In early May I had another discussion with John about the options emerging clearly from his review. He believed that his proposals would provide the basis for a far more effective defence force for the needs of the future. But it was already clear that opposition within the armed forces and in the Conservative Party would be strong. I would have to see the Defence Chiefs of Staff to discuss with them their reactions to what was proposed. Moreover, many marginal seats would be involved, especially in dockyard closures. We would have to make every effort to explain our priorities both in the country and to our NATO allies, particularly the Americans.
What I had not expected was that the most public opposition would come from a Defence minister. On Friday 15 May Keith Speed, the Navy minister, made a speech which effectively disowned the whole strategy of the review. John Nott did not want him to resign at once and suggested that he should be moved to another department. I said that there was no question of this: if he was going to be disloyal to the Government in one department, he would in another. I saw him very late on the night of Monday 18 May and told him he must go.
In early June I met the Chiefs of the Defence Staff, at their request, with John and Peter Carrington. The press had been full of stories about my ‘fury’ at their lobbying against the review. But in fact I had found the behaviour of the Chiefs of Staff throughout impeccable, and I said so. No one at the meeting openly contested that the NATO central front was bound to be the decisive arena. Scenarios of conflict in the Third World might be more likely: but only on the central front could the war be lost in an afternoon. It was argued that we should again press for a full-scale NATO review. But we could not afford to postpone decisions in the hope that a NATO review might help us: moreover such a review at this time could itself destabilize the alliance.
On the morning of Monday 8 June John Nott and I met Sir Henry Leach, the First Sea Lord, who argued vigorously the importance of the surface fleet. I have the greatest respect for his judgement. He could well argue that the Falklands War proved him right. He could certainly argue today that with the end of the Cold War and events in the Gulf there is now a need for mobile forces and a strong navy. At that time I had to disagree with him because I could see no other way of meeting our NATO obligations within the financial constraints.
John announced the conclusions of the Defence Review to the House of Commons on the afternoon of Thursday 25 June. The decisions — particularly to cut the number of ships and to close the base and dockyard in Chatham — ran into fierce opposition, not least from Members of Parliament whose constituencies were affected. The closure of the dockyard went ahead. But after the Falklands campaign the following year some of the decisions of the Defence Review were altered. Certainly no one who lived through that campaign could be in any doubt about the importance of a country such as Britain with far-flung interests being able to project its military power swiftly and effectively across the globe.
THE POLISH CRISIS
No matter how effectively Britain managed its defence effort it was on the unity, strength and credibility of NATO that our security ultimately depended. It was of the utmost importance that American public opinion remained committed to western Europe. So the tensions and divisions which arose in the alliance at this time were of great concern to me. My view was that ultimately we must support American leadership: but that did not mean that the Americans could pursue their interests regardless of the opinion of their European allies.
The need to decide how to react to the imposition of martial law by General Jaruzelski’s Government in Poland on 13 December 1981 highlighted problems which had been growing throughout 1981. Some European countries, most importantly the Germans, were hostile to President Reagan’s economic policy and mistrustful of his rhetoric on defence and arms control. I, of course, did not share these attitudes, though I wanted tougher action to control the widening US budget deficit. What I found irritating and on occasion quite unjustified was the way in which the actions the Americans preferred inflicted a good deal more pain on their allies than on themselves and, one might argue, the communists in Poland and the Soviet Union. The first such issue was the Polish Government’s crackdown on Solidarity.
I was from the first acutely aware of the importance of the Polish question. Like most people in Britain, I have always liked and admired the Poles, many of whom settled in this country during and after the war. But there was more to it than that. On 9 December 1980 I talked quite frankly to the Polish Deputy Prime Minister who visited London. I said that I was conscious of witnessing a change in a socialist state of a kind that had not occurred in the last sixty years. A new group of people — the Solidarity movement — were challenging the communists’ monopoly on power on their own terms. I told him how closely we were watching events in Poland and how excited I was by what was happening. I said that the socialist system had succeeded in suppressing the human spirit for a surprisingly long time but that I had always been confident that there would be a breakthrough.
But these happy signs were not to last. The Soviets brought increasing pressure to bear on the Poles. From the end of 1980 the Americans became convinced that the Soviet Union was planning direct military intervention to crush the Polish reform movement, just as they had crushed the ‘Prague Spring’ of 1968.
From about the same time we began to draw up measures to punish the Soviet Union in such an eventuality. Peter Carrington and I agreed that we should respond in a measured, graduated way depending on the situation we faced. We foresaw four possibilities: a situation in which the use of force by the Polish Government against Polish workers was imminent, or had already taken place, or one in which Soviet intervention was imminent, or had already taken place. We agreed that ineffective sanctions would be worse than useless, but sanctions would have to hit the Soviets harder than they hit us. Meanwhile, we had to make a number of complex judgements about Soviet and the Polish Government’s intentions. Was the present ostentatious Warsaw Pact activity the prelude to armed intervention or a means of bringing political pressure to bear on the Polish Communist Party? If we continued to provide food aid and to proceed with plans for Polish debt relief would this benefit the Polish people or play into the hands of the hardliners in Poland who were struggling to survive the consequences of their own misgovernment? These were not easy judgements to make.
Suddenly the situation changed. Martial law was declared in Poland from midnight on 12–13 December 1981 and a ‘Military Council for National Salvation’ consisting of military leaders was set up under the Prime Minister, General Jaruzelski. The borders were sealed, telex and telephone links severed, a curfew imposed, strikes and assemblies banned, the broadcasting system brought under tight control. There was no doubt in my mind that all of this was morally unacceptable but that did not make it easier to gauge the correct response. After all, in order to warn off Soviet intervention, we had consistently said that the Poles must be allowed to decide on their own internal affairs. Were the Soviets themselves behind it, intending to use the crackdown as a means of turning the clock back to hardline communism and subordination to Moscow? Or was this really a temporary decision, as the Jaruzelski Government claimed, forced upon them to bring some kind of order to Poland, with the implication that this would prevent a Soviet takeover? At this early stage there was a severe shortage of information not just to illuminate these questions but even as to the whereabouts and safety of leading Polish dissidents.
The more we learnt of the background to what had happened, however, the worse it appeared. President Reagan was personally outraged by what had occurred, believed that the Soviet Union was behind it and was determined to take swift action. I received a message from him on 19 December to this effect. Al Haig sent a parallel message to Peter Carrington pointing out that the Americans were not proposing that the West should now implement the far-reaching measures to meet Soviet military intervention that had already been agreed in NATO. What they wanted were some political and economic measures at
once and others in reserve if the situation worsened. Without any further reference to us, the Americans would be announcing sanctions against the Soviet Union later that day. These, we were were glad to note, rightly did not include abandonment of the disarmament talks going on in Geneva. But they did include measures such as the cancellation of Aeroflot landing rights, a halt to negotiations on a new long-term grain agreement (though an existing agreement would remain in place) and a halt to the export of material for the construction of the planned natural gas pipelines on which work had already begun.
It was this last point which was to be the cause of great anger in Britain and other European countries. British, German and Italian firms had legally binding contracts to provide equipment for the West Siberian Gas Pipeline, which involved components made in the United States or under United States licence. It was not clear at this stage whether the measures announced by President Reagan against the Soviet Union applied to existing contracts as well as new ones. If the ban extended to existing contracts this would deprive British firms of over £200 million of business with the Soviet Union. Worst affected would be a contract of John Brown Engineering for pump equipment for the pipeline project on which large numbers of jobs depended.
While pressing the Americans on this particular point, I ensured that we gave them the strongest possible backing both in NATO and the European Community for the general line they wanted to take. This was by no means easy. Initially, the Germans were reluctant to take any measures against the Polish Government, let alone against the Soviet Union. The French were pressing hard for continuing the sale of food at special subsidized prices by the European Community to the Soviet Union. But I still felt that if we could persuade the Americans to take a more reasonable line over the pipeline project we would be able to demonstrate a fairly impressive western unity. The trouble was that there were those in the American Administration whose opposition to the pipeline project had nothing much to do with events in Poland. These people believed that if it went ahead the Germans and the French would be dangerously dependent on Soviet energy supplies, which would have damaging strategic implications. There was some force in this argument; but it was exaggerated. Although Russia would be providing just over a quarter of Germany’s and just under a third of France’s gas, this would be no more than 5 per cent of either country’s total energy consumption. But in any case neither the Germans nor the French were going to accede to American pressure. Such pressure would therefore be counter-productive as well as irrelevant to the specific problem we faced in Poland. There was also American talk, which seriously worried the Bank of England, of forcing Poland to default on her international debts, which would have had severe effects on European banks.
At OD towards the end of January 1982 we discussed these possibilities. I said that there was a clear danger of the American Government’s present policy damaging western interests more than those of the East and provoking a major transatlantic quarrel of precisely the sort that it had long been the main objective of Soviet policy to bring about. Britain had already offered to do more to meet American wishes than our European partners were likely to accept. This was no longer a time for concessions but for some straight talking to our American friends. I decided to approach President Reagan. I also asked other ministers to try to influence their American counterparts. An urgent invitation would be extended to Al Haig to visit London on the way back from his current visit to the Middle East.
In fact, Al Haig joined me for a late lunch at Downing Street on Friday 29 January. I told him that the single most important aim must be to keep the western alliance together. The most recent meeting of the NATO Council had gone well. But the measures now being proposed by the United States were causing concern. Anything that the West did must be designed to harm the Soviet Union more than ourselves. The reports of possible steps by the US to bring about a default on Polish debts and indeed the debts of other East European countries were worrying: although this would doubtless bring about difficulties for the countries concerned it would also create incalculable problems for the western banking system, which was so important to the reputation of the western world as a whole. I also said that whatever the Americans felt about the matter we had to face the fact that the French and the Germans were never going to abandon their contracts for the Siberian Gas Pipeline. Nearer the bone, I noted that the Americans had not included a grain embargo in their first round of measures because this would clearly hurt their own people. Indeed, few of the measures adopted by the United States would have any serious effect at home — but they would hurt Europe. To say the least there was a certain lack of symmetry.
I gained the strong impression that Mr Haig basically agreed with my analysis. I also had the sense that he was feeling increasingly isolated and powerless in the American Administration, which indeed he was to leave later in the year. He said that he thought that it would be useful if I sent a message to President Reagan about these matters, which I did later that day. I believe that the pressure I applied had some effect, but unfortunately it proved to be temporary.
Meanwhile, the West’s response to events in Poland was becoming increasingly entangled with the wider question of our political and economic stance towards the Soviet Union. President Reagan sent a message to me on 8 March stressing the need to halt or at least restrict the grant of export credit to the Soviet Union, particularly credit subsidized by our Governments. The American argument was that not only was the USSR economically weak, it was suffering from an acute shortage of foreign exchange. European and other governments which provided the Soviet Union with subsidized credit were cushioning their failing system from economic realities which would otherwise have forced its reform. The Administration had a good argument here, though our assessment was that restricting credit would not have the dramatic impact which some US experts imagined. At this time we were receiving conflicting and confusing signals from the US Administration about its intentions. But I hoped that tighter controls by European governments on credit for the Soviet Union might allow us to secure the undertaking we wanted that the US restrictions on contracts for the Siberian Pipeline would not be retrospective.
Out of the blue, however, the Americans announced on 18 June that the ban on the supply of oil and gas technology to the Soviet Union was to apply not only to US companies but also to their foreign subsidiaries and to foreign companies manufacturing American-designed components under licence. I was appalled when I learnt of this decision. I condemned it in public. The reaction of the Europeans generally was still more hostile.
Britain took legislative action under the Protection of Trading Interests Act to resist what was in effect the extension of US extra-territorial authority. Then European irritation was increased still further by the news that the Americans were intending to renew grain sales to the USSR on the pretext that this would drain the USSR of hard currency — but transparently because it was in the interests of American farmers to sell their grain. The Administration was somewhat taken aback by the strength of opposition they faced and it was left to the excellent new Secretary of State, George Shultz, to find a way out of the difficulties, which he did later in the year, allowing the existing contracts for the pipeline to go ahead. But it had all been a lesson in how not to conduct alliance business.
THE VERSAILLES G7 SUMMIT
I like to think that my own relationship with President Reagan and the efforts I made to try to establish common ground between the United States and the Europeans helped to prevent disagreements over the pipeline and other trading issues from poisoning western co-operation at this critical juncture. Certainly, the summer of 1982 saw some useful international diplomacy. Between 4 and 6 June the heads of government of the G7 countries met amid the splendid opulence of Versailles. The rooms of the Palace itself were used for meetings and relaxation. There was a final banquet in the Hall of Mirrors followed by after-dinner entertainment of opera and fireworks. (In fact, I left early: it would not have been right to
stay for all this while our troops were still fighting in the Falklands.)
President Mitterrand, who chaired the summit, had prepared a paper on the impact of new technology on employment. It quite often happened that the country in the chair at summit meetings felt that they must introduce some new initiatives even at the cost of extra government intervention and increased bureaucracy. This was no exception. For my part, I had no doubt about the attitude to take to technological innovation: it must be welcomed not resisted. There might be ‘new’ technology but technological progress itself was nothing new, and over the years it had not destroyed jobs but created them. Our task was not to make grand plans for technological innovation but rather to see how public opinion could be influenced in order to embrace not recoil from it. Fortunately, therefore, President Mitterrand’s paper was kicked into touch in the form of a working group.
I had a candid bilateral discussion with Helmut Schmidt while I was at Versailles about the European Community budget — to which West Germany and Britain seemed destined to remain net contributors — and about the CAP on which so much of our money was spent. This was a particularly sore point for me, because only a few weeks before Britain had been overridden in the Agriculture Council when we had sought to invoke the Luxemburg compromise against farm price rises. Helmut Schmidt said that he wanted to maintain the Luxemburg compromise, though he doubted whether it should be applied as we wished. But he added that the CAP was a price which had to be paid, however high, to persuade members like France and Italy to come into the Community from the beginning.
The Downing Street Years, 1979-1990 Page 33
