Foreign Relations of the United States, 1946, Eastern Europe, The Soviet Union, Volume VI

740.00119 Control (Rumania)/5–946: Telegram

The Acting Secretary of State to the Representative in Rumania (Berry)

secret

Washington, June 19, 1946—6 p.m.

406. 1. Dept much interested tripartite conversations Rumanian economic recovery reported urtel 484, May 9 and preceding telegrams, despatches and minutes sent War Dept. Dept believes that improvement major-power relations with respect Eastern Europe would be greatly facilitated by development such economic consultative groups in which economic policies of major powers can be dealt with at technical level with least possible reference to political and security issues. Dept, therefore, anxious to continue and extend scope of U.S. and U.K. participation such conversations and, if possible, to place them on more permanent basis with view establishing clear cut precedent for tripartite consultation on means of furthering economic recovery Eastern European countries as envisaged Yalta Declaration. Our hope would be tripartite consultative machinery on Rumanian economic recovery could be continued even after dissolution of ACC. To this end, suggest you consider possibility participation U.S. and U.K. civilian representatives in discussions.

2. For your information, Dept has proposed to U.S.S.R. in connection, possible U.S.-Soviet loan negotiations discussion of means to further economic recovery of Eastern European countries.⁹⁵ Dept is also promoting creation under UN Economic and Social Council of a Sub-commission on Reconstruction of Devastated Areas with similar terms of reference.⁹⁶ To extent prior agreement on facts of and remedies for Rumanian economic situation could be worked out at Bucharest level, work of above groups on Rumanian problems would be greatly facilitated.

3. In light above considerations, Dept would like tripartite economic group not only propose particular economic and administrative measures to Rumanian Govt through ACC, but to undertake responsibility for working out with Rumanian Govt comprehensive economic recovery program for latter part 1946 and 1947. Although you will know extent to which this is possible, Dept believes following outline of program may be useful:

A. Basic economic objectives of recovery program:

1. Maintenance of minimum agreed consumption standard of food and essential consumers goods for civilian population;

2. Provision for exports which will provide sufficient exchange (including necessary amounts of freely convertible currencies) to pay for minimum imports required to maintain minimum consumption standard and in general to maximize essential production and to meet other essential foreign exchange obligations including service charges on any reconstruction credits which may be received;

3. Fulfillment of clearly defined armistice obligations to maximum extent consistent with (1) and (2).

B. Industrial production

Production targets for individual industries required to reach basic objectives of the economic program; raw materials, fuels, equipment and spare parts requirements, allocation controls, and labor program required to reach production targets; measures to induce management to maximize production.

C. Food and agriculture

Estimates of agricultural production, consumption and exportable surpluses in 1946 and 1947. Measures to increase production.

D. Bail and road transport

Rolling stock and other equipment requirements, domestic production and import requirements.

E. Foreign Trade

1. Minimum import program for 1946 and 1947 by commodities and probable sources of supply.

2. Commodities available for export in 1946 and 1947 which can be sold in markets to yield currencies required to pay for imports.

3. Maximum armistice deliveries compatible with attainment of first two objectives of economic program during same periods. (A clear determination of all economic armistice obligations would, of course, be a prerequisite for U.S. agreement to a recovery program.)

F. Price, Fiscal and Wage Policy.

4. Reference specific Soviet proposals outlined urtel 484, May 9, and Schuyler’s T–1137, April 27,⁹⁷ proposals refer largely to establishment of administrative controls which are probably necessary to economic recovery. More basic question, however, is economic program to which controls will give effect. Therefore, Dept suggests that while Schuyler could agree to necessity controls of this general type, U.S. should stress that tripartite preparation of general economic recovery program is fundamental if controls are to be used to promote recovery. Dept’s specific comments on five proposals follow:

A. Your para. 1: Centralized industrial planning agency appears desirable if composed largely of reasonably impartial technically competent specialists rather than politicians. Such agency should be limited to laying out industrial plans and general supervision of production schedules as suggested in our Feb proposals. In this connection, our Feb view should be reaffirmed that state administrators should be carefully examined with object of eliminating obstructionist type.

B. Your para. 2: We agree that there should be government supervision of exports and imports to prevent import of nonessentials, but exports should be permitted to greater extent than at present to those areas from which needed imports can be secured in return. Desirability that U.S. and British oil and U.S. lumber companies be allowed to export on their own account in order that they may import critically needed equipment might be noted again. In general, Rumanian exports should be allowed to move to markets which will yield the currencies required to pay for essential imports and to meet other foreign obligations.

C. Your para. 3: Re supervision of all banks to insure extension of credits to Rumanian industrial enterprises, it should be noted that large part of banking structure already under control of state or of Rumanian-Soviet joint bank. We agree that state investment should be extended only to essential industry.

D. Your para. 4: We agree that availability of liquid and solid fuels a bottleneck on industrial production at present and that better allocation system desirable. We feel, however, that equally important reason may be that Soviets are taking too much out of country and solution may involve reduction Soviet demands for reparations and Army maintenance. Additional transport should also be allocated to coal and oil industries.

E. Your para. 5: We are unable discuss this point fully without seeing budget. Rumanian Government was requested to submit study of proposed 1946–1947 budget to ACC (Schuyler’s T–166, Jan 9⁹⁸) and this should be called for. Balancing of budget by increasing taxation appears impossible so long as present degree of corruption in tax administration continues. On basis of expenditures for past year it appears that costs of Russian occupation account for most of deficit and that only hope for substantial reduction deficit lies in substantial reduction occupation costs.

F. As regards general question Rumanian Govt intervention in private business, U.S. representatives should not take position that U.S. opposes it as matter of principle (since this is primarily an internal Rumanian affair), but that U.S. attitude depends entirely on whether in individual cases Govt control is likely promote or hinder production or distribution of essential commodities and services. In general, Dept feels this issue should not be overstressed and the U.S. representatives should emphasize their willingness participate in preparation tripartite economic recovery program and avoid as far as possible assuming position of mere critics of Soviet or Rumanian Govt action.

5. For your confidential information, Dept’s policy is not to grant credit to reparations paying country unless reparations and other economic armistice obligations have been clearly defined and fixed at size which permits country to earn foreign exchange sufficient to pay for essential imports and to service credit. In addition no U.S. economic assistance for Rumania could be considered unless economic recovery program which clearly satisfied objectives outlined in para. 3A above had received tripartite approval and had been accepted by Rumanian Govt. If conversations proceed favorably and there appears to be some possibility of tripartite agreement on recovery program which meets these conditions and if question of credits is raised you may inform ACC and Rumanian Govt along these lines.

6. Your detailed comment requested.

Acheson

95. For documentation regarding the consideration of granting loans and credits to the Soviet Union, see pp. 818 ff.
96. By the resolution of the United Nations Economic and Social Council on June 21, 1946, a Temporary Sub-Commission on Economic Reconstruction of Devastated Areas was established. For terms of reference of the Sub-Commission and an account of its work, see Yearbook of the United Nations, 1946–47 (New York: 1947), p. 479.
97. Latter not printed.
98. Not printed.