Dollars and Detente

...A more fundamental issue raised by this style of financing, especially in the field of energy, is whether the U.S...

...And the primary beneficiaries of the more than $1.4 billion in U.S.-Soviet trade last year have been U.S...

...Negotiations are still in an early phase...

...Even corporate aircraft giant Boeing has complained about the Council's fee schedule...

...It was 1959, and a young, anti-communist Vice President Nixon stood next to Soviet Premier Nikita Khruschev in an American-style kitchen, arguing about whose system of government would ultimately prevail...

...Congress, however, has considerable leverage over such trade...

...If North Star receives Ex-Im Bank credit, and the LNG venture does not, Japan will once again have been entirely cut out of the new energy market by the United States—hardly an inducement to cordial Japanese-American relations...

...The dangers of such deals are illustrated by three joint energy projects being considered by American multinational consortia...

...Multi-billion dollar barter projects like Hammer's deal are the wave of the future, according to Commerce Department officials, but raise serious economic and political questions...

...In both projects, the corporations that have negotiated the terms of the ventures do not have a direct financial stake in them...

...Government's chief tool for providing credits and loans to finance the purchase of American equipment and technology...

...A bizarre coalition of cold warriors and liberals has formed to deny the USSR most-favored-nation treatment unless it permits free emigration of its citizens, intended to aid Soviet Jews who wish to emigrate to Israel...

...Several Senators have said that some members of the coalition don't give a damn about the human rights issue but are only interested in killing detente with the Soviets...

...giants, Occidental, El Paso Gas, and Bechtel, but Japan as well...

...Government...

...Several sources have verified Subcommittee contentions that Administration officials rejected reliance on the chambers because they were too large and could not be directed in the same way a smaller, more exclusive group might be...

...Administration officials have not yet officially redefined Project Independence, but unofficially they indicate the goal of total energy self-sufficiency must be modified somewhat to enable the Administration to pursue the equally important goal of strengthening detente through expanded commercial relations...

...Commerce officials say the deals would give the United States access to new sources of natural gas and oil that would not result in an outflow of capital injurious to American balance of payments...

...A similar financing scheme has been worked out for Occidental's fertilizer project...

...The Nixon Administration possesses mechanisms for dissuading trade it decides is inimical to American national interests...

...In the House a majority signed a resolution which calls for a moratorium on credits to the Soviet Union until the Senate acts on the Administration's trade bill...

...The Multinational Subcommittee is attempting to avoid aiding those who wish to see detente destroyed and yet to subject the structure of economic detente to public examination and criticism...

...The Council will not disclose its budget, but sources report that the Soviets and American companies contribute almost $1 million a year to the Council's operations...

...Although the Administration and the companies claim these negotiations are far less advanced than are the North Star talks, the LNG consortium has already applied for Ex-Im Bank credit to help finance the American share of the exploration phase...

...multinational corporations, especially those whose chief executives contributed heavily to Nixon's presidential campaigns...

...The controversial project has two phases: exploration, at an estimated cost of $200-$300 million, and development, which could cost the United States about $3 billion if sufficient gas deposits were confirmed...

...This explanation has not impressed the Church Subcommittee staff members...

...Dollars and Detente JUDITH MILLER The Nixon Administration's detente with the Soviet Union was forged less than three years ago, but its roots stretch back to a celebrated International Trade Fair in Moscow...

...multinationals having a direct interest in expanding U.S.-Soviet trade...

...The railroad's terminal would be close to the Chinese border...

...In most cases, the private bank loans are guaranteed by the Government...

...Jack Bennett, Undersecretary for Monetary Affairs in Treasury, heads the Committee's working group which meets often...

...In addition to the export controls, gas and oil imports must be approved by the Federal Power Commission...

...Officials also point out that the Soviet Union has an excellent credit record, and would not risk economic warfare with the United States by cutting off natural resources in periods of international tension...

...Government ought to provide low-interest loans of 7 per cent to finance gas and oil development in the Soviet Union instead of in the United States...

...A consortium of three corporate giants—Tenneco, Texas Eastern Transmission, and Brown and Root—are negotiating a natural gas venture known as the North Star Project...

...In Congress, the question is phrased another way: What ever happened to the Administration's plan for energy self-sufficiency, Project Independence...

...Although Council officials claim the group does not participate in actual negotiations between Russians and American companies, it admits to steering the Russians toward member multinationals that might provide the Soviets with what they need...

...Both the Soviets and the Americans operate chambers of commerce, and there already exists an International Chamber of Commerce with broad industrial representation which could have served the purpose spelled out in the protocol...

...Now, the Japanese are once again anxiously seeking participation in U.S.-USSR joint energy ventures...

...In these barter ventures, one or several multinationals provide the USSR with credit to purchase American equipment and technology to develop their natural resources, and are repaid in the natural resource generated by the American investment...

...Several banks involved in the financing have told the Multinational Subcommittee they are not particularly concerned about whether the investments are profitable or economical, but rather about whether their credits are secure...

...If the deal falls through and the Russians default, the U.S...

...If reserves justified development, a 2,500-mile pipeline would be built to carry gas from Yakutsk in Siberia to a Pacific port near the Chinese border...

...the consortium and the Soviets have not yet agreed on a price for the gas, nor has the group requested a credit extension from the Export-Import Bank (Ex-Im), the U.S...

...The Multinational Subcommittee is concerned about other foreign policy questions as well: What impact will the joint U.S.-USSR-Japan energy projects have on American-Chinese relations...

...So instead of using existing institutions, Secretary of Commerce Frederick Dent convened a group of twenty-six chief executive officers of major U.S...

...President Nixon and Soviet leaders are now toasting the official end of nearly thirty years of Cold War, and the drink is still Pepsi...

...The Administration has managed to exert substantial control so far over multinational negotiations with the Soviets through several mechanisms...

...Opponents of detente are attempting to block the Administration's request to extend the Ex-Im Bank's charter for another year and to raise Ex-Im credits from $20 billion to $30 billion...

...Government must be approved by the White House...

...In 1962, Japan was negotiating an agreement with the Russians to extend the Yakutsk oil line to a Pacific port in return for gas, a deal similar to the one Japan and Gulf Oil are now considering...

...The Japanese, who would split exploration costs with the United States, have already signed a protocol authorizing their participation in the venture if the U.S...

...Once FPC authorization is given to the price negotiated by the multinationals and the Russians, however, the companies would be assured a market for their gas and oil even if cheaper energy sources are located...

...Council dues range from $1,000 per year for an association membership to $10,000 per year for a corporation with sales of more than $1 billion...

...The FPC must also approve the price of the imported gas and oil...

...This last provision has been the focus of the House and Senate attack...

...The largest barter project so far is Occidental Petroleum's $400 million fertilizer deal, a commercial coup negotiated by Occidental's President Armand Hammer, who contributed heavily to Nixon's political campaigns...

...Japan is a participant in the Yakutsk LNG exploration project, but not in the North Star deal...

...The Administration has established a cabinet level East-West Trade Policy Committee, chaired by Henry Kissinger...

...Another unofficial mechanism of Administration manipulation, and one which affords multinationals an inside track on East-West trade, is the U.S.-USSR Trade and Economic Council...

...For example, the Japanese, who receive 40 per cent of their oil from Arab countries, are extremely eager to diversify their energy supply sources...

...The United States pressured Japan to back off on her negotiations with the Russians by canceling an agreement to buy jet fuel from the Japanese corporate giant, Idemitsu...

...private commercial banks, including Chase Manhattan, have already agreed in principle to finance another 45 per cent, with Ex-Im guarantees...

...Japan has already expressed willingness to spend up to $1.5 billion in credits in exchange for the desperately needed oil, but Gulf Oil Co., the American participant, is more reticent about the deal...

...In the Japanese-American LNG exploration venture, the Ex-Im Bank has been asked to extend credits to the Russians to cover 45 per cent of the American share of the cost...

...There, the gas would be liquefied and shipped in El Paso tankers to the United States, where it would be regasified and sold...

...The Vice President's close friend, Donald Kendall, president of Pepsico, Inc., hustled the two warring leaders over to his company's exhibition, where he temporarily reconciled the ideological squabble by presiding over a toast to the future with glasses of—what else?— Pepsi-Cola...

...In 1973 the Department processed 3,046 applications for material destined for the People's Republic of China, the USSR, and Eastern Europe, and rejected 106 applications on such grounds...

...Although it ought to have meant a reduction of political tension and military rivalry between the two superpowers, detente's principal manifestation so far has been trade...

...Wrhat effect would such a project have on the already delicate state of U.S.-China affairs...

...chaired by Senator Frank Church, Idaho Democrat, has begun the first sober investigation of detente's economic component and its impact on broader foreign policy considerations...

...So, although El Paso and Occidental would profit from Russian gas sales in the United States, the corporations would not invest a single company penny in the initial exploration phase...

...American oil and gas interests attempted to limit Soviet gas and oil exports, and accused the USSR of dumping oil and gas and pricing politically...

...The Subcommittee is particularly concerned about the effect of detente on the dangerous trend toward increasing economic concentration within the American domestic economy...

...How will such ventures affect U.S.-European relations...

...The Soviet Union would pay the remaining 10 per cent...

...The trade agreement negotiated with the Russians in 1972 included a provision enabling the Soviets to establish the Kama Purchasing Commission, U.S...

...Finally, a third project, also involving Japanese-American participation, would enable the Russians to develop the Tyumen oil fields in western Siberia and ship the oil through a pipeline to the Pacific port of Nakhodka...

...The Senate's Multinational Subcommittee staff members, however, object to the plans on different grounds —financing, for one...

...The consortium's only capital investment would be the construction of tankers to transport the gas to the United States, and even tanker construction is heavily subsidized by the U.S...

...Administration officials defend the projects to develop Soviet natural resources, arguing that they would be mutually beneficial and would serve to strengthen detente...

...The Multinational Subcommittee i$ concerned that important foreign policy considerations are being ignored as a result of the Administration's effort to shore up detente through trade...

...The Commerce Department's export control program has authority to deny export licenses for materials which could make a significant contribution to the military potential of another nation...

...Thanks to detente, the corporation that gave America its Pepsi generation has now acquired a monopoly on cola sales to the largest new accessible market in the commercial world—the Soviet Union...

...For better or worse, Kendall and Pepsi-Cola have come to symbolize the Administration's detente...

...The consortium estimates that the area contains gas equal to about two-thirds of America's domestic reserves—more than enough to justify development...

...While detente is currently being attacked in Congress by a bizarre coalition of liberals and cold warriors, the Senate Subcommittee on Multinational Corporations, Judith Miller is Washington correspondent of The Progressive...

...The protocol signed in June 1973, during the Washington summit meeting between Nixon and Brezhnev, called for the establishment of a joint U.S.-USSR Chamber of Commerce to bring Soviet officials and American businessmen together...

...companies to set up commercial offices in Moscow, an exchange of commercial representatives, and, most important, the granting of most-favored-nation—non-discriminatory tariff treatment —to the Soviets...

...While the Council professes to be open to all companies and committed to expanding its narrow membership base, its fee structure is designed to discourage all but those large corporations already seriously involved in and committed to East-West trade...

...Most of the enormous new projects being considered by American multinationals and the Soviets are "industrial cooperation" ventures—barter systems of trade particularly beneficial to the Russians, who lack sufficient hard currency to purchase the American technology they require...

...Government is left holding the bag...

...Occidental will supply the Soviets with eight ammonia plants, pumping stations, chemical storage facilities, railroad tank cars, and a 1,200-mile pipeline, in exchange for Soviet-produced ammonia and urea—scarce resources in the United States...

...A former White House official has told the Multinational Subcommittee that every venture costing more than $5 million involving the U.S...

...The Committee is responsible for coordinating economic policy with the Soviet Union and Eastern Europe and for providing American companies with trade guidelines...

...The group's president is Harold B. Scott, a former Commerce Department official who once served as vice chairman of the Committee to Re-elect the President...

...Pepsi-Cola president Donald Kendall was designated chairman of the organizing board and is now co-chairman of the Council...

...The second project, the Yakutsk Liquid Natural Gas (LNG) venture, involves not only the U.S...

...If agreement is reached with the Soviets, the consortium would construct a 1,500-mile gas pipeline from Western Siberia to a seaport near the Norwegian border, where natural gas would be shipped to the United States...

...participants decide to proceed...

...Furthermore, it is argued, the Soviet government has guaranteed that all dollars borrowed from the United States would be spent on American technology and equipment, which would boost American production and employment...

...In the Tyumen oil field project negotiations, the Russians have been pressing the Japanese and the United States for an agreement to build a railroad rather than a pipeline to deliver the oil...