HENRY A. KISSINGER

January 28, 1980

Dear David:

It was good to see your letter wait-
ing for me on my return to the office.
Your compliments on the book were flat-
tering and appreciated. I saw your
family in Milwaukee and enjoyed it
very much.

It would be nice to see you again.

Mr. David Owen Kieft
456 Summit Avenue
Saint Paul, Minnesota 55102

January 14, 1980

Henry A. Kissinger
1800 K Street
Suite 520
Washington, D.C. 20006

Dear Henry:

I'm about to complete my reading of your impressive memoirs and wish to congratulate you for such a magnificent achievement. The only other American political memoir to reach this level of distinction is that of Dean Acheson, and your book is better than his.

I regret not having had a visit with you when you were here late in September. But it was fun to see Nancy. Reliable sources report that you will be in Milwaukee next week. Should you be at a reception and meet a woman who looks a little like Julie Andrews, it's my mother. She has always wanted to meet you and Nancy.

P.S. When I was a child I knew Acheson and one day asked him what President Truman was like. "Well, David, it all goes to show that any man can be President of the United States." Truman would have been elated to hear that. Incidentally, it is not generally known that Truman and Acheson invited Thomas A. Dewey to be Ambassador to Russia. Of course, he was still alive at the time.

JAN 17 1980

Seoul, December 20th, 1979

Dear Mr.Prof. Kissinger,

I am a Korean professor for German Literature and Journalism
in Seoul. It is for me a great honour writing to one of the
great persons of this century, like you.

I had studied German Literature, Philosophy and History at the
University of West Berlin, Germany, from 1967 until 1977.
I was and am always an admirer of your brilliant political
activitie and historical senses.

From about 3 monthes ago I began to read some parts of your
"Memoirs" on "TIME" and "DER SPIEGEL" with great interests
and tensions, not at the least, Korea was one of your compli-
cated political stages, even not directly.

In this month, at last, I have read your "MEMOIRS" ( C. Bertel-
smann ) on German. It moved me deeply.

I am neither a politician nor a historian. But your book is
full of high penetration, historical gravity and dramatic
power. For me and everybody perhaps your book is a gigantic
document of an unforgettable and most difficult worldhistory.
I have ordered an original-copy from America.

And if I can get your admission I would like translate your
Memoirs into Korean and publish it.

I really want to introduce your gigantic"Symphony" here
and let Korean a historical reality.

We are not the member of the International Copyrights
Agreement. But I will do my best to satisfying any of your
concerns including royalty, although we have a strong official
foreign exchange. I hope you can understand me.

And I want your generosity at the same time. I am very happy,
if I can hear an "O.K." from you.

JAN--1980

Sincerely yours,
JAN 11 1980

( Kwang-Yoon, Kim)

( Kwaeng-Yoong, Kim)

JAN 11 1980
Sincerely yours
JAN

JAN

if I can hear an "O.K." from you.
And I want your generosity at the same time. I am very happy,
foreign exchange. I hope you can understand me.
concerns including royalty, although we have a strong official
Agreement. But I will do my best to satisfying any of your
We are not the member of the International Copyrights
and let Korea a historical resity.

I really want to introduce your Gigantic "Symphony" here
Memoira into Korea and publish it.

And if I can get your permission I would like translate your
I have ordered an original-cody from America.

document of an unforgettable and most difficult worldipatriot.
power. For we and everybody perhaps your book is a Gigantic
full of high concentration, historical gravity and dramatic
I am neither a politician nor a historian. But your book is
amazing ) on German. It moved me deeply.

In this month, at last, I have read your "MEMOIRS" ( C. Bertel-
cated political at sea, even not directly.

and tenors, not at the last, Korea was one of your combi-
"Memoirs" on "TIME" and "DER SPIEGEL" with great interest
From spont 3 months ago I began to read some parts of your
activity and historical aeneas.

I was and am always an admirer of your brilliant political
university of West Berlin, Germany, from 1965 until 1966.
I had studied German literature, Bibliography and History at the
Great Britain of this century, like you.

in Seoul. It is for me a great honour writing to one of the
I am a Korean professor for German literature and journalism

Dear Mr. Prof. Klaasen,

Seoul, December 50th, 1980

C. P. O. BOX 2147
SEOUL, KOREA
TELEX: KOMOPRO K28385 SEOUL
CABLE: "INCUSOKO" SEOUL
TEL. : 23-6464~6

한국국제문화협회
INTERNATIONAL CULTURAL SOCIETY OF KOREA

Understanding
Friendship
Peace

March 31, 1980

Dr. Henry A. Kissinger
Chairman, Board of Trustees
International House
500 Riverside Drive
New York, N.Y. 10027
U. S. A.

Dear Dr. Kissinger:

Your most kind letter of invitation is deeply appreciated.

As one of the World Council members, I am very much eager to attend the Ninth Meeting slated in early May. And I had already informed the good office of Mr. Thomas F. Olson that I would be present at those meetings.

However, to my deep regret, I have to inform you now that I am not able to take a trip abroad during that period, as unexpected official duties press me to stay in Korea. I was looking forward to the privilege of meeting with you and all the members of the World Council as well as the Board of Trustees on that occasion, but my situation here hardly allows me to do so. It is my sincere hope that you may generously understand my unavoidable circumstances.

Once again, please accept my apology for changing my plan. It is my earnest hope that I may have an opportunity to meet with you in the not-too-distant future.

With my warmest regards,

MWK/pko

APR 14 1980

APR 14 1980

WWK\pko

Sincerely yours,

With my warmest regards,

may generously understand my unavoidable circumstances.
hardly allows me to do so. It is my sincere hope that you
Board of Trustees on that occasion, put my attention here
and all the members of the World Council as well as the
was looking forward to the privilege of meeting with you
as unexpected official duties preclude me to stay in Korea. I
that I am not able to take a trip abroad during that period,
However, to my deep regret, I have to inform you now

Olaon that I would be present at those meetings.
I had already informed the good office of Mr. Thomas R.
eager to attend the Ninth Meeting slated in early May. And
As one of the World Council members, I am very much

appreciated.

Dear Dr. Klaasinger:

U. B. A.
New York, N.Y. 10021
200 Riverdale Drive
International House
Chairman, Board of Trustees
Dr. Henry A. Klaasinger

INTERNATIONAL CULTURAL SOCIETY OF KOREA
하국제공협회

Peace

Friendship

Understanding

March 31, 1980

TEI' : 53-8494-8
CYBRE: .INC20K0. SEONF
TELEX: KOMOBRO KS9382 SEONF
SEONF' KOREA
C. B. O. BOX 5147

AMERICAN BAR ASSOCIATION

SECTION OF
INTERNATIONAL LAW

1155 EAST 60TH ST., CHICAGO, ILLINOIS 60637 TELEPHONE (312) 947-3861
WRITER'S DIRECT TELEPHONE NUMBER (216) 383-2522

**CHAIRMAN**
Lyon L. Brinsmade
1100 Esperson Building
Houston, TX 77002

**CHAIRMAN-ELECT**
Charles N. Brower
1747 Pennsylvania Avenue, NW
Suite 500
Washington, DC 20006

**DIVISIONAL VICE-CHAIRMEN**
**General**
Gerald Aksen
New York, NY

**International Law**
John Norton Moore
Charlottesville, VA

**Comparative Law**
M. Sean McMillan
Los Angeles, CA

**International Trade and Investment Law**
Mark R. Joelson
Washington, DC

**International Organizations**
James W. Callison
Atlanta, GA

**SECRETARY**
Joseph P. Griffin
Washington, DC

**BUDGET OFFICER**
Edward J. Pastucha
Irvington, NY

**LAST RETIRING CHAIRMAN AND SECTION DELEGATE TO HOUSE OF DELEGATES**
Leonard J. Thorne
Washington, DC

**COUNCIL MEMBERS**
Sydney M. Cline, III
New York, NY

**Arthur T. Downey**
Washington, DC
Sally A. Harpole
Los Angeles, CA

**Alexander C. Hoagland, Jr.**
Mexico City, Mexico

John B. Houck
Cleveland, OH

John H. Jackson
Ann Arbor, MI

Robert M. Moore
San Francisco, CA

Martin Perlberger
Los Angeles, CA

E. Charles Routh
Seattle, WA

Arthur W. Rovine
Washington, DC

Louis B. Sohn
Cambridge, MA

James C. Tuttle
Troy, MI

**EDITOR-IN-CHIEF**
The International Lawyer
Francis S. Ruddy
Houston, TX

**EDITOR-IN-CHIEF**
The International Law News
Mont P. Hoyt
Houston, TX

**YOUNG LAWYERS DIVISION REPRESENTATIVE**
George C. Spina
Washington, DC

**LAW STUDENT DIVISION REPRESENTATIVE**
George T. Berry, Jr.
Washington, DC

**BOARD OF GOVERNORS**
**LIAISON**
William L. Howard
Portsmouth, OH

**ATTORNEY-CONSULTANT**
Edison W. Dick
Washington, DC

**SECTION ADMINISTRATOR**
Marilyn Neforas
ABA Headquarters
Chicago, IL

October 1, 1980

Honorable Henry Kissinger
Suite 1021
1800 K Street, N. W.
Washington, D.C. 20006

Dear Dr. Kissinger:

I understand that you are speaking at a conference in Canada on Canadian-U.S. relations in the 1980s on October 20-21.

As backdrop for your presentation at this conference, you may well be interested in a joint initiative undertaken by the ABA and Canadian Bar Associations with regard to the problem of dispute settlement between the two countries. In that connection, I am enclosing herewith a copy of a report which reflects the backdrop and substance of this initiative. Also enclosed is a summary I prepared for the American Journal of International Law.

The initiative is essentially a long term approach to the problem of dispute settlement between the two countries. It attempts to look over the hill rather than confine itself to the immediate world in which we live. It attempts to anticipate problems rather than handle them in crisis situations.

The Joint Working Group of which I was the U.S. Co-Chairman, reviewed the whole history of disputes between the two countries and came up with two recommendations which were adopted by the two bar associations. One recommendation was that all disputes relating to the interpretation, application or operation of treaties in force between the two countries be submitted to compulsory third party arbitration. In addition, it was recommended that by ad hoc agreement between the parties other disputes could be submitted to third party settlement and eight categories of disputes especially appropriate for such special agreements were listed.

In addition, there is a recommendation that the two governments conclude an agreement providing for a regime of equal access and remedy in judicial and other proceedings relating to transfrontier pollution. This would mean that under the proposed regime, persons in both countries would have equal access to judicial and administrative procedures and

OCT 14 1980

454

THE AMERICAN JOURNAL OF INTERNATIONAL LAW [Vol. 74]

ing voiced their support for ratification of the treaties. It was generally felt that the effort to afford international protection to fundamental rights and freedoms of the individual would be crippled without U.S. participation in these treaties.

Witnesses opposing the treaties expressed concern that U.S. obligations under them would infringe upon areas of peculiarly domestic concern that have traditionally been left to state governments to regulate. The Secretary of State, in his letter of submittal of December 17, 1977,⁶ recommended certain reservations, declarations, and understandings in an effort to minimize the perceived conflict between U.S. domestic law and the international obligations imposed by the treaties.⁷ Many of those testifying in favor of the treaties vigorously opposed the recommended reservations. In their view, the fears articulated by treaty opponents were unfounded, which made reservations responding to those fears unnecessary; they found the reservations also to be undesirable, since, it was maintained, they appeared to dilute U.S. commitment to international human rights law.

Not directly considered at these hearings was the Genocide Convention, although members of the committee and many witnesses spoke to deplore Senate inaction with regard to it. There is little hope that further action on the four treaties will be taken by the Foreign Relations Committee until the Senate votes its advice and consent to ratification of the Genocide Convention. That does not promise to be soon. However, the November hearings on the four human rights treaties have yielded a thorough and informative record that can provide a solid basis for further consideration of the treaties in the future.⁸

LAURIE J. BENNETT

Office of the Legal Adviser, U.S. Department of State

JOINT BAR ASSOCIATION PROPOSAL FOR CANADIAN-U.S. DISPUTE SETTLEMENT

In 1975 and 1976, officers of the Canadian Bar Association were approached by representatives of the American Bar Association for the purpose of working together on a proposal that would constitute a joint initiative toward creating a legal structure for peace in the world.¹ The representatives of the American and Canadian Bar Associations agreed that the most practical course of action would be a demonstration research project on the matter of dispute settlement between the two countries, to be carried

⁶ Reprinted in S. EXEC. DOCS. C, D, E, and F, note 2 *supra*, at v.

⁷ Included in those reservations, declarations, and understandings was a declaration that the treaties were to be non-self-executing; a federal-state reservation, to the effect that the United States obligates itself to implement only those provisions of the treaties over which the federal Government exercises jurisdiction as to subject matter; an understanding that everyone has the right to own private property; etc. *Id.* at vi-xv.

⁸ *International Human Rights Treaties: Hearings Before the Senate Comm. on Foreign Relations*, 96th Cong., 1st Sess. (1979).

¹ The proposal for the project originated at a meeting of the leadership of the Section of International Law of the ABA, which was held in October 1974. After consultations, it was agreed that it should be undertaken by the section in conjunction with one or more bar associations of other friendly countries.

1980]

ried out by societies.²

After over was able to and recommend settlement on the other criteria, other proceedings.

The proposal was made at the International Conference of States in 1979, they said, with the aim of association's association.

The Joint bar association proposed treating the case as a civil one, but the United States, with Canada, opposed the proposed system but to accommodate the joint position.

The thrust of the proposal in both countries lay in the idea that the affected parties should not be left without the affected protective system but to accommodate the parties' different positions.

The second proposal, which was called the 'dispute settlement' or 'treaty soning' proposal, was not accepted by the other countries.

Compulsory interpretation, or optional interpretation, or optional provision.

² Henry W. C. Graff, *International Human Rights Treaties: An Interpretation* (King and King, 1978).

³ Copies of the resolutions published in *Ottawa Reports* in 1978.

⁴ Since the United States did not feel that the proposal was sensitive, it did not publish a formal response.

1980]

CURRENT DEVELOPMENTS

455

ried out by a joint working group composed of members of the two as-
sociations.²

After over 2 years' work, in the spring of 1979, the Joint Working Group was able to present to both bar associations a 100-page report presenting and recommending two draft treaties, one providing for the compulsory settlement of certain legal disputes between the two Governments, and the other creating a regime of equal access and remedy in judicial and other proceedings relating to transfrontier pollution.

The proposed treaties were reviewed and approved by the Section of International Law of the ABA and its counterpart in Canada; in August 1979, they were endorsed by the House of Delegates of the ABA at the association's annual meeting in Dallas, Texas, and by the Canadian Bar Association at its annual meeting in Calgary, Alberta.³

The Joint Working Group, in conjunction with the leadership of the two bar associations, is now taking steps with the respective executive and legislative branches of the two Governments to promote the adoption of the proposed treaties. A summary of their basic provisions and some of the reasoning behind those provisions follows.

The thrust of the draft treaty on transfrontier pollution is that persons in both countries should have equal access to judicial and administrative procedures for the prevention of and compensation for pollution damage. It should not matter on which side of the border the polluter is located, where the affected person lives, or in which jurisdiction the judicial or administrative protection is sought. What is being proposed here is not a new legal system but the adjustment of the two countries' existing municipal systems to accommodate equally residents of both in pollution matters.⁴

The second treaty provides that a system of third-party settlement of legal disputes between the two countries should be established and maintained for use as and when required. The main provisions of this treaty are:

Compulsory jurisdiction is limited to questions of interpretation, application, or operation of the various treaties in force between the two countries.

All disputes not subject to such compulsory jurisdiction may be submitted.

² Henry T. King, Jr., Gerald Aksen, Professor Don Wallace, and Arthur T. Downey have represented the Section of International Law, with Professor Louis B. Sohn acting as U.S. rapporteur. For the Canadian Bar Association, T. Bradbrooke Smith, Q.C., W. C. Graham, Q.C., and Professor J. G. Castel have been the designated representatives, with Professor George Alexandrowicz acting as Canadian rapporteur. Messrs. King and Smith acted as cochairmen of the Joint Working Group.

³ Copies of the Report and Recommendations of the Joint Working Group and of the resolutions and related reports of the 2 bar associations are incorporated in a document published by the Section of International Law, which can be obtained from ABA headquarters. Copies are also available at the offices of the Canadian Bar Association in Ottawa.

⁴ Since a number of the disputes that have arisen in the past between Canada and the United States have originated in pollution damage claims by private parties, it was felt that this proposal would fill an existing gap. Implicit also in the thinking of the Joint Working Group was the feeling that this type of dispute might create more extensive problems in the future.

456

[Vol. 74]

to third-party settlement only through an ad hoc agreement by both countries, and there are set forth eight categories of disputes especially appropriate for such special agreements.

Procedures are set forth for the constitution of a three-member arbitral tribunal or for submission of a dispute to a special chamber of the International Court of Justice.

The proposed system establishes legal procedures to complement existing procedures even though the preponderant majority of cases is resolved by bilateral negotiations. The availability of a third-party decision to the process is crucial. There are questions on which the two states may reasonably disagree and on which a genuine reconciliation of legally supportable conflicting positions cannot be had through negotiations since each side continues to maintain the legal validity of its claim. At other times, difficult and unsettling negotiations may lead to a solution, but a genuine accommodation may be lacking and a fundamental disagreement only patched over.

Third-party settlement can assure that in appropriate cases issues are kept self-contained and are dealt with on their own merits without "linkage" to other bilateral issues. In complex relations it may frequently be unwise to "trade off" the interests of different groups and regions. Consequently, the proposed treaty suggests that, where a dispute is a legal one or has legal aspects, obligatory arbitration or adjudication may be the most efficient and equitable means of settlement. Where a dispute is wholly legal, the prospect of compulsory arbitration encourages negotiators to find a resolution. Where a dispute is partially legal, arbitration of the legal questions can reduce its dimensions and provide a framework which will simplify resolution of the remaining issues.

Compulsory jurisdiction is especially appropriate for Canada and the United States because their mutual treaties are many and varied. The net result of a series of decisions over a period of time will properly reflect the equality and fairness inherent in genuine third-party proceedings. The automatic availability of third-party settlement should reduce tension and diminish frustration by assuring that a genuine and impartial solution can be had if negotiations will not produce one.

HENRY T. KING, JR.
Cochairman, Joint Committee on the
Settlement of International Disputes

How Nations Henkink
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457

REPUBLICAN NATIONAL FINANCE COMMITTEE

310 FIRST STREET, S. E.
WASHINGTON, D. C. 20003

WOODWARD KINGMAN
CO-CHAIRMAN

REPLY TO:
I MONTGOMERY STREET
SAN FRANCISCO, CALIFORNIA 94104

October 30, 1980

Dr. Henry Kissinger
1800 K Street, N.W.
Washington, D.C. 20006

Dear Dr. Kissinger:

I wanted to thank you so very much for making our San Francisco luncheon at the Logans on October 18 such an outstanding success. First of all, it was a tremendous help to our fundraising efforts for the California Republican Victory Fund. Needless to say, in such a close presidential election, these additional funds have been badly needed and appreciated. Even more importantly, you gave our campaign efforts a big boost in delivering such an effective speech concerning the inadequacies of the Carter administration. I can't tell you how many enthusiastic comments I have heard about the remarks you made.

I also enjoyed having a chance to visit with you at lunch, and you may recall our discussion of the problem of U.S. bank loans to the Lesser Developed Countries. I've taken the liberty of enclosing a copy of an article I wrote on this subject.

Again, we thank you for including San Francisco in your extremely busy schedule and want you to know how much we appreciate the assistance you have given our campaign efforts here.

WK:jvo
Enclosure

A copy of our report is filed with the Federal Elections Commission and is available for purchase from the Federal Elections Commission, Washington, D. C.

THE JOURNAL

Volume III Number 3

Fall 1978

Minimum Competency Testing: The Consumer Movement in Education by Diane S. Ravitch 1

Inflation: Addiction and Withdrawal by Fletcher L. Byrom 10

Chasing our Favorite Mirage — Tax Reform by L. Douglas Lee 20

The Future of Nursing Homes in America by Frank E. Moss 28

Welfare Is the Problem by David A. Stockman 39

Have the Banks Overloaned to Developing Countries? by Woodward Kingman 51

The Displaced Homemaker, Victim of Socio-economic Change Affecting the American Family by Marjorie Bell Chambers 68

The Social Security Challenge by S. William Green 77

Recent Books on Socioeconomic Issues Reviews of: *Lectures on the Theory of Production*, author— Luigi L. Pasinetti; *Two Cheers for Capitalism*, author— Irving Kristol; *Training and Jobs Programs in Action: Case Studies in Private Sector Initiatives for the Hard-to-Employ*, author— David Robison; *The Market for Human Blood*, author— Douglas E. Hough; *Welfare, The Political Economy of Welfare Reform in the United States*, author— Martin Anderson; *All Our Children: The American Family Under Pressure*, authors— Kenneth Keniston and The Carnegie Council on Children; *The Revisionists Revised, A Critique of the Radical Attack on the Schools*, author— Diane S. Ravitch. 87

THE INSTITUTE FOR SOCIOECONOMIC STUDIES

White Plains New York

CONTRIBUTORS

Diane S. Ravitch, Ph.D., the author of *The Revisionists Revised* and *The Great School Wars*, is Assistant Professor of History and Education, Teachers College, Columbia University.

Fletcher L. Byrom serves as Chairman of both the Committee for Economic Development and of Koppers Co., Inc.

L. Douglas Lee, Ph.D., is an Economist with the Joint Economic Committee, Congress of the United States.

Frank E. Moss practices law in Washington, D.C. and was a United States Senator from Utah, 1959-1977.

David A. Stockman (R. Mich.) is a Member of Congress.

Woodward Kingman is Executive Vice President of the Crocker National Bank.

Marjorie Bell Chambers, Ph.D., is President of the American Association of University Women and formerly served as President of the Colorado Women's College.

S. William Green (R. N.Y.) is a Member of Congress.

Monroe J. Haegele, Ph.D., is Vice President & Economist, First Pennsylvania Corporation.

Richard E. Bernstein, Ph.D., is Assistant Professor of Economics, Temple University.

Tim Barnicle is Legislative Director in the office of Senator Muriel B. Humphrey.

Tracey Thayer has served with the administrative office of the court, New Jersey Pretrial Services Section, Trenton, New Jersey.

Gordon L. Weil is Contributing Editor of *The Socioeconomic Newsletter*, published by The Institute for Socioeconomic Studies and previously was an aide to Senator George McGovern.

Lloyd R. Targer, Esq., is Research Associate, The Institute for Socioeconomic Studies.

Constance Horner teaches at the Georgetown Day School in Washington, D.C. and is a frequent contributor to public affairs debate.

THE JOURNAL / THE INSTITUTE FOR SOCIOECONOMIC STUDIES

Leonard M. Greene, President

B.A. Rittersporn, Jr., Editor

HAVE THE BANKS OVERLOANED
TO DEVELOPING COUNTRIES?

Woodward Kingman

The dramatic increase in bank lending to the less developed countries (LDCs) in the past five years has aroused comment and concern as to whether this debt problem is manageable and whether it has been properly handled. The concerns vary according to the perspective of the observers involved — from those in the investment community charged with evaluating the soundness of the leading banks involved, to those in the international sphere anxious about the economic and social development of the poorer nations of the world.

For the last two years, this concern has been reflected in the press, in speeches by politicians and government officials, and in securities analysts' reports. Dire predictions have been made that bank loans to the LDCs would be like the Real Estate Investment Trust (REIT) loan disasters. Some have warned that the larger banks with excessive LDC exposure might be vulnerable to failure. The LDCs were described as being "awash in a sea of debt" and on the brink of massive defaults which could have "domino effects." The banks, of course, were put on the defensive, and the annual reports of the larger United States banks have begun to include detailed explanations of their loans to these foreign borrowers.

Enough information has now become available so that a more rational evaluation of some of the questions is possible: Were the banks imprudent? How important is their increasing role with the LDCs? Will it continue to expand? Are any of the banks in jeopardy because of their LDC loans? Can the developing countries repay their debt? How does the new private borrowing compare with the more traditional borrowing from public agencies? What are the implications of this borrowing for the world economy? What are the implications for the United States economy?

51

Woodward Kingman

## Historical Background

Developing countries, by definition, are those whose relatively low income and output and rates of economic growth have for many years required net inflows of resources from abroad to supplement domestic savings and to add to the foreign exchange available from exports and other hard currency earnings. In all, there are about 100 such countries. The World Bank groups them in four categories, three of which are classed according to income: countries with annual per capita income between $376 and $1,999 are in the highest category; those with incomes between $200 and $375 are in the middle category; and those under $200 are in the bottom category. The fourth category is comprised of oil exporting developing countries. Table 1 lists some major non-oil developing countries and provides data on their gross national product (GNP).

A number of large banks have made loans in developing countries for decades, but that activity was on a limited scale until about ten years ago. The lending was limited to traditional short-term, self-liquidating, and relatively secure purposes. While the banks occasionally participated in project financing for home-based multinational corporations, the large national development projects were financed by government-sponsored development banks, the World Bank or foreign assistance programs. Suppliers also were a major source of financing.

In the late 1960's and early 1970's, the multinational corporations became increasingly active in the faster-growing countries in Latin America (particularly Brazil) and East Asia (especially South Korea, Taiwan, Hong Kong and Singapore). Simultaneously, the rapid growth of Eurocurrency markets made it possible for the multinationals to obtain dollar financing without being inhibited by the controls that the United States imposed on outflows of funds. About the same time, the official aid programs of the major industrial countries were being revised downward, so that many LDCs were forced to seek greater private financing from abroad.

In the early 1970's, a combination of three major factors led to an acceleration in LDC debt: the commodity price boom, the oil-price hike and the recession in the industrial countries. The commodity price boom lasted from 1972 to 1974. Nations that benefited significantly included such major copper exporters as Chile, Peru, Zaire and Zambia, as well as those countries which enjoyed a surge

52

Woodward Kingman

in demand for their agricultural products, such as Argentina, Brazil, Mexico, the Philippines and Thailand. To cover the capital needs for the capacity expansion of their exports as well as to finance the resulting temporary increase in their imports, greater recourse to the Eurocurrency markets occurred.

An even greater need for commercial bank borrowing by the LDCs came with the 1973-1974 oil price rise and the subsequent recession in the industrial countries. Normally, foreign borrowing and investment increase a developing country's total income and create additional resources out of which foreign owners and creditors can be reimbursed for their loans. The rapid sequence of economic events was not normal, however. After the commodities boom had temporarily accelerated their growth and export trade, the oil price rise and recession that followed suddenly imposed a loss of some $10 billion in income (2.5 percent of their combined GNPs) in payments to the members of OPEC. In order to reduce their resulting deficits and rebuild their reserves, the non-oil LDCs borrowed in the aggregate an estimated $60 billion from commercial banks in the three years following the OPEC price rise. Total external debt of these LDCs rose from $75 billion at the end of 1972 to approximately $180 billion at the end of 1976. As of September 1977, total outstanding loans by United States banks to the non-OPEC LDCs are estimated at over $55 billion.

Part of this increase in debt reflected the worldwide surge in inflation that was occurring. While the LDCs' import and export prices both doubled in dollar terms from 1972 to 1976, the debt of the LDC group increased in real terms only 20 percent over the period. Furthermore, even though the developing countries increased their combined exports by two and a half times — at about the same rate as their outstanding debt — their real GNP rose by a fifth during this time, or at about the same rate of increase as their real debt.

## The Reason for Bank's Increased Involvement

From this brief overview of the historical background of the debt buildup, what conclusions can be drawn about the significance of the present level of debt? Why did banks so readily participate in the buildup? Did they act prudently?

One frequently hears the rather simplistic explanation that the

54

debt expansion occurred primarily because of the banks' eagerness to put newly acquired petrodollar deposits to work in loans to LDCs at a time when domestic loan demand was slack. Of more significance in any analysis of a borrowing pattern is the need of the borrowers, for it is the borrowing entity that establishes the loan demand. In the developing countries, the booms and recessions of the industrial world have a direct cyclical effect on trade balances. Although the LDCs' import needs remain steady, their exports will suffer a sharp drop when the industrial countries have a recession. The consequence is a serious trade deficit for the LDCs.

This in turn leads to a sharp increase in their need for foreign borrowing. In the 1970's, credit was available not from the traditional government agency sources, but from the Eurodollar or other Eurocurrency term loans provided by syndicates of the very large United States and European banks. These loans typically are floating-rate notes priced by charging the borrower the cost of the Eurocurrency funds to the leading banks, namely the London interbank offering rate (LIBOR) plus an additional percentage referred to as the "spread over LIBOR." Eurodollar loans extended to various LDCs carry "spreads" which vary according to a country's credit worthiness. In other words, loans perceived by the market as presenting a greater risk of loss, carry higher interest rates. Therefore, the spreads increased in 1975-1976 compared to 1974, as the deepening recession caused lenders to require a greater return for the higher risk involved.

## How the Banks Limit Their Exposure

If the risks increase during a recession and during increased borrowing by the LDCs, how do the banks keep from overextending themselves in these higher risk areas? First, while the risk premium in the loan rate is only a portion of a percentage point, when multiplied by the principal amount of all the loans involved, it provides significant additional earnings as protection against possible loan losses. More important, in many cases banks obtain guarantees on LDC loans from public agencies, governments, or international corporations. For example, a loan to an automobile manufacturing company subsidiary in an LDC could be guaranteed by the parent company in Detroit, even though it is carried as an LDC loan in the borrowing country. The United States banks that have made these

55

Woodward Kingman

loans are those with the greatest experience in international lending and the most capital to protect against losses. The 21 largest United States banks (each with over $5 billion in total assets) that account for nearly all the foreign lending had about one-third of their consolidated assets invested in foreign loans at the end of 1975. About one quarter of these loans were to non-oil LDCs, or roughly ten percent of the 21 banks' total assets. But no single LDC represented more than 2.5 percent of the total. Banks limit their exposure in any one country.

The way in which most of these banks limit their exposure is to consider two different kinds of risks. The first is a country exposure limit based on "sovereign risk." This encompasses the kind of risk involved in (1) the ability and willingness of a government to make available to domestic entities the foreign exchange necessary to repay their external debt and (2) the possibility of expropriation of assets or other adverse political action. The other kind of risk is simply that involved in the ability of the individual borrowing entity to generate the local currency cash flow necessary to repay its indebtedness. Maximum country exposure limits are established, taking into account all these relevant political, economic and financial factors. Then, after any loan is made in one of these countries, it continues to be subject to quality controls from within the bank and without — by the bank's internal auditors in the borrowing country and/or at headquarters, and by regulatory officials in the bank's headquarters country and sometimes by regulatory officials of the country where the loan is booked. The actual losses incurred by United States banks in recent years have been less in overseas lending than in domestic loans, both in absolute terms and as a proportion of total risk assets.*

## Role of the Private Banks vs. the Public Agencies

In view of these characteristics of private bank lending to developing countries, what is the significance of their increasing role as compared to that of the official public lending agencies? In 1967, an estimated $18.6 billion of the LDCs total external debt, or approximately 71 percent, came from official agency sources, compared with an estimated $7.8 billion, or 29 percent from private sources. By

*According to a Federal Reserve Survey of a small group of American banks, the average loss during the years 1976-1977 on foreign loans has been about one-third of one percent, as against a domestic loan loss ratio of over three-quarters of one percent. Cf. Henry C. Wallich, *International Lending and the Euromarkets*, remarks delivered at 1978 Euromarkets Conference, London, England, May 9, 1978.

56

the end of 1975, this proportion had changed to about $50 billion, or
approximately 57 percent from official sources, as against $38 billion,
or 43 percent, from private sources.

The significance of this trend has been important from the point
of view of the developing countries. First, since a private bank must
suffer the full consequences of its lending policies in any developing
country, it develops a disciplined approach in foreign lending that
covers a broad range of political and economic factors that may be
only partially of interest to an official agency. Loans from official
sources may be rather strictly limited to specific purposes. As to
terms, probably the main advantage in dealing with official sources is
that longer maturities and lower rates are obtainable. Mindful of that,
for the poorer countries, the official sources will continue to con-
stitute the dominant role, as is appropriate.

However, for developing countries that can meet the necessary
credit standards, the private lending institutions offer advantages.
Among these are their diversity, competitiveness, magnitude of lend-
ing capability (unlimited by budgetary restraint), flexibility and speed
of response.

Finally, of particular significance is one basic characteristic of
private bank lending — namely, that its availability in the future will
depend upon a satisfactory past record of debt servicing and not on
certain political considerations that influence government sources of
credit. In this way, lending by the private banks tends to encourage
better debt servicing by the developing countries.

The economic indicators that the private banks use to evaluate
the LDCs' managerial competence to service debt will vary among dif-
ferent countries and areas. For instance, the Latin American countries
generally have been able to sustain higher debt levels as against their
export earnings, and they have been able to adapt to a higher con-
tinuing level of inflation. The East Asian countries, on the other hand,
have generally put greater stress on price stability. But both groups of
countries have shown remarkable success in their economic growth.

Financial Condition of the Borrowing LDCs

Many people do not realize that of the 100 developing coun-

57

Woodward Kingman

tries, only about 20 or 25 have made use of private bank credit. These
are primarily the countries with higher growth ratios and stronger ex-
port performance. The expansion of commercial bank lending to
LDCs in the early 1970's became rather concentrated among the
higher income countries in Latin America and East Asia. They had
already been growing faster than the lower income countries, and the
availability of private bank credit enabled them to export even faster.

Consequently, only ten countries accounted for the bulk of the
commercial bank loans to the LDCs at the end of 1976. Mexico and
Brazil represented about half of the total, with most of the remainder
going to eight other countries in Latin America and East Asia (Argen-
tina, Chile, Colombia, Peru, South Korea, the Philippines, Taiwan, and
Thailand). Indeed the Federal Reserve, in a survey covering more
than 30 of the largest United States banks, reported that of the $42
billion owed by non-oil exporting LDCs, 68 percent of that debt was
lodged in only five countries: Mexico, Brazil, South Korea, the Philip-
pines and Taiwan. All are categorized as "higher" or "middle" in-
come and have growing economies and close political ties to the
United States. It was this group that largely benefited from the surge
of commercial bank lending in the past ten years, while the smaller
countries had to rely on the traditional sources — official govern-
mental agency loans and grants.

How has the financial condition of these borrowing countries
progressed recently? Economic activity for the non-OPEC LDCs has
picked up substantially in the past year. While their GNP growth was
off by one-half between 1973 and 1975, falling to 3.4 percent, the GNP
growth rate is expected to reach the level of five to six percent this
year.

A particularly encouraging growth performance has been
achieved by the East Asian countries. South Korea and Taiwan at-
tained almost ten percent real growth last year; Thailand and the
Philippines were at six to seven percent. Some of the Latin American
countries did not quite match these records. They are still im-
plementing the stabilization measures necessary to reduce their
current account deficits, thus inhibiting inflation — but some amount
of real growth as well. Consumer prices rose by 20 percent on
average in the non-OPEC LDCs last last year, as compared with a 30
percent average annual rate during the three previous years.

The collective current account deficit of the developing world

58

was significantly reduced in 1977. Between 1973 and 1975, the current account deficit of these countries taken as a group rose from $11 billion in 1973 to $38 billion — as explained earlier (see Table II). As a result of the domestic measures implemented since then, their collective current account deficit fell to $26 billion in 1976, and further to, perhaps, $21 billion in 1977. Debt servicing at this level is quite feasible, partly because of more adequate availability of official sources of funding. Continued sluggish economic growth in Europe and Japan may cause a slight increase in the LDC deficit this year, but its financing should not be a problem.

At present, there would appear to be only three countries among the major LDC borrowers having any difficulty in bringing their current accounts into better balance, namely Peru, Turkey, and Zaire. The latter two countries are now in arrears in meeting their debt service requirements. Peru will find it difficult to meet those requirements this year without a major refinancing. In each of these three countries, internal politics have not yet made it possible to implement effective stabilization programs. Additionally, slow growth in the industrial countries has adversely affected the export trade of these three countries, as it has in other LDCs.

In Peru, it currently appears that the Peruvian Central Bank may have put together a financial package that will reschedule payments on its international debt. An $85 million short-term "swap" arrangement has already been signed with ten other central banks in June. Another larger, long-term loan with a consortium of banks is under negotiation as of this writing. This loan would probably be tied in with a standby credit arrangement with the International Monetary Fund (IMF).

## Outlook for Future Lending to LDCs

What, then, is the current outlook for the LDCs and their lending banks? Most financial analysts now agree that the heavy involvement of the commercial banks in lending to the LDCs has been a necessary and constructive development. Indeed, how many of the lesser developed countries would have survived the volatile cyclical fluctuations of 1973-1976 without the assistance of these large banks?

The need for a continuation of the commercial banks' involvement with the LDCs is likely to continue for three reasons: (1) the

59

developing countries' need for foreign capital will last for quite some time, (2) temporary financing will be required from time to time by the LDCs during periods of economic recession or downswings in commodity prices, and (3) the OPEC surpluses will continue.

However, since 1975 there has been some slowing in the growth of commercial bank lending to the non-OPEC LDCs, reflecting progressive reduction in the aggregate current account deficits of these countries. While such lending from all industrial countries rose by $17.4 billion in 1976, it increased only $2.1 billion in the first half of 1977. Statistics for United States banks and their foreign branches show that United States bank lending to these countries rose by $12.3 billion during 1976, but increased by only $3.8 billion during the first three quarters of 1977 (Tables III and IV).

The demand for additional commercial lending to LDCs may be slightly stronger in 1978 than in 1977, however. One reason for such an increase is the continuing sluggish economic growth in Europe and Japan which will adversely affect LDC exports. Such an increase in LDC demand for foreign borrowing will probably not be great, however. Mexico and Brazil, which represented 52 percent of United States bank lending to LDCs at the end of 1976, are still subject to domestic stabilization programs, and while their current account deficits may rise somewhat, the increase will not be great. Nor would the principal East Asian developing countries (except South Korea) be expected to incur a significant increase in their current account deficits.

The reduction in the current account deficit of the developing countries, as well as their continued external borrowing in order to take advantage of attractive international credit market conditions, has resulted in an increase in their gross international reserves. Reserves had been unchanged from the end of 1973 to the end of 1975. In 1976, however, reserves rose $11.6 billion, and in 1977 by a further $9.9 billion, implying import coverage at the end of 1977 of a comfortable four months.

As a result of their increased level of reserves, many LDCs are now in a position to pay off or refinance a substantial portion of their external debt in order to reduce interest costs. South Korea, Malaysia, Indonesia and the Philippines have all recently negotiated refinancings that will permit prepayment of loans made a couple of years ago at higher rates. Of the major LDC borrowers, only Brazil appears to

61

Woodward Kingman,

have adopted the strategy of paying above-market rates of loans, in order to assure itself of the continuing goodwill of its lender banks when additional capital is needed in the future (Table V).

Developing countries should not be expected to make net repayments of debt which would in effect turn them into capital exporters at a premature stage of their economic development. Rather than be concerned as to how all their debt will be repaid, we should understand that debt payments should be made on schedule, but that they will from time to time have to be "rolled over" and replaced by new debt. As long as the country's total debt is kept in reasonable proportion to its GNP and its exports, the LDCs' credit rating and ability to refinance its debt can be maintained.

However, it is essential that these borrowed resources are put to productive use, i.e., for investment rather than for consumption. Probably the most effective employment of capital is for the improvement of the means of production. The public agencies recently have been focusing more on the basic human needs in developing countries. Intended to aid the small farmer or urban dweller, such programs are laudable and may also produce favorable effect on the overall economy. However, the emphasis on reducing poverty directly may run the risk of providing only temporary relief. Ultimately, the beneficiaries may find themselves less able to cope than before. One is reminded of the old adage that to give a man a fish helps him for one day, to give him a fishing net helps him until the net wears out, but to teach him how to make a net helps him for the rest of his life.

## The Effect on United States Economy

Some critics have suggested that the great increase in lending to the developing countries by United States banks has deprived our own domestic industries of needed bank credit. The facts do not substantiate this claim. During the years in which the number of these foreign loans has grown, United States companies have enjoyed unusually high liquidity. Domestic loan demand has been slack during this period and has only recently begun to pick up.

In addition, it should be remembered that off-shore lending does not necessarily impact on the domestic supply of lendable funds; foreign loans are funded by foreign deposits. As explained

64

Woodward Kingman

earlier, the loans to the developing countries are comprised only partly of United States funds going abroad and partly of the Eurocurrency deposits derived through the overseas branches of the United States banks.

The United States economy, therefore, has not been adversely affected by loans to the developing countries. United States banks participating in the loans have in most instances benefited from the opportunity, and the stability of the United States banking system has not been jeopardized by these lending practices. While these banks will probably not derive as large a percentage of earning from these developing countries in the near future, any decline in this activity will be offset by domestic loan demand which has recently begun to increase.

## Outlook

Despite the fears and apprehension of critics, the preponderance of evidence indicates that the United States banks have maintained sound lending practices in their greatly increased extension of credit to the developing countries, and are not themselves in a weakened position as a result.

For all parties concerned, the involvement of the commercial banks with the developing countries has proved to be constructive. Indeed, if the U.S. and European banks had not stepped in when LDC credit requirements expanded so rapidly in 1974-75, those countries would have suffered far more seriously than they did. Foreign borrowing allowed these countries to absorb the OPEC oil and recession shocks with relatively small losses of output and employment. Without this financing, the LDCs' only alternative would have been a drastic cutback on imports to bring their foreign exchange outgo in line with their foreign exchange income. A rapid cutback in their imports could have had disastrous results. Such a sudden reduction in the standard of living in these developing countries could have ignited profound internal unrest, if not revolution. Outbreaks of this sort, clearly would have hurt United States export sales and jeopardized American overseas investments. The probable consequence would have been a serious economic recession, ramifying to the other industrial countries of the world.

In view of these considerations, Henry Wallich, a member of the

66

Board of Governors of the Federal Reserve System, sounded this very positive note at the Conference on International Economic Cooperation when it met in Bonn this spring: "It is good to be able to report on one area where clear progress has been made — the flow of bank credit to developing countries."

Obviously, the size of the buildup in this flow of bank credit is a potentially serious situation. But the LDCs' debt increase since 1973 has in the aggregate been no greater than their growth in export earnings and their ability to repay. With proper vigilance and caution, the problem can be satisfactorily worked out to the advantage of all concerned. The developing countries fully recognize the need to maintain their credit standings in order to meet future borrowing requirements and they have already made progress in reducing their current account deficits. With the continuing help of the banks, the developing countries will be able to keep their debt service on an even keel. Banks should continue to provide assistance on a prudent basis, carefully limiting their exposure on a country-by-country basis to borrowers of good standing and to transactions which are sound and sensible. If this is done, we can look forward not only to continued stability in our own banking system but also to further progress in the growth of the lesser developed countries and corresponding improvement in world trade and prosperity.

67

THE DISPLACED HOMEMAKER —
VICTIM OF SOCIOECONOMIC CHANGE
AFFECTING THE AMERICAN FAMILY

Marjorie Bell Chambers

The American family is changing its social composition and its means of economic support. Increasingly, the result is the displacement of the traditional homemaker. Lacking both emotional and financial support, and education and training for employment, the displaced homemaker soon becomes another member of society's disadvantaged. In 1976, legislation to meet the special needs of the displaced homemaker was first introduced in Congress following passage the previous year in the California legislature of a two-year test program. This legislation struck a responsive chord and similar legislation was soon under consideration in 28 states. However, only ten states now have operating programs. One of the more successful is Maryland's Center for Displaced Homemakers.¹

The displaced homemaker is usually considered to be between the ages of 35 and 64 years and divorced, separated or widowed. There were 9,652,000 such women in the United States in 1976, twice the number in 1950.² With the ratio of divorce to marriage per year 1 to 2, this displaced group of women will continue to increase in numbers. Of the women served in the Maryland Center, only 17 percent received some income from their former husbands. Fourteen percent received Social Security. Fifteen percent were eligible for welfare. Children were living at home with 65 percent of these female heads of households. Many of the women were lucky to have a total income of $6,000 scraped together from the above noted sources and from part-time work. One-third were living in poverty with incomes below the government low-income level.

The public image of the typical American family consisting of a

¹ Congressional Record, Senate, March 9, 1978, p. S3364

² U.S. Department of Commerce, Bureau of the Census, March, 1976

68

Embargoed until 11:00 A.M., Tuesday, January 15, 1980

President Lane Kirkland's Tribute to George Meany

"The whole earth is the sepulchre of illustrious men."

So it was said on such an occasion in a golden age many
centuries ago. And so it is now with George Meany.

There were no boundaries to his mind and spirit, save
those of his own constant principles.

There is a Book here which tells us that wheresoever
men are in chains, we are bound with them. George Meany
endeavored to live by the full scope of that Writ.

Strangers did come and try to teach him their ways.
Some, indeed, scorned him just for being what he was.
But they came and went and George Meany abided.

Certainly he was not of the right. Surely he was not
of the left, nor was he anchored in the center. He stood
above such transient categories in resistance to all power
directed against the rights of man and woman, and in
affirmation of the role and the interests of plain people.

And it is to the honor and credit of this trade union
movement that we clung to his leadership as long as we could;
that we kept him as long as the Lord would let us, for he was,
to his last day, the best there was.

For many years he presided with a gavel and wooden block
made and given him by the Carpenters' Union. His last light
tap of that gavel, before he yielded it, split that old
battered block apart -- a sign, perhaps, of the honorable
completion of his apprenticeship here and of an impending
summons to a higher call.

JAN 17 1980

- 2 -

That call came 63 years to the day of his admission
to membership in the United Association that was his pride.

Now he is young and strong again, free of pain, blessed
with a teeming store of grace, starting over with the
steadying -- and, when needs be, humbling -- force of
Eugenie at his side.

And we now have faith that better days lie ahead for
the working people of America, and of the world, because
George Meany is up there, negotiating the matter with God.

Now we take our last leave of what remains of him here.

Good bye, George. Fare thee well.

RADIO-TV MONITORING SERVICE, INC.

3408 WISCONSIN AVENUE, N. W. → WASHINGTON, D. C. 20016 → 244-1901

<table><tr><td>PROGRAM:</td><td>ON COMPANY BUSINESS</td><td>DATE:</td><td>FRIDAY, MAY 9, 1980</td></tr><tr><td>STATION OR NETWORK:</td><td>PBS TELEVISION NETWORK</td><td>TIME:</td><td>10:00 PM, EDT</td></tr></table>

## ON COMPANY BUSINESS--PART I

### (CLIP OF SENATE COMMITTEE HEARING ON CIA)

**SPEAKER I:** Have you brought with you some of those devices which would have enabled the CIA to use this poison for killing people?

**SPEAKER II:** The round thing at the top is obviously the sight which works by electricity. There is a battery in the handle and it fires a small dart.

**SPEAKER I:** And the dart itself, when it strikes the target does the target know he's been hit and is about to die?

**SPEAKER II:** A special one was developed which potentially would be able to enter the target without perception.

**SPEAKER I:** As the murder instrument that is about as efficient as you can get, isn't it?

**SPEAKER II:** It is a weapon, a very serious weapon.

(MUSIC)

**WILLIAM COLBY:** A secret organization is a risk in any society. I believe it is a risk that we must take for the net gain because I believe it is always going to be there. Now let's say that we abolished the CIA. Let's don't ever have this kind of intelligence organization again. You know what's going to happen? American presidents are strong willed men. They wouldn't be in that office if they weren't. If they don't have an intelligence service they're going to create their own. It may not be very big and they may reach into the looney bin to find the people to run it and they may call it the plumbers but they will have it.

(MUSIC)

-2-

NARRATOR: On Company Business is a documentary in three parts on the Central Intelligence Agency and it's role in American foreign policy. Part I examines the CIA in the 1940's and explores it activities through the early 1960's.

(CLIP DEPICTING END OF WAR, JOYOUS CROWDS, MILITARY, NEWSPAPER CLIPPINGS, ETC.)

ANNOUNCERS OF NETWORKS: This is ABC, the American Broadcasting Company. This is the Mutual Broadcasting System. This is NBC, the National Broadcasting Company. This is CBS, the Columbia Broadcasting System.

ANNOUNCER: Now back to New York.

COLBY: We had just fought a war. And in a war you conduct all sorts of operations, deception operations, behind the lines activities, sabotage, all the rest of it. And Ike was involved in that and the OSS was involved in that. We demobilized all of our military forces at the end of 1945. We stripped our Navy, Army, and Air Force. The Soviet forces were not demobilized. As the danger of Stalin's expansion, that kind of society seemed to be threatening to sweep around and cover more of the world. People were very concerned that they were faced a new totalitarianism. It was the same as the Hilter one but under new management. And consequently we developed the CIA, in order to conduct the subversive level of the struggle.

PHILLIP AGEE: The great burning question at the end of the war was how the United States was going to avert a return to the great unemployment of the depression period of the 1930's. During the last phase of the war production in the United States was double what it had been in it's best pre-war year. And this exceedingly high production had been achieved with ten million men and their arms. There was only one way that the return to the unemployment of the Depression could be averted and that was by creating foreign markets for our over production. This was the economic rationale behind the Marshall and the reconstruction of the economy of Europe.

( CLIP OF PRESIDENT TRUMAN GIVING SPEECH )

PRESIDENT TRUMAN: We are following a definite and clear foreign policy. That policy has been, is now, and shall be to assist free men and free nations to recover from the devastation of the war. We could choose the course of inaction. We could wait until depression caught up with us. Our other course is to take timely and forthright action.

(NEWS CLIP OF SECRETARY OF STATE MARSHALL)

LOWELL THOMAS: Preparing for the special session of Congress the Foreign Policy of Senate and House. Here's Secretary of State Marshall tell what's needed to give the free nations of Europe economic support.

-3-

SECRETARY OF STATE MARSHALL: I recommend that you give immediate and urgent consideration of a bill authorizing the appropriation of sufficient funds to provide the supplies necessary to permit the people of these countries to continue to eat, to work and to survive the winter. We find ourselves, our nation in a world position of vast responsibility. We can act on our own good by acting for the world's good.

AGEE: The CIA comes into this because the political forces in Western Europe after World War II that were prevailing had been the backbone of the resistance to facism and they were the left wing political parties, principly the Communist parties, especially in France and Italy. These parties knowing that the reconstruction of their economy would bring economic and political dependence on the United States opposed the Marshall Plan.

The CIA was set up partially to combat on a political war basis the effort by left wing organizations in Europe to impede the success of the Marshall Plan.

(NEWS CLIP-SIGNING THE BILL)

THOMAS: Signing the bill that will enable our national military establishment to do more co-ordinating and less pulling in opposite directions, President Truman uses a number of pens. These in turn are passed out as souvenirs to the witnesses, one of whom is the boss of the armed forces, Secretary of Defense Johnson.

COLBY: The CIA was set up first to collect intelligence and to analyze intelligence, to centralize intelligence. To get it all together so it could all be looked at together in the best academic tradition. Also however, it was set up in order to struggle at that subversive level with the subversive forces that we faced.

AGEE: The CIA from the beginning, at least as early as 1951, has used the information that it has collected. And it has used the information in order to penetrate and manipulate the institutions of power in whatever country it is operating in order to influence the course of events in those countries. And essentially this boils down to propping up those forces which areconsidered to be the friendly forces and in penetrating, dividing and weakening those forces which are considered to be the enemy forces.

(CLIP-NEWS DEPICTING ROME, ANTI-RED, COMMUNISM, ETC.)

COLBY: I think that whenever we had the choice we tried to support Senate-Democrat forces. Clearly that's what we did in Europe. We didn't support any Facist groups in Europe. We

-4-

didn't have to because there were good Socialists, good Christian Democrats. We did not go to the right wing forces.

**JOSEPH BURKHOLDER SMITH:** I joined CIA in September 1951. The preceding year, April 1950, NIC 68, was drawn up. It was a joint inter-agency working paper. It was inspired primarily by Dean Acheson and it was the blueprint for the Cold War.

**DEAN ACHESON (CLIP):** It is not only the threat of direct military attack which must be considered but also that of conquest by default, by pressure, by persuasion, by subversion, by neutralism. By all the paraphernalia of indirect digression which the Communist movement has used.

**SMITH:** It was the height of the Cold War. Senator McCarthy, General McCarthy was terrorizing the nation with charges of a great internal conspiracy. The State Department according to him, you will remember, those of you who are old enough, was filled with Soviet spies.

(NEWS CLIP-VIGILANTES BREAKING RED RINGS, ETC.)

**THOMAS:** Main Street, USA, at peace, unaware that a kabal of conspirators wants it's enslavement. Two former Communists show how the organized minority using the seizure techniques taught in Moscow can take over a city. First the mayor is hustled off to jail, then the chef of police. In the Red Trimmer an early lesson teaches the importance of controlling law enforcement, without a control press red tryanny could not survive. So the town's news editor, who is likely to be independent, is quickly seized to adorn a concentration camp. The red propaganda readily rolls from the once free press and the picture on the front page tells one and all who gets allegiance from now on.

**STALIN:** The people name of the government established by the revolution shall be known as the United Soviet States of America, USSR. Affiliated with the Union of Soviet Socialist Republic of which Moscow is the capital of the world wide Communist super state.

**SMITH:** The concept was that the Soviet Union was engaged in a world wide effort to obtain domination everywhere.

**SENATOR HENRY JACKSON:** The question is the machinery that was set up as a result of our experience in a Hot War adequate to deal with may well be twenty-five, ten, twenty-five, or fifty year struggle in a Cold War. The problems presented are entirely different. I think the Russians are counting on a lack of staying power on the part of our country. I think they feel that we're sort of fat rich and slap happy and we don't have the

-5-

staying power and the patience to set up for the long term struggle.

**ACHESON:** We have passed through the time of wakening of people to the nature of the true danger in the world. We are now deep in a period of action.

**AGEE:** The institutions of power which are penetrated and attempts are made to manipulate them are the political parties, the security services, the military institutions, the trade union organizations especially, the youth and student movements, the cultural organizations, professional societies and in a very big way the public information media.

**PRESIDENT EISENHOWER:** We need powerful radio abroad. Operated without governmental restriction to tell in vivid and convincing form about the decency and essential fairness of democracy. If the state for freedom will provide for the expansion of Radio Free Europe into a network of stations. They will be given the simplest, clearest charter in the world. Tell the truth.

**SIG MICHELSON:** Radio Liberty was started entirely with CIA funds, I think, from the very beginning until 1971. In 1972 Radio Free Europe was started in part by the Crusade for Freedom and later the Radio Free Europe Fund.

## (FILM CLIPS DEPICTING VARIOUS METHODS OF INFILTRATION THROUGH R.F.E.)

**R.F.E. ANNOUNCER:** These carry more than the message of freedom. They give specific instruction to the Russian people how to look for their liberation with maximum effectiveness and minimal danger and the very motive of the Soviet Secret Police. To achieve a truly free Russia, your allies behind the Iron Curtain need your help. They need moral support and your material aid.

**MICHELSON:** No one really knew that it was funded by the CIA. When I say no one obviously some persons knew. When I personally found out it very early. But at that time, I think, we took the position which Europeans do now that national intelligence is part of the whole foreign policy or for that matter domestic policy in any country. And our support for the CIA during the 1950's was certainly considered patriotic.

## (FILM CLIP - NEWS)

**THOMAS:** The film industry signs up in the campaign to help answer communist lies. Mr. Cecil V. DeMill says,

**CECIL DEMILL:** Signing the freedom scroll today will cost you less than a minute of your time. Let it be your firm commitment to this warfare for the minds of men. That this world under God shall have a new birth of freedom.

-6-

**AGEE:** One of the principle mechanisms that the CIA used after World War II in its programs to influence the course of events in different countries was the use of front organizations. For example, in the youth field, the CIA set up the World Assembly of Youth, which continues today with its headquarters in Brussels. In the student field the CIA set up the co-ordinating secretariat of National Unions of Students.

**SMITH:** The operation runs in a very simple way. Most people will join an outfit because their friends belong or because they feel like-well, I guess it's a good idea that I belong to it. And only a few people bother to go to the meetings and these people of course always end up as executive officers. Of course executive officers control all these organizations and this technique used by Court Meyer and his division in youth organizations and in women's organizations and other such groups.

**AGEE:** In the trade union field, the CIA founded or helped to found the International Confederation of Free Trade Unions with its headquarters in Brussels which continues to exist today.

**PAUL SAKWA:** My first job at CIA was case officer for a French left operation, non-communist left. And it was then that I was case officer for a labor operations in France. And Irving Brown who was then receiving money from us, he was passing around in France.

(FILM CLIP - NEWS)

**THOMAS:** At St. Paul, A. F. of L. President William Green, center, and Dick Walsh, left, Theatrical Labor leader, here Irving Brown give a first hand report on the value of the American motion pictures abroad.

**IRVING BROWN:** I have just returned from Europe where as the representative of the American Federation of Labor for over four years I have had the chance to see the terrific impact that the American movies are having on the people's abroad. Particularly those behind the Iron Curtain. This places a great responsibility upon the American people and the American motion picture industry.

**VICTOR REUTHER:** I, as the European Director of the CIO, had some concept of what it cost to provide technical assistance to trade unions in Europe. And I know that on the very modest budget which the CIO could afford in those days, I could not possibly be a match for one Irving Brown, who was dispensing funds on the basis that very early began to raise doubts in my mind whether these funds were truly AFL funds.

**TOM BRADEN:** In 1947 during a general strike the communist union were about to take over France. Competent observers

-7-

feared that there would be a fall in the government and the French people were hungry. Many of them took to the streets. It was at that time that David DeVinsky's International Ladies Garment Workers Union went to the aid of a free French union. J. Lovestone and Irving Brown working for DeVinsky gave money to a new union called the Force Ouvrier cause labor unions cost a lot of money. Those days, France was paralyzed. When they ran out of money they came to the Central Intelligence Agency. Those people were doing a great job and we were very glad to help them.

(NEWS CLIPS-VIEWS OF TRAINS, SHIPMENTS, STRIKES, FRANCE, TROOPS)

THOMAS: New Premier Schumans tries to deal with the waves of strikes. All lines are tied up. Communist control unions calling the workers out and stopping fuel production as winter comes. General transport strike, stopping the shipment of fuel and food in a country cold and hungry. Strikes are the communist tactics as the Marshall Plan develops economic aid to support freedom in France. The American program bitterly opposed by Communists.

REUTHER: In the early days of the Marshall Plan when there were some political strikes caused by communist trade union forces perhaps communist political elements to try to defeat the Marshall Plan, to try to block the foreign aid from being unloaded, it became a matter of breaking these strikes. And the U.S. government through Central Intelligence called upon Irving Brown and J. Lovestone who tried to organize a counter move. And of course if you want to break the strike, you go to boys who have big bare knuckles and who know how to wield big cudgels and they turned into, what could best be described as the Corsican Mafia. under the leadership of a well-known Corsica racketeer by the name of Sere Pisante, who became really a paid agent of Central Intelligence, who collaborated with Irving Brown and Lovestone in their operation to break the strikes.

SAKWA: In about 1953, I terminated funds for Sere Pisante, of course Brown did not like this but there was nothing for Sere Pisante to do at that time. And probably he was involved in smuggling, heurine going through Marseille and he didn't need our money. During the executive board meeting of the ICSU I was acting Labor Attache and I was Escort Officer for a Mr. and Mrs. George Meany and Mr. Meany's secretary Virginia Teahaus. And the last evening of their stay in Brussels as I was driving Mr. Meany and Mrs. Meany and Mr. Meany's secretary back to the Metropol Hotel we got into a discussion about European labor and international labor and perhaps it was unfair of me to go into this kind of dialogue with George Meany because he did not know that I was working for CIA and that I had once been Washington case officer for Irving Brown's labor contract and firms. I was the one who set his budget and cut his budget. So it was unfair perhaps from that point of view. But I did take him on and I

-8-

gave him my views on how unpopular Irving Brown was and as a consequence how much damage he was doing for labor and discrediting people he was associated with because he had the reputation, I knew what was deserved, as being a big money bag man for CIA.

Meany didn't know how to quite cope with this except to explain to me that there were some things I did not know about. These were precisely the things that I knew everything about.

GEORGE MEANY: The American Federation of Labor, during my time as secretary/treasurer and as president in the AFL-CIO during my time as president I have never received any CIA money for any activity either directly or indirectly.

REPORTER: Does that apply to Irving Brown?

MEANY: Yes, that applies to Irving Brown as well.

REUTHER: When you come through a devastating war as the European countries did and people literally pulling themselves out of rubble. Those first courageous trade unionist who have the courage to re-establish their organizations desperately deserved help. And much of the first help went to them from the AFL, even was legitimate, was proper, was humanitarian. You know you send care packages and you give them mimeograph machines and so on. When it went beyond that and became a matter of twisting their arm and saying look now, you're dependent on our help. You've got to break up the old CGIT, Organization in Italy. And when they turned to a marvelous human being like Leon Blume, Nobel Prize winner, courageous French resistance hero. And turned to him and against his own better judgement, forced him into breaking his life-long ties with the Cergite, the Trade Union Federation of France. And when they commenced the split in France and Italy they isolated these heroic figures from the main body of the labor movement and thus destroyed their influence, and made them captives of foreign largesse. And nothing will destroy the good name of a national trade union federation then to have it become known that they're dependent on hand outs from the rich uncles in America, especially if the rich uncle gets it from the CIA.

AGEE: The purpose of all these different activities, political and the front organizations in the different sectors of the population were to fill this political vacuum that existed after World War II and fill it with those forces which would be favorable to close relations with the United States and the so-called Atlantic Alliance.

And in order to preclude any participation in these organizations and in the national, the political life by left wing forces such as the communist parties, it was to shove them aside and to isolate them so that the development of Europe for as many generations as possible could be brought under the controls of those forces which were friendliest to the United States and to

-9-

the interest of our corporations which were moving in part and
parcel with the reconstruction of Europe after World War II.

ELSIE WILCOTT: In Washington, D.C., I worked on the Central America's desk of Mexico and Central American countries. That was back in 1957, 58. And at that time, well at first I thought that it was just information gathering. Then I realized they were really intervening in the affairs of these countries.

(NEWS CLIP)

THOMAS: In this Guatemalan town of Eqopoulos just occuppied by anti-government forces are the first evidences of that much publicized anti-communist revolution. This is headquarters for the once exiled officers leading the liberation forces. Col. Miguel Midosa is district commander under all rebel chief Col. Carlos Costijuana.

WILLIAM WILLCOTT: Elsie would come home and say things like-well, they're buying boats in Guatemala - and I'd say, - Oh no, Elsie, you must have got something garbled. You know the United States Government would never do a thing like that. I couldn't believe this. In the nine years that I think I've said a thousand times, the United States Government would never do a thing like that and then I would find out that in fact they had done exactly that.

THOMAS: Serious trouble in Teheran, the capital of oil rich Iran. It's pro-western ruler Shah Mohammed Reza Pahlavi has lost his throne temporarily at least. When his army failed to oust dictatorial minded Premier Mossadegh, the Shah was forced to flee for his life to neighboring Baghdad. Another king without a country.

(NEWS CLIP - SAME CONTEXT - LATER DATE)

THOMAS: In Rome, where he had fled, thirty-three year old Shah Mohammed Reza Pahlavi, hears astounding news. Royalists forces have revolted, arrested Mossadegh, and want their sovereign home. Army men are given principle credit for this sensational change. When the army turned against Prince Mossadegh's appointed officers it assured the return of the King.

DAVID ATLEE PHILLIPS: In 1953, a few CIA people managed to make some changes in Iran. President Eisenhower liked it very much. In 9154 a few of them in Guatemala made some changes which seemed almost without effort. However the demands kept growing. Intelligence was asked to do what armies should have been doing. It seemed so easy to hope that secret shenanigans could accomplish what an army should have been doing.

VICTOR MARCHETTI: We were supporting every half-assed dictator, military hunta, oliarchy that existed in the Third World. as long as they promised to somehow maintain the status quo, which

-10-

would of course be beneficial to U.S. geopolitical interests, military interest, big business interests and other special interests.

(NEWS CLIP)

THOMAS: In front of the Presidential Palace in Havanna and it seems as far as the eye can see, Cubans, upwards of a million, five-sixths of the population of this capital city. Namely one out of every six persons on the island. Why are they here? Fidel Castro asked them.

(CASTRO SPEAKS IN OWN LANGUAGE)

THOMAS: A graduate lawyer, Dr. Castro displays an eloquence and dynamism that completely sways the enormous crowd.

MARCHETTI: I felt that we were grossly mishandling the actual liberation movement and the emergence of national liberation leaders like Sukarno, Nasser, Nkruma, and so forth, throughout the world. I do not believe that we should be trying to overthrow these people, or assassinate these people but that instead that we should have worked with them.

(NEWS REEL OF CUBA)

THOMAS: The ailing premiere of Cuba. Fidel Castro emerges from his convalescence to address a youth congress. And to announce that Cuba is expropriating the United States own property in that country.

The name is chilesed from the telephone company and signs torn down from this and other properties worth nearly a billion dollars.

At the White House presidential news secretary Haggard Ian announces a break in diplomatic relations with Cuba.

HAGGARD IAN: There is a limit to what the United States in self respect can endure. That limit has been reached.

MARCHETTI: I am to this day absolutely convinced that we drove Fidel Castro into the arms of the Russian bear. Because he was frightened that we were going to murder him and destroy his new Cuba and he was absolutely right.

(CASTRO CLIPS - CAPTIONED)

COLBY: The way it would start, it might be an ambassador it might be a CIA officer, maybe somebody here in Washington, maybe somebody in the White House, would suggest it would be a good

-11-

idea to help certain groups in another country. That would be looked at, see if we had the contacts. Reliable people we could deal with. And the plan would be put together as to how this would be done. That same plan would then be approved within CIA as sensible. It then would be submitted to the President for the final okay.

The President's approval and then the agency would go ahead.

(NEWS REEL)

THOMAS: Forty-six were wounded, two killed under questionable circumstances. Castro in a broadcast speech last night says bombs from U.S. based planes were responsible for the casualties. Other reports say it was men in cars. What ever the reason Castro stirs strong feelings of anger against the United States.

WILCOTT: One of the operations they had was to burn the cane fields. From what I understand, the way it was done they had people in frogmen suits. They would take them out to the coast of Cuba, jump into the water with incendiary devices in their frogmen outfits, come up on the beach, plant these incendiary devices in the cane fields and swim back to the boat. They'd take off and then fifteen minutes later the incendiary device would go off and it would start a big fire in the cane field.

(NEWS REEL-CASTRO CLIPS-KENNEDY PRESS CONFERENCE)

REPORTER: Has a decision been reached on how far this country would be willing to go in helping an anti-Castro up rising invasion in Cuba?

PRESIDENT KENNEDY: Well, first I want to say that there will not be under any condition any intervention in Cuba by United States forces. This government will do everything it possibly can and I think it can meet it's responsibilities to make sure that there are no Americans involved in any action inside Cuba.

PHILLIPS: There is no question that American presidents found it convenient to make an operation secret because that way it obviates the necessity for public debate. In many cases it is obviated the necessity for any sort of discussion in the congress. Indeed that's what led to the fiasco in the Bay of Pigs. Gee, we have another big one to do and we keep it secret too. When it couldn't be kept secret.

(NEWS REEL OF CUBAN REVOLUTION)

-12-

THOMAS: Cuban revolutionary troops such as these have invaded Castro's island fortress. Reportedly rallied by a mysterious radio message--Alert! Alert! Look well at the rainbow, The fish will be running very soon.

Undefeated by parachute the rebels have struck along the coast within ninety miles of Havanna. Initial accounts of the fighting sketchy but bombing of military targets with heavy casualties.

Meanwhile, in Havanna, acting foreign minister Jualvarez shows foreign envoys and newsmen fragments of what may have been rockets fired during the B-26 raid. As might be expected he points an accusing finger at the U.S.

The same line is followed at a dramatic meeting of the United Nations General Assembly political committee by Cuban minister Raul. He says his nation has been invaded by what he terms mercenaries from Guatemala and Florida.

Quickly, forcefully the charges are denied by Chief U.S. delegate Adalai Stevenson.

ADALAI STEVENSON: These charges are totally false and I deny them categorically. The United States has committed no agression against Cuba and no offensive has been launched from Florida or from any other part of the United States.

PHILLIPS: I have been stationed on Cuba on two occasions, in 1955 and 1956, then I returned, in 1959, 1958, I was there 1959 and 60 before I had to leave rather abruptly. I have an affinity for Cuba, the Cuban people are marvelous. I'd seen what was going on there and many of the participants in the Bay of Pigs were on that landing course because I had known them personally in Cuba and I had recommended on a number of occasions that such and such a person would be a good man to have in the Brigade. So when that broadcast came from the beach and the leader said, we're standing in the water and there's nothing else we can do. And he cursed, he cursed us, I felt he was cursing me too.

THOMAS: Magic epilogue to a gallant venture. Outside Miami Headquarters of the Cuban Revolutionary Front exiled wives and mothers seek word of those who participated in the Old Star Liberation INvasion. For most, no news is better news, especially in Havanna, as Castro in a four hour television harangue shouts death for all seven hundred captives who claims taken in the aborted landing.

Miles away in Camp David President Kennedy and former President Eisenhower confer on the repercussions on the Cuban episode. General Eisenhower promises bi-partisian support for the President and his crisis as the president moves to the next round of the unceasing East-West power struggle over Cuba.

-13-

PRESIDENT KENNEDY: I've said as much as I feel can be usefully said by me in regards to the events of the past few days. Earlier statements, detailed deceptions, or not to feel responsibility, because I'm the responsible officer of the government, but merely because - and that's quite obvious - but merely because I do not believe that such a deception would benefit us during the present difficult situation.

FRANK CHURCH: The secretary gave us a critical analysis of the death of the Cuban Bay Pigs.

PHILLIPS: When the Bay of Pigs failed I was sitting in the building on that night that everyone knew it was a failure. And Robert Kennedy came in his shirt sleeves, and he had been sent there by his brother to clean that place out. He wanted to find out what had gone wrong and do something about it. The result however was that Bobby Kennedy fell in love with the concept of clandestine operation. And we now know, there is one question that has not been answered. Did President Kennedy and Bobby Kennedy know that there were assassination plans against Fidel Castro. It is an unanswered question. There is one thing that I am absolutely sure of is that they not only knew but they wished for the continuance of that long period after the Bay of Pigs in which there were many actions taken against Cuba, to put it precisely there was this one part when Bobby Kennedy said-When are you fellows going to get off your bottoms and do something about Fidel Castro?

RICHARD HELMS: There were found some, uh, a suit, a wet suit, a clam shell, various things that were on the shelf in the agency that were regarding as things that might be used in possibly killing Castro or being used against him which never came off the shelf, were never used. If that's a plot to have created this then I will back up and say then we ought to enumerate every single item that conceivably had to do with the invasions of Cuba which we were constantly running. Under the government agencies we had task forces which were striking at Cuba constantly. We were attempting to blow up power plants, or something to ruin sugar mills. We were attempting to do all kinds of things during this period. This is a matter of American policy, this wasn't the CIA. If those things taper over into assassination plot maybe so.

SENATOR DODD: Why didn't you want to tell the Warren Commission, or why didn't you tell the Warren Commission about the efforts to get rid of Fidel Castro or to overthrow the Cuban government?

SENATOR HEIMS: Mr. Dodd, you're singling me out as to why I didn't march up and tell the Warren Commission when the operations against Cuba were known to the Attorney General of the United States, the Secretary of Defense, the Secretary of State, the Assistant to the President for National Security Affairs, the President of the United States, himself, although at that point he was dead. I mean all kinds of people knew about these operations high up in the government. Now why am I singled out

-14-

as the fellow that should have gone up and identified a govern-
ment operation to get rid of Castro? And it was a government
wide operation supported by the Defense Department, supported
by the National Security Council, supported by almost everybody
in high position in the government.

MCGEORGE BUNDY: As far as I ever knew or know now, no one in the White House or at the Cabinet level ever gave any approval of any kind to any CIA effort to assassinate anyone.

I told the committee in particular, that it is fully
inconsistent with what I know of President Kennedy and his brother
Robert. That either of them would ever have given any such order
or authorization or consent to anyone through any channel.

REPORTER: You were head of the agency during the time
most of these allegations occurred. What did you tell the Com-
mission?

JOHN MCCONE: Well, I had no knowledge of it, what so
ever. As you know I stated there was feasibility or lack of feas-
ibility, there obviously was dicussions of the question of whether
such matters had been planned. But I had to plea ignorance be-
cause none was brought to my attention and therefore I knew no-
thing of it.

MARCHETTI: No President in his right mind is going to
say, Dear Director, I here by order you to assassinate Fidel Castro.
In fact, he probably will do the exact opposite. He will issue
what is known in the trade as a non-order and non-directive.

He will say, we have these terrible problems down here
in Cuba and it's quite obvious to all of us that the key to it
is Fidel Castro. Now if we could just get rid of that person,
maybe we could work out some kind of arrangement. But of course,
we can't do anything like that. That would be wrong. And so;
I just don't know what we're going to do about it. We're just
going to have to make the best of it.

He is saying this at a luncheon with McNamara and maybe
Rusk and maybe Helms, McCone, whoever was director at the time
It went over from McCone to Helms. These men are astute enough
to know that what the President is really telling is get rid of
Castro. But I'm not going to personalize it and I've already
made a statement for the record that I'm against it in the event
that anything ever goes wrong, I'll be able to say, didn't I tell
you that would be wrong?

(FILM CLIP-CONGRESSIONAL HEARING)

DODD: Could you tell this committee who the individuals
were involving Mafia chiefly or organized crime figures?

-15-

HEILMS: As far as I am aware in that particular situation it was William J. Harvey, who was in touch with John Roselli and it was Harvey and Roselli that were attempting to find, if I understood it correctly some channel from Florida into Havanna.

I also understand that there was a question of poison pills which were supposed to be transported to Havanna. There was never any evidence that they were ever transported there or ever left the United States. There was never any evidence that this crowd ever left the Florida mainland and if it's was an assassination plot it was misadvertised to me because I had understood it was an effort to see if a connection could be made between the Mafia in Florida and the Mafia in Havanna. And to the best to my knowledge the connection never was made.

ROBERT MAHEU: Sometime in 1960, during a period wherein for some previous years, I had been doing work for the CIA. I was approached by my project officer, who asked me if in connection with a planned invasion in Cuba I would contact a Mr. John Roselli. We started having meetings in Miami. During one of those meetings in Miami I was interviewed to a Mr. Sam Gold, who subsequently, turned our to Mr. Gianconni.

MARCHETTI: In any dirty job, such as paying military activities, assassinations, sabotage, and the like, we were known as special ops. Almost invariably, the agency direct, involvement of the agency officer, the career officer ends in the planning stage. And sometimes even before that, just the policy decision making stage. The dirty work will be carried out by either contract agents, one time agents, gangsters, mercenaries, whoever happens to be available at that moment.

MAHEU: We were told it was important in connection with the invasion of Cuba, at that time, to dispose of Mr. Castro. And to the word dispose you can add anything you want.

DODD: It is likely that at the very moment President Kennedy was shot a CIA officer was meeting with a Cuban agent in Tehran and giving him an assassination device so that he could use it against Castro.

Now I read this and again I'm reading from the same report I read earlier, they're calling it an assassination device. Are we getting semantics here again?

HEILMS: I believe it was a hypodermic syringe they had given him with something called Blackleaf Number Forty in it. This was in response to Amlash's request whereby he could be given a device to kill Castro. He returned this device to the case officer. The case officer brought it back to Washington and that

-16-

was the end of the plot.

DODD: Okay, but for purposes of discussion. The officer gave this Cuban, this agent, in Paris, a device, the material described in it, I presume the material injected into a human being would kill them.

HELMS: I would think so, yes.

DODD: The agent gives the Cuban agent the device to kill somebody.

HELMS: I'm sorry he didn't give him a pistol because it would have made the whole thing a lot simpler and less exotic.

DODD: Well, whether it's a pistol or a needle, if Amlash is a political plot to destabilize the government what the blazes are we giving an agent a device that would kill Castro with for if it's not an assassination plot for?

HELMS: Well, if you want to have it that way why don't you just have it that way?

DODD: Well, it's not a question of what I want.

HELMS: I think it is a question of what you want.

DODD: Mr. Helms, I'm reading to you from reports here, prepared at your request by the Inspector General. I'm not fabricating this or creating it on my own. I'm quoting.

HELMS: I understand that. I understand that.

DODD: Well, it's not a question of what I want. It's a question of what this committee would like to know. And the committee is not satisfied at this point as to exactly what the characterization was.

HELMS: Well, I've told you what I believe the characterization of Amlash to be.

DODD: Well, how does that...

HELMS: If it's because we gave him a gun or a hypodermic needle or whatever the case may be at his request because he aims on Castro. If that's your definition of assassination then have it that way. That's quite satisfactory with me.

REPORTER: But don't you open yourself to blackmail? In otherwards, if you're involved in a corporate operation and you're using elements, like for instance, the Mafia in some of these assassination attempts against Castro. Isn't that a very

-17-

dangerous thing to get involved in?

PHILLIPS: You bet it is. It's very, very tricky.
The Mafia--aren't you getting into trouble when you used them
in World War II? As we now recently read we use them in New
York cities.

I had only known that we used them in Marseilles on the docks there. Of course, it's a tricky business. It's a part of the evaluation that a good intelligence officer and expert policy maker will make in deciding to use any person or any instrument in any political organization. There is no question. But it's very tricky.

MARCHETTI: In the set-up that the agency has where the
dirty work is done by contract people or one time hirees and so
forth, obviously if anything goes wrong they can be disavowed.
If the person turns bad, turns sour, and may want to speak out
and may possibly have some credibility or evidence, well then,
stronger action is called for and you can have the ultimate term-
ination of the agent.

MAHEU: When the police arrived they found Mr. Giancano dead. He had been shot several times in the upper part of his body and throat. Approximately six shots, fired from a twenty-two caliber weapon.

REPORTER: Is there anything to support the theory that Giancano killing may have been in some way connected with an involvement in an alleged CIA plot to assassinate Fidel Castro?

MAHEU: We know nothing about that. We have nothing to lead us to believe that at all.

COLBY: One of the conclusions that the Senate came to
after eight months of study, one of the conclusions was that no
foreign leader had been assasisted by the CIA.

It wasn't for want of trying in Castro's case, of course.
But that's the only case in which there is any substantial effort
made against one. And yet, I think the world as a whole, thinks
the CIA was around trying to assassinate everybody. And it's just
plain false.

(NEWS REEL-CONGO CLIP)

THOMAS: Patrice Lumumba comes back to Leopold still a prisoner. The former Congo premeir who was captured when he went inland no longer wears the tufted whiskers on his chin to identify him. His arrest provoked several clashes between Lumumba followers and Congalees army troops.

-18-

Congo strongman, Col. Joseph Mubuto, shown as he watches Lumumba arrive, says he is prepared to put down any uprising.

Mubuto enjoys the sight of Lumumba being tied up more firmly for transfer to garrison town of Keyesville. A soldier tries to stuff into Lumumba's mouth a crumpled speech, asserting his claim to power. The former premier shows no emotion. It may be the end of a chapter but not yet the end of the Congo story.

JOHN STOCKWELL: In training down at Camp Perry, at the farm, a CIA officer, middle-grade officer at that time, was telling us about his career. And one of the things he threw out to illustrate the adventures you get into was finding yourself in the Lumgumbashe (?) in the Katanga with Lumumba's body in the trunk of your car trying to figure out what to do with it.

SENATOR FRANK CHURCH: One of Mr. Lumumba's weaknesses was his capacity to turn matters over to the Soviet Union. I would sense that his death, unless it results in a kind of martyrdom that would prove useful to the Russians, should be provided as a blow to their interests.

STOCKWELL: The CIA had developed a program to assassinate Lumumba under Devlin's encouragement and management. The program they developed the operation didn't work. They didn't follow through on it. It was to give poison to Lumumba. And they couldn't find a setting in which to give the poison to him successfully, so that it wouldn't appear to be a CIA operation.

I mean, you couldn't invite him to a cocktail and give a drink and have him die a short time later, obviously. And so they gave up on him. They got cold feet. Instead they handled it by the chief of station talking to Mubutzo about the threat that Lumumba posed and Mubuto going out and killing Lumumba, having his men killing Lumumba.

REPORTER: What about the CIA relations with Mubuto? Were they paying him money?

STOCKWELL: Yes, indeed. I was there in 1968 when chief of Station told the story about having then, the day before that day, having gone to Mubutzo to make the payment of cash twenty-five thousand dollars. And Mubutzo saying, keep the money. I don't need it. And by then Mubutzo's European bank account was so huge that twenty-five thousand was nothing to him.

NARRATOR: Part II of On Company Business will focus on CIA activities in Latin America during the 1960's.

Dr. Henry Kissinger

May 16, 1980

Page 7

than to quote once again what William Simon stated on the 60 MINUTES broadcast: "he (Ambassador Akins) was a true expert on the subject of the Middle East and oil."

As to Ambassador Farhang, we are sure the viewing audience factored in its own evaluation of his statements because of his current position and sympathies. However, I should note that he did not, as you claim he did, accuse you of collusion, and he did not, as you claim he did, "read from an alleged document citing neither context nor precise meaning and dated nine months before the event in question." In fact, Dan Rather read from a memo sent by Ambassador Zahedi on March 10, 1973. The message was read in context, and Ambassador Farhang's response was "I'm not saying there was a conspiracy." We hold no particular brief for Ambassador Farhang; he was simply expressing his opinion, an opinion you could have addressed had you chosen to participate in the broadcast.

I believe this letter has addressed your principal points of contention. As I stated above, we believe the broadcast was accurate and stand by it fully.

cc D. Hewitt, D. Rather

CORRECTED COPY

2

three days before the program was shown. It
cannot be irrelevant to the fairness of your
program that George Ball is a leading Democratic
foreign policy commentator and has been con-
sistently attacking me on every conceivable
issue for a decade.

(4) William Simon was talking of tactical
disagreements we had a year later; he too would
deny the basic thesis. The other side of these
tactical disagreements was never mentioned,
nor their nature, nor were witnesses for the
other side put on.

(5) Mr. Rather made no reference to any
of the facts in the detailed rebuttal I had
sent to him. Instead he quoted distorted ad
hominem fragments of a private conversation.

(6) "60 Minutes" had no shred of evidence
that our government believed that the Shah would
be unable to pay for the arms he had ordered.
Nor could it have, since no evidence exists.
You should also know that on December 28, 1973,
in a meeting chaired by me and attended by
Secretary of Defense James Schlesinger, Chairman
of the Joint Chiefs of Staff Admiral Thomas
Moorer, CIA Director William Colby, and Deputy
Assistant for National Security Affairs General
Brent Scowcroft, it was decided to raise the
cost of military equipment to the Shah to com-
pensate for the unjustified increase in oil
prices--disproving the basic thesis of the program
that it was the US government's policy to raise
oil prices to enable the Shah to purchase more arms.

(7) Offering me an opportunity of personal
rebuttal does not compensate for the deliberate
presentation of untruths. The program's refusal
to put on any of the officials and experts I
mentioned and its insistence that no one except
me would be acceptable was a calculated device to
cast me in the role of the defendant. It was a
maneuver to hype the program. It was neither
fair nor truthful.

HENRY A. KISSINGER

May 12, 1980

Dear Mr. Leonard:

I have your letter of May 9. It addresses the tone but ignores the content of my earlier letter. "60 Minutes" may be popular, but it did not meet just principles of fair and balanced journalism in this instance. This is clear from the attached transcript of the program, to which some preliminary marginal comments have been added; as you will see, there is scarcely a page without a misstatement of fact:

-- Many of these constitute deliberate falsifications, defamations or personal attacks. The facts with respect to most--for example that, though Mr. Akins claimed to the contrary, I did "respond" promptly and forcefully to his alleged "warnings" and have the documents to prove it--were fully known to Mr. Rather and the producer prior to the show and they failed utterly to take those facts into account or to reflect them in the program.

-- Perhaps even more serious than the misstatements of fact is the deliberate omission of material and vital information which would have exposed the spuriousness of the allegations. Every expert on the subject of oil prices would agree on the following facts:

(1) Until 1970 the United States' self-sufficiency, and our ability to export oil, stabilized world oil prices.

Mr. William Leonard
President, CBS News
530 West 57th Street
New York, New York 10019

2

(2) Beginning in 1970 we became net importers; imports had reached 30% of our requirements by mid-1973. Coupled with major increases in imports by other industrialized countries, this fundamentally changed the relation between world petroleum supply and demand.

(3) The Arab-Israeli war of October 1973 and the late-1973 Arab oil embargo against the United States and some of our allies further upset the balance and set off a wave of panic buying.

(4) The Saudi production cutback of 1973 of 2 million barrels a day further exacerbated the situation.

(5) Iran joined neither the embargo nor the production cutback.

It was these fundamental facts which set the stage for the OPEC price rises of 1973-1974--not some hidden understanding with the Shah. Similar fundamental factors have been involved in the oil price rise from $14 a barrel, when I left office, to over $30 a barrel today. It is profoundly misleading to the American people to suggest otherwise, as the "60 Minutes" program did. Yet not one of these undisputed facts was mentioned or even hinted at on the program. Not one expert was put on or even interviewed to testify to them.

I urged Mr. Hewitt to present these facts through economic experts familiar with them. He refused. It was the refusal to include in the program a fair presentation of the economic realities of the 1973-74 oil price increases, about which I do not possess independent expertise or personal involvement, that caused me to suspect that the program would focus on individuals rather than on substance.

3

This, and the fact that the program
would be entitled "The Kissinger-Shah
Connection", emerged only after I had discussed
my appearance with CBS. Furthermore, the
"Periscope" item in Newsweek which came to my
attention on Monday, April 28, reported that
CBS had forced me to appear to defend my
overall relationship with the Shah. These
made it increasingly apparent that I was
being set up for the role of a defendant on
the show.

In all my experience with news organiza-
tions I was never exposed to the pressure and
threats employed by "60 Minutes. Within a
24 hour period I received eight phone calls
from Mr. Rather, Mr. Wallace and Mr. Hewitt
and a personal visit from Mr. Rather on the
day of the failed rescue mission in Iran when
there were many other demands on my time--
all giving me deadlines of two hours to respond.
Their theme was identical: "60 Minutes" would
proceed with the presentation that I had told
them was untrue without consulting additional
documents or other witnesses unless I personally
rebutted charges I had insisted were fabricated
and malicious.

The program should have presented a fair
and balanced picture on the issue. This was
CBS' obligation as a matter of both law and
good journalism. (Nor did my non-appearance
discharge CBS of that responsibility.) Had it
included such a presentation, then I would
have been glad to appear with respect to those
matters of which I had some personal knowledge.
But Mr. Rather's narration during the program
leaves no doubt that my judgment about the
real character of the presentation was correct.

Enclosure

HENRY A. KISSINGER

May 29, 1980

Dear Mr. Leonard:

I have your letter of May 16. My
response has been delayed by a trip to Europe.

Assure yourself that I relish this ex-
change even less than you and wish even more
heartily that the need for it had never arisen.
But it has. The plain fact of the matter is
that the May 4, 1980, "60 Minutes" segment,
"The Kissinger-Shah Connection?", was an attack
on me and my motives which I can hardly ignore.
All of it, with the exception of a short post-
script--which itself was a distortion of my
position--was selected and produced to show that
my own "intentions at the time" (to quote your
letter) were to accept or encourage or welcome
the quadrupling of world oil prices to subsidize
the Shah's arms purchases, and that this accounts
for the price "you," the American consumer,
now pay for gasoline.

Your letter of May 16 evades the central
issue, which is that your program was filled with
factual errors and gross distortions of the
truth and that you proceeded to broadcast it even
after you were provided with facts and evidence
that proved its principal assertions to be false.

My objections to your program are, if anything,
reinforced by your letter. They fall under three
headings:

2

-- The false charge of collusion.

-- The systematic misrepresentation of fact.

-- The overall unfairness of the presentation.

I shall deal with these in turn.

## The False Charge of Collusion

After reading your letter of May 16 I suppose I should be grateful that you and "60 Minutes" now feel so strongly that there is no basis for the charge of collusion between the Shah and me in OPEC's oil price rises of 1973. Your viewers might be forgiven if they received a contrary impression from a program entitled "The Kissinger-Shah Connection?" Your program had, after all, no other point except to charge that I shared in the responsibility for the decision, in ways amounting to either explicit or tacit collusion. I have encountered no viewer who derived a different impression; any impartial panel would come to the same conclusion.

The charge of collusion is not only implied by the title (regardless of the disingenuous question mark) but is underscored from the very outset by Mr. Rather's opening series of innuendos of dark doings: "Under Kissinger's direction there was virtually no public debate when the Shah ordered $5.7 billion worth of military hardware from this country between October 1976 and September 1977." (The special quality of this sentence is that almost every word in it is untrue or misleading. I was not Secretary of State for most of this period. Most of the orders were approved in the Carter Administration. All sales were put before the Congress as the law required. What the phrase "under Kissinger's direction" can possibly refer to in this context is obscure, to say the least.)

Mr. Rather then goes on to cite a miscellaneous collection of accusations--none of which was even remotely true—including such "authorities" as the Iranian President, to imply a continuing special personal affinity for the Shah--citing no

CYJ

evidence whatever and not reporting my publicly
available denials. He then advances his
answer to the puzzle of why the Shah received
such "preferential treatment": "People in a
position to know pointed us toward a link between
Henry Kissinger, the Shah of Iran and the price
you are paying for gasoline." If this is not
a charge of collusion, then I doubt if it is
possible to make one.

In all events, that is precisely the way
two of the people Mr. Rather selected to inter-
view on the program--Mr. Ball and Mr. Simon--
interpreted it in letters to you. I think it
likely that a typical viewer came to the same
conclusion.

Mr. Rather pursues the point of collusion
relentlessly and falsely in the paragraph
immediately following: "This is where it began
[presumably the high oil prices]. October 1969.
The Shah was in Washington for an official visit
with President Nixon and his first real encounter
with Henry Kissinger. They talked privately
for one hour, it is believed, during which the
groundwork was laid for the Nixon administration's
policy toward Iran of continuing military and
economic aid to the Shah." Once again there are
no facts whatever to support this statement. My
schedule of appointments shows no private
meeting with the Shah in October 1969 (or in May
1972 for that matter). No record confirms that
any major decisions were taken during the Shah's
conversations with Nixon in 1969. No directives
of any kind were issued as a result of the visit.
It appears to have been a tour d'horizon. It
is clear that the subject of oil price never
came up. Nothing, in short, "began" on that visit.

Mr. Rather then poses the "theory" to Mr.
Simon which, of course, your program implies
over and over is correct and continues the
collusion theme: "Dr. Kissinger knew full well
what he was doing...he wanted the Iranians and
the Shah to have the weapons...," etc. (page 5
of the transcript). The false implication of
conscious action on my part encouraging the oil

4

price increases in 1973 and afterward, acquiescing in them, deliberately failing to object or to "use my influence with the Shah" to lower oil prices or keep them down is in fact confirmed by your letter. It is the theme of every interview and portion of the program, particularly the repeated (false) assertions by Dan Rather, George Ball and James Akins that I consciously ignored repeated warnings to do something.

You now say that the program was meant only to suggest an awareness of a "commonality of interests rather than collusion." This is both hair-splitting and disingenuous.

There is not much difference of consequence that I can see between a belief on my part that a world oil price increase was in the national interest of the United States so that the Shah could buy arms and colluding with him to that end, which is what your charge that I did not object--or even your later refinement that I objected inadequately--amounts to. But of course the program clearly went further, beginning with the very title. It did not imply a similarity of world view by Kissinger and the Shah; it was aimed at a "Kissinger-Shah Connection."

You substantiate the alleged commonality of interests with a quote from _White House Years_ which you never mentioned on the program and which has absolutely nothing to do with my view on oil prices. The quotation explains the reasoning behind Nixon's decision to sell F-14's to Iran in July 1972, fifteen months _before_ the Yom Kippur war and the consequent oil price rises. There was no crisis over the oil price then; we were convinced--as the relevant documents made clear--that Iran could pay for this weapons system out of then existing oil revenues. I have never seen a document to allege the opposite; I never heard anyone suggest that Iran's oil income was insufficient to buy the planes. You simply twist my analysis that American and Iranian strategic interests in the security of the Persian Gulf and the Middle East were parallel into the totally erroneous assertion that they were also parallel with respect to oil prices. Your allegation of a perceived "commonality of interests" with respect to oil price increases

CYS

5

rests on no evidence, only insinuation.

In a recent communication to former Assistant Secretary of Treasury Gerald L. Parsky you seem to claim that my transgression consisted of willfully not making "a direct appeal to the Shah to dissuade him from submitting his new [price] formula." It happens that a formal demarche was made in Tehran protesting the projected price increase; it was coupled with protests in all OPEC capitals and a demarche to all OECD nations urging a concerted protest on the part of all industrialized countries. This took place within 24 hours of the warnings received. The relevance of protests to other OPEC capitals comes from the simple facts (unmentioned on your program) that OPEC decisions were made unanimously and that we were facing an Arab oil embargo and a Saudi production cutback which were the immediate cause of the buying panic and the inflated prices at the December auction. Of course your program made no such hair-splitting distinction between the possible methods of making a demarche in Tehran; your program asserted over and over again that nothing was done. This is an absolute falsehood, and you had reason to know it was a falsehood.

Your letter to Parsky alleges that Simon confirms your new version (never broadcast); this too must be false. Simon never offered a view I am aware of in December 1973 that we should follow a different course. Treasury was aware of the circular cable and made no contrary recommendation. My disagreement with Simon occurred in August 1974 in a totally different context. All this is essentially irrelevant since no viewer could possibly come away with the impression left by your letter. You cannot seriously argue that you devoted a whole program to the wisdom of a single cable to which you do not even refer or whether it should have been a circular dispatch--all this seven years after the event.

6

## Systematic Misrepresentation and
Omission of Facts

There were, as I have said, a host of other factual errors in addition to the charge of collusion. Some were plain misrepresentations, some misstatements by omission.

## The Central Misrepresentation

Of all the misstatements one was central. Mr. Rather and the "60 Minutes" staff gave Akins the lead in the program. They did so because he was putting forward his claim to have been a martyred voice, crying in the wilderness, valiant and alone in his opposition to OPEC price rises, ignored by me and finally fired because his heroic warnings had been "annoying the Secretary." Preposterous. Akins played no such role.

The point, in any case, is not Akins' alleged warning but Rather's repeated statement that the warnings, whether first or last, were ignored. "We didn't [intervene]" (page 3 of transcript); "He [Akins] never got an answer" (page 3); "No response" (page 4). Akins' charade about the Christmas holidays clearly relates this to the December 1973 OPEC price rise. This assertion is central to your program's thesis; it occupies two transcript pages. My letter to Dan Rather of May 1, three days before the program was aired, supplied considerable evidence that this assertion was simply wrong.

In addition, your viewers were told (on page 7 of the transcript) that "the Shah personally led OPEC into quadrupling the price of oil." This is another falsehood. Any serious journalistic inquiry into the facts would have discovered that OPEC oil prices were first nearly doubled in mid-October, at the instigation of the Saudis; it was as a result of the extraordinary market disruption caused by the Arab oil embargo against the Western world and the Saudi production cutback--

7

which the Shah of Iran opposed--that conditions
arose for another increase in December.

Omissions

The omissions in your program were an
equally serious affront to the public under-
standing of the issue. You admit in your
letter of May 16 that the loss of American
energy self-sufficiency and the Arab-Israeli
war coupled with a Saudi production cutback
"set the stage" for the OPEC price rises. I
do not know your definition of "set the stage,"
because your program ignored all of this
essential background and reduced a major and
complex problem to the comic book level of two
evil personalities (and in the end, to me alone,
which is the implication of the claim that I
"blew it"). And your letter goes on to reiterate
your central thesis ascribing it to "commonality
of interest" and stressing the crucial role of
my "state of mind." All my correspondence with
you has refuted your simplistic account with
factual evidence or offers of expert testimony.
So have George Shultz, Gerald Parsky, Charles
W. Robinson, and Professor M.A. Adelman of MIT
in letters to you or Mr. Rather or Mr. Wallace
with which I am familiar. As with all facts
that contradict your tendentious thesis, you
simply ignored these letters.

A program allegedly dealing with the reasons
for today's energy costs that does not even
mention the end of American self-sufficiency,
the changing relationship between the host
governments and the companies beginning in 1969,
the Arab oil embargo of 1973, and the Saudi
production cutbacks can scarcely be called serious
journalism. That oil prices had already been
nearly doubled under Saudi leadership two months
before December 1973; that since I left office
oil prices have risen from $14/barrel to around
$30/barrel; that Iran's 1979 prise rose from $17

CYS

8

to $35/barrel at the time of the fall of the
Shah; that Iran's price today, without arms
purchases and without the Shah, is the highest
of the OPEC countries, are all facts relevant
to the validity of your loaded thesis that
there is "a link between Henry Kissinger, the
Shah of Iran and the price you're now paying
for gasoline."

The background information on the economics
of oil, that I tried vainly to inject into your
consciousness, obviously does not make for an
exciting, action-packed TV program. Its only
merit was that it would be crucial to any
intelligent, as well as fair, analysis and
judgment.

What you did was to present the Saudi
version of events as seen through the eyes of
Mr. Akins without informing your viewers that
both the Saudis and Mr. Akins are highly
interested parties. Saudi Arabia, as I have
shown, was in fact crucial in triggering the
whole 1973 sequence of events. Indeed, Saudi
Arabia was in 1973, and has remained, central
to all OPEC price decisions since it consistently
produces below capacity and hence its production
determines world supply. This is pertinent, one
might think, to any assessment of the price
rises of the 1970's, and particularly one like
CBS's that relies to a substantial degree on
obviously self-serving Saudi claims via Akins
that it was all someone else's fault. That
Yamani's argument as presented by Akins should
be taken with a grain of salt is proved by the
fact that Saudi Arabia could have stopped or
at least mitigated the December 1973 oil price
rise by the simple device of ending its produc-
tion cut. Instead it reaffirmed it.

What your thesis comes down to is that a
country which did not join the 1973 embargo
against us and selected countries of Western
Europe and which continued maximum production is
blamed for the oil price rises while the country
which organized the embargo, curtailed its
production and maintained the cut for several more
months is the passive bystander; indeed that its

9

version of events is the only admissible one.

Your letter of May 16 makes the false assertion that "curiously your [my] chronology [in my letter to Rather of May 1] stops in January 1974 as if this were the end of your significant diplomatic efforts to undo the OPEC price increase."

As to that, I repeatedly told Mr. Rather before the program to look into my actions in 1974 and 1975, since they would have proved my commitment to a strategy of restraining oil prices beyond doubt. He argued that this was beyond the scope of his inquiry. Had he taken up my suggestion, he would have found that at the end of December 1973 we sent sharp protests to the key OPEC countries including Iran (as indeed my letter of May 1 makes clear); that in early January 1974 we sent out invitations to key consumer countries to organize opposition to high oil prices; that the Washington Energy Conference met in February 1974 under my chairmanship and resulted later in 1974 in the International Energy Agency, still the sole consumer organization in existence. And since the program you have learned--what serious investigative journalism would have discovered before--of the consistent American policies and actions to stabilize the market and lower prices as described in the letter to CBS News of former Deputy Secretary of State Charles Robinson, the official responsible for all negotiations in this field.

I gave Rather a list of my public statements on the subject on May 1, three days before the program was aired. You dismiss these in your letter as "an assortment of speeches" apparently not worthy of your attention. But I cited these speeches because they were careful statements of governmental policy worked out under my leadership by all relevant departments, including Treasury, over periods of weeks. Their common theme is opposition to high oil prices and the need to organize effective action against them. Had Rather read them before airing his

10

charges he would have found that on February 3, 1975 I proposed a floor price for alternate supplies of oil to prevent any reduction of OPEC prices from wrecking new sources of energy and thus destroying the market again--a proposal which would have made no sense had we not sought to bring down OPEC prices. And the assertions of Dan Rather, George Ball, and James Akins on your program that I made no effort to reduce prices after 1973 are also undermined by the fact that the price of oil in real terms *declined* by 15% between 1973 and 1978. Your failure to examine these speeches, which is apparent from your letter of May 16, raises obvious additional questions about your willingness to verify assertions on your program.

## The Overall Unfairness of the Presentation

It is a curious definition of journalistic independence that uses only witnesses that support a preconceived thesis on a program watched by tens of millions. That Akins has made a career out of peddling this line (and has even been called "the Ambassador from Saudi Arabia" by three reputable journals--*The Economist* of August 25, 1975; the *Washington Post* of March 14, 1976, and *Forbes* of April 15, 1976); that George Ball has been a long-time critic of me on a hundred other issues; that Khomeini's ambassador to the UN has no personal knowledge of any of these events of course does not disqualify them from appearing on your program. Obviously, Bill Simon is a Republican and a friend, but he and I disagreed on some of these matters in the period after 1973, *after* the price rise had already occurred and not on the 1973 events that are the central concern of the program. The problem is that *all* your witnesses gave only one point of view, which was both tendentious and demonstrably erroneous, while *no* independent participants were presented to give a different view.

11

It is striking that two of the critical witnesses you presented on your program have since written to you dissociating from the more egregious accusations broadcast on it and objecting to the deceptive editing which created the impression that everyone was speaking about the December price rise:

— George Ball wrote you on May 8 that he was criticizing the 1972 decision to sell sophisticated arms to Iran. He explicitly repudiates your program's implication that he had examined the files relevant to the oil price decisions of 1973-1974 during his two week stint in the White House in 1978.

— William Simon has written you that he has no basis for endorsing the thesis of an "alleged deal" between the Shah, myself, and President Nixon as was implied by your program. Nor does he claim knowledge of the events of 1973. His disagreement with me occurred in August 1974. He was not involved in the December 1973 decisions.

— Mr. Rather read, moreover, from an alleged document from March 1973, nine months before the OPEC decision in December, at a time when OPEC was making no decisions to alter the low oil prices. Immediately following this, Khomeini's UN ambassador—without any pretense of personal knowledge whatever—speculated on the link between oil prices and arms purchases.

In short, your program strung together quotations referring to three different periods; this not only distorted the views of two of your witnesses but presented itself as evidence when in fact you had no evidence to prove the "link."

In this context, the refusal to put on any other witnesses is indefensible. I did not insist on "friendly witnesses," as you allege. What I proposed was an interview of some noted authority on oil prices who could testify to the

12

uncontroverted fact that the supply and demand
situation in 1973, as compounded by the Arab
boycott and Saudi production cut, made for the
rise in the price of oil. Had this point been
established by experts, I would have been happy
to comment on those matters within my knowledge
such as the messages I sent and other steps
I organized.

Your letter, and indeed your only claim
to fairness, rests entirely on your invitation
for me to appear. Yet it clearly emerged as
an afterthought less than 72 hours before the
program was to be aired. I first heard of your
project on April 17, while I was in London.
I returned Mr. Rather's phone call and informed
him that his central thesis was untrue; I also
said that in judging my emphatic denial he should
remember that I never had made a flat assertion
to a journalist which I knew to be false. I
gave him a list of names he could consult to
support what I told him. I offered to let him
review evidence upon my return on April 21. Mr.
Rather assured me that he would not proceed with-
out talking to me in person and reviewing the
evidence; he implied that he would consult some
of the persons I mentioned for his own background.

The next time I heard from Mr. Rather was
late in the evening on April 24. He now informed
me that he planned to proceed with the story
as it stood on April 27. He had seen no need
to consult additional witnesses. Reminded of
his promise to review evidence and talk to me
he said that this required a postponement for
which he needed your approval. You were returning
from a trip and would look at the segment the next
morning.

Around noon on April 25, a little more
than fifty hours before broadcast time, Mr. Rather
conveyed to me what he said was your decision.
There would be no review of evidence and no
interviews of other witnesses, expert or not. Any
rebuttal would have to come from me alone. This
was followed by a series of phone calls and a

13

personal visit by Mr. Rather, who--in the presence
of my wife--stated that the program as it stood
was extremely damaging to me but it would go
on unchanged and without further research
unless I appeared. He never told me that the
title of the program was the "Kissinger-Shah
Connection." I learned that only on Sunday
from looking at the television listings. He
gave me an hour to respond.

Was CBS being fair or was I being blackmailed?
Had I agreed to an interview, would Mr. Rather
have sought the truth or attempted to support
the thesis which he had so relentlessly and
incorrectly established in the central segment
of the program? Whatever the answer to these
questions, the shortness of time--and your need
to postpone the broadcast--came solely from the
fact that you prepared the program to suit your
thesis and then approached me only at the last
minute in response to my strong protests.

The brief "rebuttal" from me which was aired
on the program hardly met any standard of jour-
nalistic responsibility. Mr. Rather quoted
distorted fragments from what I had thought was
a private conversation. He neither asked my
permission nor did he check the alleged quotes
with me. Mr. Rather avoided any substantive
material I had given him and emphasized ad hominem
comments that did not reflect the basis of my
denials. I doubt that it would have compromised
CBS News' vaunted independence to permit me at
the conclusion of an unrelentingly hostile
program a few sentences of substantive rebuttal.
This could easily have been in my own words
and read by Mr. Rather from my letter of May 1,
which presented material factual evidence.

A Final Point -- The Price of Military Hardware

The statistics of your letter of May 16
regarding military hardware miss my point completely.
You claim now that your program focused on my

14

motives--my "conscious state of knowledge,"
my "intention." The fact that the U.S. govern-
ment raised the price of its arms to Iran
proves the very opposite of acquiescence,
approval or Mr. Rather's "theory" that we
tolerated the oil price increase to subsidize
the Shah's weapons purchases.

You cite the data to show that the Shah
earned much more from the oil price increases--
$16 billion from 1972 to 1974--than he spent
in arms purchases--$4 billion at peak. This
shows on the face of it that much more fundamental
factors must have been involved than the desire
of a single OPEC nation to finance arms acquisi-
tions. The data, in short, disprove the thesis
of the program. Pity they weren't used.

I note your threat--itself highly inappro-
priate for a presumably unbiased news organiza-
tion--that you could make a good case on the
air that if oil prices had not risen in 1973
the Shah could not have bought anything
"approaching the volume of military hardware
that he in fact purchased subsequently." This
argument, if presented, would be as untrue as
your program. It would advance the same mis-
statement that oil prices could have remained
at the 1972 level but for policy errors in 1973.
No serious person accepts this given the growing
imbalance between supply and demand. There is
no telling what a highly rated program can make
people believe. But it can not make truth out
of a falsehood even by misusing its access to
a large audience.

Conclusion

Your broadcast was not only unfair to me;
it was a profound disservice to the American
people. The international oil price has risen
between 1973 and 1980 from around $3.00 a barrel
to its current price around $30 a barrel by a

15

series of increments. You arbitrarily selected the increment that took it from around $6 a barrel to $11 a barrel. Ignoring what went before or after you treated this one increase as decisive. You assigned the blame for "the price you're now paying for gasoline" to two individuals and strongly implied a collusive conjunction of motives without which oil prices would still be at the 1972 level (without a shred of evidence). You therefore give the American people the impression that it was not the increase in world consumption, not the slow pace of developing alternative sources, not the indecision and conflict over our national energy policy, not the lack of consumer-nation solidarity that caused the present situation but the misguided and secret action of one or two individuals. Instead of major efforts to overcome an authentic crisis CBS calls for a witchhunt. Three successive Presidents of both parties have asked for a national dedication to overcome an accelerating crisis. Your program's contribution was to turn the call for a national effort, which alone can solve the problem, into a bizarre search for scapegoats.

When I initiated this correspondence I was, to be sure, outraged. But I was convinced that a news organization of the reputation and influence of CBS News would be sufficiently responsible to look at the full panoply of facts and arrive at an honorable solution, even if it meant admitting its own fallibility. I would have thought that a viewership of tens of millions would inspire a special obligation for fairness. It would have been easy to settle our dispute by a serious discussion among individuals who have heretofore dealt with each other on the basis of mutual respect. Instead you have disregarded a host of letters by men of the highest repute challenging your thesis, and supplying you with data that refute it. You have ignored the documentation supplied by me that also refutes it. You have thrown all the resources of your organization into proving an untenable thesis by tortured interpretations and hair-splitting

HENRY A. KISSINGER

January 24, 1980

Dear Mrs. Kissinger:

How interesting that we share
the same last name. It was
kind of you to write to me.

I hope that this letter
will find you in good health.

Mrs. Mabel Kissinger
Box 217 Jones 218
Quincy United Methodist Home
Quincy, Pennsylvania 17247

MASSACHUSETTS INSTITUTE OF TECHNOLOGY

DEPARTMENT OF ECONOMICS

CAMBRIDGE, MASSACHUSETTS 02139

May 5, 1980

Mr. Mike Wallace
CBS News
524 West 57 Street
New York, N.Y. 10019

Dear Mr. Wallace:

Some months ago, you thought it worthwhile to ask me some questions on oil economics. Permit me to say that your program last night (May 4) suffered badly by its failure to research the international oil market and the role of certain countries in it, notably Iran and Saudi Arabia, and the role of the State Department during the oil price hikes of 1973-74.

The same monstrous ego which led the Shah into follies and crimes made him wildly overstate his role in raising oil prices. In fact, Iranian capacity and production never exceeded about one fifth of the OPEC total. Not Iran but Libya was the leader in starting the parade. In 1970, they made demands which, if we are to believe the head of Shell, some companies were willing to accept, some not. But the Libyans had the backing of the State Department, notably Mr. James E. Akins. (Church Committee Hearings, vol. 8 p. 771). A few months later, the Persian Gulf countries, including Iran, had the same success, with the same support. The State Department wanted credit for that achievement, because "the previously turbulent oil market would now quiet down." (Platt's Oilgram News Service, February 18, 1971).

In late 1973, the Persian Gulf price had been raised from about $1.35 to $3 per barrel. What gave it a boost to $7 was the Arab production cutback. It was advertised as an "embargo" of the United States, but a selective embargo was impossible, because oil previously going elsewhere was diverted to the United States. But the production cutback sent prices far up. Whether the Arabs' primary motive was to raise the price, or to put pressure on the consuming countries, nobody can say, nor does it matter. The cutback did both. Non-Arabs, including Iran, did nothing but benefited by the higher price.

The role of Ambassador Akins during this time was unusual, to say the least. We have two bits of evidence in the public domain, from which we can infer what the unpublished record would look like if we had it. First, he warned in early November that fuel oil would be "critically" short at the U.S. East Coast in a few days if the Arabs' demands were not met. (New York Times, November 10, 1973). This was obviously false. But uninformed public opinion

-2-

might well panic at such a warning, delivered by a high ranking American official.

The second act was to pressure American corporations to pressure the American government -- his own government -- to yield to Arab demands. (Church hearings, vol. 5, p. 6).

These publicly known acts, plus others, made three newspapers refer to Mr. Akins as the Saudi Ambassador to the United States -- a long time, incidentally, after the embargo period, when they had been able to observe him afterward. (London Economist, Aug. 23, 1975; Washington Post, March 14, 1976; Forbes, April 15, 1976.)

Look now at the oil price during 1974. On New Year's Day, according to an OPEC communique, it was $7 plus a small undefined cost margin. (Petroleum Intelligence Weekly, Dec. 31, 1973). By the end of the year, it was nearly $11. Your informants would have us believe that Iran was the price leader. It is a matter of public record that they only followed the lead of Saudi Arabia. On at least three occasions, (P.I.W. March 11, June 17, November 25 - all 1974) the Iranian price escalated up because it was tied to prices elsewhere in the Gulf, and the Saudis kept raising the price, often retroactively - as they did this year. They might re-define the price classes so as to raise the average. And they also just raised the price.

Along with raising the price, the Saudis were also quite willing to talk in favor of lowering it. Some people took it very seriously. Some still do. On at least two occasions, Mr. Kissinger visited Riyadh, and announced that his friend the King agreed with him, prices ought to come down. Each time prices were raised again. (New York Times, October 13, 1974; Oil & Gas Journal, October 21 and December 23, 1974.) Of course, Mr. Kissinger will not forgive Mr. Akins for making a fool of him in public.

That was not the only kind of Saudi deceit. They promised an oil auction to bring prices down, and were widely hailed and praised for their moderation. Then they cancelled the auction. Soon another promise -- they would not allow prices to be reduced. But of course they did allow it, so in March 1975, chagrined American officials were complaining that the Saudis had "pulled the rug from under them." (Oil & Gas Journal, March 17, 1975.)

A person like myself, without access to the American diplomatic record, can only make the logical inference that Mr. Akins collaborated with the Saudi campaign of deceit. Mr. Kissinger, who has seen that record, is not afraid to call Mr. Akins a liar. In the unlikely event that we ever see the Saudi archives, we will learn how he interpreted his instructions from our government.

RICHARD D. KITCHING, M. D., INC.

SUITE 902
CAMC MEDICAL STAFF OFFICE BUILDING
3100 MACCORKLE AVENUE, S.E.
CHARLESTON, WEST VIRGINIA 25304

RICHARD D. KITCHING, M. D.
PRESIDENT & TREASURER

SUE H. KITCHING
VICE PRESIDENT

JANET M. SEATON
VICE PRESIDENT

NANCY K. RABEL
SECRETARY

TELEPHONE 346-0831

14 May 1980

PSYCHIATRY
RICHARD D. KITCHING, M. D.

SOCIAL WORK
BIOFEEDBACK
DEBRA K. ROTH, M. S. W.

PSYCHOLOGY
NANCY K. RABEL, M. A.

OFFICE MANAGER
JANET M. SEATON

Henry Kissinger, Ph.D.
Suite 520, 1800 K Street, N.W.
Washington, D. C. 20006

Dear Dr. Kissinger:

As an "old classmate" from George Washington High School in New York and a steadfast admirer of yours, I wanted to thank you for THE WHITE HOUSE YEARS and all you put into them and it. For the first time, though I have read many books on our nation and its history, I felt a comprehension of some of the wide focus--as well as the narrow "up close" focus of trying to execute diplomatically that which could really be accomplished in no other way; e.g., aircraft carriers alone will not do. Your talks with Le Duc Tho must have tried the patience of the saint of saints, yet all the pieces fit together. There was a coherency of policy as I have not seen before or since; we need that again!

I pray that we may see you back at the helm of our foreign policy as we grope to find our new place in the world with less bluster, more substance and more certitude. Thank you ever so much for the thrilling feeling of participation in your and our country's most terrible troubles and for having an upbeat view--in which there was at least a glimmer of hope for all of us in the darkest tunnel.

This is such a cross roads in our history, and we are being buffeted like an ocean sailor without a rudder; yet it could be the beginning of the most productive years in all the history of mankind with the proper leadership and a plan. Let us not start out by betting our fall back position as is our wont, but sit in and listen for a while. I await your next book with keen anticipation. (Next time have two volumes so I can hold it on my belly without cutting off the circulation to my feet--don't write less!)

RDK:js

Ferrol Klabin

Tel: 011-55-21
221-7171 (bank)

SOM handles
CF
Klabin

Rio de Janeiro, May 8, 1980

1580

After I left New York, our meetings and conversations keep coming back to my mind and more and more the series of events are showing how right and precise you have been. Somehow it seems that the "window of danger" of 1983 is coming into reality in a shorter time than our prevision. The feeling is like being in an endless tunnel of misunderstandings.

I suppose that by now tactics are more important than longer term views. I have been working hard on my side to try to open the gates for closer and deeper intercommunications between our two countries. I hope that when you will have clearer perspectives of the political scenery in the United States you will let me know a list of people that should be invited through different channels for meetings and for a more profound knowledge of Brazil and its realities. Anyway I intend to be in Washington at the next Councillors' meetings of the Center for Strategic and International Studies in July.

As you have asked in your previous letter about any comment I might have on the forthcoming meeting, I suggest that some of the time will be considered on Biomass: an alternative form of energy.

I also want to thank you very very much for your kind invitation and the time that you and Nancy so elegantly have spent with me.

My warmest regards to you and please convey to Nancy my profound respect and sympathy.

MAY 16 1980

Responded by phone
6/11 in other context

Rēalites®

132 WELSH ROAD HORSHAM, PENNSYLVANIA 19044
TELEPHONE (215) 657-4600

September 26, 1980

Mr. Henry Kissinger
Suite 520
1800 K Street, NW
Washington, DC 20006

Dear Mr. Kissinger:

REALITES Magazine is planning an upcoming feature on winter sports and leisure activities. Besides coverage of ski resorts such as Cortina and Gstaad, we will include ideas for memorable winter weekends. We're asking a few well-known and respected people to share with us some of the winter places and activities they've found most exhilarating.

We're looking for satisfying experiences, not just the most expensive resort or vacation spot. Perhaps a favorite sport, some great wintertime reading, an unusual activity (reindeer safaris? helicopter skiing?), or a cozy country inn.

Would you take a moment to answer the enclosed questionnaire and return it to us by October 6. We'd be most delighted to include you in REALITES.

KK/jes
Enclosure

P.S. If you have any black-and-white photos of yourself--especially any with a winter setting or showing a favorite winter activity--we'd appreciate seeing them.

SEP 29 1980