840.51 Frozen Credits/860

Memorandum of Conversation, by the Assistant Secretary of State (Berle)

The Rumanian Chargé d’Affaires called on me today, at his request.

The subject was the blocking of Rumanian funds. He did not seem to be too well informed. He raised an objection to the blocking, on principle. He said he understood that it turned partly on the belief that Rumania was occupied by the Germans, partly on our own theory of national defense, and partly on an endeavor to prevent any goods reaching Germany. He thought that the amount involved—some thirteen million dollars of Rumanian Government funds—was not an item sufficient to affect our defense; he stated that Rumania was not effectively occupied by Germany; he said that all of the materials for which they used this American exchange as a revolving fund were for strictly Rumanian consumption. Therefore he pressed an objection of principle against our blocking exchange.

I said that I found it difficult to accept any such principle. We happened to be the last great country in the world that preserved the principle of free exchange. But we could hardly recognize that we were bound by a principle against exchange blocking orders when every other country in the world, including Rumania, felt entirely free to put blocking orders into effect as they saw fit.

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Further, I said, the blocking orders were really motivated primarily by two desires. One was to safeguard American interests: we had seen Austria and Czechoslovakia occupied and every obligation to the United States repudiated at the same time that all of the assets of these countries were promptly withdrawn or utilized.

The second was a desire to assure that the assets in question reached their rightful owners, instead of somebody else.

We had, I said, every sympathy for independent Rumania. We desired nothing more than that she should be able to preserve herself. We recognized fully the cruel situation in which a country menaced by two forces, both of which were quite ready to occupy territory, necessarily found itself. This underlined our own policy of being unable to recognize seizures by armed force.

Coste thereupon explained at some length that there was not a true force of occupation, but merely a “military mission”; that it did not exceed ten thousand men; that it was not regimental formation, but company formation; and then added, somewhat illogically, that Americans would find difficulty in realizing that the Rumanians on the whole were favorably disposed towards the Germans. They had vivid and terrible recollections of the Russian army which had marched through during the World War and the fighting they had had to do to get them out. The troops in Rumania, on the other hand, had been Austrian; and they had behaved themselves well. Many of these Austrians had subsequently been in Rumania as technicians and had created a favorable impression. In any event, if they were forced to choose between Russians and Germans, they would naturally choose Germans.

I said that we did not feel called upon to pass judgment on what a country in that unhappy predicament might do; that we could not very well retire from the blocking order; but that we would of course examine sympathetically any application for licenses which they might make.

A. A. Berle, Jr.