Mr. Garner said that while the Bank was anxious to maintain its position
as an international institution, it was clear that in the case of this
loan it could only go through if the United States Government actually
supported it. If our attitude was simply one of not opposing the loan it
would probably not be made. He said he was discussing
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the matter with Averell Harriman3 later this week
but said that the Bank had not made an approach to any other Government.
He added that the Bank would be interested to learn of any views
Ambassador Griffis might have. I informed Mr. Garner of such information
as we have received from the Ambassador and said we would continue to
keep him informed.
In reply to my question Mr. Garner stated that some purchases of the
supplies contemplated could be made through member countries other than
the United States and in these cases the Bank contemplated endeavoring
to get the agreement of the countries concerned to the use of their
capital subscriptions for this purpose. In the case of any supplies
coming from countries not members of the Bank, such as Sweden and
Switzerland, an effort would be made to obtain credit terms.
I referred to the relationship of the proposed loan to the negotiations
in connection with the European Recovery Program and said that in the
event that the Bank was to negotiate a loan the timing of any
announcement might be of importance and inquired how soon the Bank felt
that a decision would have to be made. Mr. Garner replied that in his
opinion a decision would have to be made shortly after the return of Mr.
McCloy on October 25. He pointed out that Mr. McCloy was now visiting
Czechoslovakia and Poland.
I said I would see that the matter received prompt attention in the
Department and said that we were grateful to Mr. Garner for informing us
of the Bank’s views on the matter. I indicated that I felt that the only
loan justified was a limited one of this sort and that while I was
personally inclined to think that a loan on this limited basis might be
advisable, the Department would have to consider carefully the
relationship of such a loan to the Marshall Plan.
Memorandum by the Vice President of the
International Bank for Reconstruction and Development (Garner)
[Annex]
[Extracts]
[Washington,] September 30,
1947.
Considerations Affecting a Possible Loan by the
International Bank to Poland
In June we sent a fact finding mission, including a qualified coal
engineer, to Poland to investigate conditions relating to the Polish
request for a loan of about $128 millions to finance increased
production of coal and directly related industries.
The group returned in August and reports that a loan of about $50
millions should result in substantial increase in coal
production.
Poland’s rejection of the invitation to the Paris Conference points
up the group’s own findings regarding the relations with Russia.
Their investigation included discussions with several Socialist and
Communist members of the Polish Cabinet, members of the opposition
and minority parties, including the opposition leader, church
authorities, senior members of foreign embassies, legations and
consulates of some of the Bank’s member nations, and other foreign
observers. Such discussions pointed to the virtually unanimous
agreement that there is today a substantial degree of actual and
potential domination by Russia of Poland’s political and economic
policy, although, at present there appears to be little interference
in the actual operations of the Polish economy.
In considering a loan to Poland, therefore, it is obvious that the
Bank can not ignore the financial risks, inasmuch as Poland’s
actions might be determined by Russia, a non-member of the Bank,
whose policies and objectives appear to be hostile to those of most
of the Bank’s members. However, the vital importance of Polish coal
to our members in Western Europe, including those to whom we have
already extended loans, convinces us that we should explore all
possibilities for making a loan.
. . . . . . . . . . . . . .
Debt Record—The Polish Government has
announced publicly its intention to negotiate this autumn for the
resumption of payment on its foreign debt, service of which was
suspended following the invasion. The Polish authorities stated that
with regard to the foreign debts of Danzig and the former German
territories in the East and of Vilna, now incorporated in Russia,
they would expect to negotiate settlements in accordance with the
liabilities as fixed by the peace treaties.
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We understand that negotiations are under way for settlement of the
claims of foreign owners of properties which have been
nationalized.
We believe that it would be practical for the Bank to get
satisfactory assurances from Poland regarding these matters.
conclusion
It is our opinion that the proposed loan of about $47 millions would
support a substantial increase in Polish coal production, with
definite undertakings on the part of Poland to ship the bulk of
increased export coal to the West.
We are further of the opinion that the value of this coal to other
members of the Bank is sufficient to justify the risk that Russia
might force Poland to default on its obligations.
However, it is realized that it is futile for the Bank to proceed in
this matter unless its largest stockholder, the United States
Government, would be willing to support the Bank in making such a
loan.
Furthermore, it would be necessary to obtain the unofficial support
of leaders in the financial community and the press in order to
avoid criticism of the Bank which might interfere with its future
financing in the American market. Confidential discussions with a
few representative American bankers indicate that it would be
possible to get support for the loan in important quarters.
The management of the Bank realizes the risks in a loan to Poland but
considers the potential benefits sufficiently great to justify this
risk. It also considers that if it turns down the loan it will
greatly strengthen Russian propaganda claims that Poland and other
similarly situated countries have nowhere to turn except to
Russia.
