860F.24/8–1446: Telegram
The Acting Secretary of State to the Ambassador in Czechoslovakia (Steinhardt)
us urgent
1067. Urtel 1511 Aug 14. Please utilize following info in presenting note to Zecho Govt.
US rejects as without foundation charges of discrimination on sale of surplus property under line of credit of 50 million dollars to Czech Govt. Agreement of May 28, 1946 represented line of credit $50 million for surplus property and not a loan. Public announcement at time as well as text of credit agreement made clear US did not guarantee to deliver surplus goods to amount of $50 million.
Czech Govt own delay in purchasing surplus property is reason for lack of success in comparison other countries. On Oct 19 last year this Govt offered to give Zecho Govt rights to purchase surplus up to 500,000,000 crowns. Negotiations on this offer were protracted and it was agreed on Feb 18 extend Zecho 50 million dollar line of credit repayable over 30 year term with interest at 2⅜ per cent. This line of credit not accepted by Czecho Govt until May 28. Since Feb 23 however this Govt has been selling surplus property and making sales commitments to Zecho Govt in belief it would eventually sign credit agreement. Prior to agreement $1,137,567 had been sold and delivered and $412,000 more committed for sale.
Surplus sale to France made on same date as signing of Zecho agreement was subject to all prior commitments to other Govts including Zecho Govt up to limit of their line of credit. It did include however only $412,000 of commitments to Zecho Govt. French sale was part of general settlement of war accounts and was greatly to US advantage since other buyers including Zecho Govt were unable, or did not for other reasons, take advantage of opportunity to purchase US surplus in France. Incidental to French sale a commitment was made to sell to France from surplus a selected list of rehabilitation and reconstruction items wherever located abroad. We are informed all European surpluses applicable to this list have been committed and remainder of list is now being completed, so far as possible, from Pacific area surpluses.
European surpluses far from being exhausted, are now or shortly will be available for commitment amounting to upwards of $1 billion in Belgium, Italy and Germany. Our latest reports indicate US surpluses of tires, tubes, medical supplies and gloves to amount of $751,321 have been committed to Zecho Govt. While uncertain what part this commitment is for tires, so far as such tires were actually available at agreed prices at time of Zecho bid, it would be regarded by this Govt as binding contract.
[Page 215]Though Zecho Govt has by its own delays risked loss of considerable part of the $50 million credit extended them for surplus property purchases, they have already received or committed upwards of $10 million and still have opportunity if it is pursued aggressively to use approximately $40 million remaining for purchases from over $2 billion of surpluses in Europe and in Pacific area. End Summary.
Please transmit to Dept exact text as delivered to FonOff.54
Dept. assumes in light of comments urtel 1512, August 14, that note will be written in strong terms.
- The exact text of the Embassy’s note of August 30 to the Czechoslovak Foreign Ministry was transmitted to the Department with despatch 1220, August 30, from Praha, neither printed.↩