611.60F31/3–148: Telegram

The Ambassador in Czechoslovakia (Steinhardt) to the Secretary of State


251. I feel very strongly that Dept should seriously consider withholding approval of project of Czechoslovak steel industry to acquire about 25 million dollars equipment from [two American firms]. Embassy understands these contracts were made subject disapproval on political grounds. It is my understanding that Czechoslovaks have paid some four and half million dollars on this contract. I believe also that the Czechoslovaks purchase of the blast furnaces at Linz for about three million dollars should not be approved. This Czechoslovak money in United States might well be impounded to protect American claims against Czechoslovakia for property they seized or nationalized.

Under a semi-free economy perhaps there could be no valid objection to assisting Czechoslovak steel industry to eliminate obsolescence in productive equipment. However, since the economy is at present being thoroughly integrated with Soviet, any supplying of American industrial equipment to Czechoslovakia would contribute to promotion of Soviet politic-economic policy.

Dept’s attention is invited to other Czechoslovak projects which have been contracted for or are pending and which might well be delayed or disapproved. They include the expenditure in the US of about 25 million dollars for motor vehicles producing machinery, the building of oxygen plant for the steel industry at a cost of about 1 million dollars, the purchase of 15 million dollars worth of hydrocol equipment for Stalin Works, and the construction of a rayon filament yarn plant for 5 million dollars. These projects may be expected to be pushed within the coming months concomitantly with the five year plan.

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I have reason to believe that most of these projects were intended to benefit the Soviet Union.1

  1. Telegram 417, March 25, to Praha, not printed, replied that the Department of State had no legal authority to effect any contract cancellations and in general had no opportunity to express its views on the negotiation of such contracts. Furthermore, the Department considered linking payments to American firms for equipment with the settlement of American property nationalization claims to be inappropriate and probably impracticable. However, effective United States control over the items mentioned by Ambassador Steinhardt would be assured by export licensing policy which would prevent the issuance of export licenses for such capital equipment or other items as would contribute to Soviet war potential (611.60F31/3–148).