Happy New Year, Dr. Kissinger.

Happy New Year, Yoshiki.

This is another New Year's prediction of Dr. Kissinger what is going to happen, and what will happen this year. Last year, you predicted much more optimistic relations between two countries, Soviet and U.S. '17 I think Reykjavik torpedoed everything and destroyed. '22 This year was what kind of relationship you have with Soviet? '26

You know, last year, it was going along more or less as I predicted until October. '34 until the Reykjavik meeting. Now, I still believe that there is a good opportunity for progress with the Soviet Union '42 in 1987. I do not think that Gorbachev will want to wait until the end of the Reagan Administration because that is not a wait of two years, that's a wait of 55 four to six years. It will take the President 18 months to get organized. Nobody can predict what will happen, so I believe we will see a new Soviet proposal or approach early in the New Year and that there will be considerable progress made on East West relations during 1987. 1'16

But Mr. Gorbachev is coming with still SDI, he is too much obsessed with objection of SDI. '2' But he's obsessed with SDI. And he is trying to get America to abandon its most advanced technology. '33 And in the past, all arms negotiations have limited deployment, not research or technology. '39 But I believe what will happen is, the Soviets will modify their Reykjavik proposal, in which they say we can only do only laboratory tests which imply that it has to be inside the building. '52 I believe they will modify to say that laboratory means, '57 tests and there of a certain kind. So we are then going to negotiate about the nature of the test and think is a soluable problem. '07

Why, why so Mr. Gorbachev is eager to have negotiate or the agreement with U.S.? '14

Because he has enormous domestic difficulties. '17

Gorbachev faces a Governmental structure that is in need of renovation. '22 The Soviet Union is the only large power which has never had legitimate successions. '30 All their leaders in office. Second, they have terrible economic problems. So they need to renovate their economy. '37 And they cannot do both aggressive policy and deal with their domestic problems. '46

His political the situation, domestically is getting stable or he has any serious problem this time? '54

Well, every Soviet dynasty and you really have to look at each leader as a beginning of each Soviet dynasty begins with a purge and ends in stagnation. '02 We are now in the purse phase. And so that is a precarious and difficult phase for any Soviet leader. '11 I think it is getting somewhat more stable but as he reform his economy, he is going to '18 be forced to attack the middle level management and that is very entrenched. '22 Because the Communist system and the Central plan system is very comfortable for managers, they have no markets to worry about no costs, no prices, all they have to do is produce a certain quantity. '35

Page 2

And so he is not out of the woods yet. 3'40

Q: How about their Military? They are happy with Mr. Gorbachev or they are worrying about military? 3'47

A: The military. Well, the Soviet Military of course are getting more and more influencial. 3'54 And it is not clear, it is the first time, in the long time in 30 years, that there is military man on the Politbureau. 4'05 But several secret police people are on the politbureau one can explain some of the Soviet arms control policy and general policy as an attempt to get relaxation of tensions without paying any military price. 4'23 And one reason they are so eager to do away with SDI is because if America doesn't have any defense, then nuclear blackmail becomes more and more plausible. 4'34 And also of course because it avoids technological raids under difficult circumstances for the Soviet Union. 4'42 Still, I think they will pay some price including a military price. 4'47

Q: He has been, Mr. Gorbachev has any imminent danger or threat or anything in his country? (To himself?) huh-huh. 4'57

A: Well, you know if he has an imminent threat, he will perhaps be the last to know, but he will know it before I do. 5'04 It is not easy to remove an active General Secretary. 5'07 But he has to move with some care because if he brings about a coalition of all the parents against him, then it is like 5'19 you know like in the Japanese feudal period, or in the feudal period in Europe, that his position could be endangered. 5'30 But it doesn't look that way now.

Q: But by your judgement, he is making good success in accelerating or invigorating their economies as he took his position? 5'41 5'38

A: No. I think he is making progress and improving quantity. 5'45 He is not making progress and improving quality. The Soviet Union is in no sense of technological competitive with Japan, the U.S., Western Europe and any advanced market economy. 5'59 Partly because it's structured doesn't permit it, but he will improve the quantity, but that doesn't solve his problems. 6'01

5'06

Q: Do you think his attitude toward the West to be nice and to be friendly, is only a tactical posture toward the West or he is trying to change his whole structure of society and international relationship? 6'21 6'18

A: I don't think Gorbachev has decided yet what his real posture is. He has unusual skill in p[olitical relations]. But there is a danger if you are too obsessed with public relations that you only concerned with the immediate and not with the long range. 6'38

Up to now, he has taken the line of least resistance which is what political figures

often do. 6'47 And he has attended to keep the status quo politically and get improvements at the same time. So in its economy what he is trying to do is to get an improvement with the present

structure. 6'52

page 3

that will turn out to be impossible. 7'04 He is trying in Foreign policy to get a relaxation of
cension without changing any of the conditions that produce the tension. If we conduct an
adequate foreign policy, that should prove it possible. At that point we will know, what adapt
ions he is really willing to make. In my belief, 7'25 he will make adaptations, if we conduct
consistent and purpose for foreign policy, all of us in the West. 7'35
7'28 7'28

: So attitude of Western Society, U.S. Japan, and Western Europe is very important. 7'41 7'37

: It is very important that we show a readiness to be conciliatory, but also a determination
safeguard what we consider essential. 7'51 7'46

: Now in the U.S., I'd like to have your prediction, what is happening in Washington. 7'53
Do you think President Reagan is going to resign or forced out, or what happen? 8'02 7'58

: Absolutely not. I do not believe President Reagan will be forced to resign or will be forced
out. 8'08 On the contrary, unless there is some new revelations in areas that I can't even conce
8'04 I believe that we will see that in January, and February, these investigations will run
of steam. 8'22 Afterall there is only one action that is legally questionable. That is the
8'16" diversion of funds from the sell of arms to Iran to the Contras, and that is one Foreign Policy
decision which is questionable. 8'36 namely the sale of arms to Iran. Those are the two issues,
all the rest is details. 8'42 I believe that the President has been damaged, I think he will
overcome it. 8'36" And I think that by February, he will be able to look forward to the positive
achievements of his remaining two years. 8'50 8'51

: He is taking your suggestion or advice regularly? 9'02 8'55

: Oh, President calls me occasionally, and 9'08 I respond to his questions. 9'05

: You said this Iran and Contra scandal is not a devastating damage, but many people say, 9'15

: A: A damage but it will not be fatal. 9'23 9'17

: I see. And now President can restore the prestige and influence after this scandal, what he
do? 9'32 9'26

: You know when such a crisis occurs, for a period of time, you see nothing else on television
9'41. You read nothing else in the newspapers. And after a while you forget what the subject
matter is, all you know is that there is a scandal. 9'50 But unless there are new revelations,
it is got to run out of steam. 9'55 9'49

And if I am correct, that there will be progress in East West negotiations, as I believe I am,
then, people will start debating positive achievements, and that will over a period of time
restore the President's prestige. 10'14 In a way, it may even be a blessing because the organ
tion that produced the decisions on the sale of arms to Iran, and on the diversion of funds,
10'24 could have gotten the President into even worse trouble if it had not been discovered now
10'23

Q: But I think in the last several years, the President had very good staff and such as people, Mr. Baker, steering away President out of danger like this. (10'41) And those good staff, left, people criticize ability of Chief of Staff this time, Donald Regan, and also, 10'51 President himself getting a little bit older, and his judgement, 10'55 10'48.

A: NO, I don't think it has anything to do with his age. 10'51

I think the problem is that the President focuses on general objectives. He is not a man for details. 11'06 That means that his staff has to watch the details. 11'03

The NSC staff became one of the players, it became almost an agency that was used for convenience purposes to conduct certain operations in order to avoid certain types of 11'23 Congressional oversides. That meant that they were too busy to protect the President.

Now that has to be ended. 11'32 And I know Mr. Kaluchi, the new Security Advisor very well, fact, he used to work for me. 11'37 So I know he is going to end this and so the President will get much better staff advice. 11'47 I don't think the President from my observation has lost any vitality. 11'52 But one has to know the things he likes to do which is general directions and therefore his staff has to pay meticulous attention to detail. 12'03

Q: But still I think for last 6 years, President had no problem like this. Suddenly, he has ma problems since Reykjavik and Libya and 12'08

A: Because there are many reasons why he had no foreign policy problems, one is that the Soviet Union was so preoccupied with its succession problems and so he was 12'26 in a way luck and unlucky. He was lucky that he had no crisis, he was unlucky because in a crisis you can tell whom you can rely on and what staff procedures will work and which will not work. 12'39. And this is unfortunate I don't minimize it but I believe that by the time they meet next year, 12'47 we can look back to this as an accomplished event. 8

12'51

12'45

Q: You said Mr. Kaluchi came to position where you used to be, is that enough for reconstruction 13'00 staff member. Do you think much more reconstruction of the staff or cabinet members is necessary in coming few months? 13'09 13'02

A: I believe that a reconstruction of other parts of the Administration will be necessary too, and will take place in my view. 13'10 13'11

Q: Always you don't like to speculate but who is going and who is coming? 13'22 13'15

A: I can't speculate on that but I think there will be changes. 13'25 13'18

Q: Mr. Shultz is leaving? 13'20

A: I have no reason to believe that. 13'30 And I think he is a distinguished public servant.

13'33

ge 8

But on the trade deficit itself, this year maybe 1987, even difficult for you to reduce
the peoples so pessimistic about your ability of competitiveness or international trade ability
you have any idea, the U.S. can improve? 24'35 24'24"

Fundamentally, we cannot ask the Japanese to improve our competitiveness. 24'40 24'29"
that is an American problem. And that requires some structural changes at how we go at
economic planning, 24'47' it involves some structural changes even in the emphasis we place on
quarterly profits which tends to emphasize immediate production over qualitative, improvement which
won't yield with result. 25'04 That is an American problem, that the Japanese cannot solve.
24'53"
25'06"
On the other hand, the Japanese can help in some cooperative measures, to reduce the
trade deficit, but I repeat, it would be more effective on a general basis, by doing it 25'25
industry by industry. 25'27 25'16"

So we should not too much involve in technical matter. 25'24"

Well, I think certainly we have to be involved at some level, but I this debate on the
trade deficit has been going on for a decade now, and every year, 25'50 there is a new
discussion and then there is a new disappointment, and this constant friction is going to 25'57
undermine a very basically sound relationship. 26'03" And I would like to have one negotiation
that then settles the problem for at least 2 years let's say, and look at it again, and 26'17 I hope
that such a negotiation will take place during the course of the next year. 26'20
26'09"

And what is your prediction Japan relationship with U.S. this year? 26'14"

I think the relationship in 1987 will have inevitably some frictions on the economic
course of the year. 26'22"
level. 26'24" But on the political level, I think, it will continue to be very strong and
believe that the relations on the whole will be very good. 26'49
26'36"

So you say not big change since 1985 and 1986. 26'41"

No, I don't expect big change, I expect trade legislation and that makes it important
or everybody to stay calm and not take retaliatory measures. 27'03 26'51"

So how do you categorize the relationship, stable, conflict or what, what do you say? 26'55"

I would say there is a certain amount of conflict on economic issues, 27'14 part of it is
Japan's responsibility, part of it is America's responsibility. I think on the political
level, relationships are very good. 27'24 And it is important to get the political and economic
relationships into synchronization. 27'30
27'17"

And you pointed out recovery of President's prestige, and

And its importance for Japan. 27'96 27'24"

Page 10

The U.S. and Soviet Union improve their relations, which I expect despite everything, 4'29
then. I think the Soviet Union will not exasperate the situation on the Korean Peninsula. 4'28

The rumor of assassination of Kim Lusan has any 4'34 .. 31'58

: Well, it's a very strange phenomenon. 4'39 32'03"

specially since not only that the South Koreans say it, but the Vietnamese who have no interest
148 in being supportive of South Korean objectives also said it. 4'58 There probably is some
ension in North Korea, the Kim ilsong family and the establishment figures because I do not think
that the other organizations, say the military are too eager to have a dynasty develop in which
he son succeeds the father. So I believe it indicates 5'10 some tensions in the North Korean
system. 4'59 And it probably also showed that they managed to fool the South Koreans about
that was going on. 32'54"

: But you do no expect or anticipate any imminent danger? 32'59"

: I do not expect a military action by North Korea against South Korea. 5'40 But the North
Koreans could become tempted but more even in 1988 next year than in this year to engage in acts
of sabotage or create a sense of insecurity so that people will be discouraged from visiting the
Olympic games. 6'00 83'24"

That could happen in the second half of 1987. 6'05 33'29"

: So overall your prediction 1987, is not so dark not so bad, that Soviet eager to make another
negotiate with the U.S. and 6'16 dollar is getting a little bit cheaper, but world economy might
be stable and 32'23 33'46"

A: The world economy is in a precarious situation in the sense that there are many factors
increasing American indebtedness, 6'31 American consumer debt the international so that could
be a crisis. Also and there hasn't be a recession for a long time, so if a recession ever starts
6'43 I think it will be more severe than people now expect but I would expect 1987
6'50 to be fairly stable, not dramatically improved, on the economic level, but fairly
stable. 6'58 34'22"

Q: Politically. 34'23"

A: Economically. 34'24"

Politically, I also think that 1987 will be without great drama in so far as that can be controlled
by the superpowers. 7'11 34'34"

Q: Thank you, thank you very much Dr. Kissinger. 34'36"

A: And Happy New Year to everybody. 34'38"