Foreign Relations of the United States, 1981–1988, Volume X, Eastern Europe

404. Memorandum From William Stearman of the National Security Council Staff to the President’s Assistant for National Security Affairs (Allen)¹

Washington, June 19, 1981

SUBJECT

• Czechoslovak Claims Negotiations

We need White House positions on two basic and interdependent aspects of the Czechoslovak claims issues: (Details are in State’s memo to you at Tab I² and attachment at Tab II.)³

(1) Do we accept the virtually unprecedented Czechoslovak offer to pay 100% of the principal owed US claimants or do we try to press them to pay some interest as well? (Treasury wants to squeeze them for more. State says take the money and run.)

(2) Will we oppose (including a threat to veto) pending legislation (scheduled for markup June 24) to meet claims through a sale of Czechoslovakia’s gold held here? (Treasury seems ambivalent and State opposes on the grounds that this violates international agreements and would critically damage relations with Prague.) Our determined opposition to this legislation would encourage claimants to accept the Czech offer or something like it. Congressman Bingham,⁴ sponsor of the bill, is reportedly prepared publicly to go along with the Czech offer, if the Administration strongly supports it.

The over 2,500 claimants seem divided between a majority ready to accept the Czech offer and a group of heavy-hitters (including the biggest claimant, Mobil Oil) which has retained a battery of lawyers who want to fight for as much interest as possible—in addition to the 100% principal. (The more litigation, the higher the fees.) The latter group would be happiest with the gold solution. On the other hand, this solution would shaft many small claimants, especially the old, because the gold vesting approach would take 12 years to pay off all claims. (Payments would come from the interest on the dollars yielded by the gold sale.) This would not bother Mobil Oil, but would distress those in their seventies, for example.

Position on the Czechoslovak Offer

The Czechs insist that they have made a final offer. No one is sure how much more, if any, additional money can be squeezed out of them—probably at most a few million. As the State memo points out, the Czech offer is “probably unparalleled in claims settlement history”, and is up 300% from their last (1974) offer.

Why are they doing it? Probably to increase their Dun and Bradstreet rating in order to promote trade with the US. Do we want to encourage trade with the CˇSSR? You know all the pros and cons of trade with Eastern Europe. There are those who claim that extensive economic relations with the West emboldened the Poles to do what they’re doing. Are there those in Prague who would like to reduce economic dependency on the USSR for political reasons? Maybe.

Do we desire improved relations with the CˇSSR at this juncture? If we do, we should reject the gold solution and accept the Czech offer or something like it. The Czech negotiator maintains that taking the opposite course would severely affect US-CˇSSR relations and might well result in the recall of their Ambassador here. As the Czechs would see it: first the Nazis take their gold, then the Americans. Unfortunately, this decision comes at a time when we are still formulating our basic policy towards Eastern Europe.

The Gold Solution

Apart from aggravating the Czechs, the gold solution would irritate our British and French allies who, with us, are parties to the 1946 Reparation Convention and 1946 Tripartite Commission Agreement, both of which would be violated by this legislation. The legislation also would compensate some who were not US citizens when their property was seized. This is also contrary to international law.

On balance, I believe we should leave it up to State and its able negotiator, Roz Ridgway, to decide whether or not to press the Czechs for more money, and we should oppose the gold vesting legislation. I believe this approach would be most fair to the majority of claimants and would be most consistent with US foreign policy interests.

I have just learned that State is asking for a delay of the Bingham Bill markup (schedule for June 24) in order to work out a position on further negotiations. Jim Symington, one of the lawyers for the Mobil Oil, etc group, contacted Frank Hodsoll in Jim Baker’s⁵ office to protest any delay in the markup. You might want to relay your decision on the Bingham Bill to Hodsoll.

Recommendation

1. We should inform State that it should determine whether or not to continue negotiating with the Czechoslovak side in order to win interest payments for the claimants. Marc Leland of Treasury should also be informed of this decision.⁶

2. We should oppose the Bingham Bill and other Congressional attempts to meet US claims against the CˇSSR Government by vesting Czechoslovak gold held in the US. You will inform Max Friedersdorf that this is the NSC Staff position.⁷

1. Source: Reagan Library, Executive Secretariat, NSC Country File: Czechoslovakia 6/5/1981–12/2/1983. Confidential. Sent for action. Pipes and Dobriansky signed their concurrence beneath the recommendations. Allen initialed the top right-hand corner of the memorandum. “RVA has seen” is stamped at the top of the first page of the memorandum.
2. Not found attached. See Document 403.
3. Not found attached.
4. Reference is to Jonathan Bingham (D–New York).
5. White House Chief of Staff.
6. Neither “Approve” nor “Disapprove” was selected.
7. Neither “Approve” nor “Disapprove” was selected.