296. Telegram From the Embassy in Greece to the Department of State1

3408. Reference Deptel 3558 May 31.2 Greek-SOV Bloc trade relations have evolved during recent years, not without difficulties, into “normal” exchange of largely primary products, governed by trade and clearing agreements. During recent months indications from overt and covert sources all point to likelihood that Sovs preparing offer Greece “economic assistance”. SOV Embassy extremely active (Embdesp 973, May 213). Sovs returning this year to Salonika Fair on large scale. Inspired press articles (enclosure number two, Embdesp 885, April 254) and cautious official comment to Embassy officers indicate SOV economic campaign in Greece may also include “reconstruction assistance”.

Available evidence does not permit precise forecast nature and timing any offer economic assistance. Visit Greek parliamentarians to Moscow, perhaps this summer, could provide opportunity. Also, Sovs might await developments on Cyprus issue, this summer and fall.

Recent internal economic developments tend weaken GOG capacity to resist SOV offer. Cessation of OSP will create serious labor problem, and possible political repercussions. Bauxite and tobacco production in excess of free world requirements make them natural targets as means of payment for Sov capital goods. GOG especially vulnerable on tobacco since increased purchases by Sovs could obviate need for planned subsidization program. Citrus fruits, and potentially cotton, also in this picture.

Internal economic situation would be greatly aggravated by any decline in level business activity in Western Europe, which largely responsible for Greece’s relative “prosperity” at present, or if greater competition encountered from Turkey, because of devaluation of lira or Turkish introduction tobacco export subsidies.

Further buildup of Greek-US relations, politically, militarily, and economically is basic .… Our plan furnish GOG two submarines fits this concept, as did recent negot 20.1 million dollar Public Law [Page 565] 480 agreement,5 and counterpart release program continuing budget support at 100 million drachmae average per month until end of 1956. However PriMin’s June 6 statement on investment program, characterized privately to Embassy officer by Deputy PriMin as rehash of last December’s budget message, underlines paucity of effective tools which PriMin has to work with to provide political and economic fillip to his govt’s program, even though statement received fairly good press.

A tangible economic development program, which Greek people will believe leads toward a higher standard of living, is essential. … GOG decisions on several such projects are upcoming, such as the Porter Hotel, the Kennicot asbestos development, and the Westinghouse bid to construct the Ptolemais steam power plant aided by Eximbank financing (Embtel 3390, June 96).

However, cardinal feature Karamalis economic program as presented us (Embdesp 950, May 157) is accent on agricultural improvement. Greek farmers are chronically underemployed and yet they are backbone of electorate which keeps conservative govts in power here. We are conscious that cooperation with Karamanlis on agricultural program involves some problems for us, but such cooperation essential if we are to bolster Karamanlis capability resist Soviets offers.

Specific proposals in country team message which follows.8

  1. Source: Department of State, Central Files, 611.81/6–1156. Secret.
  2. Telegram 3558, May 31, requested that the Embassy evaluate the possibility of a Soviet offer of assistance to Greece, which Karamanlis would have difficulty rejecting, and to suggest measures for countering such an offer. (Ibid.,611.81/5–3156)
  3. Despatch 973 transmitted information about intensified Soviet efforts to cultivate relations with Greece. (Ibid., 661.81/5–2156)
  4. Enclosure B to despatch 885 was an article by a Greek “left winger” on financing the economic development of Greece. (Ibid.,481.609/42–556)
  5. The Agricultural Trade Development and Assistance Act of 1954 was designed to facilitate the sale of surplus American agricultural products in foreign countries. For text of P.L. 480, see 68 Stat. 454.
  6. Not printed. (Department of State, Central Files, 881.2614/6–956)
  7. See footnote 2, supra.
  8. Telegram 3420 from Athens, June 12. (Department of State, Central Files, 781.5–MSP/6–1256)