Foreign Relations of the United States, 1955–1957, Eastern Europe, Volume XXV

244. Memorandum From the Deputy Under Secretary of State for Economic Affairs (Dillon) to the Secretary of State¹

Washington, March 28, 1957.

SUBJECT

• Aid to Poland

Problem

Before we can proceed with the Polish discussion it is necessary for the Department to determine its position on the level of assistance to Poland.

Discussion

A recent appraisal by EUR, concurred in by R and CIA, indicates that there has been no change in the basic Polish situation since your “friendly nation” finding last December (Tab A).²

The Poles have requested aid approximating $300,000,000. Their requests, covering cotton, fats, wheat, coal-mining machinery and certain other items are set forth in Tab B.³ A condensed statement of the Polish economic situation and the new Polish economic policies in relation to U.S. aid appears at Tab C.

The Polish economic situation is serious. Poland is moving in the right direction—toward internal economic freedom and away from its heavy dependence on the Soviet Bloc. The Poles have stated that the U.S.S.R. now pays the entire cost of its troop support in Poland.

There is relatively widespread press support for U.S. help to Poland (Tab D).

You had earlier authorized aid offers of $25,000,000 ($15,000,000 under P.L. 480 and $10,000,000 under Section 401 of the Mutual Security Act). It is the opinion of our negotiators and of Embassy Warsaw, in which I concur, that the $25 million previously authorized will be inadequate to achieve the political objectives which we seek. Embassy Warsaw feels, however, that as much as $75,000,000 would be on the generous side and that less could be given (Tab E).⁴ My judgment is that any amount lower than $50,000,000 in direct assistance would be a severe disappointment to the Poles, would not help in achieving our objectives and might well be considered money wasted.

Taking all views into consideration I would recommend a program of direct assistance of $50–$65 million, of which $25,000,000 would come from P.L. 480 and $25–$30 million in dollar loans from Section 401. In addition, we should attempt to negotiate trilateral deals with Western Germany to finance surplus agricultural commodities to Poland on the basis of a credit to Germany by our Commodity Credit Corporation.⁵ If trilaterals are feasible, they might range from $10,000,000 to $30,000,000 depending on discussions with Germany.

Tentative estimates of commodities which could be furnished under the present $25 million authorization and under the proposed enlarged authorization of $55 million are given in Tab F. Both authorizations envisage mainly agricultural commodities for consumption, chiefly in 1957, plus some of the Polish requests for coal-mining and agricultural machinery. The trilaterals through Germany would be mostly for cotton, but possibly also a small amount of wheat to meet current deficits.

Information on Polish credit negotiations with other Western countries—so far very modest—appears at Tab G. What we do will undoubtedly influence future possibilities.

These recommendations have not yet been discussed with the other agencies on the U.S. delegation (Agriculture, Commerce, and ICA) because we wished your prior approval of the general lines of the program. Agriculture will undoubtedly agree to the increase in P.L. 480 funds and to trilateral arrangements. The full $30,000,000 which we recommend from Section 401 are not now available in ICA and would require transfers from unused military assistance funds. To achieve any substantial increase in Section 401 funds will presumably require the personal intervention of the Under Secretary with Mr. Hollister and possibly with Defense.

Recommendations

1. That you approve an increase from $15 million to $25 million (the present limit under existing appropriations) of funds for supplying agricultural commodities under Title I of P.L. 480 to meet Poland’s most urgent agricultural requirements.

2. That you approve an increase of $10 million to $30 million (the legal limit) of funds under Section 401 of the Mutual Security Act to be used for the purpose of opening a line of credit to Poland, to be payable in dollars on terms to be agreed for Polish purchases in the United States of coal-mining machinery, agricultural machinery, fertilizers and possibly some agricultural or other items.

3. That you authorize the Department to take the position with ICA that the Section 401 loan referred to above not be treated as an ICA loan but that it be serviced by the Export-Import Bank and conform closely to Eximbank procedures. This would be acceptable to the President of the Bank.

4. That you approve an immediate approach to the Federal Republic of Germany urging it to agree in principle to finance from $10 million to $30 million of surplus United States agricultural commodities to Poland on the basis of credits made available by the Commodity Credit Corporation.⁶

1. Source: Department of State, EE Files: Lot 76 D 232, US/Polish Talks—Basic Preliminary Documents, #1. Secret. Drafted by Dillon and concurred in by E, OFD, ITR, L/E, EUR, EE, and in substance by U/MSA. Also sent to the Under Secretary of State.
2. Reference is to the memorandum from Beam to Dillon, March 23; see footnote 3, Document 242.
3. None of the tabs is printed.
4. These recommendations were incorporated in telegram 1333 from Warsaw, March 26, which concluded by emphasizing the “desirability of ‘keeping our hand on the faucet’”. On the basis of Poland’s record over the past decade, the Embassy believed that the Polish request for $300 million and the possibility that a lesser amount might be rejected was “almost beyond comprehension.” (Telegram 1346 from Warsaw, March 27; Department of State, Central Files, 748.5–MSP/3–2757)
5. On February 11, German Ambassador Heinz L. Krekeler informed the Secretary of State that Germany wished to supply grain to Poland but would need U.S. surplus grain to substitute for that shipped to Poland. (Memorandum of conversation by Jacques J. Reinstein; ibid., 748.5–MSP/2–1157) In an aide-mémoire dated February 12, Germany noted that if the U.S. Government agreed, “the forthcoming American-Polish negotiations could be helpful in including the Federal Republic in three-cornered trade arrangements or using her as a transit country.” (Memorandum prepared in the Department of State entitled “Economic Talks with Poland”, enclosed with a letter from Kalijarvi to the Assistant Secretary of Agriculture, Earl L. Butz, February 19; ibid., 748.5–MSP/2–1957)
6. On March 29 Dulles initialed his approval of all recommendations. In recommendation 2, however, he reduced the figure from $30 million to $25 million and crossed out “(the legal limit)”. He also wrote in the margin: “Subject to ICA views, when it is involved”.