From: NSRCM – CPUA
To: NSPHR – CPUA
Date and time 08/29/85 19:20:23
NOTE FROM: ROBERT MCFARLANE
SUBJECT: South Africa Developments
As you may know South Africa has suffered a liquidity crisis born of the refusal of many banks here and abroad to roll over short term maturities. Today they decided to close their banks tomorrow. Earlier requests from them to Paul Volcker (hold close) and John Whitehead to intervene were declined both out of concern that they offered to do nothing to relieve the basic instability and the inevitable refusal they would have faced by bankers as a consequence.
Today the Secretary of State talked to the President at my request, to lay out this problem and also to assure that State and the White House were in synch on public comments on how we feel about South Africa (as a precedent to Chet's backgrounder). From that call two positions were approved by the President.
With regard to their financial crisis we will tell them privately:
Financial markets are reacting to the uncertain climate for investment and stability brought on by their policies.
History has proven, however, that South Africa can be a very attractive site for investment.
Therefore, policy changes which hold some promise of restoring stability would relieve their current crisis of confidence.
If they succeed in taking reasonable steps to restore calm and some expectation of good faith discussions/negotiations, we would consider sympathetically possible bridging help (so would the IMF probably).
With regard to the state of affairs generally Chet was authorized to say:
Our policy is that apartheid must go. This is both a USG position and a reflection of the sentiment of our body politic.
The question before S.A. is how not whether to do it. Only they can determine what will work; it is not for us to say or do. They must do it.
In recent years they have made a beginning. Some progress has been made.
In recent months that progress has been brought to a standstill and replaced by violence.
In the wake of their apparent interest in making further changes, we have tried to be helpful. We believe it is up to them to take further concrete steps promptly. That is not a rhetorical US judgment – the financial markets are telling them the same thing.
If the situation doesn't improve we will continue to express our views. Congressional measures intended to influence change must be dealt with. No decision have been made but those decisions will be affected by the situation in South Africa.
We want to see significant discussions commence. The State President said he intended to “cross the rubican.” [Rubicon] It is time for specific deeds and [end p1] dialogue.
Bill Martin please provide this to Ed Djerijian.
John, you might also provide it to Larry.
cc: NSHS – CPUA
NSWFM – CPUA
NSWRP – CPUA
NSJMP – CPUA
JOHN M. POINDEXTER[end p2]