'-1L ' J I ' - - I SECRE P 7491 THE WHITE HOUSE WA SHING T ON MEMORANDUM OF CONVERSATION SUBJECT G- 7 Meeting wit h President Gorbachev PARTICIPANTS George Bush Pre sident of the United States Franco is Mitterrand Pres ident o f the French Republic Helmut Kohl Chance llo r of the Federal Republic of Germany Brian Mul ro ney Prime Minister of Canada Guilio Andreotti Prime Minister of Italy Toshiki Kaifu Prime Minister of Japan Jac ques Delors President of the Commission of the European Communities John Major P rime Minister of the United Kingdom Mikhail Gorbachev Pres dent of the USSR DATE TIME AND PLACE Wednesday July 17 1991 2 20 p m -6 15 p m Music Room Lancaster House London England Prime Minister Major We're all very pleased that President Gorbachev is here We are among his well-wishers We've all heard that President Bush and President Gorbachev have resolved START We're all very pleased This is an historic meeting -the first of its kind I'm delighted that it's taking place We've all studied your letter We agree with much of what you have to say We have moved from confrontation We're united behind your efforts We want to integrate you into the world economy The USSR has immense human and natural resources There are immense challenges but limitless opportunities We accept your personnal commitment to reform We hope you'll talk in detail not just on the nature of economic reform but also h ow it wi ll be implemented so we can help you You can also learn what we can do t o h elp ou t and o ur inhibi ti ons Our interests the b u dget deficit t he money suppl y etc center- republic relations including with regard to he deficit and debt the question o f private property -- personal property and priva te owne r ship of companies These seem vital to economic r eform The are a where we are equipped to he is t echn ical a ssist ance know-how on ma croecon omic and mi croecon omic reform e g ene r gy The key is to create a c limate o f confiden ce t o att ra c t inc r eased i nv estment Your count r y needs an irrev ersible refo rm p r ocess This is for the Soviet peop le to do but we will do what we can t o h elp Th e internat i o n a l i ns titutions can help we n eed t o e xplore t h is issue with you I ' d like to invite you to share y our houghts ¢ $CRE'f Declas on OADR · i-eRr· ' U··c--r · DECLASSIFIED PER E 0 i 2958 AS AMENDED CJ¾ f '41 SECRET President Gorbachev Thank you I ' m pleased to be here with you and all your colleague s My being here is a symbol of the profound chang es which have taken place in international relations This meeting of state leaders is important You s hare a special responsibility because of the r ole played by your countries You help shape the wo rld I understand the rea l his toric context and that this dictates wh at's possible But it also dict ates the need f or a new level of trust This is a strateg ic moment Let me point to some important elements and also respond to yesterday's Political Declaration e' Enormous gains have been achieved in dis armament and in resolving regional conflicts There is a real chance for progress but we must be realistic Dangers arise from the t ransitional situation in the USSR This requires spec ia l intellectual effort There is a crucial political choice We're leaving behind one system of values that regulated rel at ion s between states to a new understanding new methods of achieving security -- collective security versus old alliances There is also instability both political and economic We also see how the legitimate desire for national self-determination has negative implications nationalism separatism sometimes with religious overtones There are dangers to the po li tic al environment A balanced approach is needed we have a unique responsibility fl' Let me share some thoughts on the real dangers that confront us The inviolability of borders changing international institutions The USSR wants to be part of the world economy There are questions about how to organically incorporate it We believe it is in our long-term int erest to integrate ourselves We will also renew our federation This will help us move together with fewer social -costs and to overcome our distorted economy perhaps the most distorted economy in the world ii We expect reciprocating steps from you Like lifting legislative barriers letting the USSR participate in international economic institutions and a number of other st eps I have long lists on each We need reciprocating steps Let me be frank Will you be we ll-wishers onlookers or active supporters I ' l l answer your questions but want you to answer mine We've decided on irreversible moves But· it wi ll be impossible to move to radical reform outs ide the world market So integration isn ' t a selfserving p olicy it 's a strategic move 7 A few wo r ds on the economy We had a dramatic situation late last year and early this year We had to maneuver between the ultra-radicals and those who would slow down or reverse reform So we had an acute critical situation Even well-tested political leade rs broke down under pressure It wa s like an ea rthqua k e with the r oo f sh ak ing over ou r heads 7 Let me tell y ou Go r bachev was playing f or time to save perestroyka The mechanism of self-preserv ation wa s n o to suspend change but to radicalize it This was reflected in the 9 1 process Z -EGRET We arr ested t he situation We go t s ome time t o impleme nt anticrisis me a su r es But we c a nnot wa s te time Dange r s still e x i s t We must addr e s s the t r a nsit i ona l problems i n the second h alf of 1 991 and in 1 9 92 Fir s t ou r p l an is soc i al accor d Se cond to r adi c al iz e the econ omy Th i rd t o seek new interna t i onal e co nomic c o operati on wi th the i n dustria l ized economies We d id reach a c cord wi t h t h e r epub li cs We c an debate specifi c e lement s b u t we need a l l three of t hese Al s o f or the s o ci a l aspe ct t here is a gr owth o f suppo r t fo r r eform fr om b el ow Some say this is the mo s t imp ort a nt social change I agreed wi th Presiden t Bus h Hi s missi on came with Ed Hewe tt and others I t a l ked t o t h em to He wet t a Sp ec i al As s is tant to the Presi d e n t who knows the USSR who said that s omethin g unpr ecede nt e d h as h appened Ne w pe ople have eme rged In pa rti c ular Moscow ha s changed but not the province s but now they have too ft Our r e form s b egan fro m above now they have support from the p eople Demo c r a tic f orce s a r e mo re a ct ive The r e a re n e w d e mocrati c g r o up s -- mov e ment is r apid We have move d t owar d a new Un ion t r e aty based on federalist principles Eight of the repub lics h a ve approv ed it Ukraine will decide in September We 're lo ok i ng fo r the optimal combination of sove reignty and a new u ni fied state Let me emphasize the importance of the referen dum in whi ch a large percentage of the population favored maint a in in g t h e Uni o n There will be no change in the direction of the process underway It's impo rtant to avo id extreme s Before the republi c s had no freed om no oxygen it was all unity Now the hotheads wa nt to move t o disinte g rati on There are adventurists separatists We can't put 70 million people out of our borders We're economically interrel ated All our problems must be tackled t ogether So we c an't separate or divide our Union Bu t we can redistribute autho r i t y and achieve a new balance -- a common e c onomic space with uni finances and a cent r al bank We need a n e w ro for ou r republics Pre sid e nt Delo rs i s l ookin g at me v ery cl ose l y be cause h e has many question s Pres ide nt Kohl t o o I underst a nd thi s We need the Union Take the Yugo s lav e x amp le This c oncerns a ll o f us It gi v es us an idea of what could happen if the Uni on disintegrates That ' s why I proposed the refer endum the people supported it So do 9 republics with 93% of the pe ople and 97% of the territory of the USSR The sovereign republics will have broad authority We will devise a new constitution and then hold elections There will be new authorities elected by the people who have a mandate for reform This new gove r nment will have new erms of reference As for the other republics some will hold their own referenda e g Armenia Moldova e v en Georgi a A l arge majority are for union Ev en their polls show 70 - 80% in favor of a new union % SEGRR SECRET The Baltics are a special case We will rely on a constitutional framework It's up to them to decide If they want to separate we'll have a divorce procedure to figure out the way to do so Th is is especially important because there are many Russians there defe n s e interests infrastructure etc We will do this through a c on stitut iona l process with ou t violence The key i s self - determination We have to res'p ect this On economic matters we've got 13-15 o f the republics This is a multifaceted process Others have these problems too e g Prime Minis ter Mulroney is tackling the question of Quebec constituti onal ly We 'll d o it in the same way JZ We're radica liz ing economic reform We're in a process of transition not just declaring our intentions We're gaining ground though there are many contradictions We have legislation on the rights of private property and entrepreneurship We already have these laws -- did you know that We have come a long way it's described in the paper on legislation I gave you t l · Reform has accelerated over the past six months There are new non-state producer s and private initiatives in banking and commodity exchanges There is debate in the Communist Party about these new sectors The process also applies to the defense sector In 1988-90 cooperatives grew by over 200% These are not collectives but cooperatives and they employ 6 million people with an output of 70 billion rubles Leaseholders account for 7% of industrial output Shareholding exists in large enterprises There are 3 000 joint ventures Over 47 000 individual firms 15 000 non-state cooperative banks Soon we'll adopt anti-monopoly legislation We need to accelerate more in the next 1-2 years no more than 2 We're in transition from centralized demand to economic regulation of business We want to commercialize most of our industry There is equality and protection of all forms of property We have laws on foreign investment There are problems of ruble convertibility I'll address slater Step-by-step we'll liberalize prices We'll move from a situation in which 35% of our prices are unregulated to one in which 70% are unregulated We're creating a market infrastructure We need y o ur help above all on defense c o nversion ¢ On priv ate propert y our l egis l ation permits 100% fore i gn ownership Each republic decides on its own Russia has a communal tradition The situation is not the same in Central Asia which is less likely to accept private ownership Each republic will decide this on i sown probably by referendum Reselling of leasehold rights is possible if there is interest ¢ Re g a rding mac r oe c o nomi c st a biliz ation This i s not the mos t i mpo r tan t i ssue I set ou t ou r progr am wi th f i gures e g those required by i nternati onal economic institutions We wi ll go as f ar as socially acceptable either of us would want to see the process become s o ci ally impossibl e The deficit is b eing L6RE1 5 reduced to n o more than 10% of GNP It will be covered by bonds and the state banks We wi ll rai se interest rates and will change our tax policy We will freeze deposits to use to buy shares There are s ome 250 b il lion rubles in the hands of enterprises Some ask why i sn ' t Gorbachev cut ting military expenditures whe n h e will so lve the qu esti on of links with Cuba and Afghanistan I ' ve tried t o tell you about the real process of arms proc u r emen t We ' ve c ut 2 9% s i nce 1988 Procurement of APCs is d own by a fac to r of f our I'll cut more What we've d one alre ady has c reated s o c i a l tension The best bra i ns etc are in this secto r Now t h e y're idled This will add to prob l ems in the Ar my Now t he Army and the de f ense industrialists basi c ally support us We wil l implement the wi t hdra wa l from Germany includi ng with regard to humn itarian and economic problems We will continue the defense conversion process $ Ne w Economic Cooperation We'r e responding We've created b etter conditions for foreign investment and recognize the nee d for this We're going t o make the transition to ruble convertibi lity I f we do many of our problems will take care of thems el v es Conve rtibility is under study Your involvement can cons i st of some f inancing more likely oriented to specific projects Paying debts -- we will pay them We have great potential With some space etc we will earn currency to pay our debts We accept the rules of the game but bear great burdens and need solidarity You have a list of projects many of which have be en d evel oped by your businesses They want a political signal We're opening up our defense sector -- 80% of it our holy of holies This is important for you to see We share the burden and the respo nsibility To promote cooperation in investment we' ll accept international groups to monitor certain areas $ This brings me to this question How shall we complete this meeting We don't have a l ot of time We need to say something These are not just the USSR's problems We need to show we can cooperate what the mechanisms of coope ration are All you say let's discuss I am looking to President Bush hoping he'll say something We need a f ollow-up mechanism we need to create one We need to say something p o litically too There needs to b e f o ll ow- up We need an arrangeme n t aro und the Chairman and I ' ll l ook to the Chairman I invite y our Economi c Finance Ministers to come to Moscow to follow up on this di scussi on This is agreed with the republics All our debts will be repaid Ne w relations will come and we will establish an Inter-Republican Committee to develop projects for you y8' Finally the USSR is closely linked to Eastern Europe We ' ve acted badly Both We had a bad divorce We know we have to cooperate with Eastern Europe We understand the need for this There a e na ural links The sooner we cooperate wi th you the sooner we ' ll cooperate with them Presi d ent Havel said to help the OSSR is to help us A clearing system of accounts - Chancellor Kohl is working on his German unification I ' d like o thank all I got carrie away I ' ll stop $ SECRB' P Prime Minister Major I'll invite President Bush to speak U The President First I want to note STAR T Thi s is in the interests of all of us We're trying to hammer out the details before we get to Moscow I will go there later this month This treaty is historic it's the first s ign of a reduction of our massive stockpiles of strategic weapons I'm not trying to bring this issue into the G- 7 but want ed t o no te it It sets a good t one I don't have much t o say U As for a follow-on mechanism each nation has its own bilateral pr oblems to work out For example Prime Minister Kaifu has special concerns You're right about follow -on We should have the Chairman of this group coordinate common areas with the USSR this is the way to do it We could also discuss the IFis which are important as purely economic coordi nation mechanisms As you move toward a market parti cipation in them will be very important It gives you worldwide contacts So I'm enthusiastic about a follow-on mechan ism ft Someone I'm not an expert can discuss follow-on with the IFis The political push will come through the Chairman We can do without organizations so they don't compete with existing ones So the bilateral issues will be considered separately This leaves nations with special problems the flexibility to move bilaterally ¢ I'd like to ask a question Experts raise the question Qf working out the details of the union treaty You are moving in this direction It is criti ca l to investment taxing rules etc For example jurisdiction over offshore platforms we've found is very complex And we've had many years to sort all this out in the United States But it's critical to attracting investment It can get you rnilti -b illion dollar energy development this would overshadow aid It's the same with food distribution I've met with our Soviet experts they all say this is key Yours was an outstanding presentation p' Chancellor Kohl We al l f eel this is a most unusual hour It ' s historic and we are grateful to you f o r comin g Congratulations to Presidents Bush and Gorbachev y our progress on ST ART is a favorable development We are having an open discussion We have some questions JZ I ' m grateful o President Bush and the questions he put about moving to a cooperative system We don ' t want bureaucracy We ' ll try it ou he Chairman will lead So here won ' t be any new structures but all of the G-7 structures we use now This is a huge step toward normalcy -- like joining the World Bank cooperation h rough he OECD e c These a r e normal in stitutions not new ones Perhaps ou r Finance Ministe rs could meet in Moscow This is a good idea It would heighten our a warenes s of y our problems j 8ECRE'f I have some questi on s 1 Will the Un i on Treaty come about What guarantees ar e there We talk ed with the Ukrainians This i s key t o investment 2 What a bout making informat i on pub l ic on possible Western cons ortia e g in ene rgy modernization o f nuclear power p l ant s There is interes t because of Chernobyl Fear is great V 3 Your moves toward disarmament are a great s tep forward Conversion too This is importa nt fo r acc e ptance of our policy in the West We want to help but need to know if we support that ou r aid won't go t o Cuba Pres ident Delors There is aware ness of the incredible problems that exist 1 I think people recognize the union treaty is import ant 2 All property needs to be developed on the basis of equality 3 As for trade and cooperation the EC ag reed to he lp fil l the shops and to help main tain s ocial accord We've also worked out a te chnical ass i stance agreement covering sectors So there already is cooperation though it's inadequate I have some ques tions 1 Institutionally there are two key questions Your letter asserts there is agreement on a union treaty but it looks different from the point of view of the Ukrainians etc a Will the Center have total control over defense policy Is there to be coo r dination of each individu al budget Will the center levy direct taxes or rely on republic assurances of revenues b Wi ll there be a single monet ar y financial sys tem This is essential Wil l Ukraine issue it s own currency Without it you couldn't negoti ate with the IF is or make the ruble convertible 7 2 Financing level re exte rn a l solvency You said you have always paid your debt But you ' ve cut imports by 40% and there is a decline in cur ren c y rese rves How d o you see t he next few months Our Finance Ministers need to know this and to pass it to th e IMF Ot herwi se the re ' s n o room fo r man euv er 3 Is there a link betwen y ou r inte rnal situation and t he reduction in imports fr om Central and Eastern Europe If so we c oul d thi nk of a me chan ism to re a ct i vate t r ade 4 Re technical assistance Prime Minister Pavlov has set up a single mechanism Can you confirm that it will continue There needs to b e a single i n terlocutor with the IMF e tc We ' v e work ed wi th the Pavlov group Will it continue Your r eplies wi l l help u s move ahead fn 3E6RET You have great resources SEQ8D' f -----eu _ _-- t t e r- g d We have no right to doubt expectations to get over certain doubts It's the problem of the chicken and the egg will the USSR establish itself first or does it need assistance now re c ognizing the risk of failure Consider this questi on a g ainst the background of your actions over the past 5 years History will remember y our actions as extraordinary We 1 ve considered the USSR as a c ountry since 1917 since 1924 you 1 ve had relations with the satellites Your perestroyka has made it possible to move to a new system to free many peoples from their recent occupation German unification was made possible by your policies So your actions argue for belief What you have done is a f a ct there is hope for the future There are great problems Look at Germany It has emerged as a great power in 50 years and i t has diff i culty assimilating f i ve stat e s What does this say about the USSR without the same degree of prosperity unity with the system of the Czars I t will be much harder The alternat ive is upheaval We can't settle this in an afternoon All this is the basis for feeling we ' re taking the right ro a d The USSR needs serious sens i b l e assistance Conditions are posed first political stability based on a union treaty Some should have their sovereignty France and the U K never re c ognized the incoporation of Lithu ania into the Soviet Union An overeager d esire for in d ependence makes your task more difficult The example of one b ecomrning independent could be a model for another repub lic with longer stronger historical ties to the center As Pres i dent Delors said be quick Are you one country in d i v ersity or several countries He noted defe nse energy the IMF IBRD OECD EBRD The mi s s ion o f these four with direct liaison with the Chairman is t he best way The invitation to the 7 Finance Ministers is a happy idea They can debate on the spot Pri me Minist er Major h as a mandate fr om us He has authority from us 7 I wouldn ' t say privatize everything I ' m of a socialist temperament this is true of most of us around the table There i s a happy synthesis between private enterprise and the role of the state This operates in all s t ates Some don ' t admit it It ' s not for us to tell you what sy stem to have if we have a common basis e g p rivate p roperty Investors want their profits You r c ountry ne e ds a middl e path to permit e xternal assistance You ne e d to tak e stock of what ha s wo rke d elsewh e re You have s ubstant ial resou r ces a n d great weal th Bu t this has n ' t a l wa y s p r oduced added wealth You have unproductive techno l ogy The distribution system doesn ' t allow you to get the most out of your resources '1 Some of our kings sought wives in Russia This was not just because they were beautiful but because of an alliance of inte r ests I n 14 92 the first emissary from Mosco w reached Fl or e n ce Thi s is not the moment to refuse your interest in integrat i ng y ou rself i n ou r common h istory Jl' Prime M inister Kaifu I agree with many of your comments We hope perestroyka will be successful The true worth of reform is 6ECRB'F 9 f or the USSR to wo rk with us as a partner There needs to be a firm c ommitmen t t o t he transformation of your economy into a ma rket e conomy Having listened to your pr esentat ion I understand wh a t you want to do On the political level you nee d t o involve yo u r people Ne w thinking ne e ds to involve t he Asia Pacific r eg i on We h ave seen s ome progress with China and Korea t his is pos it ive Japan is your nei ghbo r in the Paci f ic end imp r ovement in our relations is important beyond the bilateral cont ext We met and tal ked about the Peace Treaty This wou l d be significant for world pea ce and prosperit y I read your me ssage You spoke of risk and the need t o move c arefully But on economics ha lf -boiled re forms wi ll increase the costs at the e n d of the day You say you'l l r educe the military and that th i s is key f o r r e ducing the deficit I wonder how s peci fically y ou ' l l do t his and when you will carry it through Regarding private ownership you said it was ess enti a l but also said all fo rm s of property will be treated equally I s a mixed economy th e ultimate goal or is this a transitional stage We will p roceed with technical cooperation U TEA BREAK Prime Minister Mulroney You're in a unique situation It gives you an advantage You already know history will be favorable to you Your challenge is to keep going politically and stop those who might reverse you All of us start e d with strong economies you didn't That's why we appreciate your difficulty as political figures You have a rich country with a poor system It is correctable This is better than the other way around The key to your integration with the world economy is to achieve it in the judgment of the marketplace not among us The marketplace can be brutal It's not impressed by half-measures It 's nothing personal to you that the market judges so harshly it doesn't give too many compliments But the beauty is that once the market is on your side it can create tremendous wealth Private investment is the key He cited a Canadian firm doing an oil recovery project in the Arctic It involves about $1 billion Mu ltiply this by 100 The private sector will respond So the quest i on we ask is how can you attract more p rivate inve s tment me et voter exp ectati o ns and consumer demand a nd c r eate we alth Grat it ude i sn ' t lon g in Can a da t he quest i on vote r s ask is what will y ou do for us tomo rr ow Jn I asked our top investors to visit me and I asked them what it would take for them o invest in the USSR They cite three factors 1 political stability e g clarity as to who has control o f resour ces 2 currency reform 3 pr ivate ownershi p freedom for ent erpreneur ial act ivity J obs are created by small business Canadian businessmen a r e in the USSR with McDonalds They said getting rights to the land i s like dental surgery The one in Moscow employs 1100 and 2 -3000 in its supp l y netwo r k He wants many more Tha ' s where the jobs a r e It ' s no mystery why U S French and other farmers are productive they own the land and can pass it on The SEGRET 10 pr oductiv i ty of Saskatchewan f armers wo ul d drop like a stone if a g riculture were collectivized jl The key to market pricing government authorities have no power t o co ntr ol p rices This requires a psychologica l leap o f faith You can ' t d o it part way The debate goe s on but you can ' t chal l e nge some fundamentals Federalism allows us t o take from one part a nd give to another for the gene r al welfare 1J I have tw o questions 100 % 1 You sai d 70% o f pr ices will be decont ro lled Not ri ght n ow bu t as the objective 'i Why not 2 You said that cutting military expenditures increases ten si ons I unde rstand yo ur point It serves as a regi o nal subsidy program You sa id the Army gene rally supports re form Do es this mean fu rt her cuts could provoke the Army Jt I rec ommend that Finance Ministers and Mini s t ers of Small Business go to Moscow U Also we have bilateral programs plus the IFis We'll focus on energy agriculture nuclear safety Canada has proposals in these areas We ' ll discuss them when we meet tomorrow So institutional activity doesn't preclude these things U We be lieve in what you're trying to do We want you to succeed for you and for us and for the world U Prime Minister Andreotti Our colleagues discussed the economy I 'll touch on the political We started with a horrible economy We met in CSCE but now have Japan too I thi nk the message to world public op ini o n is positive Plus there's President Bush's announcement Thi s has educational va lue for wor ld public opinion - Regarding the substance of the enormous transformations I recall a complet e reversal - - now we're crying for the USSR not to cut off th e old Warsaw Pact nat io ns Its v ery satisfy ing Economic cooperation is based on political cooperation Certain topics stri k e public opinion in some nations e g Cuba Castro is t he greatest critic of Gorbachev Castro says if he loses Go rbache v ' s pro ect ion t he U S wi ll e at him up Don ' t b eli eve thi s All mus be a ware of Go r bachev ' s pub lic opinion He had to st r uggle with German unificat i on It ' s the same with the Japanese problem It will be better to solve these problems with coope rati on The re n eed s to b e a positiv e mess age Thi s can also h e l p in the Mi de ast y o u Gorbachev h elp ed wi th Syr ia thi s coul d help with Israel As k ed about Sov ie Jews leav i ng settlements a peace conferen ce La st y ea r I had the h on o r o f giving y o u a prize n ot beca u se o f s ucces s es but b e c a us e of the a c t i on s y ou ' re tak i n g ¢ Prime Minister Lubbers The first step is constitutional reform We in estern Europe are looking for political union We ' re SEGREf SECRE' P coming from different poles We can learn from one another The second is the econ omy You need radical ref orm That may answer many questions Third is integration with the world economy We want to support you politi c ally and in practice He recalled ideas like the Energy Chart er the envir onment common infrastructure espe c ially in transport Fourth is the USSR EC and the USSR Central and Eastern Eur opean relationship You spoke of divorce and rea liz ing t he need for one another It would be useful t o add to our agenda studying a mechan i sm for trade with Eastern Eur o pe Perhaps a s p ecial credit mechanism would help rt President Gorbachev I th a nk you for the atmosphere It makes it p ossible to e xpress our common concerns Thanks for your remarks on your positions notwithstanding differences they cast light on the viewpoints regarding cooperation and on world politics at large This move s us toward our organic in tegration There seems to be reason to say if I understan d correctly that there is not just support but agreement to set up a specific framework There is the question of the f orms of cooperation All of what we were doing here is necessary for all of us The fruitlessness of the command syste m and s tate ownership brought u s to a state where we can't harness our potent ial Logic has driven this home to us We n eed the mass of society to understand and no t just at the int ellect ual level We need to change our dogma our psychology etc in the Party and everywhere We are forming new stru ctures compet ition new people in t h e processes and new attitudes toward owne rship We need to create confidence in our economy We're just starting at this however We underst and the scale the history and the burden on society We're a country of 120 different nationalit i es Everything is converging on this moment We'll travel this path We appreciate your expressions of support There won't be any disappointment regarding new thinking There is a growing process of mutual understanding What we n eed now is a new measure of trust We want to move into the international economic arena If we ' re not admitted into the IMF the World Bank GATT and t he EBRD it won ' t work We need t hem to provide o xyge n to bre a t h e we ' ll f i t int o the political p roc ess We ' r e talk i n g about mut ual i t y I f I'm g o ing t oo far o r am t oo optimistic then let me know I hop e n ot 8' As for your specific questions You ' re interested in business So are w There can be no stability without radical refo rm U On macroeconomic stabilit y we understand your app r oach Let me respond The Union Treaty covers all major aspects o f foreign policy -- with a mechanism uclear power is p a r t of the union ' s purview as well as transport corr unications an d met eorology U SECRET SEGRE 12 Then there's the br oad field o f j o int respons e This includes individual projects where investments might be carried out U We ' l l have a singl e mar k et a single currency a c e ntral bank ce ntral authority and f e der a l taxe s among 7 o f 9 republics We're sti ll discussing th is wi t h Russia and the Ukraine No w we 're l ook ing at mechanisms We discussed Hamilton Bismarck a range of wor l d experiences I won ' t si gn the Uni on Treaty wit hou t a federal tax Y I want a strong center and strong republ ics on the basis of distributed power SI Regarding the convertibl e ruble We need this Without it we'll be delayed McDonald's vice president wants to invest rubles but he nee d s dollars for investment At what exchange rate It's up to 40 rubles t o the d o llar The commercial relationship between the ruble and the dollar doesn't correspond to reality We face great difficulty on this issue I have files on proj ects in the pipeline The stabilization fund is a technical matter let our experts e xamine this We'll get convertibility anyway without this fund but lack of it would slow us down Y For Prime Minister Mulroney On price decontrol we're aiming to decontr o l 70% of all prices during 1991-92 This will double the level currently decontrolled We'll just be keeping 3-4 items controlled The question is bound up with assessing goals I'm not saying give us goods I'm saying for each specific step toward a market in good time in sequence in synchronization On the pace of reform I would like to speed it up but can't go any faster Society could no t stand it There are always disputes Economists like Leontief or Galbraith will always say why have a ministry to move to a market But there is no pure unregulated market economy We shall move toward reform of property monetary reform and private enterprise -- but let society decide We'll adopt a legislative framework and then give the republi cs the fre e dom to c h o ose As for Cuba and Vietnam · our re l a ti ons have cha n ged radi c all y We ' ve c ut aid t o Vi e tn am t hr ee- f old Aid to Cuba has been h alve d We get mo r e from t h e Cubans than the r e v e rse as o f J u l y e g sugar citrus Cuba will be gradually integr a t ed i nto t he normal processes Things are moving Regarding Vietnam we helped to introduce big rice producers to the market Cuba and Vietnam will become normal members of the world communi· y I is extremely important to tell the world of our brainstorming not for applause but to show the fact and the break throughs achiev ed I hope the Chairman will work for pos i ti v e con tact We a l so need a mechanism ft Prime Min i ster Major Let ' s consider what we ' ll say in our p ress conferen ce There will be huge interest We need some mes§a g e SE6RET SDCfUJ'P - - 13 • - • It should be a positive one and will be historic Let me sketch out my views I will be brief I'll stress the frank substantive nature of our discussions in a cordial free atmosphere I'll welcome the START agr eement and the positive respose it received Regarding dimension and style I'll emphasize across the tab le n ot around the table with set speeches and the questi ons and answers I ' l l say we agreed to promote Soviet integration in to the wo rld econ omy And I ' ll discuss some specifics 7 1 Special Ass ociation wit h the IMF and the World Bank and the other organizations I would include mention that this is an enormous step forward which will bring benefits expert advice and a wealth of experience U 2 Ask the 4 major international institutions IMF IBRD OECD and EBRD to work closely together especially on creating a market economy U 3 We'll intensify our technical assistance especially in energy defense conversion transport nuclear safety and food distribution -- both bilaterally and through the inter national institutions U 4 On trade I should mention the consequences- of the collapse of trade with the USSR's neighbors and that we'd like to see trade reestablished Also more trade access U 5 Regarding follow-up I 'd note that this isn't a one-off occasion but is part of a continuing dialogue The agreed mechanism would be the Chairman of t he G-7 -- to keep in close touch with the USSR visit it and maintain liaison with the others After the visit we could report on progress Chancelklor Kohl would do the same And it would be desirable for Finance Ministers and Small Business Ministers to accept the invitation to visit U These are six particular way s to fol low up This is the beginning not the end It's the fi rst step toward helping the USSR become a full member of the international economic community U I 'd li ke to request comment beginning with Gorbachev U £r e sident Gorbachev I ' l l be po sit i v e Th is wa s an import ant political discussion among statesme n We determined certain areas as directions for our cooperation We ' ve not yet exhausted our coopera ion but are started on it I ' d like to thank y ou _all -- End o f Meet ing - - SE6RE t