CONFIDENTIAL / NODIS

MEMORANDUM OF CONVERSATION

OFF THE RECORD Luncheon
New York Times

Monday, September 30, 1974

229 West 43rd Street, New York City

Participants:

Secretary Kissinger
Arthur Ochs Sulzberger, Chairman,
President and Publisher
Harding F. Bancroft, Vice Chairman
Charlotte Curtis, Associate Editor
Max Frankel, Sunday Editor
James L. Greenfield, Foreign News Editor
Sydney Gruson, Executive Vice President
Bernard Gwertzman, Reporter, Washington Bureau
John B. Oakes, Editorial Page Editor
A. H. Raskin, Assistant Editorial
Page Editor
James Reston, Vice President
A. M. Rosenthal, Managing Editor
Jack Rosenthal, Assistant Sunday Editor
Seymour Topping, Assistant Managing Editor
Tom Wicker, Associate Editor
Robert Anderson, Special Assistant to the
Secretary for Press Relations

SULZBERGER: What is your view of the appointment of Ambassadors who have made substantial campaign contributions?

SECRETARY: I am in favor of Ambassadorial appointments on the basis of merit. About 70% of our Ambassadors are from the Foreign Service, and this is the way it should be. I do feel, however, that it is beneficial to our country to bring in a few highly qualified people from the outside to serve as Ambassadors. Bill Fulbright, for example, would have been excellent in London, but could not go because of his wife's health.

QUESTION: What happened at last Saturday's oil meeting of the Five?

SECRETARY: This was a very useful, informal exchange of views. At the request of our allies, the discussion will remain secret as they do not wish to be pushed into a corner in their respective capitals through any public airing of what transpired.

CONFIDENTIAL / NODIS

GDS

CONFIDENTIAL / NODIS

2

The basic theory is to move towards cooperation between consumers and producers. The first step has been to establish the International Emergency Program which now awaits ratification by the twelve governments. Now we must state the basic problem facing us bearing in mind Scottie Reston's statistics in today's paper which are accurate and show the potentially unbearable situation ahead. The problem is how do we pay for the increased cost of energy. We can do it in three ways - by inflation, by cooperative action among consuming countries or by having producing countries meet the deficits of consuming countries. This is the main question. The less developed countries can meet this problem, but this does not affect our post-war structure. If this question is not resolved in the next three to five years, what will happen to our post-war structure?

QUESTION: What is France's attitude?

SECRETARY: France is now in the lead calling for a cooperative approach, although it was against this eight months ago. The situation is more acute now than in February, as the rate of accumulated balances has increased so rapidly. The birth of IEP after just six months is a spectacular success. Regarding a restriction of consumption, the President should not worry about public reaction. He is obliged to tell the American people. If a cataclysm arrives and he doesn't speak his mind, he is in trouble.

A. M. ROSENTHAL: Why did the Administration not come forward earlier?

SECRETARY: Watergate and the transition held us back. President Ford will come forward now. As an aside, let me point out that one must differentiate between public and private statements of oil producers.

WICKER: What do you think of the French announcement?

SECRETARY: I am rather attracted by it - a simple system setting a limit on what is to be spent on total imports, and maybe setting an import price. Back to the producers for a moment, the small sheikhdoms like Abu Dhabi, Kuwait, Bahrein and Qatar do not understand the meaning of money or what to do with it. Yamani, however, is highly sophisticated and has a limited understanding of these questions. The only problem is that he is more influential in the United States than in

CONFIDENTIAL / NODIS

CONFIDENTIAL / NODIS

3

Saudi Arabia. The Shah is really the only one who knows
what to do with his revenues.

GRUSON: What do we do to prevent a world cataclysm?

SECRETARY: It will depend on what happens to our cooperative efforts. We could solve our problem bilaterally, but Japan and the Europeans could not as they are too weak. What is the solution? We put forward specific ideas on Saturday, but they implored us not to discuss them. Generally speaking, our objectives must focus on consumer restraint, research, easing of the burdens of deficit countries, solving the problem of the least developed countries, preventing further price increases, and seeking price reductions.

GWERTZMAN: What about a meeting between producers and consumers?

SECRETARY: There should be such a meeting, but such a move now would be a disaster. One must wait until the consumers know what they are doing. Two problems face consumers - how to get oil prices down, and more importantly how to give advanced industrialized nations the sense they can control their own destinies. FDR did this in the 30's; he gave our people this vital sense during the depression.

A. M. ROSENTHAL: Is the Shah moveable? Is he the one primarily responsible for insisting on the maintenance of high prices?

SECRETARY: We tried earlier to get prices down through the Saudi action. I didn't think it would work at that time. The Saudis do not have the political structure to be in the lead in getting prices lowered. King Faisal's position between moderates and radicals in the Arab world will not permit him to do this. We will need the Shah's acquiescence at some point. If this is put to him as a political decision, maybe he'll do it.

QUESTION: What leverage do we have with these people?

SECRETARY: Faisal and the Shah need us for political reasons. Take our role in the Arab-Israeli problem and our counterweight to the Soviets in the Middle East.

QUESTION: Will we have a program to combat the energy problem?

CONFIDENTIAL / NODIS

CONFIDENTIAL/NODIS

4

SECRETARY: There will be no chance of doing anything if we don't. I fully agree we must discipline ourselves. President Ford will come up with a program.

QUESTION: But other Cabinet members with whom we have talked are not ready for a program.

SECRETARY: If we don't act, nothing will work. Simon and I believe the U. S. must act and have been working on this for the past three months.

BANCROFT: Why no signals then in the past three months?

SECRETARY: The Nixon resignation, the transition and picking up the morale of a badly demoralized government are the principal reasons you have had no signals.

GRUSON: Are not the oil and Arab-Israeli problems intertwined?

SECRETARY: We must separate these issues. The Arabs will go along as long as the diplomatic track is moving on the Arab-Israeli front. If there is a stalemate, the Arabs may relate oil to the Arab-Israeli problem. I deal with both problems keeping them in phase. The only way to deal with the Arab-Israeli question is a step-by-step approach. One point to remember here is that we have coalesced with the West and Japan because of our active Arab-Israeli diplomacy.

QUESTION: In looking at the enormous transfer of resources from producers and the problem of recycling, how do you view the future of the West?

SECRETARY: First, take a minor state like Libya which has no policy concepts, but only chooses to use its money, on occasion irresponsibly, at the whim of its leader. Look at what they did in Chad and Uganda and what they almost did in Malta before Mintoff saw the light. If we do not cooperate in solving the problem of recycling vast investments from producers, Western unity could lose its identity. The organic structures of countries such as Italy and the United Kingdom must be related to other countries. The nightmare of Schmidt, for example, would be the sudden shift by producers, not even maliciously, of large sums from German banks. This could ruin the entire banking system. We must find out how to shift these funds equally in Western countries.

TOPPING: Re the disposal of Arab funds, are they not doing this in a helpful way now?

CONFIDENTIAL/NODIS

CONFIDENTIAL/NODIS

5

SECRETARY: Yes, but this represents a claim on resources.

RESTON: How do you suppose the Soviets view all this in light of the situation in Portugal, Spain, Italy, etc.?

SECRETARY: An historical view would be that the West is in crisis - the uncertainties in Portugal, Spain as it looks to the post-Franco era and Italy with the possibility of an opening to the left where the Communists could be expected to act responsibly to get economic problems solved. Such a move in Italy would have major consequences in France and would isolate Germany.

GWERTZMAN: There is the Europe of the mid-30's and the Europe of post World War II. Do you compare the Europe of today with either?

SECRETARY: It really isn't either. The depression of the 30's is different from the economic problems facing Europe today with the vast transfer of revenues from oil producers. At the end of the war Europe's economy was shattered, but there was effective leadership and a sense of purpose to reconstruct and move forward. Now Europe is facing the problem of leadership to cope with the energy problem. Can the present leaders, most of whom have fought their way up the political ladder and have to focus more on accommodating themselves to precarious political structures than on solving long-term problems, meet the challenge? Giscard is a superior person in France. Schmidt in Germany is a strong man, but I don't know how farsighted he is. The capacity of the body politic of the West is the big question.

GRUSON: The reaction to the President's and your speeches has been one of helplessness. What can you tell the American people?

SECRETARY: My speech was not just on energy. The draft started out with the human dimension, but I didn't agree with this approach. It dealt with the problems of local conflicts, nuclear proliferation, energy and food. We had to face these as major problems, and the American people had to hear what lies before them. I didn't feel at all helpless. This isn't a question of the public accepting or not accepting the speech. It is not my job to put an energy program to the U. S. people, but I can use my influence to urge a program. The President

CONFIDENTIAL/NODIS

CONFIDENTIAL / NODIS

6

will come up with one in two weeks, but I do not know precisely what it will be. He may be more optimistic and conciliatory than I.

**QUESTION:** Is foreign aid in serious trouble?

**SECRETARY:** At the request of the Congressional leadership, the President agreed to a continuing resolution until the end of the year. The leadership did not wish to bring the bill to a vote before the elections as they thought it would be cut even further. Aid is in trouble in terms of amounts, restrictions and the general spirit towards assistance.

**TOPPING:** The Administration seems less conscious of humanitarian problems and more interested in the political and security aspects of food aid.

**SECRETARY:** Regarding food to Egypt and Syria, I am interested for foreign policy reasons. But there is also the larger food program for India which is useless to us in strategic terms. In Bangladesh there is also a substantial program. The fact that food aid is one of our foreign policy tools does not mean that we take an inhumane approach. I pushed the World Food Conference and will present proposals in Rome this November. We need to develop a domestic consciousness around the world, and we hope to have food exporters organize themselves to meet the world food problem.

**QUESTION:** Is detente succeeding?

**SECRETARY:** What is the detente policy trying to do? We want detente because the U. S. and the USSR are not compatible in many areas and we must create a framework to reduce frictions. We have been more secure during the past five years because of this policy, but much is left to be done. The Soviet leadership is just not farsighted; it has no long-term concept. Conditions are favorable for a SALT agreement in the next 12-15 months. Regarding Senator Jackson, of course it is desirable to have a *quid pro quo* for everything, but we cannot balance the books every day. One must look five to ten years ahead here.

**QUESTION:** What are the foreign policy priorities of the United States?

CONFIDENTIAL / NODIS

CONFIDENTIAL/NODIS

7

SECRETARY: Detente, the Arab-Israeli problem and energy. We must deal with all these. Cyprus is a peripheral, not priority problem for us. Re the Middle East, there will be no more shuttling as in the past. The purpose of my next trip is to design a negotiation without me. We cannot involve the Secretary of State personally in every problem that arises.

QUESTION: What about relations with Cuba?

SECRETARY: We must ask ourselves what Cuba can do for us. There is really very little, although resuming relations might help us with some Latin American countries. The idea of a Ford-Castro, or a Kissinger-Castro meeting is ridiculous. We should treat Cuba as the island that it is, not as a cosmic event. We will normalize our relations in time.

A. M. ROSENTHAL: What about the situation in Bangladesh -- they need all the help they can get? Also is India in serious trouble?

SECRETARY: These two countries have enormous problems. I will be going to the sub-continent to redress some of the problems that arose in 1971. We will set up some institutions for cooperation while I am there.

QUESTION: Was the Administration acting against the law in not stopping military aid to Turkey?

SECRETARY: I was given a formal legal position. It was sent to the President with whom I discussed the whole subject. According to one technical provision, we are in compliance with the law. There are other discretionary points which we could use, such as a waiver. But I didn't want to take the pressure off the Turks by announcing any waiver action. Our concern from the outset of the Cyprus crisis was not to write a script because we believed the situation was totally fluid. For example, we doubted Sampson would be around for very long, and made a point of not seeing him. As for the present situation, Karamanlis is the only hope for Greece. I have never seen such a disparity between public and private Greek statements about us. They know that their only hope is the United States. As for Turkey, there is the danger they may go in a pro-Qadhafi orientation and line up with radical Arabs in a pan-Moslem movement against us. We must retain the threat of an arms

CONFIDENTIAL/NODIS

CONFIDENTIAL / NODIS

8

cut-off. If we don't do this, our leverage will be lost. It is in Greece's interest that we do this as the U. S. is the only one who can obtain concessions from Turkey.

A. M. ROSENTHAL: For 20 years we have been closely identified with governments that are reprehensible - Salazar, Franco, the junta in Greece, South Korea. Why do we have to maintain these close associations?

SECRETARY: This is a just criticism. The problem we should solve is not to love them, but find a way to deal with them in a practical way. As for the junta, we knew the leaders were stupid and would eventually do themselves in.

GRUSON: Why did we destabilize the situation in Chile?

SECRETARY: Colby did not use the word destabilize, only Harrington did. To return to Greece, I cannot defend our attitude towards the junta. The amount of thought I gave to this relationship in the last five years was minimal. I did stop Agnew from going there for three years, but was then over-ruled.

JACK ROSENTHAL: Can you comment on the problem of the control of covert operations?

SECRETARY: This is a troubling problem. Should a democracy engage in such operations? On balance, yes. On control, covert operations have been cut by 60% since 1969, and there is no more automatic annual review which tended to keep projects operating year after year. I exercise my influence the least in the 40 Committee. I don't remember calling anyone before a vote. Votes are generally unanimous and then approved by the President. My perception of Allende is available in backgrounders I gave at the White House in 1970. We felt that Allende would move Chile towards a one-party dictatorship, and that this would have had a destabilizing effect in other countries in Latin America where U. S. interests would have been profoundly affected. We authorized Ambassador Korry to deal with Allende in a conciliatory manner. There was no cut-off of the economic aid pipeline in Chile and we continued our regular humanitarian programs throughout the Allende period. Since the coup, we have provided humanitarian assistance. The total package we have requested for this year is $85 million.

S/PRS:RAnderson:avw

10/5/74

CONFIDENTIAL / NODIS