Page 115 - Argentina - Carter, Regan, and Bush VP

„ GONg^EBEWTlSir - GDS -3-

I, myself, believe that we may have overloaded the circuits
and pushed too far, but like our policy to the Soviet Union,
there is a logic to it which is difficult to argue. Indeed,
it is even more difficult to change direction than with the
Soviets because there are laws on the books which mandate
that with respect to Argentina we tie oiir X-M credits, oppose
bans in the IFI's, and condition our arms sales. Anything
less, or a step backwards from the place we currently find
ourself, would be judged as a Presidential retreat just as
surely as a different decision on Dresser.

|V Personally, I am most disturbed abo<jj£11JJa&jjjifi£i5£on not to
11 finance $270 millign worth of Export-Import Bank credits.
■ B2 qorfflESygFLev^tEat this is either a legitimate or an effective
Vinstrument, though I do agree with State that the law gave us
little choice. The decision did have an unintended positive-
impact in that it has finally aroused the business community
(there are $600 million worth of credit applications pending
in X-M), and they have descended on me, and I have deflected
them to Capitol Hill, where they helped defeat more restrictive
amendments to the X-M bill last week.

I had sensed that we wete approaching the brink when Newsom
told me he had decided to hold everything up until the
Argentines agreed to a visit by the Inter-American Commission.
Newsom, Bushnell, and our Ambassador Castro all thought
Argentina would reach agreement soon, but I had my doubts and
still have them. Vaky agrees with me, and we both are looking
into ways to step back from the brink without appearing as if
it is we who blinked first.

It is not at all clear that the Argentines won't blink first.
For one thing, the Europeans made a joint demarche in March,
and they seem to be behind us. Secondly, world public opinion
is becoming conscious that Argentina is this year's Chile, and
the Argentines have become so nervous that they took out a half
dozen pages of ads in the Times and have given at least
$1 million to a Madison Avenue P.R. firm to improve its image.
Most important, Videla, for the first time in a very long time,
is in charge. And he keeps saying he is eager to move forward
on his own to restore the rule of law. As he takes those steps,
I will make sure that we are quick to respond.

So I will work closely with Pete Vaky to try to develop a strategy
to make sure we don't totter over the brink. Since we will have
to act before October 1, I am conscious of a quick turn-around,
and as soon as we have a strategy, I will get back to you.

IV. The Southern Cone: Are We Winning.or Losing?

I think Kissinger's observation that if we don't turn our policy
around to the Southern Cone soon, we will have them allied against

t£0NFIDENTTAIi - GDS