LIMITED OFFICIAL USE PAGE 01 EC BRU 02457 251418Z 43 ACTION EUR-25 INFO OCT-01 EA-11 ISO-00 EURE-00 SP-03 AID-20 EB-11 NSC-07 RSC-01 CIEP-02 TRSE-00 SS-20 STR-08 OMB-01 CEA-02 CIAE-00 COME-00 FRB-02 INR-10 NSAE-00 XMB-07 OPIC-12 LAB-06 SIL-01 L-03 H-03 PA-04 PRS-01 USIA-15 ABF-01 FS-01 DRC-01 /179 W --------------------- 061883 P R 251206Z APR 74 FM US MISSION EC BRUSSELS TO SECSTATE WASHDC PRIORITY 6769 INFO AMEMBASSY BERN AMEMBASSY BONN AMEMBASSY BRUSSELS AMEMBASSY COPENHAGEN AMEMBASSY DUBLIN AMEMBASSY LONDON AMEMBASSY LUXEMBOURG AMEMBASSY PARIS AMEMBASSY ROME AMEMBASSY STOCKHOLM AMEMBASSY THE HAGUE AMEMBASSY TOKYO USMISSION OECD PARIS LIMITED OFFICIAL USE EC BRUSSELS 2457 PASS TREASURY, FRB, CEA E.O. 11652: N/A TAGS: EFIN, EEC SUBJ: EC FINANCE MINISTERS' DISCUSSION OF GOLD, APRIL 22-23 REFS: A) THE HAGUE 2042 LIMITED OFFICIAL USE LIMITED OFFICIAL USE PAGE 02 EC BRU 02457 251418Z B) EC BRUSSELS 2208 (NOTAL) C) EC BRUSSELS 1808 (NOTAL) 1. SUMMARY: ACCORDING TO PERMREP AND COMMISSION SOURCES, THE INFORMAL UNDERSTANDING REACHED BY THE EC FINANCE MINISTERS AND CENTRAL BANK GOVERNORS APRIL 22-23 PROVIDED THAT A) CENTRAL BANKS SHOULD BE PREMITTED FREELY TO BUY AND SELL GOLD--AMONG THEMSELVES AND ON THE MARKET-- AT PRICES OTHER THAN THE OFFICIAL PRICE; B) THAT PURCHASES FROM THE FREE MARKET SHOULD NOT LEAD TO ANY INCREASE IN WORLD MONETARY GOLD STOCKS; AND C) THAT THERE SHOULD BE EARLY CONSULTATIONS WITH THE U.S. AND AN EFFORT TO REACH AGREEMENT IN THE C-20 ON THIS UNDERSTANDING. END SUMMARY. 2. EC COMMISSION AND PERMREP SOURCES HAVE BRIEFED THE MISSION ON THE MEETING OF EC FINANCE MINISTERS AND CENTRAL BANK GOVERNORS AT ZEIST. THESE CONTACTS EITHER WERE PRESENT AT THE MEETING OR HAVE HAD ACCESS TO PARTICIPANTS. THEIR ACCOUNTS ARE GENERALLY IN ACCORD WITH THAT OBTAINED BY EMBASSY THE HAGUE. 3. EC COMMISSION SOURCES TELL US THAT THE UNDERSTANDING REACHED BY THE MINISTERS AND CENTRAL BANK GOVERNORS CORRESPONDS TO THE VIEWS EXPRESSED IN A REPORT PREPARED BY THE CENTRAL BANK GOVERNORS FOR THE ZEIST MEETING. THIS REPORT STATED THAT CENTRAL BANKS SHOULD BE PERMITTED BOTH TO SELL AND TO BUY GOLD EITHER AMONGST EACH OTHER OR ON THE MARKET AT AT PRICE OTHER THAN THE OFFICIAL PRICE AND THAT, FURTHER, THEY SHOULD HAVE COMPLETE FREEDOM OF DECISION TO BUY OR TO SELL WITHOUT OBLIGATION TO ENGAGE IN ANY PARTICULAR TRANSACTION. COMMISSION SOURCES STRESSED THE POINT THAT ANY TRANSACTIONS IN GOLD WOULD BE STRICTLY OPTIONAL. THEY ALSO NOTED THAT PARTICIPANTS IN THE ZEIST MEETING MADE CLEAR THEIR INTENTION TO AVOID ANY REMONETIZATION OF GOLD. OUR CONTACTS SAID THERE WAS AGREEMENT THAT THE CENTRAL BANKS AS A WHOLE WOULD NOT BE NET ACCUMULATORS OF GOLD BUT THERE WAS NO QUESTION OF MAKING THIS OBLIGATION BINDING ON INDIVIDUAL CENTRAL BANKS AS INDICATED IN REF A. 4. THE MINISTERS AND GOVERNORS ALSO DISCUSSED CERTAIN SPECIFIC FEATURES THAT MIGHT EVENTUALLY BE INTRODUCED INTO LIMITED OFFICIAL USE LIMITED OFFICIAL USE PAGE 03 EC BRU 02457 251418Z THE SYSTEM BUT THAT WOULD REQUIRE FURTHER STUDY. THESE ARE: A) AMOVABLE BAND COORDINATED BY THE CENTRAL BANKS WITH A CEILING FOR PURCHASES AND A FLOOR FOR SALES; AND B) SOME KIND OF AN INTERMEDIARY THROUGH WHICH MARKET INTERVENTIONS MIGHT BE CHANNELED--POSSIBLY IN THE FORM OF A BUFFER STOCK. THESE "MODALITIES" WILL ALSO BE DISCUSSED WITH THE U.S., BUT THEY ARE NOT CONSIDERED ESSENTIAL ELEMENTS OF ANY REVISED ARRANGEMENTS FOR GOLD. 5. AS REPORTED IN REF A, THE MEETING DEPUTIZED DUTCH FINANCE MINISTER DUISENBERG AND CENTRAL BANK GOVERNOR ZIJLSTRA TO CONSULT WITH U.S. TREASURY AND FED OFFICIALS. WE UNDERSTAND DUTCH TREASURER GENERAL OORT WAS ALSO CHARGED WITH RAISING THE POINTS AT THE C-20 DEPUTIES MEETING MAY 7. THE DUTCH WILL REPORT ANY U.S. REACTION TO THE EC FINANCE MINISTERS, WHO ARE SCHEDULED TO MEET AS A COUNCIL IN BRUSSELS MAY 20. IF THERE IS NO AGREEMENT IN THE C-20, THE POINTS OF UNDERSTANDING REACHED AT ZEIST WOULD NOT AUTOMATICALLY BE APPLIED WITHIN THE EC. RATHER, THE ENTIRE ISSUE WOULD HAVE TO BE RECONSIDERED. 6. COMMISSION SOURCES TELL US THE PARTICIPANTS AT ZEIST AGREED THAT CONTACTS ENVISAGED WITH THE U.S. WOULD BE IN THE FRAMEWORK OF DISCUSSION AND CONSULTATION RATHER THAN NEGOTIATION. (THE FRENCH REPORTEDLY SPECIFICALLY STATED THERE SHOULD BE NO "NEGOTIATIONS", AND THIS POINT WAS ACCEPTED BY THE OTHER PARTICIPANTS.) 7. IN COMMENTING ON THE DISCUSSIONS AT ZEIST, ONE SOURCE WHO WAS PRESENT AT THE MEETING TOLD US THE VIEW WAS WIDE- SPREAD THAT AS A PRACTICAL MATTER, CENTRAL BANKS WOULD NOT SELL GOLD UNLESS THEY KNEW THEY COULD BUY. FREEDOM TO SELL BUT NOT TO BUY WAS MEANINGLESS SINCE THE PRICE COULD NOT BE CONTROLLED AND A NATION THAT SOLD GOLD WOULD SIMPLY UNDERCUT ITS OWN POSITION IN THE ABSENCE OF ANY BUYING. MOREOVER, IF THE PHASING OUT OF HOLD WAS TO BE ORDERLY, CENTRAL BANKS WOULD REQUIRE FREEDOM TO OPERATE IN BOTH DIRECTIONS. FINALLY, THE POINT WAS MADE AT THE MEETING THAT NON-MONETARY COMMODITIES ARE BOTH BOUGHT AND SOLD ON THE MARKET AND THAT GOLD, IF REGARDED AS A NON-MONETARY COMMODITY, SHOULD BE TREATED LIMITED OFFICIAL USE LIMITED OFFICIAL USE PAGE 04 EC BRU 02457 251418Z SIMILARLY. MYERSON LIMITED OFFICIAL USE NNN

--- Capture Date: 01 JAN 1994 Channel Indicators: n/a Current Classification: UNCLASSIFIED Concepts: POLICIES, MINISTERIAL MEETINGS, BANKERS, GOLD CRISIS, GOLD TRANSACTIONS Control Number: n/a Copy: SINGLE Draft Date: 25 APR 1974 Decaption Date: 01 JAN 1960 Decaption Note: n/a Disposition Action: RELEASED Disposition Approved on Date: n/a Disposition Authority: golinofr Disposition Case Number: n/a Disposition Comment: 25 YEAR REVIEW Disposition Date: 28 MAY 2004 Disposition Event: n/a Disposition History: n/a Disposition Reason: n/a Disposition Remarks: n/a Document Number: 1974ECBRU02457 Document Source: CORE Document Unique ID: '00' Drafter: n/a Enclosure: n/a Executive Order: N/A Errors: N/A Film Number: D740097-1114 From: EC BRUSSELS Handling Restrictions: n/a Image Path: n/a ISecure: '1' Legacy Key: link1974/newtext/t19740415/aaaaamzv.tel Line Count: '155' Locator: TEXT ON-LINE, ON MICROFILM Office: ACTION EUR Original Classification: LIMITED OFFICIAL USE Original Handling Restrictions: n/a Original Previous Classification: n/a Original Previous Handling Restrictions: n/a Page Count: '3' Previous Channel Indicators: n/a Previous Classification: LIMITED OFFICIAL USE Previous Handling Restrictions: n/a Reference: A) THE HAGUE 2042 Review Action: RELEASED, APPROVED Review Authority: golinofr Review Comment: n/a Review Content Flags: n/a Review Date: 01 APR 2002 Review Event: n/a Review Exemptions: n/a Review History: RELEASED <01 APR 2002 by boyleja>; APPROVED <10 JUN 2002 by golinofr> Review Markings: ! 'n/a US Department of State EO Systematic Review 30 JUN 2005 ' Review Media Identifier: n/a Review Referrals: n/a Review Release Date: n/a Review Release Event: n/a Review Transfer Date: n/a Review Withdrawn Fields: n/a Secure: OPEN Status: NATIVE Subject: EC FINANCE MINISTERS' DISCUSSION OF GOLD, APRIL 22-23 TAGS: EFIN, XG, EEC To: STATE Type: TE Markings: Declassified/Released US Department of State EO Systematic Review 30 JUN 2005