760F.61/8–246: Telegram

The Chargé in the Soviet Union (Durbrow) to the Secretary of State

secret

3075. Embtel 2297, July 26, and 3004, July 27.51 Surface indications are Czechoslovaks did fairly well in their recent conversations in Moscow particularly with respect to economic concessions published in joint communiqué. Yet there appear to be factors which would point to less favorable relationship in what concerns implementation of the agreement.

Soviet commitment to turn over large German built synthetic gasoline plant to Czechoslovaks and leave machinery from other German plants in Czechoslovakia will certainly involve favorable reaction in Czechoslovakia and abroad. This apparent generosity presumably reflects substantial Czechoslovak Communist vote recent elections. Gesture was probably made not only to bolster prestige of Communist Party over other Czechoslovak elements who have been looking westward for trade and assistance, but also as example to other governments such as Austria and Hungary of Soviet benevolence to those who do not resist Soviet policies. It may reflect as well belief, predicated [Page 211] on continued predominance of Soviet influence in Czechoslovakia that efficient Czechoslovak operation of these plants is of more immediate benefit to Soviet economy than would be their removal at this time to USSR. Factors in this connection would be patent shortage of skilled labor here and increasing backlog of as yet unassimilated equipment already moved from Eastern Europe and Manchuria.

According to official of Czechoslovak Embassy here, agreement relating to Czechoslokak property abroad in Soviet occupied zones arose out of difficulties experienced by Czechoslovaks during past year. Russians have been treating property of Czechoslovak citizens of German or Hungarian nationality (race) as enemy property and have been arbitrary in their ruling on individual cases of this kind. Under agreement, Soviet Govt now recognizes such property as Czechoslovak. Despite program for withdrawing citizenship from many of these people, Czechoslovak Govt considers itself as still holding sovereign rights over their property and insisted on this principle in negotiations with Russians. Informant, who was not too sanguine over prospects of successful implementaiton of this undertaking, stated that most of property involved industrial and commercial establishments in Bulgaria and Rumania.

Declaration of need for replacing temporary trade agreement with long term undertaking to reflect requirements of Czechoslovak two year economic plan is obscure. Current trade agreement signed in April is to run 1 year and is subject to renewal. Background of proposed long term agreement may possibly be connected with recent rumors that USSR desires extensive integration of Czechoslovak productive capacity in current Stalin 5-year plan.

Agreement regarding equipping of Czechoslovak Army (reported to involve equipment for 10 divisions) on credit terms is similar to agreements with Poland and Yugoslavia and underlines fact that although Czechoslovak armament industry can be diverted, in part at least, to civilian production Czechoslovak Army is not to be permitted to fall below standards apparently being set for “friendly neighbors” of Soviet Union. At same time it constitutes important step in direction of increasing dependence Czechoslovak Army on Red Army.

No details available here on air and rail communications agreements. Embassy would appreciate receiving any information obtainable in Prague.

Repeated to Paris as 277, Prague as 27.

Durbrow
  1. Latter not printed.