WEEKLY REVIEW SPECIAL REPORT OSTPOLITIK FROM BRANDT TO SCHMIDT

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP85T00875R001000070013-6
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 15
• Document Creation Date: December 27, 2016
• Document Release Date: January 7, 2011
• Sequence Number: 13
• Publication Date: August 9, 1974
• Content Type: REPORT

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Secret
-'S-D
Weekly Review
Special Report
Ostpolitik from Brandt to Schmidt
Secret
N! 636
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OSTPOLITIK
FROM BRANDY TO SCHMIDT
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Despit6 this'setback;' neither Bonn nor Pankow washed-:to reverse what had been
accomplished under Brandt they proceeded to establish' diplomatic relations shortly
Chancellor; Schmidt, a- major figure in Brandt's government, wants to maintain.
continuity in relations with all the :Eastern countries, but he plans to pursue a more
cautious policy in .'line. with his more modest expectations of what can be ac
complishecl
their differing .views,on.economic:cooperation with the.-East Brandt and his chief
foreign- policy adviser; Egori Bahr, wanted to move in this direction, hoping to get
the government more actively involved in promoting trade and financing industrial
projects. They regarded Ostpolitik as a long-term process,. designed.to preserve the
possibility of German reunification by slowly overcoming the division of Europe
Schrnidt, a;politician more attuned to problems' within 'the Atlantic com-
munity,;giives highest priority to the threat of economic instability that Western
Europe `faces as a result of the rising cost of raw materials and energy. HHe argues.that
theneed to control inflation rules out the granting of large credits or loans to the
energy., from the Soviet vUnion, he has'-informed' the Soviet leaders' that at present
Schmidt's parsimonious attitude will,,disp!ease the Soviets, who. will make their
.impatience .evident when the .Chancellor visits Moscow this Cztober. Bonn's` decision
to; establish a Federal Environmental Offico in West Berlin this fall has also soured
bilateral.' ;; relations. From ' all present indications, however, neither. side wants a
confrontation ,to:'dev.elop over this '' issue. Their goal will be to create as much
favorable publicity at the summit meeting as possible since no major agreements are.
likely to econcluded.:This effort would particularly benefit Schmidt since the two
coalition parties ?in Bonn face stiff'contests, in two state elections later that month.
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In the long run, we are very keen-if only for the sake of supplying our economy with
raw materials and energy-on raising trade with Moscow and the other East European
countries even further. From the Soviet Union we want gre't quantities of raw materials
of every description: natural gas, crude oil, possibly electric current.... We must be
prepared to grant credits once the situation concerning our export surpluses has become
somewhat more favorable again. That will be the case in one or two years. The Soviet
leaders know that at present we are close to the edge of our capacity.
Chancellor Schmidt
June 12, 1974
Background
The collapse of the Brandt government fol-
lowing the Guillaume affair came at a time when
Bonn was about to conclude its efforts at re-
storing normal political relations with the USSR
and Eastern Europe. Brandt was particularly in-
terested in establishing a new relationship with
the "other Germany" based on trust, and he
looked forward to the opening of diplomatic re-
lations with East Berlin. Upon leaving office,
however, he had only the bitter feeling that he
had been victimized by East German machi-
nations.
The revelation of Guillaume's espionage ac-
tivities it the chancellor's office also came at a
time when Brandt's critics were claiming that
Cstpolitik had already come to a dead end. Many
parliamentary deputies on both sides of the aisle
were pointing to the widespread public feeling
that Ostpolitik had faired to live up to the expec-
tations raised by the chancellor.
To be sure, the general atmosphere of
Bonn's relations with the East had certainly im-
proved, compared with the hostility and recrimi-
nations that characterized the first 20 years of the
Federal Republic's existence. Ostpolitik had
helped free a new generation of West Germans
from the burdens of the past and had permitted
Bonn to have the same kind of relationship with
the East Europeans that the other Western na-
tions enjoy. The Brandt government could also
pride itself on contributing to East-West detente,
and could claim that the current series of multi-
lateral negotiations would never have been pos-
sible without Ostpolitik.
The government could also point to such
tangible gains as the improvements in transit and
traffic privileges that allowed greater access to
East Berlin and East Germany. The Quadripartite
Agreement on Berlin, which went into effect after
the Bundestag ratified the non-aggression treaties
with the Soviet Union and Poland, reaffirmed
Western legal rights and ,:,;cess to the divided city.
More West Berliners and West Germans have since
been able to visit the "other Germany" than at
anytime since the Berlin Wall was erected. Auto-
mobile traffic between Wesi Germany and West
Berl-n rose by nearly 17 percent in 1973, and
travel by West Germans to East Berlin and East
Germany jumped by almost 62 percent during the
same period.
Nevertheless, by the end of 1973, enough
difficulties had emerged to convince many West
Germans that Ostpolitik was running out of
steam. Although Bonn went on to establish diplo-
matic relations with the remaining East European
countries, these governments refused to give a
formal guarantee that West Berliners traveling in
their territory would receive legal assistance as
part of the usual consular services. They referred
West German officials to Moscow to settle the
issr.-e.
Most disappointing of all was Pankow's de-
cision in November to doi;ble the minimum
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currency exchange requirement for travel to East
Germany. This tactic reduced visits by roughly a
third from the 1973 level. Officials in Bonn and
West Berlin protested strongly but had no means
of forcing Pankow to reverse its action.
In response to this situation, Brandt and
Bahr wanted tc prove thit Ostpolitik was not
stagnating, hoping at the same time perhaps to
distract public attention from other problems
that the chancellor was encountering on the
domestic scene. During his 11-day visit to Mos-
cow in early March, Bahr discussed Berlin issues
with Soviet leaders and made preparations for the
chancellor's visit to the Soviet Union later this
year. Some progress was made in negotiating a
scientific and technological agreement as well as a
bilateral legal assistance agreement extending such
services to West Berliners. West German and
Soviet officials were in fact trying to conclude
these negotiations when the Guillaume affair
became public.
During Bahr's visit, the Soviets announced
that they were prepared to pay cash for nearly $1
billion worth of equipment to be provided by
West German firms during the first phase of the
Kursk steel mill project. The Soviet decision
removed pressures on Bonn to subsidize the
project and, at the same time, underscored Mos-
cove's interest in giving Brandt a badly needed
public relaticns boost after his party's defeat in
the Hamburg state elections.
Ostpolitik was again showing some signs of
progress.
Chancellor Schmidt clearly does not have
the commitment to Ostpolitik that motivated
Brandt and Bahr. Like most residents of Ham-
burg, where he was born, Schmidt looks westward
and is convinced that West Germany's future lies
in its relationship with the Atlantic community.
Schmidt's principal areas of interest are financial
policy, European monetary cooperation, and de-
fense problems pertaining to the Atlantic al-
liance-a subject on which he acquired consider-
able expertise as defense minister in the first
Brandt government. In his government declara-
tion on May 17, Schmidt stated that he intended
to place a high priority on dealing with domestic
economic problems--something that many voters
felt Brandt had failed to do. The dismissal of
Brandt's protege, Egon Bahr, from the cabinet
and from the post of federal plenipotentiary for
Berlin was another sign to some that the new
Chancellor intended to substitute a policy of
"benign neglect" for Brandt's active policy to-
ward the East.
Despite these developments, Schmidt has
stated publicly that he intends to travel to Mos-
cow to meet with Brezhnev later this year, prob-
ably in October. His decision came as a surprise in
Bonn where the Guillaume affair still rankles and
where many believe that the East should have
first demonstrated its good intentions before
Schmidt agreed to visit Moscow.
The East Germans, for their part, agreed at
about the same time to place diplomatic re;ations
on a firmer basis by exchanging permanent mis-
sions with Bonn. A few weeks later, the two
Germanies concluded three bilateral accords in
the humanitarian field. West Berlin officials, who
had often charged that Brandt and Bahr were
sacrificing the city's interests for the "broader"
goals of Ostpolitik, were gratif:c_+ that Bonn's
permanent mission would be us~'.r,tc'a to provide
consular services for West BerIhne:,:; :ind that the
three inter-German accords z o ap Aied to West
Berlin. Thus. just prior to t4-,;: Guillaume affair,
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Actually, East Germany soon made a move
in that direction. In an apparent effort to make
amends for the damage the Guillaume affair had
done to bilateral relations, Pankow announced in
late May that it wouid be prepared to hold bi-
lateral talks concerning the currency exchange
requirement and economic cooperation, espe-
cially industrial projects involving the delivery of
energy to West Berlin.
Pankow's forthcoming attitude was probably
the result of prodding from Moscow. Both the
Soviets and East Germans are aware that Schmidt
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is in a strong position in view of the reluctance of
most West Germans to see Ostpolitik moving
again if the price is additional political and eco-
nomic concessions. The bilateral talks so far have
not taken place.
Schmidt's decision to go ahead with a sum-
mit meeting with Brezhnev this fall reflects the
value he places on maintaining continuity in rela-
tions with the East. He is aware that since its
revival by foreign minister Schroeder in the
Erhard government more than a decade ago,
Ostpolitik has become a permanent dimension of
German foreign policy. A pragmatist, the new
Chancellor also realizes that he must keep open
his channels to Moscow and is anxious to estab-
lish personal contact with the Soviet leaders. Any
sign that he was allowing detente to wither would
raise serious problems for Schmidt with his col-
leagues in the Social Democratic Party and would
disappoint the East Europeans
Schmid indicated that he
was aware of these considerations when he
praised the previous government's efforts at
detente in his maiden speech to the Bundestag.
Moscow likewise has no intention of allow-
ing inter-German problems to undermine its rela-
tions with Bonn. As long as Bonn does not adopt
an anti-Soviet line, Moscow seems prepared to do
its part to keep relations between the two states
on a businesslike basis. Brezhnev and Brandt were
able--over a period of time-to develop a relation-
ship that enabled both sides to discuss their prob-
lems in a candid fashion. There is no reason to
believe that the Soviet leaders will be unable to
deal effectively with Schmidt, even though they
view him with some caution. The Soviets prob-
ably believe he is bound by the agreements they
concluded with Brandt and that he will not radi-
cally alter bilateral relations. Their demonstrated
desire for Western technology and long-term
credits is another factor underlying their apparent
interest in assuring stable relations.
The East Europeans also have a strong in-
terest in expanding relations with 3onn. Their
eagerness for greater trade and economic coop-
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Economics Minister Friderichs (I) and Chancellor Schmidt
eration with West Germany will not be affected
by their need to support the political interests of
their East German ally. In the past, several East-
ern regimes have grumbled that the East Germans
enjoyed the economic benefits of inter-zonal
trade for years while slowing efforts by others to
establish diplomatic relations or to expand trade
with West Germany. N . w that the two Germanies
are developing their political relationship within
the framework of the Basic Treaty, Pankow has
little say over what the other East Europeans
choose to do in their relations with Bonn.
Finally, and perhaps most important, there
are no major political disputes between Bonn and
most of the Eastern capitals. The Eastern regimes,
moreovi-,r, have had to end their vitriolic attacks
against German revanchism to prove their com-
mitmerct to detente.
Despite the extent to which Bonn's relations
with the East have been "normalized" and the
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interest of both sides "n keeping them that way,
sources of past and future friction continue to
exist. The complex issue of legal assistance for
West Berliners traveling in the East is a good
example of this. Most Eastern governments allow
West German embassies to provide consular
services and, as a matter of practice, legal assist-
ance to West Berliners. They insist, however, that
Bonn has no authority in cases involving West
Berlin courts. West German and Soviet negotia-
tors have reached agreement cn a formula to solve
the issue but remain deadlocked on the manner of
official Soviet acknowledgement. Schmidt and
!3rezhnev may discuss this issue when they meet
this fall.
Bonn's decision to establish a Federal En-
vironmental Office in West Berlin has also been a
troublesome issue.
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rapprochement "o dec1ic go was the realization that the sdhition to7hhe
German problem; question ivas conceivable . neither. through annexation
nor through a Angle act but only as th e,r'es pit of an. historica8 process.
The East Germans have retaliated by under-
taking spot checks of travelers on the autobahn.
There have been no serious disruptions of traffic,
but one employee of the Environmental Office
was denied the use of the access route. At Bonn's
request, the Transit Commission established to
handle such matters met on August 6. Bonn
hopes to resolve the issue in the commission and
prevent it from causing further trouble.
The Soviets, for their part, regard such ef-
forts to strengthen West Berlin's ties to the Fed-
eral Republic as violations of the Quadripartite
Agreement and have strongly protested Bonn's
decision. Although Moscow regards the issue as
One, of the main` consr'derdt'6nsfn the formulation of "c~i~tnge tlt$o' i
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 one of prestige, it may not seek an open confron-
tation because the Western allies have agreed to
support Bonn. Soviet diplomats in Bonn have
suggested measures that would prevent establish-
ment of the office from undermining their legal
position. Specifically, they seek a guarantee from
the West that this office will be the last federal
institution to be established in West Berlin.
Officials in Bur .; will not reverse';reir plans
to have the office fully manned sometime this
fall, but they may be willing to go along with a
possible decision by the Western allies to give the
Soviets some form of assurance. Mayor Schuetz,
on the other hand, will most emphatically oppose
any agreement, formal or informal, that would
curb efforts to strengthen the city's ties to the
Federal Republic. The Chancellor will almost cer-
tainly discuss Berlin issues with Soviet Foreign
Minister Gromyko when he visits Bonn in mid-
September.
Whither Ostpolitik?
Beyond keeping such issues as these from
becoming too aggravated, the basic problem
facing Chancellor Schmidt and his government is
how to give continued meaning to Ostpolitik.
Actually, there are only two areas that offer
opportunities to extend Ostpolitik beyond what
the Brandi government achieved.
Cultural exchanges are one such area. West
German and Polish historians, for example, are
meeting annually to revise school textbook inter-
pretations of World War II. As a result, future
generations of West German and Polish youth
may have a less acrimonious relationship. Ideo-
logical differences, however, still pose limitations.
This is particult?ly true with regard to East Ger-
many, which war,`-, to purge from its citizens'
minds any notion of German unity by empha-
sizing the Marxist foundations of East Germany's
political, social, and economic system. Conse-
quently, Bonn is encountering difficulties in nego-
tiating a cultural agreement with Pankow.
Cross-cultural understanding is more likely
to be advanced by tourism. Travel to the East is a
kind of everyday Ostpolitik-largely outside aov-
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ernmental direction-in which first-rand exposure
tends to weaken old prejudices, many of which
have nothing to do with ideology. The number of
West Germans on vacation or business trips to
Eastern Europe has grown tenfold in the past
decade-and now reaches nearly three million
each year. Although the Eastern capitals welcome
the tourists for their hard currency, they are still
worried that exposure to Western ideas and in-
fluences poses a threat to their system of
government.
Ostpolitik and Eastern Trade
Despite the attention given to cultural co-
operation and tourism, trade and incustrial co-
operation is of far greater importance to govern-
mtnt and business circles in West Germany.
Actually, nothing could better illustrate the dif-
ference between Brandt and Schmidt on Ostpoli-
tik than the manner in which each has viewed
economic cooperatior1 with the East.
Brandt's Approach
Last November, Brandt appointed Bahr as
chief government coordinator for all economic
cooperation with "state-run economies." In
preparation for visits to Washington and Moscow
to discuss East-West trade, Bahr formulated new
models for economic cooperation with the Soviet
Union and Eastern Europe. Emphasizing the bilat-
eral approach, Bahr's plans had two objectives: +o
boost German imports of raw materials and fuels
from the East, and to make West Germany more
competitive in financing large-scale industrial prcj-
ecis in these fields. Bahr ii-tored the creation of a
financial institution modeled on the US Export/
Import Bank that weuid offer loans and credits to
support projects promising to generate impc,.-fs of
raw materials.
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These models, though ostensibly directed
toward practical considerations, were more an
indication of Brandt's and Bahr's e_gerness to
shape policy in terms of their own politica!
philosophy. Both men looked upon Ostpolitik as
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a long-term process, the next phase of which
would be economic cooperation. Their overall
goal was to set in motion an "historical process"
that would ultimately help break down the exist-
ing political, military and economic blocs in
Europe, a process that would eventually over-
come these divisions and make German reunifica-
tion less remote. Both men shared a Bismarckian
perspective that saw Germany as a force in central
Europe with valid interests in the East as well as
the West.
The four-stage plan for the demilitarization
of central Europe that Bahr drafted in 1968 when
chief of the Foreign Ministry's policy and plan-
ning staff illustrated his line of thought. It
envisioned the gradual creation of a demilitarized
zone by means of renunciation-of-force agree-
ments and troop reductions. Berlin would then
eventually serve as the administrative center for
the zone, which would include, at the minimum,
the two Germanies, Poland, Czechoslovakia, and
the Benelux countries.
Brandt never publicly endorsed this police
proposal for obvious political reasons, but per-
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haps accepted its long-range goals as something to
work toward. Growing pessimism about the
ability to create a new security system for Europe
in the foreseeable future prompted Brandt and
Bahr to turn their attention to trade and eco-
nomic cooperation with the East. Both men
evidently hoped to further the "historical
process" of pan-European cooperation by offer-
ing the Eastern capitals more of what they so long
desired-Western technology and trade. They
justified their views by arguing that the conflict
between the two halves of Europe was fading in
significance when compared with the growhig
problems between the industrialized nations of
the northern hemisphere and the underdeveloped,
though often energy-rich countries of the so-.ith.
Schmidt has a somewhat different perspec-
tive on economic relations with the East. Unlike
Brandt and Bahr, he has formal training as an
economist arid has a better sense of wha? is pos-
sible. He does not share their belief that the goal
of improving relations with the East justifies the
expansion of economic ties as a matter of prin-
ciple. Furthermore, the Chancellor. like most
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West German politicians, recognizes that the eco-
nomic relations among members of the European
Community are of far greater importance.
!n any case, Schmidt is pragmatic in his
assessment of West Germany`s economic relations
with other countries. This applies to the goal of
creating an economic and monetary union for
Western Europe as well as grandiose visions of
trade with the East. Schmidt sees the need to
deflate exaggerated expectations in both areas.
The consistent thaine in the Chancellor's public
and private comments is that plans for economic
cooperation or assistance must not only be feasi-
ble but must also serve West Germany's interests.
This "hard-headed" attitude is unavoidable,
Schmidt argues, given the economic problems the
nation faces as a result of the rising cost of raw
materials and fuel.
Osthandel (Eastern Trade)
Billion
US Dollars'
1956 57 58 39 60 61 62
64 65 66 67 6b 69 70 71 72 73
Chancellor-I- Grand Coalition --I-- Chancellor Brandt
Erhard
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As finance minister in Brandt's cabinet, for
example, he repeated'y argued that budgetary
limitations and the need to control inflation rule
out government su' Aidies for export credits to the
East, even for large-scale industrial projects. Eco-
nomics Minister Friderichs and many of his col-
leagues in the Free Democratic Party support
Schmidt on this score. They fear that granting
subsidies to bridge the gap between the high in-
terest rates on the German money markets and
the credit demands of the Soviets and East Euro-
peans might set an undesirable precedent. They
defend this "laissez-faire" policy with the argu-
ment that Eastern trade has grown steadily with-
out government intervention.
Indeed, the German business community has
been largely self-reliant in its undertakings. Ger-
man firms operate either independently or with
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the assistance of the Ostausschuss der Deutschen
Wirtschaft-a semi-official organization whose
members are drawn from firms interested in East-
ern trade. Since 1956, the Ostausschuss has
played a prominent role in searching out and
promoting commercial opportunities for these
firms. Bonn's "laissez-faire" policy toward East-
ern trade clearly contrasts with the policies of
other Western industrialized nations that are more
willing to underwrite trade with the East with
direct financial assistance.
Egon Bahv's re-entry into the cabinet on
July 10 as minister for economic cooperation
does not signal a change in this policy, as this
ministry is responsible only for assistance pro-
grams to less-developed countries. The appoint-
ment was basically a shrewd political move by
Schmidt. It currys favor with Brandt and other
party leaders who have supported Bahr in the
past, withoL't expanding his direct role in the
foreign policy field.
Schmidt's conservative attitude on the ques-
tion of loans and credits to the East is evident in
two particular cases, one involving Poland, the
other East Germany. For some time, for example,
Warsaw has been angling for some $1 billion in
credits. The Poles recently indicated that they
would accept Bonn's offer of $400 million in
long-term, low-interest credits, but they still
demanded addition&I funds as indemnification for
war victims. They insist that ethnic Germans
living in i oland will not be allowed to emigrate in
large numbers until these demands are met.
Schmidt has stated that he is not prepared to
accommodate Warsaw. At present, ethnic Ger-
mans an: being repatriated at the rate of about
10,000 t year, far lower than the annual rate of
50,000 that Warsaw promised last December.
In the case of East Germany, Pankow has
shown its interest in continuing the swing-credit
system tit helps finance inter-German trade. Its
desire to renew this provision or some modifica-
tion of it beyond 1975 surfaced in recent discus-
sions with West German officials concerning the
currency exchange requirement for travel to the
East. The East Germans have not yet demanded
the continuation of credit at its present level as a
quid pro quo for a reduction ir, the currency
exchange requirements, but the idea is on their
minds. Schmidt has refused to make concessions
to get Pankow to rescind its decision doubling the
currency requirement, however, and demands
that the E-ist Germans comply with the bilateral
The Search for Energy
Despite his unwillingness to open Bonn's
coffers to buy "human rights" for ethnic Ger-
mans or West Berliners, Schmidt is aware of the
need to assure adequate energy supplies for the
Federal Republic and for West Berlin in the
coming decade. The Soviet Union, with its
abundant sources of raw materials and fuels, has
much to offer in this regard, as Schmidt and
German industrialists realize. German firms, with
government concurrence, have recently turned to
the Soviets for the enrichment of uranium. Mos-
cow presently offers much more favorable terms
for such services than does Washington, but
present contracts with the Soviets still do not
constitute a significant portion of West German
requirements. Bonn's overall energy policy aims
at avoiding dependence on any one country or
group of countries for vital raw materials.
Efforts to diversify the nation's energy
sources have focused on major non-Arab pro-
ducers such as Iran, but the government is also
considering projects in the energy field that will
involve the Soviets. One such project, being
planned by the Joint West German - Soviet Eco-
nomic Commission, is a trilateral deal involving
Iranian natural gas, in which German firms would
supply large-diameter pipe for the construction of
a pipeline across the Soviet Union from Germany
to Iran.
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Bonn is also considering projects that would
supply electrical energy to West Berlin. The
enclave is the only major urban community in
Europe not connected to a power grid, and West
Berlin will be hard pressed to meet its energy
needs In the coming years without expanding its
power plant system at considerable trouble and
cost. The Poles have offered to supply West Berlin
with electrical energy from a new plant cn the
Oder, provided Bonn finances the construction of
a transmission line to the city. The Soviets are
interested in building four nuclear power plants,
two of which would supply energy to the Federal
Republic in return for construction costs. In both
cases, Bonn has demanded that there be a single,
continuous transmission line from the East link-
ing West Berlin and the Federal Republic. The
Soviets agreed to this demand in June, overriding
objections from the East Germans. This sudden
breakthrough on the 'ong-standing deadlock has
permitted the Soviets and German firms to reach
a general agreement on the construction of the
first of the power plants, which will be situated in
the western part of the Soviet Union.
Schmidt will r onLt"er longer and harder than
Brandt on whether the government should help to
finance these projects. His own public and private
statements indicate that he would like to see
these projects eventually completed.
Several factors will influence his thinking on
the question of offering the financial assistance
that these projects might require. A decision in
the affirmative would contradict his arguments
about the need to control inflation and would
raise the eyebrows of other EC members who
have listened to his admonitions on this score. On
the other hand, the Chancellor must reckon that
the Soviets might not be able or, for that matter,
willing to pay cash for every industrial project as
they have in the case of the Kursk plant. The high
cost of borrowing funds in the West German and
Eurocurrency markets could tempt the Soviets to
shop elsewhere for the equipment they need.
Thus, the possibility of being cut out of the
sizable Soviet investment projects with their pay-
off--increased access to Soviet raw materials-may
motivate Bonn to subsidize credits in certain
cases.
Marienborn checkpoint
Scene of recent harassment
Special Report
SECRET
The meeting with Brezhnev in October will
come too soon for Schmidt to offer anything
August 9, 1974
Declassified in Part - Sanitized Copy Approved for Release 2011/11/04 : CIA-RDP85T00875R001000070013-6
 CI 'DDT
classified in Part - Sanitized Copy Approved for Release 2011/11/04: CIA-RDP85T00875R001000070013-6__1
substantial in the field of trade and economic
cooperation. The Chancellor seems prepared to
risk further Soviet impatience, and probably
hopes that the large-scale industrial projects can
be handled on strictly a commercial basis.
Schmidt's earlier interest in shelving the plan
to establish the Federal Environmental Office in
West Berlin was, in part, related to the fact that
Bonn could not afford to satisfy Moscow's de-
mand for credits. The Chancellor realizes that it is
now too late to "kill" the project as a consolation
prize for the Soviets. Mayor Schuetz and the West
Berliners have made the environmental office a
major political issue and insist that plans for its
formal establishment not be postponed for the
sake of the summit. Moscow, from all present
indications, does not want any last minute con-
frontation and appears ready to receive Schmidt
despite the bitterness this issue has created.
Officials in Bonn do not expect that any
agreement on major issues will be reached at the
summit. Schmidt's main objective will be to
extract as much favorable publicity from his vi!::t
as possible. The two coalition parties-the Social
Democrats and Free Democrats-face stiff con-
tests in two stale elections on October 27; this
may prompt the Chancellor to time the summit
to garner the greatest political capital for his
government. The trip will most likely be
scheduled for mid-October to coincide with the
next meeting of the Joint Economic Commission
and a large West German industrial exhibition
tanned for tin Moscow
Special Report .12-
SECRET
August 9, 1974
Declassified in Part - Sanitized Copy Approved for Release 2011/11/04: CIA-RDP85T00875R001000070013-6