600 



U.S. negotiators claim that the price impact on U.S. consumers would 

 be minimal because cheaper U.S. sources would still provide most of 

 the domestic supply and fixed costs make up most of the price. A 

 provision for "rolling in" the foreign gas into domestic supply would 

 prevent large price increases for U.S. consumers. 



The large-scale and the long-term nature of the projected natural 

 gas transaction make it especially important that U.S. Governmental 

 and private interests carefully study the terms of the arrangement to 

 insure that the United States receives maximum benefits. The follow- 

 ing are some of the important questions which should be examined: 



1. What economic benefits will the United States receive? The gas 

 project involves a huge outlay of U.S. investment funds. Will the im- 

 ports of natural gas and the stimulus to U.S. shipbuilding and other 

 capital goods industries provide an adequate economic return? 



2. What are the alternative costs of obtaining the same energy sup- 

 plies from other sources? Mr. Thornton F. Bradshaw, President of 

 Atlantic Richfield Company, suggested that, at the currently projected 

 price of Soviet gas, the same supply could be obtained from domestic 

 natural gas reserves, gasification of coal, and other domestic sources. 120 

 Alternative foreign sources also warrant consideration. 



3. What are the appropriate roles for the U.S. Government and pri- 

 vate industry? How much of the American investment should be 

 financed or guaranteed by the Eximbank? What should the Govern- 

 ment's policies be with regard to other aspects of the arrangement, such 

 as shipbuilding subsidies and import regulation ? 



4. What kinds of commercial arrangements are needed for U.S.- 

 Soviet cooperation in this area? Business facilities in the Soviet Union 

 are inadequate for an operation of this scale. Although private owner- 

 ship is not likely or necessary, some clear assurances of authority and 

 managerial responsibility will be needed. 



5. What are the indirect economic costs of the project? How much 

 would be added to fuel prices for U.S. consumers ? Would financing for 

 the Soviet project saturate the U.S. capital market and drive up inter- 

 est rates for long-term capital ? 



<■». Is the Soviet project a preferred investment, eligible for lower 

 rates, more favorable terms, and higher risks than other investments? 

 If preferential treatment for the natural gas project is warranted by 

 political factors, what are the net political benefits? 



POLITICAL BENEFITS FROM EXPANDED U.S.-SOVIET COMMERCIAL RELATIONS 



Dr. Kissinger, Mr. Peterson, and other U.S. officials have attached 

 great political significance to expanded commercial relations with the 

 Soviet Union. Both the grain sales and the natural gas negotiations 

 may test the assumption that increased economic ties lead to improved 

 diplomatic relations. The commercial relationships established by U.S. 

 agribusinesses and by the U.S. oil and gas industry with their Soviet 

 counterparts may be long term. The potential gas project would be 

 based on a 25-year contract. While grain sales are unlikely to recur 

 on the l!)7'_J-7.') scale, considerable sales of feed grains and agricultural 

 technology are likely in the future. 



• i • i • 



U.S. exports of grain, technical assistance, and capital investment 

 would be balanced in part, on an economic balance sheet, by U.S. im- 



v>0 Panel Discussion at the National Association of Manufacturers* "U.S.-Sovlet Trade 

 Conference," Feb. 28, 1973, Washington, D.C. 



