Foreign Relations of the United States, 1947, Eastern Europe; The Soviet Union, Volume IV

711.74/5–2247

Department of State Policy and Information Statement¹

[Extract]

secret

[Washington,] May 22, 1947.

Rumania

i. current us policy toward rumania

a. General Political. In conformity with our objective of supporting peoples who are resisting attempted subjugation, our present policy toward Rumania is directed to preventing the Soviet Union from establishing complete control over that country.

Our efforts since the end of the war to bring about Rumania’s political and economic reconstruction along democratic lines have so far failed. In accordance with obligations undertaken in the Crimean Declaration on Liberated Europe, we brought about tri-power consideration of Rumania’s political situation but hopes that the political issues could be so resolved soon faded. However, although the US long-term objective of the readmission into the family of peaceful nations of a democratic and independent Rumania wherein US interests would enjoy equality of opportunity will be difficult of attainment in the foreseeable future, we intend to continue our efforts to that end. There are still democratic forces in Rumania which are opposing, sometimes actively, though less and less effectively, the imposition of a Communist dictatorship. It is our policy to continue to give these elements whatever political support we can, while withholding from the Government itself any economic assistance, other than of a completely humanitarian nature, as this would only serve to complement its totalitarian economic policies and consolidate its political position.

[Here follows a summary review of the political developments within Rumania during 1945 and 1946 and the efforts by the United States Government to assist in the establishment of democratic institutions there. Full documentation on these matters is included in Foreign Relations, 1945, volume V, pages 464 ff. and 1946, volume VI pages 555 ff.]

In addition to these steps taken by this Government to normalize its relations with Rumania, to support democratic political elements, and to implement its Yalta commitments, we have given support to the Rumanian people on humanitarian grounds. When a severe famine threatened the province of Moldavia during the past winter, we provided substantial quantities of concentrated foods for distribution through the American and Rumanian Red Cross and allocated 76,000 tons of corn for purchase by the Rumanian Government.² Although these humanitarian efforts were duly recognized by the Rumanian people and grudgingly by the Communist-controlled Government, we have no intention of giving any economic support to the regime itself as long as it is unrepresentative in character and repressive in action.

After the formal conclusion of the peace with Rumania and when the US shall have established full diplomatic relations with that country, we will continue our efforts toward developing Rumanian independence. During recent months a new wave of political arrests has swept the country and it seems clear that the Communists are attempting to liquidate the opposition and consolidate their position before final ratification of the treaty. The opposition parties have appealed to the King, to the Council of Foreign Ministers, and to the UN.

For the moment, however, it is not expected that US actions can accomplish more than to retard the present momentum toward the consolidation of Soviet control of Rumania. Nevertheless, continuance of our current policy of active US interest in Rumanian affairs, of which the Rumanians have evidence in our alacrity to protest both nonobservance of commitments and failure to protect US properties, will, we feel, encourage those now in opposition to resist further the Communist attempt to impose total dictatorship on the country and possibly to bring about its eventual political incorporation into the USSR. This policy is buttressed by wide dissemination in Rumania of information material not only concerning this country but also on developments in Rumania itself. The American people should also be fully informed of developments, in order that they can be brought to a full appreciation of US objectives.

b. Economic

1. Finance.

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In order to assist the Rumanian Government to make cash purchases of foods urgently needed to avert famine in the early months of 1947, we agreed that should it deposit some $20,500,000 worth of gold bullion to US account in Switzerland to be held in escrow, we would continue discussions with the British and French to the end that this amount be considered full settlement of Rumania’s obligation to return German looted gold. Moreover, pending this settlement we further agreed that the National Bank of Rumania could utilize gold over and above this amount to obtain dollar credits from US banks provided it would certify to its non-German origin. As a result, a credit of $7,500,000 was opened with Chase National Bank of New York in March for food purchases. In the event the present deposit is accepted as a final settlement, Rumania will receive proceeds on behalf of any countries participating in the settlement; otherwise the gold will be returned to Rumania and the latter will continue to adhere to the principles of the gold declaration of February 22, 1944.

2. Investment Several months ago representatives of the Rumanian Government indicated through our Mission in Bucharest a desire to explore the possibilities of private investment by US nationals in Rumania, and suggested sending an economic mission to this country. Our representative pointed out that unless the Rumanian Government was first willing to discuss the settlement of existing obligations toward current US investments in Rumania it seemed unlikely that private US investors would be attracted. Now that a settlement of the looted gold question is pending and the National Bank can offer gold in a third country as collateral, this situation has changed.

In addition to the $7,500,000 loan which the Rumanians successfully negotiated with the Chase National Bank, a further credit of $50,000,000 is presently under consideration. In line with our policy of not making recommendations on private loans, we have told the Chase Bank we have no objection. In this particular case the US Government was reluctant to undertake any responsibilities that it was not prepared to discharge. Should it develop that no satisfaction is obtainable as regards discrimination against US interests in Rumania, consideration may be given to reviewing our hands-off policy regarding private loans to areas in which previous US investments are being unfairly treated.

3. Commercial and General Economic Relations. The coming into force of a peace treaty with Rumania will provide a basis for regularizing Rumania’s economic relations with the rest of the world, which it is hoped will reduce the USSR’s preeminent position in Rumanian economic life established through the presence of its occupation forces and the administration of the economic clauses of the armistice. We are presently engaged in elaborating a program for implementing in the most effective possible manner the treaty clauses having a bearing on Rumania’s foreign economic relations. Our policy will aim particularly at securing fulfillment of the treaty provisions requiring Rumania to accord most-favored-nation treatment to those countries granting the same treatment to Rumania, and will seek to assist by appropriate methods in reconstructing Rumanian commercial relations on a multilateral basis. Such a policy will have application both to the administration of the joint Soviet-Rumanian companies and to Rumania’s foreign trade relations.

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4. Petroleum. Our foreign oil policy is mainly directed to (1) assurring petroleum supplies and accessible markets to the nationals of all countries on a competitive and nondiscriminatory basis; (2) respect for valid concession contracts and lawfully acquired rights and the principle of equal opportunity in the acquisition of exploration and development rights; and (3) protection of the interests of producing countries with a view to their economic advancement.

The principal petroleum problems in Rumania arise from Soviet occupation policies. Shortly after their entry into the country, Soviet military authorities removed a substantial quantity of oil equipment from the warehouses of Romano-Americana, the Rumanian subsidiary of the Standard Oil Company of New Jersey. These removals were discussed at Potsdam, and the resulting protocol³ provided for an American-Soviet Commission in Rumania to investigate the facts, examine the documents, and settle the questions involved in the equipment removals. The Soviet member of the Commission has been arbitrary and uncooperative with the result that the Commission has never really functioned effectively or resolved any of the points at issue.

The US member therefore was instructed in April 1946 to submit a report to the Commission, reciting the Commission’s terms of reference, outlining pertinent developments, and stating that in the US view the Commission’s work was completed unless the Soviet Representative could submit evidence refuting US ownership of the equipment removed. In the absence of any response from the Soviet Representative despite the lapse of several months, we now intend to give the Soviet member a specified time to accept the US report or present factual evidence in rebuttal. Failing action by the Russians we would then propose to consider the Commission’s work finished and reopen the question on the diplomatic level.⁴

The reparation deliveries in petroleum to the USSR, the requirements of the Soviet occupational forces, and the exports to the USSR under the Soviet-Rumanian Trade Agreement are a heavy burden on the petroleum industry. Practically the entire output of the US-owned oil companies in Rumania is delivered for these purposes and for the account of the Rumanian Government at very low Government-controlled prices. In general these prices have been below production costs, which has made it necessary for the companies to borrow substantial sums from the National Bank in order to meet operating expenses. The indebtedness of the companies to the National Bank has reached considerable proportions and is a source of concern in view of present uncertain conditions in Rumania. A nationalized bank may result in some type of control by the Bank of the US-owned oil companies. In addition to the low price paid for petroleum and petroleum products in comparison with world market prices, the Rumanian Government is not making such payments promptly, thus accentuating the financial difficulties of the U.S. companies. The companies have in vain sought permission from the Rumanian Government to export part of their production in order to procure foreign exchange needed to purchase operating supplies and equipment and to service their investment. The US Mission in Bucharest has continually brought these conditions to the attention of the Rumanian Government requesting they be remedied. To date these efforts have met with little success.

In addition to such difficulties, the joint Rumanian-Soviet Oil Company (Sovrompetrol) represents a medium through which the Soviet Government can exercise undue influence, unfavorable to all petroleum interests in Rumania and to US nationals, on petroleum policies of the Rumanian Government. In violation of the 1942 Rumanian Mining Law, the Rumanian Government has granted Sovrompetrol the status of a “domestic” enterprise, which places the latter in a preferred position relative to other foreign firms. Our Mission in Bucharest recently protested⁵ the preferential treatment accorded Sovrompetrol by the Rumanian Government as a violation of Rumanian law and of the most-favored-nation principle of Article 31 of the recently signed peace treaty. Recent events in Rumania, chiefly the Soviet-Rumanian Commercial Agreement and the new government controls over industry in the Act of April 5, strengthen the evidence that it is the Soviet intention to utilize Sovrompetrol and through it the Rumanian Government to prejudice and possibly destroy the position of other foreign petroleum interests in Rumania (including US) even though for the moment the petroleum industry is exempted from the Act. We further pointed out to the Rumanian Government that despite our protests it had repeatedly failed to relieve the acute financial conditions of the US companies resulting from inadequate prices paid for oil, had not granted oil exploration concessions to these companies, and had refused to permit them to export part of their production. The Government was requested to give assurances that US petroleum interests would in the future receive most-favored-nation treatment and opportunity equal to that accorded Sovrompetrol.

Although the petroleum industry has not been affected by the April 5 law for the reorganization of the National Economic Ministry, which envisages far-reaching government controls over other industries, there remains considerable doubt whether Rumania will give recognition to the US foreign oil policy objectives as set forth above or agree to a satisfactory solution of the problems now faced by the US-owned companies. The outlook for our oil interests in Rumania is uncertain at best.

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1. Department of State’s Policy and Information Statements were concise documents summarizing the current United States policy toward a country or region, the relations of that country or region with the principal powers, and the issues and trends in that country or region. These Statements, which were begun in the spring of 1946, were generally prepared by ad hoc working groups in the responsible geographic offices of the Department of State and were referred to appropriate diplomatic posts abroad for comment and criticism. The Statements were periodically revised.
2. See the editorial note, p. 476.
3. The reference here is to the decision on oil equipment in Rumania, included as Part XIV of the Protocol of the Proceedings of the Berlin Conference, August 1, 1945, Foreign Relations, The Conference of Berlin (The Potsdam Conference), 1945, vol ii, p. 1496.
4. At the conclusion of the ninth meeting of the United States-Soviet Oil Commission in Rumania on June 12, the United States members announced that they would consider the Commission terminated as of that date. This action, taken in accordance with instructions from the United States Government, resulted from the feeling that the continued existence of the Commission would serve no useful purpose. On July 21, the Embassy in Moscow presented to the Soviet Foreign Ministry a protest concerning the failure of the Commission to reach a settlement on the removal by Soviet forces of oil equipment from Romano-Americana. The substance of the protest was contained in a statement issued by the Department of State to the press on July 21; see Department of State Bulletin, August 3, 1947, p. 225.
5. The protest was set forth in a note of March 15, from Representative Berry to the Rumanian Foreign Minister. A copy of the note was included as an enclosure to despatch 1437, March 17, from Bucharest, neither printed (871.6363/3–1747).