Created: 12/4/1981

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rcWMNDUM FOR: Director of Central Robert M. Gates

Assistance to Poland: Tuesday's NSC Meeting

The NSC is meeting onTuesdayto consider0 millioncredit extension to Poland. Poland's desperate last minuteavoid default this nonth and the tension surrounding the government'sthe cadet firefighters* strike underscore the great fragility of thatand internal peace. Even though Poland has muddled through theand avoided internal and Soviet military action, the economy inivin^VondUions in particular have steadily continued to"deteriorate. tfPthe-last"two months or energing forms of politicalmy last meno to you on this subject, neither Solidarity nor theundertaken the drastic economic reformT^ToTutely essentialand recovery. And now, in the last" few'days',sne__rejirr<eis bentougher stance towardconfrontation. The moderates In the

government/Party andomewhaTlesSer extent"olidarity currently, and again, seem to be under increasing pressure from hardinersthus continuing the year long Polish political rollercoaster ride.

Z. It is against this backdrop that the NSC meets to consider0 million agricultural connodity credit, supplenenting the food aid the President approved several weeks ago. The financial aspects of these credits and questions of conditionality should not be permitted to obscure the two basic policy questions confronting this government: hould the U. S. act tohlflPfl'-"n'1 its Cqmjnuni5tgovernment-ifrgFj_ecoQCriLlti 'disaster.s, there any prospect that such an effort would succeed?

3. With respect to the first question, on balance,o mention moral and humanitarianbest served by continuation of the Polish experiment in pluralism. gns_ofeady are cropping up in Ror^nia. Bulgaria, anHeven 'sporadically in the_ySSR. While this should not be over-estimated and""may or may not have some connection to events in Poland, from the Soviet vantage point these disparate events almost certainly are viewed as related somehow and as harbingers of further trouble, elieve it is not going too far to say that the successful implantation of pluralism in Poland would represent the beginning of the end of Soviet-style totalitarianism'xsn hr

In Eastern Europe, with extraordinary implications for all Europe and for the USSR itself. These would almost certainly be longer lasting than the political and military benefits to usoviet military invasion of Poland. Thus, if Ihe West can promote Pol Uneconomic recovery and, related!y, the firm estabTTsh-ment of pluralism, our long-range strategic intere"5ts wCuTd" be well 'served".

Whether assistance can succeed depends on what you regard as success. If you think success is Polandrs economic stabilization and recovery, the answer in my viewesounding "no." Poland is broke. It is on the very edge of bankruptcy. Primitive barter arrangements areorthless currency. Economic recovery would require far reaching reforms and austerity and this in turn would require major compromises by both Solidarity and the Party and remarkable--and so faron the part of Polish workers. The predominance of moderates in both organizations, under even harsher conditions and greater pressures than now exist, would be prerequisite for serious reform and, in the process, continued social, labor and political peace and cooperation. Despite certain positive political developments inside Poland during the last two months, in ay view there is little likelihood that Solidarity and the Party can cooperate to formulate these essential reforms, much less persuade- their cadres to accept and implement them.

Moreover, as the attached MFAC paper makes clear, any Polish stabilizatic and recovery program willzount.of11Stance--

j perhaps SH Dillear for several years,-the coordinated response not onlyur-.ber of governments but of many private banks and financial Institutions, and Poland's acceptance of tough-to-swallow conditional tranches of assistance and stiff politico-economic terms, elieve the prospect for agreement on joint action of this scope on the part of so many different parties with divergent interests is verynm very pessimistic about the prospects for needed Polish economic reformsoreign assistance package big enough to stabilize the Polish economy and put it on the road to recovery.

you regard mere survival of the present proto-pluralistic Polandthen assistance probably would help. ptimistic"ontinuation of the kind of political and economic muddlinghas characterized the last year: eries of tactical compromises byoften at the brink of crisis, which forestall major military actionnake it all the more difficult for either the Party or Solidarity to cake

_the kind of significant concessions required to get the economy back on its feet. "

.However, credits and assistance could buy some more time for Solidarity and

Party to workore lasting modus vlvendi and see If they can net the country back to work.

the NSC should recognize that further U. S. economicmoney put up at high risk primarily for political reasons: to prolongexperiment/ (The only justification for assistancehat ourinterests are well served by0 million (or other sums)the hope tnatfl- allow the Polish experiment to continue andknowledge that the experiment's very survival will contribute to theunraveling of the Soviet position in Easterno paraphrase one


of Imperial Russia's last (and best) Prime Ministers, we therefore probably should wager on the muddle" and provide the credits in tranches with whatever conditions we can impose. Itrapshoot for enormous stakes.


P.S. This meeting will take placeecember. The critical problem for Poland is the supply of food for the winter--between now and latef oneew daysecision package to be prepared for the President and assuming his approval of it, the U. S. then still faces negotiations with Poland for the conditions of each tranche or for the packagehole. Given past experience with negotiations, how much of the critical winter period will be left by the time the agreements are negotiated and signed and food actually begins to move to Poland? Someone should answer these questions. The way governments operate, it Bay be that the first deliveries of food might not take place until shortly before the end of the winter.

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