860F.51/4–2447: Telegram

The Acting Secretary of State to the Embassy in Czechoslovakia


390. For the Ambassador. NAC has under consideration Czecho application with WAA for $20 mil domestic surplus property credit. Dept considers this appropriate time to review policy with respect to credits to Czecho. Any change in that policy requires See’s approval. Your views are requested before submitting matter to him.

It is difficult separate WAA domestic surplus property credit from $50 mil FLC surplus property credit, unused portion of which ($40 mil) frozen on Sec instructions Sept ’46.1 Dept cannot approve WAA credit in NAC while maintaining freeze FLC credit without giving rise to charge of inconsistency, since FLC credits should have priority over WAA credits, i.e., surplus property overseas should be disposed first. Therefore, if approve WAA credit, Dept inclined unfreeze FLC credit should Czecho reopen question. (Additional surplus property expected available Ger soon.)

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Dept’s desire review position re credits motivated by (1) improvement Czecho political situation since Sept ’46 as reported by you; (2) helpfulness Czecho participation London and Geneva ITO Conferences2 and their attitude there; (3) fact that Eximbank and FLC credits Poland not suspended, as were Czecho credits; (4) continuing impasse question Czecho transit charges through Ger (urtel 332 Apr 83) despite Dept’s efforts to arrive favorable solution; and (5) Czecho’s anticipated unfavorable balance of payments. (Dept anticipates gross deficits neighborhood $150 mil 1947 and $100 mil 1948, based on Czecho import program under Two Year Plan.)

Dept requests your views, in light (1) foregoing considerations, (2) your opinion as to effect on Czecho political situation, and (3) value extension or reopening surplus credits now in attaining US objectives, including nationalization compensation agreement or concessions in other fields you think desirable.

For your background info, Slavik applied for $20 mil cotton credit Eximbank Feb 19. Dept advised Eximbank Feb 26 it had no objection this credit. Question $50 mil Eximbank reconstruction loan, suspended Sec. Sept ’46, not reopened by Czecho. Board Directors Eximbank decided Feb 5 this credit would be considered new application if question reopened. In view present policies Eximbank doubtful they would consider long-term reconstruction loan this amount. Also doubtful Czecho will reopen question in view their application Internatl Bank Feb 27 for $350 mil long-term reconstruction loan, over three-year period.4

Repeated to Geneva for Clayton.

  1. Regarding the action of the United States Government in suspending the further sale of surplus property to the Czechoslovak Government in September 1946, see Foreign Relations, 1946, vol. vi, pp. 216 ff.
  2. The reference here is to the First and Second Sessions of the Preparatory Committee of the United Nations Conference on Trade and Employment, held in London, October 15–November 26, 1946, and in Geneva, April 10–October 26, 1947, respectively. For documentation on United States participation in these meetings, see Foreign Relations, 1946, volume i .
  3. Not printed; it recommended that renewed efforts be made to reach agreement with Czechoslovak authorities on the payment of transit charges for Czechoslovak freight crossing the United States zone of occupation in Germany (740.00119 Control (Germany)/4–847).

    Unnumbered telegram of April 8, from Praha, not printed, added the following observation on this matter:

    “Communists are exploiting issue to demonstrate indifference or hostility of West towards Czechoslovakia and necessity of Czechoslovakia to place sole reliance on Soviet Union and other Slav states.” (740.00119 Control (Germany)/4–847)

  4. In July 1946 the Czechoslovak Embassy informally requested a credit of $350 million from the International Bank for Reconstruction and Development. On February 27, 1947, the Czechoslovak Ambassador filed a formal loan application in the same amount with the International Bank, submitting a comprehensive statement on Czechoslovakia’s economic conditions in support of the loan request. At the time of this message, no action had yet been taken on the Czechoslovak application by the National Advisory Council on International Monetary arid Financial Problems.