800.515/6–1845: Telegram

No. 325
The Secretary of State ad interim to the Ambassador in the United Kingdom (Winant)
secret

5327. Emb Moscow has transmitted in its 2146, June 181 views of Soviet Government re blocking of satellite assets in Switzerland, Spain, Portugal, and Sweden. Soviets feel that since Finland, Rumania, Hungary, and Bulgaria declared war on Axis we should permit resources of these countries to be used for rehabilitation and reconstruction and that consequently they do not wish assets of state or state-controlled enterprises blocked.

Soviets, however, recommend blocking in neutrals of private assets belonging to aforementioned countries with control over such assets vested in ACC’s. As Embassy is aware, blocking has already been accomplished in Spain, and Portuguese have been requested to take parallel action. Department concurs in Soviet recommendation regarding blocking private assets but feels that blocking of state properties should also take place not only to maintain harmony with respect to blocking of other territories formerly occupied by Germany, but to avoid confusion which may arise from attempting to block on partial basis. Once general blocking has been achieved, there should be no difficulty in impressing upon neutral governments desirability broad utilization assets under general authorization or elastic administrative technique.

Assuming Russians would agree to general freeze of both official and private assets in neutrals with proviso that ACC’s would supervise expenditures, Department believes that missions in neutrals of governments represented on ACC’s should act as liaison between ACC’s and neutral governments with respect to questions of unblocking or utilization of assets covered by blocked measures. This would [Page 433]seem to be essential due to lack Russian representation in neutrals except Sweden. Furthermore, it is desirable to have some form of control exercised by our missions in neutrals for reasons that (a) recently concluded Soviet-Balkan trade pacts2 make it apparent that uncontrolled use of balances of these countries would result only in importations from abroad which would swell the amount of goods available in these countries for exportation to Soviet Union as reparations, or under trade agreements (b) accomplishment of Safehaven objectives is largely dependent on our missions and (c) there must be some means of assuring Allied countries equal access to neutral exports during the emergency rehabilitation period.

In case of Switzerland, it is now our opinion that control should be exercised by Brit and American missions dealing directly with Swiss Govt rather than through Mixed Commission. With re to London’s 4642, May 8,3 we have no objection to Brit proposal that Bulgarian and Rumanian assets be utilized for purchases of essential supplies in Switzerland in addition suggestion contained Dept’s telegram 3445, May 2 (1671 to Bern, 119 to Sofia, 228 to Bucharest)3 for utilization of such assets for diplomatic expenses and relief supplies. Also no objection to their being used for similar purposes in Turkey, Spain, Portugal, and Sweden.

Before proceeding with approach to neutral governments, Department wishes comments Embassies at London and Moscow re foregoing. If Moscow perceives no objection, further discussions should be held with Russians explaining that general freeze is considered to be more practicable than mere freeze private assets and that should Russians assent to complete freeze, Department believes that in light of current relationships with neutral governments arrangements can be made to work out elastic administration blocking regulations in such a way as to prevent undue interference with normal transactions incident to administration of the areas within the sphere of Russian interest.

Emb Moscow also reports Soviet view that blocking should not be extended to territories previously occupied by Germany such as Czech, France, Yugoslavia, etc. since the assets of these countries should be left at the disposal of their governments. Moscow should explain to Russians that blocking in neutrals of assets of these formerly occupied countries is primarily precautionary measure directed at identifying and controlling enemy property. Such blocking does not necessarily imply complete immobilization and Dept has already expressed to neutral [Page 434]govts desirability of modifying blocking measures in order that legitimate interests will not be injured. Generally speaking, govts of these formerly occupied countries have assented to blocking measures.

Sent to London and Moscow as 1475 for action, repeated for information to Bern as 2192; to Stockholm as 1237; to Madrid as 1099; to Lisbon as 1055; to Ankara as 670; to Sofia as 190; and to Bucharest as 331.4

Grew
G[eorge] W B[aker]
  1. Not printed.
  2. Such agreements had been signed at Moscow with Bulgaria on March 14–15, 1945 (not printed), and with Rumania on May 8, 1945 (text in British and Foreign State Papers, vol. cxlix, p. 876).
  3. Not printed.
  4. Not printed.
  5. As repeated to Sofia and Bucharest, this message had an additional introductory sentence not printed here.