895B.10/10–251: Telegram
The Ambassador in Korea (Muccio) to the Secretary of State
303. Ref Deptel 238, Sept 26. Article in semi-official Korea Times of Oct 2 quotes US Secretary of State as promising refund “at the first opportunity of the billion won loan of the Korean Govt to the US army in Korea.” Adds that this sum will be converted at rate of 5178 to dollar for total of $12,400,000. States “this will be advance refund of entire Korean Govt’s loan to the UN army amounting to 321,678,580 thousand won or over 60 percent of total currency issued as of Sept 27”. Also Secy Acheson said in the letter that the US navy and air force wld follow the example of the army in paying off their shares in the loan, which Korean Govt officials repeatedly pointed out is one of the greatest causes of the present inflated state of currency”.
Quotes Yang as adding that other UN member states having fighting troops in Korea wld also follow suit. Entire article apparently continuation attempt make advance appear as loan and make Acheson [Page 987] appear as guaranteeing repayment of “loan”. Above conversion rate obviously obtained by dividing won figure by dollar figure as quoted in Deptel 238.1
-
Further comments on the Korean reaction to the financial agreement were contained in despatch 106, October 5, from Seoul, which read, in part, as follows:
↩“The US decision to effect a partial settlement of the ROK’s won advances to the UN Forces was announced to the Korean public last week as an ‘advance refund of the entire Korean Government’s loan to the UN Army.’ The Secretary was quoted in the semi-official Korea Times as having promised Ambassador Yang that the ‘US Navy and Airforce would follow the example of the Army in paying off their shares in the loan.’ Yang also allegedly reported to Pusan that the other UN members having troops in Korea would follow suit in paying off their ‘shares.’ It is strongly implied in the above article that the ROK has recently received a definite commitment on ‘repayment’ of the entire 261 billion won (over 60 percent of the currency in circulation) which officials here claim has been advanced to the UN Forces (See Embtel 303, October 2).
“ROK officials have continuously misrepresented, deliberately or otherwise, the nature of the won advances and it is certain that the Korean public has accepted the transaction as a separate loan, unrelated to other financial obligations outstanding between the ROK and the UN Forces, which the UN Forces (i.e., the US) are obligated to repay in equivalent dollars or goods. That this misconception is shared by the National Assembly is evident from debates on the subject during the past three or four months. The local press has labored under the same misapprehension and, in turn, has helped propagate it. An editorial in the Minju Sinbo, in discussing the recent agreement to make a partial settlement of the won advances said, ‘We thank the United States for this action although such loans should naturally be repaid to Korea.’
“The fact that the Department has supported an immediate partial settlement of the advances to assist the ROK in combatting inflation has probably been interpreted in some quarters here as tacit admission that there is a loan obligation. The Embassy considers it unfortunate that the Korean public has been led to accept the Government’s interpretation of the won transaction. Key officials, including the Minister of Finance, with whom the US Embassy has discussed the matter, know the facts but appear to have taken no action to set the record straight.” (795.00/10–551)