Foreign Relations of the United States, 1952–1954, Korea, Volume XV, Part 2

795B.00/11–1754: Telegram

The Ambassador in Korea (Briggs) to the Department of State

secret
priority

Seoul, November 17, 1954—9 p.m.

583. Repeated information priority Tokyo 400. Tokyo pass CINCUNC and CAG. Re Embtel 577,¹ repeated Tokyo 397. During three-hour meeting reported reference telegram President Rhee reiterated principal objections he has raised against minute during last four months and at times it looked as though entire project would be rejected. After reiterating arguments back and forth he finally yielded on all except following two points which he eventually accepted with utmost reluctance:

1. Note covering US position on peaceful means as substitute for inclusion item 5 US commitments. Rhee declared he would have to reply to proposed US note by statement of ROK position including intention to proceed unilaterally should that in his judgement be necessary at some later date. I pointed out ROK position on cooperation toward unification set forth in item 1 ROK commitments and exchange notes in this connection should be regarded exclusively as means for placing US position before ROK Government in view of deletion at Rhee’s request of item 5. Rhee yielded on this only when I declared I was confident injection question of unilateral action by ROK in its note of reply would reopen entire question and at the least would introduce another delay which I indicated might be protracted. (This was finally settled by exchanging two notes with Pyun, first on deletion phrase “in violation of armistice” in reply to which Pyun would both acknowledge and confirm, and second re deletion item 5 regarding which Pyun would merely acknowledge and note contents. At initialing ceremony this afternoon notes were duly exchanged in above form.)

2. With reference to establishment of new procedures for dollar conversion at realistic rate for US monies, and for pricing aid foods into Korean economy at similar rate, roof once more practically blew off. Rhee declared his intention of making immediate strong public appeal to nation to refrain from any exchange transactions whatsoever except at 180 rate. He said he would permit US pay ROK for hwan “at any rate UNC considered fair” mentioning 254, 310 and 500, and would do this so US would not feel it was being held up in obtaining hwan. He insisted however, rate at which dollars sold to US would be kept secret and he would rigorously enforce 180 rate without exception for all other transactions. There would thus be no sale of dollars through Bank of Korea and whatever was agreed to in this regard with General Hull would be kept from public. (This was obviously what Rhee had in mind when he mentioned matter to Wood on November 15 Embtel 572 November 16² repeated Tokyo 395.)

Foregoing proposition outlined by President in emotional vein and with usual references to “country’s having been ruined by constant changes in exchange rate” it being Rhee’s conviction that changing rate is primary cause of inflation.

I decided nothing could be gained by dodging this issue and told President that what he proposed would be in clear and open violation of pertinent Appendix A provisions, and that if this was his last word on subject we would have to give up idea on negotiating minute of understanding, since economic clauses went to heart of entire arrangements. Moreover, without full understanding and agreement on these points, followed by implementation thereof along line General Hull’s recent presentation of method of acquiring hwan through open in restricted [unrestricted?] sale through Bank of Korea at whatever rate supply and demand situation produced, I was sure my government would not be prepared to place proposed program in effect. Finally I said that no program could prosper unless sound economic procedures mutually agreed upon. We argued for approximately one hour over this point alone, during which Pyun and Sohn were as cautiously helpful as possible but obviously handicapped by President’s fanatic belief that changing rate creates inflation. President finally agreed to sale dollars through Bank of Korea as set forth Appendix A, saying this would be given fair trial during which existing agreements concerning hwan advances and military conversion rate would be in suspense. (Of considerable interest that during this debate Pyun several times referred to agreements July 1950 and February 1953 being “in full force at the present time”, notwithstanding volume of correspondence exchanged during past two months when he has taken directly contrary position. There was likewise considerable discussion about current hwan and petroleum situation, described separate telegram.³)

Once President had finally agreed to all points under discussion, initialing and exchange notes ceremonies set for 4 p.m. this afternoon and went off not only smoothly but in atmosphere of marked good will on part of Pyun, Sohn and other Cabinet members present. In relaxed mood after ceremony Pyun and Sohn told me privately whole Cabinet aware of fantastic presidential views on economics, and they expressed profound relief President dissuaded this morning from issuing his proposed appeal to nation concerning 180 to 1 rate. I told them I felt it accordingly highly important for implementation new military conversion procedures be accomplished soonest, while today’s conversation still fresh in Rhee’s mind. They agreed. We may hope Cabinet influence on implementation will be helpful with Rhee, but conversation this morning indicates views set forth Embtel 572, November 16 possibly understatement of century.

Briggs

1. In this telegram, Nov. 17, 2 p.m., Briggs made a preliminary report on his meeting with Rhee, Pyun, and Sohn of that date, the gist of which was that Rhee finally agreed after much discussion and argument that the initialing of the minute should take place as scheduled at 4 p.m. (795B.00/11–1754)
2. Supra.
3. The reference was to telegram 584, Nov. 18, not printed. (795B.00/11–1754)