Foreign Relations of the United States, 1948, Eastern Europe; The Soviet Union, Volume IV

840.51 FC 60H/6–748

Memorandum by Mr. J. Burke Knapp, Adviser in the Ofice of Financial and Development Policy, to the Director of the Executive Secretariat (Humelsine)¹

[Washington,] June 7, 1948.

Subject: Requested Memorandum on Justification of US Blocking of Yugoslav Gold.

As requested in your memorandum to Mr. Havlik² of May 7, 1948,³ I am forwarding this memorandum, for the Under Secretary’s concurrence before transmittal to the Secretary, outlining the justification for maintaining the block on Yugoslav gold. Attached is a more detailed statement³ which incorporates part of the material contained in a paper of the Secretary’s Policy Planning Staff (PPS-16, November 17, 1947),⁴ the ribbon copy of which is also attached.

The United States justifies retention of Yugoslav gold primarily as a lever to induce Yugoslavia to make adequate dollar payments for expropriated American property, dinar payments for lend-lease “Plan A” obligations, and to settle certain minor claims. There are no complications regarding the unblocking operation as such which justify delay in returning the gold. On the other hand the United States is not violating any specific international commitment, such as any provision of the International Monetary Agreement, by not taking action to unblock the gold.

The use of this sort of lever is not a practice which the United States regards favorably for general use in obtaining the settlement of international claims. During recent decades, however, there have been a number of cases in Europe in which a creditor country, on behalf of its nationals or itself, has brought pressure on a debtor country to settle pecuniary claims by threatening seizure of the property of the debtor country within its borders. We are using pressure in the case of Yugoslavia for the following reasons: (1) Yugoslavia has shown little inclination to settle any of the United States claims; (2) Yugoslavia has shown little respect for the property or civil rights of individuals; (3) it is not inclined to settle the claims on the basis of their merits but expects specific returns for any of its actions which might benefit United States interests; and (4) recent experiences with Poland and Czechoslovakia have shown the consequences of the United States giving up such bargaining power as it had prior to the settlement of claims. In each of the latter cases blocked assets were released in 1946 upon promises from those countries that nationalization agreements would be signed. So far it has not since been possible to finalize settlements with either country.

The blocking of the gold does not mean, of course, that the U.S. has asserted title to it. Unilateral action by the United States to settle its claims by taking title to a part of the Yugoslav gold and releasing the balance to Yugoslavia would constitute a dangerous precedent that might be invoked against United States assets in other foreign countries. A bilateral agreement for the disposition of the gold is therefore highly desirable.

1. The source text has been initialed by Secretary Marshall. Attached to the source text is a memorandum from Humelsine, dated May 7, reading in part as follows:

   “After reading the suggested courses of action the Secretary commented: ‘Yes’ and added ‘I doubt the justification for our action in blocking the return of impounded gold.’”

2. Hubert F. Havlik, Chief, Division of Investment and Economic Development, Office of Financial and Development Policy.
3. Not printed.
3. Not printed.
4. For the text of the conclusions contained in Policy Planning Staff Paper No. 16, see Foreign Relations, 1947, vol. iv, p. 854, footnote 5.