On January 2, 1964, upon learning of the letter from Secretary of State Rusk, the President telephoned his Special Assistant for National Security Affairs, McGeorge Bundy, and proposed that he "get Rusk and the five ablest men in the State Department and go up to Camp David and lock the gate this weekend and try to find some imaginative proposal or some initiative that we can take besides just reacting to actions and just letting Khrushchev wire everybody twenty-five pages every two days and us just sit back and dodge." Johnson continued, "I'm tired, by God, [of] him being the man who wants peace in the world and I'm the guy who wants war." (Johnson Library, Recordings and Transcripts, Recording of a Telephone Conversation between the President and Bundy, January 2, 3 p.m., Tape 6401.02, PNO 10) A transcript of the conversation is printed in Michael Beschloss, Taking Charge, pages 144-145. The President telephoned Secretary of Defense McNamara a few minutes later and raised the same issue. "I don't like every time I wake up in the morning and see where Khrushchev sent me another communication for peace. Makes me appear like a warmonger." Johnson asked McNamara "to be thinking of anything you can that will give substance to our peace offensive." (Johnson Library, Recordings and Transcripts, Recording of a Telephone Conversation between the President and McNamara, 3:20 p.m., January 2, Tape 6401.02, PNO 12)

On January 3 the President discussed a proposed statement in response to Khrushchev's letter with Rusk and Ambassador at Large Thompson, but the statement was not issued. (Ibid., Recordings of Telephone Conversations with Thompson and Rusk, 11:15 a.m. and 11:25 a.m., January 3, Tape 6401.02, PNOs 16 and 17) Johnson responded to Khrushchev in a January 18 letter in which he proposed "even broader" guidelines for settling territorial disputes and called on the Soviet leader to join him in new disarmament proposals to the Geneva conference. For text, see Department of State Bulletin, February 3, 1964, pages 157-158, or Public Papers of the Presidents of the United States: Lyndon B. Johnson, 1963-1964, Book I, pages 153-155. For the President's recollections of the episode and a more general discussion of U.S.-Soviet relations during his Presidency, see The Vantage Point, pages 462-491.

2. Memorandum of Conversation/1/

Washington, January 7, 1964.

/1/Source: National Archives and Records Administration, RG 59, Central Files 1964-66, POL US-USSR. Limited Official Use. Drafted by Philip Valdes and approved in S on January 19.

SUBJECT
U.S. Industrialists Trip to the USSR

PARTICIPANTS
Mr. James Linen--President of Time, Inc.
Mr. C. W. Cook--President of General Foods Corporation
Mr. Harper--President of the Aluminum Corporation of America
Mr. Richard Clurman--Chief of Correspondents, Time, Inc.

The Secretary
Mr. Valdes--SOV

Messrs. Linen, Cook, Harper and Clurman called to discuss the trip they and other industrialists recently made to Western Europe and the USSR. They reported they had been given VIP treatment in Moscow, and the Soviet part of their trip consisted primarily in seeing Khrushchev--for seven hours at one session. The Secretary commented the Soviets probably considered them to be the "ruling circles" of the US.

The Secretary asked the group if they had seen any indications of the current Soviet economic difficulties, adding that we had underestimated these difficulties. The extent of the problem can be seen by Soviet willingness to spend one billion dollars worth of their gold reserve of two and a half billion to buy wheat. The Secretary added that when he had seen Khrushchev in Moscow in August he noted Khrushchev had been preoccupied, and thought at the time it was because of the Chinese problem. In retrospect, it seems it may well have been over the Soviet economy.

Mr. Harper replied that Khrushchev had tried hard to convince the group the Soviets wanted trade, and had urged them to sell him fertilizer plants.

Mr. Linen added that at a reception Khrushchev had talked to Mr. Peterson of the Bank of America for twenty minutes or so on the Soviet desire for credits.

The Secretary interjected that we have been trying to hold the line on credits, not just to the USSR but generally, though the British have been a problem. Mr. Linen commented that Khrushchev played on the US-British difference.

The Secretary said the Senate Foreign Relations Committee has said it will take a hard look at trade with the USSR, and the Administration is also studying this. Not too much can be expected, however, since there is not too much the Soviets have to trade.

Mr. Harper said the Soviets told them they could trade us anything we wanted, and seemed very sensitive to the line that they had nothing to trade.

Mr. Cook asked the Secretary to confirm his estimate of two and a half billion dollars of gold reserves. The Secretary said this was our firm estimate, and added that given the Soviet program and their reserves, there is a question of how good a credit risk they are. This is more of a problem than we had supposed. We had thought that the wheat sales were a one-shot operation, but with what we have seen of the virgin lands, and the dust bowl they are turning into, the less short-term the wheat shortage seems.

Mr. Cook said he had come to a similar conclusion. The Soviets do not have enough land with adequate rainfall, they lack herbicides and pesticides as well as fertilizer, and have no seed strains suitable for using with heavy applications of fertilizer. It seemed likely, therefore, the Soviets would be in the wheat market for three or four years.

Mr. Harper asked how the Soviets would pay for the wheat.

The Secretary suggested they might exchange what they have, arms for example, for a commodity such as Cuban sugar or cotton that they could sell on the market.

In reply to a question as to whether it was a better tactic to freeze out the Soviets, or to let them see the benefits of the capitalist world, the Secretary commented that a new situation has arisen since 1955 by virtue of our ability for mutual nuclear destruction. Under modern nuclear conditions, he did not worry that fertilizer plants would increase Soviet military strength, as it might have in the days of long, conventional wars. He added that we do not want to get into an aid program with the Soviets via credit. We would rather give our aid to the Free World. In the case of wheat, however, we have it coming out of our ears, and we are short of gold. If the Soviets spend gold for wheat, this could be very important. The Secretary recalled he had told Khrushchev in August/2/ that we would like to trade with the USSR, but as traders. We would like to sell 1,000 tractors, not just one, for the Soviets to copy.

/2/For a summary of Rusk's conversation with Khrushchev, August 5, 1963, see Foreign Relations, 1961-1963, vol. V, Document 344.

Mr. Harper said they had tried to push Patolichev (Minister of Foreign Trade) on patents. Patolichev had not responded, but a Chamber of Commerce man had insisted that no Americans had applied for patents.

The Secretary asked if Alcoa had a plant in Jamaica, and suggested to Mr. Harper that his office there look into the Jamaica situation. The Soviets have offered to underwrite a 250 million dollar five-year development program. Alcoa could be of assistance to us on this.

As the group left, the Secretary summarized by saying that there would be trade, not aid, with the Soviet Union, but suggested they did not count on too much. There are many problems, such as Soviet ability to pay, patents, and lend lease.

3. Telegram From the Embassy in the Soviet Union to the Department of State/1/

Moscow, January 8, 1964, 6 p.m.

/1/Source: National Archives and Records Administration, RG 59, Central Files 1964-66, CON 4 US-USSR. Secret.

2121. Deptel 1945./2/ In my discussion with Gromyko on Dec. 3,/3/ I did consider it useful to review entire range of pending bilateral issues in way designed to focus his attention on bilateral relations as whole and to leave impression of interrelationship between Civil Air Agreement, leased line, satellite communications, Consular Convention and Exchange Agreement. However, I am somewhat alarmed by lengths to which this thought is carried in introductory paragraph of reftel, which would appear to make settlement any of these dependent on settlement of all. We do not consider such linkage either feasible or in US interest. These several questions involve different agencies of Soviet system and different points of view, which, even if they really wanted to do so, Soviet Foreign Ministry or even Soviet leadership might have difficulty in overcoming or reconciling at any given time. Fact is that despite provision in Roosevelt-Litvinov agreement/4/ calling for prompt negotiation consular convention we have managed to carry on consular functions for past 30 years with degrees of success dependent more on general political atmosphere than on non-existence of conventions as such. Similarly, we have developed and carried on increasingly successful exchange program over past six years without any of other arrangements now under negotiation. All of these proposals are desirable and all are interrelated in the general context of bilateral relations and in the sense that each supports, or facilitates the carrying out of the other. However, flat linkage between them would reduce rate of progress to least common denominator (we're not even certain which this is, at present) and even risk set-back from present levels, notably in field exchanges. I trust this is not what Dept has in mind.

/2/Telegram 1945 to Moscow, January 4, commented on the inter-relationship of several bilateral issues and offered specific advice on two aspects of the negotiations for a consular agreement. (Ibid.)

/3/See Foreign Relations, 1961-1963, vol. V, Document 383.

/4/For text of this agreement, November 16, 1933, see ibid., The Soviet Union, 1933-1939, pp. 33-34.

Kohler

4. Special National Intelligence Estimate/1/

SNIE 11-5-64

Washington, January 8, 1964.

/1/Source: Central Intelligence Agency, O/DDI Registry: Job 79-R01012A. Secret; Controlled Dissem. Submitted by the Director of Central Intelligence and concurred in by the United States Intelligence Board.

SOVIET ECONOMIC PROBLEMS AND OUTLOOK

The Problem

To review, briefly and in general terms, current Soviet economic policies and problems, and to assess the course, implications, and overall outlook of the Soviet economic scene over the next few years.

Summary and Conclusions

A. A number of serious long-run problems in the Soviet economy have recently reached an acute stage. Overall growth is lagging, various sectors of the economy are intensifying competition for scarce resources, agricultural production is falling far short of needs, large wheat purchases in 1963 have greatly aggravated the hard-currency deficit, and gold stocks are nearing a critically low level. This situation is due in part to chronic Soviet mismanagement, but mainly to the burdens imposed on the economy by a series of programs too ambitious for available resources. The demands of defense and space have greatly encumbered economic growth since 1958. Recently, industry has been adversely affected, as well as agriculture and the production of consumer goods. (Paras. 1-4)

B. Soviet leaders have now launched a new effort to cope with their most intractable economic problem--the stagnation of agriculture--through a large expansion of the chemical industry, especially for the production of fertilizer. They apparently expect to finance this program from the expansion they anticipate in the economy, from cutbacks in some nondefense programs, and from large and long-term Western credits. But we also think that the Soviets will make every effort to hold down defense and space expenditures so as to release scarce resources for investment in the civilian economy. (Paras. 6-8, 10, 18, 20)

C. While defense expenditures may decline, we think it more likely that they will continue to grow, though at a slower pace than in the recent past. In the short term, the Soviet leaders have the option of reducing force levels, but in the long term they must consider the advisability of curtailing or stretching out one or more programs for advanced weapons. (Para. 20)

D. The Soviets will make sustained efforts to expand trade with the West, and particularly to obtain large and long-term Western credits. This will help foster continued restraint in the tone of Soviet foreign policy, though not major concessions of substance. (Paras. 21, 22)

E. Over the next few years, investment in agriculture and the chemical industry will greatly increase, partly as a result of the policies above outlined, partly from the natural growth of the total Soviet economy. However, chances of restoring previous high levels of industrial growth are slim, and the innate rigidities of Soviet planning and administration will continue to hamper the economy. Many of the chemical program's current targets will almost certainly not be met, agricultural production will fall far short of projected goals, and significant benefits to the consumer will be several years in the making. (Para. 25)

[Here follows the Discussion section of the Estimate.]

5. Telegram From the Department of State to the Embassy in the Soviet Union/1/

Washington, January 9, 1964, 8:21 p.m.

/1/Source: National Archives and Records Administration, RG 59, Central Files 1964-66, CON 4 US-USSR. Secret; Priority. Drafted by Kempton Jenkins (SOV), cleared by Bundy, Tyler, Thompson, Harriman (in draft), L, SOV, FAA, and USIA; and approved by Rusk.

1990. Ref: Embtel 2121./2/ For Ambassador from the Secretary.

/2/Document 3.

Your assumption that settlements of consular convention, exchange agreement, civil air agreement, and leased line issues are not absolutely interdependent is correct. I appreciate your cogent comments this important and elusive question.

However, we are convinced of necessity scheduling progress on these individual projects in such way as to maximize our leverage and pressure upon Soviets to satisfy our patently legitimate leased-line request and minimum position on consular access. It is precisely because of risk of set back from present levels in field of exchanges that we find Soviet commitment on consular access question essential prior to conclusion cultural negotiations. Domestic reaction in this country to Barghoorn case,/3/ particularly in Congress and academic world which will have to carry burden implementation exchanges agreement, in our judgment will result in seriously curtailed cultural exchange this year and sharp opposition to air agreement if we cannot provide evidence that arbitrary uncivilized Soviet action against American citizens is more unlikely in future.

/3/For documentation on the arrest of Frederick Barghoorn on October 31, 1963, see Foreign Relations, 1961-1963, vol. V, Documents 372-374 and 376.

Specifically wish to emphasize that formal conclusion consular convention is not necessarily what we have in mind, since this obviously depends on several non-substantive factors. But Soviet acceptance of at least our minimum access and notification position does inevitably affect our ability to conclude and implement satisfactorily broadest possible exchanges agreement and civil air agreement.

As President has made clear in the State of the Union address,/4/ we are determined press ahead with possible areas agreement in U.S.-Soviet relations. Therefore we desire leave no stone unturned to point out to Soviets those barriers to such progress which it is clearly within their ability to remove. Removal in this case requires changes administrative procedures and not abandoning vital Soviet interests.

/4/For text of the State of the Union address, January 8, see Public Papers of the Presidents of the United States: Lyndon B. Johnson, 1963-1964, Book I, pp. 112-118.

Rusk

6. Memorandum for the Record/1/

Washington, January 13, 1964, noon.

/1/Source: Johnson Library, National Security File, Country File, USSR, Dobrynin Conversations, Vol. I. Top Secret; Eyes Only. Attached to a memorandum of transmittal from Bundy to Rusk and Thompson.

SUBJECT
Meeting with Ambassador Dobrynin, Jan. 13, 12 o'clock

Ambassador Dobrynin came in today, at my invitation, to hear my reflections in response to the reflections which he had offered me on December 31./2/

/2/For a memorandum for the record of this conversation, see Foreign Relations, 1961-1963, vol. V, Document 390. On January 9 Thompson also raised the question of a summit meeting with Dobrynin. The Soviet Ambassador expressed the opinion that such a meeting would be useful, but no conclusions were reached during the discussion. (Memorandum of conversation; National Archives and Records Administration, RG 59, Presidential Correspondence: Lot 77 D 163) On January 13 Ambassador Kohler transmitted his recommendations on a summit meeting in telegram 2162. (Department of State, S/S-I Limdis/Exdis Microfilm) Kohler voiced his disapproval of a bilateral summit, but suggested the utilization of the "Pen Pal" channel in moving forward some of the interrelated bilateral questions.

I told the Ambassador that I had thought about his reflections in the framework of the President's clearly expressed conviction that nothing was more important than to find ways of strengthening the peace and to find new openings for good agreements between the Soviet Union and the United States.

I then said that in thinking about the possibility of a meeting with the Chairman, I had found myself increasingly impressed by the very great political difficulties standing between the President and any trip outside the country. I said that the President's position was different from that of President Kennedy in three ways:

1. There was now no Vice President, which meant that there was no one to whom the interim responsibilities of the President could be readily assigned during his absence from the country. As a result, there would be real difficulties in domestic terms for the President to leave the country on any but a very serious mission.

2. The President was deeply engaged in the process of trying to secure the passage of his legislative program, and particularly of the two great measures which President Kennedy had first put forward--the tax bill and the civil rights bill. The time available to get these bills through was now very short, and President Johnson did not have what President Kennedy had had--an experienced Vice President to whom he could confide the responsibility for working with the Congress on these measures while he was out of the country. It would be very difficult for the President to maintain a sense of urgency and of pressure upon the Congress if he himself were to leave the country on any but the most urgent of meetings.

3. The President, on straight political grounds, thought it was of great importance for him to continue to maintain the continuity and stability of the Presidency by sticking right to his work here in the United States, and thus I thought he was in the process of making a rule that he simply would not leave the country at all in 1964. I explained that we had been confronted with this problem by an informal inquiry about a visit to Martinique, and I told the Ambassador that while, of course, the two questions were not directly related, I also thought that in the process of explaining this position to the French, we had necessarily been put in the position of making clear the difficulty the President would have in leaving the country at all this year.

Thus, I concluded, my own thought now was that we ought not to think in terms of a possible meeting in 1964, unless we should somehow be successful in finding some very large new forward step, at least comparable in magnitude to the nuclear test ban treaty. I did not know what such a step might be, but I thought it was entirely reasonable for both sides to continue the work to find such a new and major achievement.

The Ambassador pressed me somewhat to know what kind of proposals would meet this standard, and I said I thought this was a very important matter and one which deserved reflection. I thought it was not just a matter for my reflection, but for his as well, and perhaps when we both had thought about that we might talk again. He was non-committal and tried more than once to indicate that it was for me to say what package would be big enough. He asked whether any of the new proposals which he saw that we were going to make in Geneva would be the appropriate size and shape to justify a meeting. I said this was a good question, and one which I could not answer without further reflection.

I told the Ambassador that we were disappointed in the tone of his country's propaganda about the situation in Panama, and he replied that as far as he knew, his people were saying nothing more than the Panamanians were saying. I said I thought this was not the case and that he should not think propaganda of this kind was helpful to our relations.

The Ambassador's invitation to put a price tag on a summit meeting is obvious, but I doubt if we need to do this for some little time, if at all. Since I pressed the Ambassador to put up his own suggestions, I think we can easily wait for them to come again if we prefer./3/

/3/In his memoir, In Confidence: Moscow's Ambassador to America's Six Cold War Presidents, Dobrynin recalls the meeting with Bundy but says "later we learned that it was Rusk who had more or less discouraged Johnson from taking part in the meeting: the secretary of state considered he was not ready for it yet." (pp. 116-117)

McG. B.

7. Telegram From the Embassy in Belgium to the Department of State/1/

Brussels, January 17, 1964, 6 p.m.

/1/Source: National Archives and Records Administration, RG 59, Central Files 1964-66, POL 1 US-USSR. Confidential; Limdis.

1006. As instructed by Secretary January 9 I saw Spaak/2/ today to convey Secretary's warmest personal good wishes and regards and to acquaint him on informal confidential basis with Secy's current thinking re East-West negotiations (so that Spaak would not feel compelled to make uncoordinated initiatives or proposals re East-West negotiations that could create problems). Explained that while we have no illusions that basic Soviet objectives have changed, Secy wants Spaak to know our views because we greatly appreciate Spaak's leadership in NAC and elsewhere in trying to keep our allies alert to possibility for progress and desirability of taking advantage of any openings that may present themselves to reduce tensions with the Soviets through formal or informal agreements.

/2/Paul-Henri Spaak, Belgian Foreign Minister, and former NATO Secretary General.

Following is summary of what I said to Spaak, at conclusion of which he asked his deep appreciation be expressed to Secy for latter's confidence in him. He said he concurs entirely with Secy's views re East-West negotiations set forth below and will endeavor to continue to be helpful to US. He also said he fully approves our draft reply to Khrushchev as tabled in NAC in Paris and deplores negative and unhelpful position of de Gaulle. (We do not have text of our draft reply to Khrushchev.)/3/

/3/For text of Khrushchev's December 31, 1963, letter to President Johnson, see Documents on Disarmament, 1963, pp. 654-665; text of the President's reply, January 18, is ibid., 1964, pp. 5-7.

(Following is summary of presentation to Spaak.)

1. General Observations.

We do not believe Soviet purposes have changed and indeed Khrushchev has insisted there is not and cannot be any ideological co-existence although there has been some improvement in East-West atmosphere as a result of certain limited agreements such as "hot line"; Test Ban agreement, etc.

At same time we recognize Khrushchev has his troubles and Soviets have great economic problems in their allocation of limited resources. Their gold and foreign reserves probably in neighborhood of $2 billion and they have been or will be obliged to spend perhaps almost $1 billion for grain. Demands of Soviet agriculture are great as are those for social advances (housing, consumer goods, etc.) whereas Soviet space and defense programs are very costly.

Insofar as overall picture concerned, Cuban missile crisis may have been more significant and sobering to Soviets than we ourselves believed at that time in causing the Soviets to think again about their past policy of rattling the threat of missile annihilation to US and our allies.

In past two years we have engaged in far ranging probing of Soviet position and have explored and tried to identify elements of common interest. We believe as a result there is better comprehension in Russia of our position and that the Soviets have been influenced in constructive direction by our views on certain issues. Appointment of Soviet Amb Dobrynin who knows and understands US has also probably contributed to greater Soviet understanding of our basic views and positions and our non-negotiable vital interests.

2. Discussions with Soviets.

A. Possibility of multi-lateral agreements with Soviets: These consist of such matters as (I) disarmament dealt with at Geneva where prospect of breakthrough in near future not great; (II) Non-aggression Pact, but here also unless Berlin were included or we derived substantial other benefits there would be little advantage for us. While it useful keep discussion of multi-lateral possibilities with Soviets going we do not believe possibility of new and far-reaching multi-lateral agreements of a formal nature too promising in reasonable future.

B. Bilateral Agreements with Soviets. In this area there are limited and modest possibilities: (I) Consular Convention; (II) Civil Air Agreement providing for flights between US and Soviet Union; (III) agreements on cultural exchange; (IV) possibly some modest and limited agreements looking to an expansion of peaceful trade but here also except for grain the field is limited because Soviets, who engage in barter trade, have so little to offer.

C. Third area of exploration with the Soviets involved subjects where our policy interests coincide but where formal international agreements are not possible. In other words problems where both we and Soviets, each for his own reasons, desire to act along parallel lines. Where, in effect, there is de facto similarity of interests and policy although no formal agreement is possible.

(I) Non-dissemination of Nuclear Weapons. The Soviets, like ourselves, desire avoid nuclear weapons dissemination and seem want them limited to nations (US, UK, France and Soviet) who have such weapons today. They do not wish US to give them to our other allies and Soviets apparently do not intend on their part to give them to ChiComs or satellites. However formal agreement probably not possible as among other things Soviets would probably insist we abandon MLF as conditions for non-dissemination agreement.

While Soviets oppose MLF they would probably do so in any event as the Soviets oppose anything that ties Germany closer to its principal NATO allies and strengthens Western unity. Actually, Soviet principal objective is Germany not have its finger alone on nuclear trigger and MLF should prevent this.

(II) Lowering Defense Budgets. Here also there seems little possibility of a "formal agreement" because it would be virtually impossible to reach meaningful agreement on what a defense budget includes and because basic factors involved in such budgets are different (i.e., we pay enlisted men minimum of $120 per month whereas Soviets pay only fraction thereof). In Soviet closed society true size of military budget can be concealed and recently when military budget went down budget for "other" types of research and development (probably including military) went up. However, defense budgets of Soviets and ourselves are leveling off and may undergo modest reduction in years ahead even though it would not seem possible to have a formal accord on this. We have told Soviets we would be willing to sit down and have technical people try to reach common understanding or definition of what elements of defense budget should be but Soviets have not taken us up on this. Nonetheless, we believe Soviets do have an interest, as do we, in leveling off and trying to reduce military spending. And we believe what we have said to them about this over the past two years has had an influence on them.

(III) Limited Measures that Could be Helpful in Certain Aspects of Arms Control. For example, agreement to destroy obsolescent bomber aircraft (B-47's and Badger) could be useful. For although these aircraft becoming obsolete in terms of total nuclear war they would still represent formidable weapon if they were given to other states (i.e., if given to Arabs it could present mortal danger for Israel and cause latter to act; if given to certain Asian nations (Indonesia) it could increase hostilities in that area, etc.). Soviets have asked us if we have other weapons in mind in addition to aircraft and we have expressed a willingness to examine other proposals but they have not followed up on this.

(IV) Nuclear-free Zones in Latin America and Africa. We feel this also offers de facto opportunities even if no formal agreement possible because (a) there are not nuclear weapons in these areas now; and (b) because these areas do not represent primary military or industrial targets. Although formal agreement perhaps impossible (Cuba might not agree unless US was included in atom-free zone and Arabs might not because of fear Israel might get "the bomb," etc.) we believe Soviets do not wish to see weapons extended into these areas any more than we do and therefore an area of tacit even if not formal agreement may be possible.

(V) We also believe we should continue to probe Soviets and urge them be cautious in such areas as Laos, Vietnam and Cuba where dangers could escalate. Re Laos and Cuba Soviets have not been entirely unresponsive but insofar as Vietnam concerned we have had little comfort or sympathy.

To summarize some constructive progress has been and may continue to be made in some of these problems by mutuality of US-Soviet interest without formal agreements and therefore fact that there are no formal agreements being negotiated does not mean we are frozen in a rigid position. We will continue to probe and believe that this method more designed to achieve positive results in certain areas than by trying to insist on formal agreements. (End summary.)

MacArthur

8. Notes of a Meeting/1/

Washington, January 23, 1964, 11:30 a.m.

/1/Source: Johnson Library, National Security File, Bundy Files, Box 18, Miscellaneous Meetings, Vol. 1. Confidential. The meeting was held in the Situation Room at the White House.

SUBJECT
Wheat Shipment to the USSR

PRESENT
Under Secretary Ball, Under Secretary Harriman, Griffith Johnson; Secretary Freeman, Under Secretary Murphy; Secretary Hodges, Robert Giles (General Counsel); Secretary Wirtz; Mr. Moyers, Mr. Feldman, Mr. Bromley Smith/2/

/2/G. Griffith Johnson, Assistant Secretary of State for Economic Affairs; Orville L. Freeman, Secretary of Agriculture; Charles S. Murphy, Under Secretary of Agriculture; Luther H. Hodges, Secretary of Commerce; Robert Giles, General Counsel for the Department of Commerce; W. Willard Wirtz, Secretary of Labor; and Myer Feldman, Deputy Special Counsel to the President.

Mr. Moyers acted as chairman of the meeting which he said had been called because the President wanted to know what difficulties were being encountered in shipping U.S. wheat in U.S. ships./3/

/3/For memoranda of meetings on the wheat sale during October and November 1963, see Foreign Relations, 1961-1963, vol. V, Documents 359, 366, 370, 371, and 375.

Secretary Freeman said that the problem we were facing was the long-term one. The Russians will not pay a shipping subsidy to get U.S. wheat. However, they do want more U.S. wheat in the future. Our problem is to decide what we should do. Uncertainty about the use of U.S. ships is the basic problem. Are we to continue to insist that 50% of the U.S. wheat be shipped in U.S. bottoms?

Secretary Hodges agreed that the basic problem was whether or not we did away with the requirement that 50% of the ships used to move U.S. wheat to the Soviet Union be U.S. bottoms.

Secretary Freeman said the Russians would be interested in buying 1,500,000 tons of wheat next spring, but no one can negotiate with them in view of uncertainty about the shipping problem. There is doubt as to how the Continental deal is coming out.

Mr. Giles said that U.S. exporters set out to lay down conditions which would result in using the least amount of U.S. shipping. Their purpose was to hold down the delivered price of U.S. wheat. The shippers came back with conditions which were quite unsatisfactory to the exporters. The Continental Company is now in a position to say that insufficient U.S. shipping is available to move the grain they are selling; hence, they will be asking Commerce to waive the requirement that 50% of the grain be moved in U.S. bottoms.

Secretary Wirtz said that the understanding reached within the Administration last November was that 50% of the U.S. grain would be moved in U.S. ships. He said the Commerce Department cannot set conditions which rule out the use of U.S. ships and then say that foreign ships can be used to move the wheat.

Mr. Giles said the understanding of last November was that 50% of U.S. shipping would be used, if available.

Secretary Wirtz said the "if available" phrase was added at a later date. He said it was understood that conditions would not be imposed which would result in frustrating the 50% limitation. He said he understood that all had agreed that if we couldn't get 50% of the grain shipped in U.S. bottoms, the wheat sale to the USSR would not be completed. He added that he was not saying that a waiver of the 50% requirement should not now be made.

Several others at the meeting did not agree that the understanding was as described by Secretary Wirtz. Secretary Hodges said the agreement was to grant a waiver if U.S. ships were not available and he felt that it was possible that only 25% of the wheat sold by the Continental Company would be moved in U.S. bottoms.

In answer to a question by Mr. Feldman as to whether the labor unions would accept a waiver of the 50% shipping requirement, Secretary Wirtz said the unions would agree if the conditions affecting U.S. shipping were fair and if the reasons why the waiver was being granted were explained to the union leaders.

Secretary Freeman called attention to the decision to use smaller ships to move PL 480/4/ wheat which had the effect of taking the smaller U.S. ships out of the shipping pool. He said now that we had cleared the air on the existing wheat contract, he believed that we should state all conditions involved in wheat shipments so that grain dealers can decide whether they should try to arrange future wheat sales to the USSR.

/4/Formally entitled the Agricultural Trade Development and Assistance Act, enacted July 10, 1954; for text, see 68 Stat. 454.

In an exchange between Mr. Giles and Secretary Freeman, an understanding was reached that it would be all right for the Continental Company to bunch up its shipments in February and March at a time when few U.S. ships would be available--hence, grain would be moved in foreign bottoms. Mr. Giles was interested in seeing that U.S. shipping firms benefited from this trade and Secretary Freeman was obviously seeking to keep the cost of shipping wheat down so as to make possible additional wheat sales.

Secretary Wirtz said that the scheduling of the shipping of wheat was being used to alter the 50% policy decision. In effect, he said the position was now that we would use 50% U.S. shipping if the cost was equal to foreign shipping costs. He repeated his belief that the Administration had decided to pass up wheat sales to the USSR if it was not possible to move half of it in U.S. ships. The unions have gone along with U.S. policy when it has been explained to them. Trouble always occurs when they read of a U.S. decision in the newspapers and afterwards have it explained to them. The next time he hoped that it would be possible for the Government to consult the unions in advance of the announcement of any new policy.

Mr. Feldman sought to summarize U.S. objectives as follows:

a. We want to sell wheat.

b. We want to use U.S. shipping, if possible, but the major objective is to sell wheat.

c. We want to help the U.S. maritime industry.

d. We want to convince the American people of the advantages of selling wheat to the USSR.

Mr. Giles worried that the Administration would be conniving to get U.S. ships out of the trade if we require bunching up of wheat deliveries in February and March while the Soviets are willing to accept delivery in April.

The group agreed that Cargill should work out a shipping

arrangement with the Russians. It would not be a condition that the delivery be made within a fixed period. The Government would not place a roadblock by requiring that wheat shipments could not be bunched. Cargill would then take the gamble involving the shipping costs.

Secretary Freeman raised again the long-range problem of wheat sales. He said he understood that Secretary Hodges would not waive the 50% shipping requirement on next year's spring crop. He asked that each Department do a paper on U.S. policy with respect to sales to the USSR of the 64 wheat crop. He saw the alternatives as:

a. Putting wheat on the free list, like barley.

b. Working out a deal.

c. A Government-to-Government negotiation.

The purpose would be to avoid the U.S. Government subsidizing U.S. wheat sales to the USSR.

Secretary Wirtz introduced the difficulties he was having with the unions which are active in trying to block Cuban shipping. Mr. Ball explained current U.S. policy toward Cuban shipments. Secretary Wirtz repeated that it would have been easier to deal with the unions if he had been able to tell them in advance how we were handling shipments to Cuba.

Mr. Ball reminded the group that, in discussing future wheat sales to the USSR, the State Department had gone on record with the maritime nations which had protested the requirement to use U.S. ships in the Soviet wheat deal that the wheat sale was a one-shot operation and did not mean that in the future we would discriminate against foreign ships.

Secretary Hodges said Commerce would keep Labor informed currently on all aspects of the shipping problem. Secretary Wirtz was authorized to talk to the unions in advance of Commerce granting a waiver of the 50% shipping requirement./5/

/5/As of February 6, 1964, sales of U.S. wheat to the Soviet Union since the October 1963 authorization of such sales totaled 1,700,000 metric tons. (American Foreign Policy: Current Documents, 1964, p. 633, footnote 11) In a May 24 memorandum to the President, Bundy reported that the outlook for another sale during the next few months was poor, unless Soviet weather turned sour. "Our evidence is that the Soviets found their last trade with us difficult and unrewarding, and will certainly not put us first in their list of possible sources." (Johnson Library, National Security File, Memos to the President--McGeorge Bundy, Vol. 4)

Bromley Smith/6/

/6/Printed from a copy that bears this typed signature.

9. Editorial Note

On January 28, 1964, a Soviet fighter shot down a U.S. T-39 training aircraft over East Germany. The three U.S. officers aboard were killed. At noon on January 28 Secretary of Defense McNamara telephoned President Johnson to brief him on the incident. McNamara told Johnson the flight had been cleared "only for local flying," but, probably due to bad weather and failure of its communication equipment, it had strayed into East German airspace. McNamara assured the President that the aircraft was not on an intelligence mission. (Johnson Library, Recordings and Transcripts, Recording of a Telephone Conversation, Tape F64.08, Side A, PNO 6) The Soviet note protesting the intrusion, January 29, and the U.S. oral reply, made to Soviet Deputy Chief of Mission Kornienko the same day, are printed in American Foreign Policy: Current Documents, 1964, pages 526-527. In its reply, the United States called the Soviet action an "inexcusably brutal act of violence against an unarmed aircraft."

10. Memorandum From the Assistant Secretary of State for European Affairs (Tyler) to Secretary of State Rusk/1/

Washington, February 11, 1964.

/1/Source: National Archives and Records Administration, RG 59, Central Files 1964-66, CON 4 US-USSR. Confidential. Drafted by David Henry and Robert Owen (SOV) and Ralph Jones (SES) and initialed by Tyler. A notation on the memorandum indicates it was discussed with Rusk.

SUBJECT
Current Status of Various Bilateral Negotiations with the USSR

We are currently conducting bilateral negotiations with the USSR on three subjects of long-range importance, a Consular Convention, a Civil Air Agreement, and a new Agreement on Exchanges. The Consular Convention and the Exchanges are at present under active discussion in Moscow. The current status of each of these matters is set forth below.

Consular Convention/2/

/2/Documentation on the negotiations for a consular agreement, which began in October 1963, is ibid.

Recent developments in the Moscow negotiations for a United States-Soviet Consular Convention suggest that a possible impasse will be averted and that a useful convention will be concluded in the near future. The USSR recently offered us an important concession, promising that United States consular officials will be notified promptly and permitted quick access to United States citizens arrested and detained in the USSR. This concession is conditioned on our accepting the Soviet demand for greater immunities to be enjoyed by consular officials./3/ We have reached agreement within the Executive Branch on accepting this proposal and Governor Harriman briefed members of the Senate Foreign Relations Committee this morning on the topic./4/ It thus looks as though we shall be able to reach final agreement with the USSR in the relatively near future. The anticipated conclusion of a Consular Convention containing notification and access provisions to our liking will exert a positive influence on negotiations for civil aviation and exchanges agreements as well as set the stage for subsequent discussions concerning the reciprocal establishment of one or more consular offices in each country. Furthermore, the US-USSR convention probably will serve as a pattern for United States bilateral consular conventions with other Soviet Bloc States, several of which (Poland and Rumania) have evidenced interest in commencing negotiations./5/

/3/In a January 31 memorandum for Bromley Smith, Klein reported that the "last stumbling block" in the negotiations was the "question of immunities for consuls. The Soviets clearly want to protect their consuls from arrest for espionage." The "gut question is what happens in the case of espionage, and here the State Department is satisfied that expulsion is an available instrument for dealing with this problem." (Johnson Library, National Security File, Country File, USSR, Consular Convention, Vol. I)

/4/For text of Harriman's testimony, see U.S. Senate, Executive Sessions of the Senate Foreign Relations Committee, vol. XVI, pp. 63 ff.

/5/Agreement on the Consular Convention was reached on April 28, ad referendum. Kohler and Gromyko signed it at Moscow on June 1. For text of the convention and President Johnson's statement, see Department of State Bulletin, June 22, 1964, pp. 979-984.

Civil Air Agreement

The prospects for the early conclusion of the United States-Soviet Civil Air Agreement which was negotiated but not signed in 1961 have improved as the result of progress in the consular convention negotiations and of Soviet agreement a few days ago to make available a leased line to facilitate communications between our Moscow Embassy and the Department./6/ The Soviets are insisting that formal signing precede the starting of technical talks. Should the latter be initiated soon and barring a serious chilling of the political climate, it may be possible to inaugurate Moscow-New York air service by early summer.

/6/In a meeting with Kuznetsov on January 3, Kohler emphasized the importance of favorable action on leased lines, indicating it "would have some weight" with Johnson and Rusk as they considered direct flights and noting that President Kennedy had expressed concern over the time lag in telegram transmissions during the Cuban missile crisis and the nuclear test ban negotiations. (Telegram 2077 from Moscow, January 3; National Archives and Records Administration, RG 59, Central Files 1964-67 AV 4 US-USSR)

Exchanges Agreement

Negotiations, which began in Moscow January 7, have now reached a decisive stage./7/ Significant progress has been made thus far with regard to the specific exchanges to be included in the various thematic sections of the new agreement, with the notable exception of the section on informational exchanges (covering publications, radio-TV, exhibits, journalists, etc.). Indications are that the new agreement will increase agricultural exchanges by some 15% or more; educational and cultural-professional exchanges (artists, writers, musicologists, etc.) will increase very modestly; scientific, technical, medical, performing arts, athletic and motion picture exchanges will remain at the level of the last agreement. Soviet efforts to remove the reciprocal and other safeguards of previous agreements are still under negotiation. One key unresolved general issue hinges on Soviet insistence that the new agreement provide blanket approval for all future contacts between Soviet organizations and United States groups of their choosing. Although signature of a new agreement is expected in due course, it is not anticipated that these issues will be resolved before the latter part of February.

/7/Memoranda of the negotiating sessions and telegraphic reports on the meetings to discuss the exchange agreement for 1964-1965 are ibid., EDX 4 US-USSR. For text of the agreement, signed on February 22, see American Foreign Policy: Current Documents, 1964, pp. 648-663.

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