Foreign Relations of the United States, 1949, Eastern Europe; The Soviet Union, Volume V

860C.6362/7–1449: Telegram

The Secretary of State to the Embassy in France ¹

secret

Washington, July 14, 1949—7 p. m.

2566. Pass Harriman from ECA and State.

1. Subj is exchange Pol coal for ECA-financed cotton.

2. May 19, 1949 Pol Gov submitted in Warsaw to Emb and E. D White, official of USDA, an Aide-Mémoire offering deliver to Western Eur countries in exchange for US cotton 1.5 to 2.0 million tons of coal over and above present commitments, coal to be delivered within 10 months of signing of agreement. Text this document being airgrammed. In addition, during discussions relevant to presentation of Aide-Mémoire, Poles indicated willingness to consider substantial cuts in price of coal in order to obtain cotton.

3. Fol is text suggested reply to be given Pol by Emb Warsaw. “Aide-Mémoire presented May 19, 1949 on the subject of an exchange of Polish coal for Amer cotton, the coal to be used in various Eur countries, has been studied by the competent authorities of the U.S. Govt. The decision reached is that, in view of the primary interest of the Eur countries concerned, further discussions of this matter should not be conducted between representatives of the Govt of Poland and those of the Govt of the US. The Govt of the US is of the opinion that the proper channels for such discussions are direct negotiations between Poland and the Eur countries concerned. The US will of course be prepared to examine with the country purchasing Polish coal any proposal which may involve US financial assistance in the purchase of cotton.”

4. On basis this reply, it is possible that Poles may approach certain OEEC countries with the aim of exchanging coal for US cotton.

5. US position in event of such an approach is:

(a) Wherever possible, Polish coal should be used instead of ECA-financed US coal if an attractive price on suitable qualities is offered.

(b) That Pol coal shld be acquired by participating countries to the maximum degree possible in exchange for their own production of nonstrategic commodities.

(c) Where it can be demonstrated that the participating country has offered and Poland has accepted the maximum practical amount of the participating country’s production, ECA is willing to consider supplying cotton for use as payment for any additional quantities of Pol coal in direct displacement, of ECA-financed US coal that wld otherwise be required. This applies only to Pol coal supplied over and above current volume.

(d) Fr, Ital, and Neth are now only Western countries using ECA-financed US coal and affected above. Not considered advisable at this time, however, to inject cotton into Ital negotiations as we understand Poles most anxious obtain maximum Italian goods in trade and Itals have ample bargaining power on basis of their own production of export goods.

(e) Austria is special case sofar as ECA financing may be required for Pol coal. To the extent feasible, dol for dol substitution of Amer cotton for US dollars shld be encouraged.

6. Accordingly OSR please transmit substance Pol proposal our reply and pertinent paras this tel to appropriate ECA Missions for use at their discretion in talking with Govts to which they are accredited. Suggest further that Missions impress upon respective govts necessity for hard bargaining lest ECA cotton merely displace Western Eur production in East-West trade flow.

7. Recognize that, with possible exception of Austria, it is not certain to what extent savings US coal or dols can be effected through use of cotton as a barter incentive. There may be quality problems with respect to the coal offered. In event transactions are possible, however, believe that Western Eur Govts concerned might be able to use as additional bargaining weapons knowledge that Poles can supply up to 2 million tons over and above their present commitments and that US cotton can be used as payment subject to considerations outlined above.

8. Pls advise soonest your comments this tel. Warsaw will then be instructed proceed accordingly.² [ECA and State.]

Acheson

1. This message was repeated to Warsaw as 434 and to Geneva as 881.
2. Telegram 1086, August 1, from Warsaw, not printed, reported that the American reply as outlined here had been communicated to Polish foreign trade authorities who appeared pleased and quite prepared to deal directly with the Western European countries concerned (860C.6362/8–149). The reply was also communicated to the Polish Embassy by the Department of State on August 2.