83. Memorandum From Secretary of State Rogers to President Nixon 1
SUBJECT
- Continuation of Negotiations on the US-Czechoslovak Gold/Claims Issue and Other Outstanding Financial Problems
Recommendation
That we take the next step in our negotiations with the Czechoslovak Government by presenting a new proposal for the settlement of the gold/claims issue and other outstanding financial problems.2
[Page 213]Discussion
Since 1952 there have been intermittent negotiations between the US and the Czechoslovak Government on two separate problems which have become linked in the course of negotiations. One is our consent to the return by the Tripartite Gold Commission (US, UK, and France) of about $20 million of monetary gold looted from Czechoslovakia by the Nazis during World War II. The other is an equitable settlement by the Czechoslovak Government of claims arising from the nationalization of US private property valued at about $72 million by the US Foreign Claims Settlement Commission.
The UK and France were unwilling to release the Nazi-looted gold until Czechoslovakia concluded claims settlements with them. The US continues to link its agreement to release of the gold to a satisfactory claims settlement. Retention of the gold provides a measure of security for the eventual settlement of the claims.
The US has distributed to the claimants $9 million realized from the sale in 1954 of a steel mill purchased and paid for by the Czechoslovaks here, which we blocked and sold. In 1961, our Embassy at Prague, with the Departmentʼs approval, signed a Statement of Principles setting forth the basis of an agreement. Subsequently, the agreement was drafted, and in 1964, initialed ad referendum. This agreement, in addition to settling various other financial issues, provided for US consent to the release of the gold in return for a final payment on the claims of $2 million. The total of $11 million would have amounted to only about 15 percent of the value of the properties as valued by the Foreign Claims Settlement Commission. On review, the Department decided not to conclude the agreement.
In 1967 we offered to consent to release of the gold for a payment by the Czechoslovaks on the claims of $2 million at time of settlement and an additional $21 million over a period of seven years. Our proposal was rejected by the Czechoslovaks. They argued the gold was theirs and improperly withheld by us, that our claims were inflated and that the US was morally obligated to conclude an agreement comparable to the ad referendum settlement reached in Prague in 1964. They asserted that they would be able to pay more than the $2 million contemplated in 1964 only if their trade with the US should substantially increase, and they believed that to be possible only if they were granted MFN. To meet this argument and to get the best possible settlement for the claimants we prepared a new proposal in the summer of 1968. Delivery was deferred as a result of the Soviet intervention of August 20, 1968. Soviet forces remain in occupation of Czechoslovakia. Nevertheless, I feel the US Government is morally obligated to take initiatives to reach a settlement so long as we retain the gold as security.
[Page 214]We now propose that the Czechoslovak Government pay us a total of $44 million (negotiable down to not less than $36.6 million) in full settlement of the nationalization claims. On this sum we would credit the full $17 million they had paid for the steel mill, which we sold for $9 million. Czechoslovakia would pay $2 million at time of settlement and the remainder in seven annual payments to begin one year after the entry into force of a mutually beneficial commercial agreement providing, on our part, for extension of MFN to Czechoslovakia. Alternatively, annual payments would commence if for any reason Czechoslovak imports into the US, in any given year, exceed by 30 percent such imports in the year 1968 ($23.8 million). The US would agree to the immediate release of the gold to Czechoslovakia by the Tripartite Gold Commission. Other lesser financial issues would also be settled, including undertakings to negotiate for the funding of US-held dollar bonds and to fund payments on their Surplus Property debt. The latter would provide a net gain to the US Treasury of some $5 million.
If the Czechoslovaks should accept our proposal, they would be accepting an overall obligation on claims far beyond anything previously entertained by them. I feel that we cannot conceivably get any settlement going substantially beyond the $2 million, the amount in the 1961 Statement of Principles, unless payments beyond that amount are deferred and conditioned upon either a substantial increase in Czechoslovak imports into the US, always an uncertain possibility, or on the granting of MFN. However, we would not be committed to grant them MFN at any time before we felt the general situation warranted. The gold issue evokes wartime emotions in Czechoslovakia and has seriously burdened our relations. It has been a lever of very limited effectiveness in dealing with Czechoslovakia. The gold, held in tripartite custody, does us no good, was looted by the Nazis and does belong to the Czechoslovaks. So long as we assert the right to hold the gold as security for a claims settlement, we have an obligation to negotiate to settle both issues. We undertook to make a new proposal to the Government of Czechoslovakia many months ago and failure to do so now would suggest we are unwilling to negotiate reasonably on an important issue.
Periodically we are pressed to reach settlement by a number of Congressmen and significant elements of the American press and interested public and even by representatives of the Czechoslovak-American communities. The situation has potential elements of difficulties with the UK which does not recover under its claims settlement until the gold is returned. The UK Embassy calls on us frequently for reports on the progress of our efforts to settle the claims.
Each year of delay erodes for many claimants the value of a settlement, through inflation, the discount that most people apply to future [Page 215] as opposed to current income, and the aging and death of many private creditors.
We have discussed this proposal with representatives of the claimants. The large corporate claimants wish to delay in the hope of a higher settlement at some time in the future, largely because of the precedent involved. The representatives of the small claimants, who are the numerical majority, indicate they would welcome any reasonable settlement so they, rather than their heirs, can enjoy the benefits.
In our discussions on the Hill, we found that members of the Senate Foreign Relations Committee and the House Foreign Affairs Committee either indicated support or had no objections to our proposal. Some ranking members of the Senate Foreign Committee and the Ways and Means Committee reacted negatively (a detailed report of these consultations is enclosed).3 We have, at least in part, met Representative Millsʼ objection by revising our proposal to include payment on the claims should Czechoslovak imports into the US for any reason increase by 30 percent over 1968 in any given year after agreement is reached, even if MFN should not be granted.
I am convinced that our proposal offers the best solution for the small claimants and the US Government. Failure to move forward at this time would further complicate the problem of ever getting a reasonable settlement for the claimants or of other outstanding financial issues and would be a further irritant in our relations with Czechoslovakia.
- Source: National Archives, Nixon Presidential Materials, NSC Files, Box 672, Country Files—Europe, Czechoslovakia, Vol. I Jan 69–31 Dec 70. Confidential.↩
- Nixon did not check either option. For the Presidentʼs decision, see Document 85.↩
- Attached but not printed.↩