S/S–NSC files, lot 63 D 351, NSC 118 Series
Memorandum by the Secretary of Defense (Wilson) to the National Security Council1
Washington, [February 9, 1953].
- The Republic of Korea is contending that since the outbreak of hostilities it has advanced to United States forces Korean currency (won) having a total dollar value of approximately $171 million.
- To date the United States has paid a total of $74 million on account for such currency advances. Although it has been estimated that a total payment of $119 million could represent settlement on a realistic basis as provided for in the exchange of notes which stemmed from the Meyer Agreement, the Commander-in-Chief United Nations Command recently was authorized to negotiate with the Republic of Korea for settlement in the total amount of $139 million involving payment of an additional $65 million for won advances up to December 15, 1952. This authorization was granted in an effort to reach an early and satisfactory settlement with the ROK and took into consideration the lack of preciseness of day to day variations in realistic exchange rates during the period covered.
- The difference between the Republic of Korea position and the United States position amounts to $32 million. General Clark has indicated that he believes the Republic of Korea would reduce its claim by $10 million, in recognition of a Republic of Korea contribution contemplated in the Meyer Agreement, to a net difference of $22 million.
- The Republic of Korea claim is based on an exchange rate of 6,000 won to the dollar established in March 1951. Since that time realistic won values have decreased sharply to a point where for several months a realistic rate of exchange would be 18,000 or more to the dollar.
- The Republic of Korea Government has informed the United States
that currency advances would be discontinued, as of 6 February 1953,
unless full settlement was made for won advances. If won advances
are discontinued, United States forces will be left with two
- Dollar procurement of won from the Bank of Korea at a 6,000 to 1 rate (present minimum realistic rate 18,000 to 1).
- Payment for goods and services in United States dollars.
- Payment in final settlement of outstanding obligations at an amount higher than an additional $65 million, which the Republic of Korea has rejected, and which represents a liberal payment for won advances, would involve the use of Department of Army appropriations for a purpose other than that intended by the Congress, namely, general economic [Page 748] assistance in the form of some contribution to stabilization of the won.
- CINCUNC has urgent need of
instructions as to the amount he may offer in settlement. Two
possible courses of action are listed below:
- Insistence by the United States that the Republic of Korea accept the $65 million previously offered. In the event the Republic of Korea refuses to accept this offer and refuses to continue won advances, CINCUNC may be instructed to procure won at the official rate of exchange or procure goods and services for United States dollars until satisfactory arrangements are made.
- Authority to pay up to $87 million, in exchange for a new agreement providing payment at a realistic rate for future won advances, in which case the source of the amount in excess of $65 million requires determination by the National Security Council. If military appropriations are determined to be the desirable source of funds, Congressional clearance may be necessary for any sums in excess of $65 million.
There is attached a Statement of the Problem, with background information.
- This memorandum with attachments was transmitted to the NSC under a covering memorandum by Lay, Feb. 9, 1953.↩
- The text of the letter is in telegram 707 from Pusan, Jan. 19, 1952, not printed. (895B.13/1–1952)↩
- Not attached hereto. Available upon request to the Executive Secretary, NSC. [Footnote in the source text.]↩