressing the Angolan
MPLA regime for withdrawal of Cuban combat forces from Angola,
there is no indication at this time that any such withdrawal
-- even partial withdrawal -- will be put forward by the MPLA
regime. In fact, the U.S. has already made a very positive
up-front signal in approving a March 1981 Ex-Im credit to the
same applicants for a gas-injection system for certain oil
wells in the sum of about $100 million, a scheme which has
been implemented and has substantially added to MPLA revenues,
without receiving any substantive "quo" in return. It would
seem foolish to provide yet another of our limited "carrots"
to the MPLA regime without any solid prospect of a return.
-- Further to the above point, the concept of tranches
carries the implication that further Ex-Im funding will be
made available in the future, thereby even further weakening
our ability to use this tool for leverage with the Angolans.
-- Such a loan would provide a very negative signal to
our non-communist friends and allies in Africa and elsewhere.
One can imagine the impact such a loan would have on Zaire,
where we are making demands for fundamental economic changes
for a relative pittance of bilateral assistance. One can also
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imagine the impact such a loan would have on the non-communist
forces of Jonas Savimbi's UNITA movement in Angola.
-- There is evidence that the private U.S. banking
community is watching this application closely as a guide to
whether new loans to the MPLA regime, some applications of
which are being held in abeyance by the banks, should be
approved. In granting approval to this application, even in
part, we would lose even more leverage with the MPLA regime by
signalling international Western banking that further lending
is okay.
-- There is very real question of Sonangol's ability to
repay. Future oil earnings by the MPLA, if the current
situation continues, will be earmarked over 80% to direct
repayment of Cuban, Soviet and other assistance. The MPLA
regime in recent months, according to intelligence, is unable
to meet current accounts.
A denial of this application would not affect Gulf Oil's
situation in Angola, since Gulf/Sonangol would merely seek
financing elsewhere. Gulf contends that the French are
prepared to finance much of this activity at concessional
rates. If true (and the intelligence on this is not compel-
ling), and if the French totally tie financing to French
purchases, there would admittedly be some loss of sales to
potential secondary U.S. suppliers, but this would not affect
Gulf's situation.
On balance, it would seem advisable to further defer approval
of the Gulf application and, if necessary, invoke Chaffee
Amendment provisions to do so.
Frederick Wettering
Staff Member
 CONFIDENTIAL
MEMORANDUM
To: SIG-IEP Group
From: AF - Chester A. Crocke 4
Subject: State Position on Gulf Request to EXIM to
Finance Angola Oil Development Project
Gulf oil has applied to EXIM for a preliminary commitment
for a $300 million package, which includes $195-225 million in
financing for Gulf (49 percent) and the Angolan state oil
company Sonangol (51 percent) to develop the major new Takula
oil field in Angola, with the remainder in loan guarantees.
The State position is that clearance should be granted to
EXIM to proceed only with a first tranche of $60 million, and
that a decision on the larger package should be delayed de-
pending on how the U.S. negotiations with the Angolans progress.
The Department has made known its concerns to Gulf and the
Angolans. At our request, Gulf Vice President Mel Hill during
his late February trip to Angola delivered a message to the
MPLA leadership, including President Dos Santos, that improved
commercial dealings between the U.S. and Angola (i.e., in this
case the full EXIM package) can occur only in the context of
progress in our negotiations on Cuban withdrawal and related
matters. On March 23 Hill reported to us that the MPLA leader-
ship is fully familiar with the decision pending on the EXIM
loan, and is aware that our handling of it will be tied to
political considerations. Gulf has agreed to cooperate with
our approach, and has informed EXIM that it is prepared to
accept a first tranche (covering $60 million)/delay scenario.
Our discussions with the MPLA have entered a critical
phase, with some positive signs. Our recent discussions with
Angolan Interior Minister Alexandre Rodrigues Kito in Paris
frankly explored what is required on Cuban withdrawal, and
Kito has returned to Luanda to consult with the MPLA leader-
ship on whether to provide the required specificity on with-
drawal in order to move the southern Africa negotiations
forward. It is important that we build MPLA confidence that
our intention is not to destabilize their government.
In addition to the political considerations involved,
American private sector interests must be taken into account
in the EXIM decision. The French have offered an attractive
CONFIDENTIAL
OADR
 alternative financing package to the MPLA which Gulf will be
forced to accept if the EXIM loan is turned down. This would
result in the use of French goods and services to develop the
Takula field, and would represent another French commercial
success in West Africa at the expense of a major setback to
the American private sector in these difficult economic times.
Gulf has already solicited and opened bids covering the $60
million development Phase III. McDermott has separately
pressed us for a decision so that they will not lose the $10
million contract which they will get if the first tranche
of the EXIM financing is approved. Gulf faces strong Angolan
pressure to move ahead with the Phase III development, and must
make a decision on financing and contracts by Monday, April 4.
We need action as soon as possible in light of current
developments in the peace process and economic considerations.
The fact that we have made the political point to the MPLA
regarding the loan, the decision on Cuban withdrawal being
considered by the MPLA leadership, and the possibility of
alternative French financing underscore the necessity to approve
the first tranche if the loan is to serve the purpose of en-
couraging the MPLA to have confidence in us and, thus, to make
the right decision. Now is not the time to send a highly
negative signal to the MPLA leadership which could play into
the hands of the Soviets and those within the MPLA who are
arguing that the U.S. is inherently hostile to the Luanda
government. A key MPLA leader, Petroleum Minister Pedro Van
Dunem, is presently in the U.S. and may be meeting with us
around April 4. He will be looking for an answer.
We will use the opportunity of a meeting with Van Dunem
to underscore the message delivered by Gulf that improvement
in the U.S.-Angolan commercial relationship can occur only in
the context of progress on the political issues under dis-
cussion between us. Approving the first tranche will enable
that relationship to continue, but will not send a highly
positive signal as approval of the full package would do. More-
over, we will have subsequent opportunities to evaluate
whether further financing should be approved in light of the
state of play on the political front. In essence, we will be
preserving our options for dealing constructively with the
MPLA if they cooperate with us in the negotiations.
 t &aecutlve Aeginy
March 28, 1983 83-1781
MEMORANDUM FOR THE VICE PRESIDENT
THE SECRETARY OF STATE
THE SECRETARY OF DEFENSE
THE SECRETARY OF AGRICULTURE
THE SECRETARY OF COMMERCE
THE DIRECTOR, OFFICE OF MANAGEMENT
AND BUDGET
CHAIRMAN, COUNCIL OF ECONOMIC ADVISORS
ASSISTANT TO THE PRESIDENT FOR
NATIONAL SECURITY AFFAIRS
ASSISTANT TO THE PRESIDENT FOR
POLICY DEVELOPMENT
UNITED STATES TRADE REPRESENTATIVE
A51RECTOR OF CENTRAL INTELLIGENCE
CHAIRMAN, EXPORT-IMPORT BANK
SUBJECT SIG-IEP Meeting on Thursday,
March 31, at 3:00 p.m.
A meeting of the SIG-IEP is scheduled for Thursday,
March 31, at 3:00 p.m., in the Roosevelt Room. The agenda is
as follows:
1. East-West Action in OECD, NATO, and COCOM (oral
report by State);
2. U.S.-Japan Working Grd p on Energy Cooperation (oral
report by State and NSC);
3. U.S.-E.C. Agricultural Update (oral report by USTR);
4. Netherlands Antilles Tax Treaty; and
5. Export-Import Bank Credits to Angola.
Papers for agenda items five and six will be circulated
on Tuesday, March 29.