Foreign Relations of the United States, 1969–1976, Volume XXIX, Eastern Europe; Eastern Mediterranean, 1969–1972

85. Memorandum From the Presidentʼs Assistant for National Security Affairs (Kissinger) to President Nixon¹

Washington, August 7, 1969.

SUBJECT

• Settlement of Czech Gold/Claims Issue

The Issue

The United States is still holding Czech gold looted by the Nazis pending settlement of U.S. claims. The gold is worth about $24 million on the free market. Our remaining claims from property expropriation are estimated at about $63 million, and we have some small miscellaneous claims in addition.

State argues that we have a moral obligation to negotiate on the issue, since the gold legally belongs to Czechoslovakia and we are ostensibly holding it as collateral against a claims settlement. They propose (at Tab B)² that we try to settle the matter by indicating our willingness to extend MFN treatment to Czechoslovakia, as well as give them the gold, if the Czechs agree to make payments of $19.6–$25 million in expropriation claims plus $5 million in the miscellaneous additional claims.

Attached at Tab C is a detailed analysis of the history of this issue and the State proposal.³

Options

You have four basic options. Under each we would return the Czech gold.

1. Authorize negotiations involving claims payments by Czechoslovakia of $24.6–$30 million over seven years, starting when (a) we extend MFN treatment to Czechoslovakia or (b) Czech exports to the United States rise by 30%. This is the State proposal.

I see no logic in linking MFN treatment to the settlement. Czechoslovakia would already be getting about as much in financial terms—the gold, now worth about $24 million and which they would get immediately—than they would give up even if they accepted the maximum proposed payments of $30 million, over seven years, starting after we had extended MFN treatment or after Czech exports to the U.S. had risen by 30%. It represents another effort by State to circumvent your decision not to seek MFN authority toward Eastern Europe at this time.

In addition, we made no improvement in our 1967 offer during the few months of the relatively liberal Dubcek government.⁴ A significantly better offer now, which this would be, might seem to reward a government which appears to be growing steadily more submissive to Moscow.

2. Authorize negotiations linking the Czech payments to an increase of Czech exports to us but dropping any link with MFN. This would be more accommodating than our 1967 offer from the Czech standpoint, because it accepts the principle that they can afford to pay us only with additional foreign exchange earnings. Conditioning the payments on export increases would make their timing very uncertain.

3. Authorize negotiations confined to gold and financial matters, excluding any reference to trade and thereby rejecting the Czech argument that they need increased exports to finance the claims payments.⁵ The deal would be about in balance, in financial terms, if you adopted the $24.6–$30 million claims settlement proposed by State.

4. Take no initiative and allow the irritant to stand. This issue is unlikely to be decisive in our relations with a country whose internal political system is regressing so rapidly. It would avoid the embarrassment of starting negotiations only to find that internal political changes had eliminated any rationale for them. We could, however, be subject to attack for holding the Czech gold without negotiating about it and reneging on an earlier “commitment” (by the Johnson Administration to the Dubcek regime) to make an offer.⁶

Recommendation

That you authorize State to initiate negotiations with Czechoslovakia limited to gold and the financial claims. They should conduct the negotiations slowly and cautiously to see how the political situation develops before signing any agreement. We should (a) omit any link to MFN or other trade considerations and (b) refuse any settlement with payments smaller than we sought in 1967. (A suggested memo by which I could convey this decision to State is attached at Tab A.)⁷

1. Source: National Archives, Nixon Presidential Materials, NSC Files, Box 672, Country Files—Europe, Czechoslovakia, Vol. I, Jan 69–31 Jan 70. Confidential. Sent for action. A notation on the memorandum indicates the President saw it.
2. Printed as Document 83.
3. Attached but not printed.
4. For documentation on these negotiations, see Foreign Relations, 1964–1968, volume XVII, Eastern Europe, Documents 47–52, 56, and 58–59.
5. The President underlined the portion of this sentence beginning with “excluding” and ending with “payments.”
6. The President circled the number 4 and annotated: “RN approves.”
7. The President wrote by hand beside the approval line: “Option 3 only (for consideration later)—but I actually believe option 4 is the best at this time.” In a note to Bergsten, attached to the memorandum, Haig wrote: “Fred—4 for a while then 3 only. Al”. The Presidentʼs decision was transmitted to Rogers in an August 16 memorandum from Kissinger, a copy of which is Tab A to this memorandum. (National Archives, Nixon Presidential Materials, NSC Files, Box 672, Country Files—Europe, Czechoslovakia, Vol. I Jan 69–31 Jan 70)