98. Memorandum From Secretary of State Vance to President Carter1
SUBJECT
- Czechoslovak Claims/Gold Issue
In response to your question, here is a history of the Czechoslovak claims/gold issue.2
Except for East Germany, Czechoslovakia is the only East European country with which the United States has not concluded a claims agreement providing for compensation for the nationalized properties of U.S. citizens.
Two previous agreements, negotiated and initialled ad referendum, have not come into force. Under the more recent agreement in 1974, Czechoslovakia would have paid $29 million (40¢ on the dollar on outstanding principal) to U.S. nationals. This figure would include $8.5 million credited as paid in 1953 and compares favorably to agreements reached between the U.S. and Poland, Romania, and Hungary and to agreements reached between other Western governments and Czechoslovakia. The U.S. would have consented to the return to Czechoslovakia of 18.4 tons of Nazi-looted gold held pursuant to the Paris Reparation Agreement of 1946 by the Tripartite Commission (U.S., U.K., France). (The U.S. holds 8.7 tons of this with the rest in London.)
Senator Long, as Chairman of the Finance Committee and floor manager of the Trade Act of 1974, was responsible for the rejection of this more recent agreement. The Trade Act’s Section 408 (introduced by Senators Long and Gravel) requires that the claims agreement be renegotiated and submitted to the Congress for approval before the gold can be returned. Senator Long has vocally expressed dissatisfaction with the State Department’s handling of this matter although a [Page 292] number of Senators and Congressmen supported the 1974 agreement which we negotiated.
Our basic goal remains to obtain compensation for U.S. claimants, many of whom are elderly and of limited financial means. Most of them would have been satisfied with, or acquiesced in, the 1974 agreement. In addition, we cannot expect any significant improvement in U.S.-Czechoslovak relations until we conclude a claims agreement. The Czechoslovak Government has made this clear by refusing to finalize the Consular Convention negotiated in 1973 and by delaying the opening of a U.S. Consulate in Bratislava.
In June 1976, David Scott, President of Allis-Chalmers and the head of the U.S. Section of the U.S.-Czechoslovak Economic Council, informed Czechoslovak officials that Long would approve a $32 million lump sum payment (in addition to the $8.5 million already credited as having been paid in 1953). Czechoslovak officials rejected this proposal. However, they said adjustments to the agreement we had reached in 1974 were possible, and later indicated to us that the amount was “negotiable”. Nevertheless, Scott reported to Long that the Czechoslovaks were “intransigent”, and the Senator then wrote to me proposing that the U.S. Government seize the gold to satisfy outstanding claims. Meanwhile, Czechoslovak officials have again stated privately and publicly their willingness to confer with us on this issue.
On June 28, senior State Department officials sought Long’s “blessing” to resume negotiations with the Czechoslovaks in which we would attempt to obtain from them the $32 million lump sum settlement (50 cents on the dollar using Long’s calculations; 56 [60?] cents using ours) which Long had previously indicated would be acceptable.3 Long forcefully expressed his view that the easiest method to settle the problem would be to sell the Czechoslovak gold held in the U.S. (worth approximately $45 million) and pay off the American claimants. He was not convinced by our arguments that we are restrained by law (Paris Reparation Agreement) and that such an action would severely damage U.S.-Czechoslovak relations.
We are examining both the legal restraints on our disposing of the gold unilaterally and the political effects of this (vis-a-vis the French and British as well as the Czechoslovaks). In addition, we are examining our next steps in light of Long’s extremely negative reaction to our proposal.
- Source: Carter Library, National Security Affairs, Brzezinski Material, Subject File, Box 18, Evening Reports (State): 7/77. Confidential. The memorandum was attached to a July 12 Evening Report from Vance to Carter. President Carter wrote the following instructions for Vance at end of the memorandum: “Try to let me know what the Czechs will now accept. Then let me talk to Long. J.”↩
- In an Evening Report dated July 6, Vance informed Carter that the Department had approached Senator Long on June 28 in order to obtain his “blessing” for resuming negotiations with the Czechoslovak Government on the claims/gold agreement. Vance informed Carter that Long was opposed to a settlement figure of $32 million and was strongly in favor of vesting the gold. Vance concluded: “In view of Long’s opposition and recent unfriendly Czech behavior, at this point we plan to do no more than look into the legal avenues open to us.” Carter wrote on the memorandum: “Give me a brief (2 page) memo on history.” (Ibid.)↩
- See Document 97.↩