860F.24/9–1846: Telegram
The Ambassador in Czechoslovakia (Steinhardt) to the Secretary of State66
urgent
[Received 1:50 p.m.]
1686. Personal for Clayton from the Ambassador. The “confidential enclosure” is a brief statement referring to the protocol of September 14, 1946 specifying “that the goods Rumania is seeking to obtain for its own consumption are the goods from surpluses of American [Page 221] war material on the European Continent or in Pacific Ocean respectively.67 The protocol is not concerned with other goods”. The confidential enclosure closes with statement that it will be communicated by both Govts to the Govt of United States and that “the protocol will come into force as soon as the Govt of United States announces that there are no objections”.
The note transmits the protocol and confidential enclosure to the Embassy with the request that the American authorities concerned be informed of contents of both enclosures and their consent obtained. It points out that the time limit for purchases of American surplus war material “is comparatively short as far as material located in Europe is concerned” and expresses the desire of the Ministry for an early reply. The concluding paragraph of the note reads “the Minister for Foreign Affairs has the honor to remark that the possibility of the sale of goods for goods from these credits to other markets has been expressly indicated to Zecho in discussions held with representatives of US Treasury at the beginning of the year”.
I informed the representative of the Ministry that I would of course immediately transmit the request of his Govt and the supporting documents to the Dept for reply but that speaking entirely on my own responsibility and without knowing the views of my Govt, I was astonished at the transaction. I indicated that in my opinion the Government of the United States was competent to sell its surplus war material to Rumanian Govt if it so desired without the intervention of Zecho Government. I also pointed out that the 50 million dollar surplus war credit had been extended to Zecho Govt for its own use and not with the intention that a part thereof should be transferred to their Government [other Governments?], and observed that it seemed obvious that the credit sought and obtained by Zecho Government for the purchase of American surplus war material had been far in excess of Zecho’s requirements (your top secret 1100 September 6 to Praha and 1101 September 6 to the Secretary in Paris repeated to Praha68).
If the Secretary and you so desire, the action of Zecho Govt in entering into this formal contract with the Rumanian Govt subject only [Page 222] to the approval of US Govt would appear to afford an opportunity to suspend or even revoke, if legally permissible, all or part of the unused balance of the 50 million dollar war surplus credit of which I understand only approximate 10 million dollars has thus far been utilized.
A representative of Ministry Foreign Affairs called on me September 16 and left with me a note from FonOff together with copy of a protocol entered into under date of September 14 between the Zecho and Rumanian Govts, and a “confidential enclosure”. The three documents are being transmitted to Dept by the next airmail pouch.
The protocol is in effect a contract between the Zecho and Rumanian Govts providing that “to enable the Rumanian Govt to obtain various goods from abroad” the Zecho Govt “will purchase abroad for the Rumanian Govt up to the amount of 10 million American dollars” of goods. All risks are to be borne by Rumanian Govt. Zecho Govt does not guarantee quality or delivery. If there are not enough goods to satisfy the requirements of both Govts, “Zecho possesses priority”. Rumanian Govt is to reimburse Zecho for cost of goods “plus a maximum of 7% to meet administrative cost” in five annual installments, 10% the first year, 15% the second year, 20% the third year, 25% the fourth year and 30% the fifth year. As soon as one million dollars of goods have been purchased Rumanian Govt will issue to Zecho Govt “cash bonds for dollars” to be guaranteed by Rumanian Minister of Finance as to “priority for cashing in free currency”. All payments “of capital and interest” are to be made in American dollars to the credit of the Praha Credit Bank in New York. In the event of delays on payment Rumanian Govt is to pay 6% interest on delayed payments.
[In a letter to Acting Secretary Acheson dated October 4, 1946, not printed, Secretary Byrnes said that he had discussed the Czechoslovak-Rumanian protocol with Czechoslovak Foreign Minister Masaryk who alleged that the idea had originated with an official of the United States Treasury Department in a conversation with a Czechoslovak Finance Ministry official. In a memorandum of October 29 to Secretary Byrnes, Under Secretary Clayton reviewed the information obtained from the Treasury Department on the matter. A Treasury Department official had visited Czechoslovakia in 1945 and 1946 on a number of occasions in connection with army financial problems. The Treasury Department official, in commenting to Czechoslovak Government representatives about conditions surrounding the purchase of American surplus property, stated that it was not his [Page 223] understanding that surplus property acquired by Czechoslovakia would have to be used within the national boundaries of Chechoslovakia. The Treasury official further told the Czechoslovaks that American surplus property should not be re-exported to the United States, directly or indirectly. In a letter of October 22 to Clayton on this same subject, Secretary of the Treasury Snyder commented that he could see how it might be possible for Czechoslovak officials to jump to the conclusion that they could transfer surplus property to Rumania even though the. Treasury Department official involved had never at any time made mention of geographical areas within which Czechoslovakia might dispose of American surplus property (860F.24/10–2246).]
- The text of this telegram was transmitted to the Secretary of State in telegram 5061, Secdel 980, September 24, to Paris, not printed.↩
- The protocol under reference was an agreement signed at Praha on September 14, 1946 between the Czechoslovak and Rumanian Governments under the terms of which Czechoslovakia would extend to Rumania a credit of $10 million for the acquisition of surplus American war material which Czechoslovakia would secure under the $50 million credit from the United States. The protocol together with the “confidential supplement” thereto were communicated to the American Embassy in Praha under cover of a note from the Czechoslovak Foreign Ministry dated September 16. All three documents were transmitted to the Department with despatch 1298, September 18, from Praha, none printed.↩
- Telegram 1100, September 6, to Praha, contained the substance of telegram 4368, Delsec 877, August 30, from Paris, p. 216. Telegram 1101, September 6, to Praha, not printed, but see footnote 60, p. 217.↩