560.AL/5–2649: Telegram
The Acting Secretary of State to the Chairman of the United States Delegation (Willoughby), at Annecy
145. Dept believes SoAfr efforts to work out scheme to offer preferential treatment to European soft-currency countries (urtel 156, May 26) may be explainable in light of para 6, UK–SoAfr Agreement, Oct 1947 which states: “The Union Govt will arrange for the SoAfr Reserve Bank to sell gold to the Bank of England against payment in sterling for the equivalent of the net amount of payments as from the 1st January, 1948, made by residents of the Union, through the UK, in favour of persons resident in countries outside the sterling area whether made in sterling or other currencies. Settlements in respect of this paragraph shall take place at times and on the basis of data to be agreed between the SoAfr Reserve Bank and the Bank of England.” It is likely that under this clause SoAfr can offset soft-currency surpluses against hard-currency deficits. If so, SoAfr surpluses with soft-currency countries wld tend to reduce UK gold receipts from SoAfr (or possibly bring about net dollar outlays by UK on behalf SoAfr). This may explain apparent pressure by UK on SoAfr to discriminate in favor soft-currency countries.
2. IMF Executive Board today examined new SoAfr restrictions announced May 23. Basis for discussion was Fund Special Staff Memo No. 64, Supplement 13, copy of which is being air pouched to you today. Board was unable in available time and on basis available facts to reach agreement as to whether or how much discrimination is justified [Page 692] in SoAfr’s present situation. UK and SoAfr Directors expressed belief discrimination justified. US Director, supported by others, expressed opposite view. Consequently Fund Board reached no definite decision on this issue and confined itself to forwarding Staff study contained in Supplement 13 to Saad1 with instructions to Saad to delete last para page 6. Del requested not reveal contents deleted para to persons outside USDel.