Foreign Relations of the United States, 1969–1976, Volume E-15, Part 2, Documents on Western Europe, 1973–1976, Second, Revised Edition

248. Note From the Government of the United Kingdom to the White House¹

Washington, November 17, 1976.

1. At the Prime Minister’s request, made during his telephone conversation with Mr. Lever on 17 November, Mr. Lever asked the Ambassador to convey the following to the White House.

2. In amplification of the issue of timing referred to in the last paragraph of the Prime Minister’s letter to the President, the Prime Minister’s view is that, while initially the whole substance of the IMF terms could be agreed before there is agreement on how best to deal with the problem of the sterling balances, it is essential that the finalisation of the IMF loan and an agreement on the sterling balances should be announced simultaneously.

3. To give effect to the Prime Minister’s view, the timing of the discussions on the two issues would need to be broadly as follows:

(a) HMG and the IMF reach substantial agreement, but leave outstanding some minor points which need to be settled before an announcement can be made;

(b) The Fed would then participate in the work already in progress among other central bankers to devise a sterling balance safety net;

(c) the outstanding IMF loan points would be settled at the same time as an agreement was reached on how to solve the sterling balances problem, with a view to a simultaneous announcement of an agreement on both issues.

1. Summary: The note expanded on the issue of timing referred to in Callaghan’s November 12 letter to Ford.

   Source: National Archives, RG 59, Records of the Office of the Counselor, Helmut C. Sonnenfeldt, 1955–1977, Entry 5339, Box 4, Britain 1976. Secret. In a November 17 covering letter, Ramsbotham noted that Kissinger and Lever had spoken by telephone again before Lever’s departure for London and that “an hour or so beforehand, Harold had had a word with Prime Minister Callaghan, the gist of which is indicated in the attached note. Harold put the point in paragraph two to the Secretary. But I thought it would be useful for you to have the whole note, particularly paragraph three, which amplifies the Prime Minister’s perception of the timing which needs to be followed.” (Ibid.) In a November 17 memorandum to Kissinger, Sonnenfeldt reported that Lever told him that morning that he would recommend that Callaghan not accept further deflationary conditions as they would result in defense cuts and protectionist actions that would damage U.S.–UK relations and the UK’s position in the world. (Ibid., Records of Secretary of State Henry Kissinger, Entry 5403, Box 19, NODIS Memcons, November 1976)