860F.51/7–3046: Telegram

The Ambassador in Czechoslovakia (Steinhardt) to the Secretary of State

secret

1437. I assume Department will give consideration to probability that if an Exim Bank $50,000,000 reconstruction loan is made available to Zecho Government on a mere promise to make adequate and effective compensation for American nationalized properties there will doubtless be unreasonable delays and extreme difficulty in reaching an agreement with Zecho Government as to the basic principles which shall constitute adequate and effective compensation. Department may therefore wish to consider the advisability of a reservation, which if necessary could be by an exchange of letters, to the effect that no part of the loan after it has been made shall be available to Zecho Government until agreement has been reached as to basic principles governing compensation for nationalized properties. To make the loan or any part thereof available before we have the slightest inkling of what Zecho Government regards as adequate and effective compensation would constitute a complete surrender of our bargaining position. As the $20,000,000 cotton credit, $50,000,000 surplus war material credit, $2,500,000 American relief for Zecho, $2,000,000 American Red Cross, $1,000,000 Catholic welfare and $275,000,000 UNRRA gift have been made available without any move by Zecho Government other than vague general promises to compensate American citizens for their properties which have been nationalized, I am disturbed at the prospect of our last trump, the $50,000,000 reconstruction loan, being played before we have a definite commitment from the Czechs that adequate and effective compensation means to them what it means to us. (Dept’s 912, July 19).

I feel fortified in the views expressed above by the knowedge that conditions in Zecho are improving so rapidly that a reconstruction [Page 210] loan, while desirable, is not imperatively needed at this time and that no harm would result if the loan though made could not be used by Zecho Government until basic principles of what shall constitute adequate and effective compensation for American citizens have been defined.

In connection with the compensation negotiations, it is essential that we receive as soon as possible a detailed list of all claims filed with Department together with a statement of dollar value of each claim. While it will be possible to commence the negotiations without detailed knowledge of the different categories of claims and dollar value of each, the negotiations can make little progress until we are in a position to give Czech authorities an estimate of the total dollar value of our claims and the different categories into which they fall.

As the responsible officials of the Government have been in Moscow and on their return departed immediately for Paris, I have been unable to ascertain their willingness to announce that compensation negotiations will begin in Praha simultaneously with announcement of a loan agreement in Washington. I have little doubt, however, that they will agree to such an announcement.

Steinhardt