Foreign Relations of the United States, 1977–1980, Volume XX, Eastern Europe

115. Memorandum From Stephen Larrabee of the National Security Council Staff to the President’s Deputy Assistant for National Security Affairs (Aaron)¹

Washington, July 21, 1980

SUBJECT

• Revised Claims/Gold Proposal for Czechoslovakia

I. Background

State had planned to table a proposal for a settlement of the Claims/Gold issue in October 1979, but its efforts were suspended at that time due to the trial of 6 Czech dissidents. In May of this year State proposed renewing its efforts to settle the issue with a revised proposal which included:

—A 100 percent cash settlement of the remaining principal value of the claims ($66.5 million);

—Simultaneous delivery of the gold (now worth $420 million);

—Full cash settlement of the surplus property debt ($8 million). (C)

At that time I sent a memo to Zbig informing him of State’s intention, which was forwarded to Madeleine for comment. (Tab A)² After Madeleine looked into the Congressional situation, she recommended going forward, and Zbig approved the recommendation. (Tab B)³ (C)

II. Rationale

The main reason for moving forward now—even in an election year—is that a bill (HR 7338) was introduced into the House by Congressman Wolff on May 13 to vest the gold—despite efforts by State to head it off. The essence of the Wolff bill is that the Secretary of the Treasury would be instructed to sell any of the gold allocated to Czechoslovakia which is in the custody of the United States, invest the proceeds in interest-bearing securities, pay the American claimants from the interest, and return the principal to Czechoslovakia after the claims are settled. (C)

Such action would be contrary to the Tripartite Agreement signed with the British and French in 1946 which stated that the gold would be returned to Czechoslovakia upon agreement between the three partners. Moreover, under the Wolff Bill the claimants would have to wait 14–25 years to get their money, whereas under State’s proposal, once the issue had been settled, they could get their money immediately. (C)

III. Domestic Implications

State’s decision to move forward was taken after close consultation with Congress and the Czechoslovak-American community. Among those in Congress concerned with the issue, there was considerable sentiment that State should finally get the issue settled. The Czechoslovak-American community, particularly the Czechoslovak National Congress, also supported an equitable settlement of the issue because many of the claimants were getting old and were about to die. (C)

In short, while an election year is obviously not the most propitious time to table a proposal, our hand was forced by Wolff.⁴ However, unlike the return of the Crown of St. Stephen to Hungary, in State’s view, this is not an issue which is likely to stir up a hornet’s nest domestically.⁵ (C)

Our proposal envisages a settlement of about 160 percent of the original principal, thus allowing us to show firmness to any domestic critics. (It should be noted in this regard that claims settlements with China and other East European countries were considerably less: Poland—41%; Romania—39%; Bulgaria—63%; Peking—42%. Moreover, our present proposal with Czechoslovakia is considerably better than the 1974 proposal, which envisaged a 41% settlement.) (C)

No thought is being given to improving relations with Prague (though a settlement would clear the decks for such an improvement if and when it became politically desirable). Lastly, any settlement is far down the road. The Czechs have reacted negatively to our proposal because it is high and so out of line with other settlements, and they are not likely to agree even to begin negotiations for some time. (C)

1. Source: Carter Library, National Security Affairs, Brzezinski Material, Country File, Box 17, Czechoslovakia: 1/77–1/81. Confidential. Aaron forwarded the memorandum to Brzezinski with a handwritten note: “ZB—Note see p. 2.”
2. Tab A, a May 19 memorandum from Larrabee to Brzezinski is attached but not printed. The memorandum was forwarded to Madeleine Albright on May 20 by David Aaron.
3. Tab B, a May 22 memorandum from Albright to Brzezinski and Aaron, is attached but not printed.
4. See footnote 5, Document 114, for background on the Wolff bill.
5. Aaron highlighted this passage with an arrow in the margin. He wrote at the bottom of the memorandum: “ZB—Question is: Will Wolff bill pass this year? If not, why press it now? I think we should slow this down. DA.” Brzezinski responded: “DA. Slow it down. I tend to feel the same way. ZB.”