249.1111 Oatis, William N./12–1252: Telegram

No. 17
The Chargé in Czechoslovakia (King) to the Department of State

top secret

302. Fol is our assessment effects Slansky trial on two principal points at issue between US and Czechoslovakia, viz., compensation claims and Oatis:

Loss of trade with US has had no decisive effect on Czechoslovakia (Embtel 167, Sept 151) and Slansky trial makes any Czech official who sincerely endeavors resume trade with US, except importation strategic commodities, liable charge of “economic sabotage.” Same true of any official willing make just settlement nationalization claims. It therefore seems improbable present regime will, under present circumstances and within foreseeable future, be in position to voluntarily either resume trade with US or settle nationalization claims. As Czechs appear reconciled loss overflights Germany (Embtel 167) three main pressure devices used so far (restrictions on US–Czech trade, denial overflight, seizure steel mill to force compensation settlement) have now failed. This is evident since Czechs on Aug 28 rejected our July proposals and have failed respond our Oct efforts resume negotiations (Embdesp 138, Oct 92). In present situation we really have nothing left with which to “negotiate.”
For over a year US officials, including President, have been telling Czechs relation with US cld not improve so long as Oatis jailed. Apparently this has not caused Czechs slightest concern since they have deliberately proceeded to make relations still worse by suspending payments under surplus property agreement, closing and seizing additional US business interests etc., for none of which has US retaliated. To date our effort to negotiate settlement has only caused Czechs make increasingly more unacceptable counterproposals and at same time to take countermeasures which now overbalance our actions. Czechs now have the advantage.
We are now more convinced than ever that time has arrived for US unequivocally state that release Oatis is condition precedent to solution any US–Czech differences (Embtel 167) and thereafter act accordingly by:
Sequestering Czech share Brussels gold pool against compensation claims (we shld refuse even discuss such action until Oatis released);
Ascertaining if, by refusing make payments either in crowns or dollars, Czechs have unilaterally repudiated surplus property agreement; and
If so, block Czech funds in US (Embtel 109, Aug 183) and stop foreign exchange and all other dollar remittances.
Any decision to adopt strong measures naturally raises question whether they would cause Czechoslovakia sever relations. We think Czechs will break relations whenever they no longer derive benefits from their Washington Embassy (which in effect now financed by US) regardless what steps US may take. Among benefits they derive from Washington representation is to maintain fiction of “independence and sovereignty” of which US Embassy Praha is tangible “proof” and on which they may place considerable value as a remnant of Czechoslovakia’s diminishing international prestige.
Although Gottwald’s position appears stronger since trial and Commies seldom worry about being consistent, nevertheless he and his cohorts can not reasonably be expected openly make themselves liable to same charges used convict Slansky and company. Regime may therefore be expected be far more cautious than ever in granting any concessions whatsoever to US unless they can extract large quid for any quo. “Concessions” wrung from US after we take the initiative, which we have lost, might tempt Czechs sufficiently to bring about release Oatis, our present primary objective. In our opinion US must both adopt much tougher attitude and at same time accede to some of Czech proposals if for no other reason than to provide face-saving device for any Czech official bold enough to concede anything to US.

  1. Document 12.
  2. See footnote 6, ibid.
  3. Telegram 109 recommended blocking all Czech funds in the United States in response to the cessation of Czech payments under the Surplus Property Agreement. (124.494/8–1852)