NATIONAL SECURITY COUNCIL MEETING - POLAND

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP84B00049R000200370020-3
• Release Decision: RIPPUB
• Original Classification: T
• Document Page Count: 24
• Document Creation Date: December 21, 2016
• Document Release Date: October 6, 2008
• Sequence Number: 20
• Publication Date: February 2, 1982
• Content Type: MEMO

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NATIONAL SECURITY COUNCIL
CONFIDENTIAL WITH WASHINGTON. D.C. 20506
TOP SECRET ATTACHMENT February 2, 1982
MEMORANDUM FOR MS. NANCY BEARG DYKE
Assistant to the Vice President
? for National Security Affairs
MR. L. PAUL BREMER III
Executive Secretary
Department of State
MR. DAVID PICKFORD
Executive Secretary
Department of the. Treasury
LIEUTENANT COLONEL ROBERT T. MEEHAN
Assistant for Interagency Matters
Office of the Secretary of Defense
MS. JEAN JONES
Director, Executive Secretariat
Department of Commerce
Executive Secretary
Central Intelligence Agency
MR. DENNIS WHITFIELD
Executive Assistant to the United States
Trade Representative
NSC review
completed.
MS. JACKIE TILLMAN
Executive Assistant to the United States
Representative to the United Nations
COLONEL CHARLES F. STEBBINS
Executive Assistant to the
Chairman, Joint Chiefs of Staff
SUBJECT: National Security Council Meeting -- Poland (C)
The attached papers concern additional measures which might.be
taken with respect to the situation in Poland. They are circulated
as background for the discussion which will take place on the
first agenda item at the NSC meeting on Thursday, February 4, 1982,
3:30-5:30 p.m., the Cabinet Room. The?first agenda item will be
"Extraterritorial Application of the December 30_Dec4sion."
-I~Altpl 9) 0
Michael 0. Wheeler
Staff Secretary
CONFIDENTIAL WITH
TOP SECRET ATTACHMENT TS820194
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Executive Summary
We are approaching an important crossroads in response to
the situation in Poland. Our response will have a critical
intact on our relations with the Allies, the Soviets and the
Poles. The Soviets consider a "friendly" Poland vital to their
security interests and unless they accurately perceive the
seriousness with which we view their actions, we will lose any
chance for influence over the outcome of the Polish crisis and
undermine our international credibility.
Q__ The situation in Poland is deteriorating. We foresee four
general types of scenarios: 1) large scale bloodshed followed
by a Soviet invasion; 2) short term maintenance of order by
force but longer term instability; 3) an incremental but
ILLEGIB largely cosmetic restoration of human rights; 4) return to
dialogue and reform;
The overall objective of the US is to maintain our capacity
for world leadership by countering adverse trends in the world
ower balance. Our specific objectives for the Polish crisis
re:
To induce the Soviets and Poles to permit a restoration of
important pre-December 13 gains in Poland.
--To drive home to Moscow that the price will be high in
U.S.-Soviet relations if it stays on its present course. We
should not be diverted by cosmetic adjustments of martial
law.
--To gain allied support for strong action against Moscow,
such as a selective embargo or a halt of the pipeline.
--To demonstrate to the American people that we are living
up to our moral and political responsibilities.
The measures we have already taken have sent a strong
political signal to Moscow and have imposed some cost. Our
Allies are moving in the right direction, although slowly and
unevenly. In considering options for next steps we must
realize that:
--It is possible that nothing we do in the short-term may be
enough, but over the longer-term united Western action can
have an important impact.
--There is no compelling reason to hold back on tough
measures. The time to exercise maximum leverage is now.
--The West's primary leverage is economic, but it.is
effective only if the Alliance is united.
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--There is no hope of getting tough Allied action unless we
are willing to take new tough steps ourselves.
--Our sanctions--and those of the Europeans--will have to be
linked to Poland. Thus we will have to accept the principle
of reversibility, while making clear that we continue to
object to the pipeline.
--We are facing considerable domestic pressure to move
forward with more energetic measures.
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Beyond judicious use of the 1imi ted leverage inhere in the
massive Polish debt to the West, our options are:
(1) To hold in abeyance new unilateral measures, while we
continue to seek Allied agreement on specific actions. This
would maximize the likelihood of united Western action. We
would, however, be vulnerable to the charge that we are long
on rhetoric and short on action.
(2) To take new intermediate steps against the USSR,
possibl
a selective embargo on non-agricultural
substantial economic costs on the Soviets. Without such
cooperation, it still increases our chances of strong Allied
actions. In either case it could trigger the Farm Bill
parity payment provision.
included and other exporters cooperated, this would impose
sacrifices sufficient to induce strong action by our Allies.
(3) To ban all exports to the USSR not covered by existing
contracts, including or exempting grain. If grain were
exports. This would have an economic impact on the Soviets
with a minimal cost to us. This would not entail U.S.
(4) To impose a total export embargo against the USSR. This
would have the greatest economic impact on the Soviets with
Allied support and could influence the course of events in
Poland. U.S. farmers would be hurt and if the Allies did
not join us, anti-European sentiments in t . . would grow.
(5) Take actions to hit the Soviets in other regions, such
as Afghanistan, Cuba, and Libya. These actions would not
require Allied cooperation, and they are likely to be
required in any event on their own merits. There is a risk
of a wider confrontation with Moscow. and a shift of
attention from Soviet to U.S. "aggression". Also they would
not immediately be linked to Poland, and as a legal matter,
some of them could be regarded as an unlawful use of force.
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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 implications
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
World War II, it has been the essential line of communication
to Soviet ground forces in Germany. From the political
perspective, maintenance of the status quo in Poland preserves
the post-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
forgo the benefits of "detente." These divisions in the West
were one among many reasons why the U.S.S.R. 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 impact 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 13; it has steadily worsened since. Little or no pro-
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.
It is impossible to predict with any certainty what will
occur in Poland in the next 12-18 months. There are a wide
range of possible scenarios. But we believe these can be
grouped within four broad categories:
(1) A Soviet invasion, most probably resulting from large
scale bloodshed among the Poles. Such bloodshed could occur in
a variety of ways: as a consequence of intensified repression,
from increased food shortages, or from some other triggering of
the pent-up bitterness and frustration now held in check by
Polish security forces. Should the Soviets intervene, Western
leverage for any amelioration of repression would largely
vanish. But the likelihood of bringing the Allies along in the
imposition of major, far reaching sanctions against the Soviets
would greatly improve.
(2) Continuation, largely unchanged, of Martial Law. While
economic deterioration would continue, the government might
succeed in keeping the lid on by heavy reliance on its security
organs. Despite its potential. instability, such an outcome
would represent a victory, albeit perhaps temporary, for the
- Soviets. This situation would be the most susceptible to
Western leverage. But the instability-inherent in martial law
would make Polish-leaders fearful of moving too far, too
rapidly. The Soviets could be expected to keep heavy pressure
on Jaruzelski not to make substantial compromises.
(3) An incremental and partial restoration of human
rights. In an effort to undercut our efforts to gain allied
support, the polish Government might move to restore a sense of
normalcy to Poland taking highly publicized steps such as
the release ofCa l ge numbef7o prisoners and the opening of a
limited dialogue with the Chuf-c1 and some elements of
Solidarity. The central aspects of martial law - e.g. the high
degree of control currently being exerted by Polish security
organs - would continue. If carried out well by the Poles,
this would be the most difficult scenario for the West to deal
with. It would particularly complicate efforts to maintain a
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unified Western position toward returning to business as usual
with Moscow and Warsaw.
(4) A return to dialogue and reform, holding open the
possibility for further political and social evolution. This
would require that the Polish regime (with at least tacit
Soviet acquiescence) see no viable long-term alternative to
developing a relationship with the Church and the working class
that preserves a significant number of the gains made since
August 1980, and which guarantees the Soviets' basic
interests. The security apparatus would undoubtedly remain
active enough to assure the Soviets and the Polish
establishment that control would not again be threatened. But,
if this resulted in real latitude for trade unions and the
Church, it would preserve the possibility of future peaceful
change in Poland and other East European countries. The
Soviets, however, could be expected to maintain their campaign
of calculated pressure to limit the extent of the Polish
Government concessions.
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.
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 U.S.S.R. 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
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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 tt an~i restoration of a minimum
of freedom (e.g. fdtrade unio activity , wi out
creating a public percetion`t a we are responsible
should there be a violent ending.
Toward the Soviet Union, to drive home that the
U.S.S.R. 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.
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.
We must view the situation to date both in terms of our own
actions and the overall situation facing the U.S.S.R. 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 gas industry;
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(5) suspended talks on a new maritime agreement and imposed
strict controls on Soviet access to U.S. ports; (6) refused to 25X1
set a date for talks on a new long-term grains agreement; (7)
decided not.to renew three bilateral coo eration a reements
that ex ire this ear.
--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 a more 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
have agreed to suspend rescheduling of the Polish debt, as well
as to suspend all export credits to Poland.
This listing of specific actions misses the larger consequences
for the Soviets. Prior to the December 13th repression, US-Soviet
INF negotiations were moving ahead, it appeared that a beginning
date for START might be announced at the Haig/Gromyko meeting, there
were massive demonstrations in Europe primarily directed against
U.S. nuclear deployments, and the Soviets' "Peace" offensive threat-
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,
ILLEGIB 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, before December 13th the West
had provided Poland with some assistance in dealing with its
massive economic problems. Now 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. We should, of course, do everything possible to
maximize these economic and political costs to the Soviet Union.
Within 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 recently denounced the regime
in language that reads like an echo of the President's December
23 statement and the January 11 NATO declaration.
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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.
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.
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 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 a de jure embargo, but we would have
gained little or no leverage iris 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
2-7 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.
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6. We will have to wrestle with two thorny aspects of the
question of reversibility--the sure growth of pressure to
reverse and the adverse effects on our international
credibility of doing so. 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
Polish 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 areversible halt to the pipeline.
8. In political terms, reversing at some future point in time
sanctions we impose will carry a heavy price, both domestically
and internationally, 'if the objectives we attach to them now
have not been met. If erosion of sanctions or domestic
political pressure forced us to remove the sanctions without
achieving our objectives, the implications for our credibility
with Moscow and in our international relationships more
generally would be immense and long-lasting. In economic
terms, the cost of many possible sanctions is not reversible --
trade, major contracts and associated jobs lost and future US
competitiveness diminished by casting_a shadow across the image
of the United States as a reliable trading partner. The
economic effects feed back into and reinforce the domestic
political cost already noted.
Polish Debt:
A possibility which should be considered whatever else we
choose to do is to continue to refuse to reschedule Poland's
1982 debt.
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 being open to the risk that other
creditors (private and/or official) would then call a formal
default on Poland's other loans and thereby undermine the
credit position of the entire Eastern Bloc. However, an SSG
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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
panicking private creditors into precipitating default and
encouraging the Allies to settle with the Polish Government
as preferred creditors.
This suggests that the leverage we derive from Poland's
massive foreign debt is both limited and difficult to use.
Nevertheless, a Presidential reiteration of our established
policy that Government-to-Government debt cannot be rescheduled
until internal conditions in Poland warrant should be
considered as an adjunct to the following specific options.
OPTION 1
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 holding open our options for future U.S. actions either
with or without-the Allies. At the same time, we would use
events such as the February 9 resumption of the 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 numerous mixes of measures which could be adopted within
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this option, the effects of which can be tailored to fall at
various points within the broad gap between Options 1 (no new
actions) and 3 (a relatively sweeping action package). 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 which
focuses on the agricultural sector, including
pesticides, fungicides, fertlizers and fertlizer
ingredients (especially phosphates which alone could
have a significant impact in the short to medium term
on Soviet grain production), revoking already-issued
licenses for exports such as International
Harvester/Combine technology, suspending
joint-venture fishing operations, etc.
-- declaring a state of national emergency and.imposing
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.
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
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the same time this would not entail U.S. sacrifices sufficient
to induce the Allies to curtail their own far more extensive
exports to the U.S.S.R. Cuts in exchanges and commercial
representation might 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 our
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.
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.
Cons:
It would not have an immediate impact because of the
exemption for deliveries under existing 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.
Total export embargo against the Soviets. One bold action
would be for-the U.S. to embargo all exports, including grain,
to the U.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
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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.
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
Ar_g_ ntina. 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 U.S. and Allied sanctions may not
succeed in changing Soviet behavior toward Poland, we should
also give serious consideration to action in other regions to
drive up the costs to Moscow of its international
irresponsibility. These steps could be taken as an alternative
to any of the actions set forth in options 1-4 or as a
complement to them. In many cases, we have already made
decisions to act against Soviet allies-and proxies, and the
actions we will be taking could be explicitly or implicitly
linked to Poland either with the Soviets are publicly. We
could also consider expanding the scope of action already
decided upon as a direct response to the Polish crisis. In
this connection, we would stress that our decisions reflect the
overall determination of the Administration to counter Soviet
use elsewhere of the kind. of indirect military force which
crushed the renewal movement in Poland.' Possibilities include:
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-Report of the SSG Working Grouv 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 governments could unilaterally (although after appro-.
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
now, if they wish. Experience has shown that chances of?sudcess
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. Polish trade,
however, 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 the 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. during 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 invokinq 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 s-ignal to the financial markets, while making a --
ripple effect much less likely and permitting the banks to deal
with the situation in a more 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'o?f the Polish official 1982 debt. at this time.
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- IMPLEMENTATION OF A TOTAL EXPORT BAN
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 require 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. After 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,
Belarus, 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: We 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
micht 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 diplomatic 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
..under taken as soon as possible.
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POLAND: POSSIBLE MEASURES AGAINST THE USSR
SHORT OF A TOTAL EXPORT BAN OR EMBARGO
Tab C
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. Embarao 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. Embargo on chemical exports This step would hurt Soviet
fertilizer production; the CIA has concluded that , among
product areas,embargoed by the US alone, suspension of
chemical exports would have the most substantial effect on
the Soviet economy. This combined with an import embargo
would torpedo 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 of 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 bad 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-cost gesture and would'
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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 grain 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. We should take no steps to set
dates at this time. We shoula 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 an
grain sales.
7. Abrogate 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 much
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 existing 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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3 _
with the shipping organization 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 the
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, could 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.
Human 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
Washincton. 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 cuts in certain sections -- e.g.,.
culture, science, commercial -- where activities have been
reduced because of our other sanctions.
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