Foreign Relations of the United States, 1948, Western Europe, Volume III

840.51 FC 53/8–1148

Memorandum by the Deputy Director of the Office of European Affairs (Reber) to the Under Secretary of State (Lovett)

confidential

[Washington,] August 11, 1948.

Background

The continued blocking of Portuguese funds in the US constitutes an irritant, serious in Portuguese eyes, which colors their thinking on more important matters, including particularly conclusion of long-range agreement for US airbases in the Azores. The question of unblocking them has been discussed on numerous occasions by the various interested officers in this Department, and recently with officers in the Treasury Department. Agreement has been reached in the Department, except for L/E which contends that Portuguese funds should not be unblocked until a settlement of the looted gold problem has been brought about between Portugal and the US, UK and France acting under the Paris Reparations Agreement.¹ Although it was never made a formal condition, it has been the practice of the United States not to unblock assets in this country of those countries neutral in the war prior to the conclusion of a satisfactory settlement on German assets and looted gold.

Accord has been reached on the German external assets, implementation of which awaits settlement of the looted gold issue. Since it does not appear that a satisfactory settlement of the looted gold question can be effected in the foreseeable future, the US is proposing to inform the claimant countries of the history and present status of negotiations with Portugal.

Ambassador MacVcagh has recommended that the blockage on Portuguese assets be removed forthwith. He cites increasing resentment in Lisbon over what is considered an injustice and widespread criticism of the Portuguese Government for its failure to get the blockade removed as creating an international atmosphere which is definitely unfavorable to United States interests. He concludes that the unfavorable atmosphere renders it impossible to make any progress toward that increase of friendly confidence necessary to obtain an extension of the Azores Agreement or to negotiate any other measures which would be vital to our defense if the need arises. He points out that neither the British nor French who have a primary interest in the looted gold question has maintained a blockade on Portuguese assets.

Recommendation

It is recommended that Portuguese assets be unblocked forthwith and that the attached letter to the Secretary of Treasury designed to bring about that unblocking be sent.²

[Annex]

The Under Secretary of State (Lovett) to the Secretary of the Treasury (Snyder)

My Dear Mr. Secretary: As you know, Portuguese assets in this country are still blocked. The Department of State and our Embassy in Lisbon have recently reviewed the situation and have come to the conclusion that overriding political and strategic considerations of our foreign policy make it essential that Portuguese assets in this country should be unblocked forthwith.

I should appreciate therefore if you could give the necessary instructions to the effect that Portuguese assets in the United States will be unblocked at such date as may be designated by this Department with due regard to the technical details of issuing the license.³

Sincerely yours,

Robert A. Lovett

1. For the text of the Paris Reparations Agreement see Department of State Treaties and Other International Acts Series No. 1655, or 61 Stat, (pt 3) 3157. For documentation relating to the drafting of the Agreement see Foreign Relations, 1945, vol. iii, pp. 1455–1505.
2. The letter, as finally approved, was sent on August 25.
3. Secretary Snyder replied on August 31 that on September 2 an amendment would be issued to General License No. 53 to include Portugal in the generally licensed trade area and to unblock Portuguese assets in the United States (840.51FC53/8–3148).