RECORD OF A CONVERSATION BETWEEN THE PRIME MINISTER AND MR. KOSYGIN IN THE CAR FROM MOSCOW AIRPORT AT 15.00 HOURS. MONDAY, JANUARY 22, 1968
China and the Strategic Embargo
After agreeing with Mr. Kosygin on the possibility of both formal and private talks, the main subjects which needed to be discussed at formal meetings (Vietnam, European security, the Middle East, and bilateral questions), and the composition of the main representatives on the Soviet side (Messrs. Gromyko, Kirillin, Patolichev, Polyansky and the Soviet Ambassador) the Prime Minister said that it would no doubt be useful if they could also have some more private exchanges about China, and the United States and Vietnam, as they had done last February. He would particularly like to exchange views about China with Mr. Kosygin.
Mr. Kosygin said that Soviet relations with China had not greatly changed: they were still very complicated, both in a political and economic sense. The Prime Minister said that he understood that Soviet trade with China was very small, and conducted within very narrow limits. Mr. Kosygin said that the Soviet Union was supplying China with rolled steel and non-ferrous metals and machine tools, but their trade had dropped to one-eighth of its former total: it was now minimal. They were refusing to supply the Chinese with sophisticated equipment in the avionics and other similar fields much though the Chinese wanted them.
The Prime Minister recalled his earlier exchanges with Mr. Kosygin about the strategic embargo. It was no longer reasonable to apply the same kind of limitations to the Soviet Union as to China; he himself favoured a liberalisation with the Soviet Union and tighter controls in regard to China. Moreover, Soviet technology was now so advanced that they no longer had such urgent need of Western strategic goods. This was, of course, a question in which our Allies were also involved, but he was considering the possibility of taking certain initiatives. He asked for Mr. Kosygin’s views on the areas in which trade with the Soviet Union might be increased; and about areas in which controls over trade with China could be tightened.
Mr. Kosygin took note of this. He said that the Chinese were trading increasingly with the Japanese. But their problem was that, because of their internal economic failures, they had few goods to sell. In reply to questions from the Prime Minister, he said that the Chinese troubles had had less effect on agriculture. Chinese treatment of Soviet diplomats had returned to normal. The Soviet Government only had a Charge d'Affaires in Peking, as the Chinese did in Moscow. The essence of the Chinese position was that they had no real military strength; but the unexpected could happen.
The Prime Minister agreed. He added that he thought that the world situation had worsened in a number of respects since he and Mr. Kosygin had met year ago. This gave a special importance to their forthcoming discussions. ……
At this point the car drew up at the Dacha.
Distribution. (Secret and Personal)
Chancellor of the Exchequer
President of the Board of Trade
Sir Burke Trend
January 30. 1968.