249.1111–Oatis, William/12–2451: Telegram
The Ambassador in Czechoslovakia (Briggs) to the Secretary of State
priority
494. Info contained Deptel 315, December 21,1 supports belief that from Czech point of view two dominant aspects Czech US econ relations may be (1) prospects of earning dols by exports to US (after Oatis release) and (2) disposition of steel mill or funds from sale thereof. If this estimate correct, we doubt whether sufficient advantage wld be gained from general blocking all Czech assets to offset disadvantages. There remains, however, important problem of steel mill.
Emb notes that since transmission our 460, December 12,2 Czechs themselves have rocked boat (so to speak) by completing payment on mill. They have also achieved more flexible position at time perhaps least advantageous to us in light Oatis discussions. But, despite possible impact thereon, Emb continues hold view that steel mill or proceeds sale thereof shld be held by US until such time as we can effect settlement of nationalization claims against Czechoslovakia. Conversely, we should regard it as at least unreasonable for us to let Czechoslovakia withdraw millions of dols representing proceeds mill, because of implied threat of further stall on Oatis if US undertakes defend interests Amer creditors.
Reftel indicates alternatives are (1) requisitions by NPA auth or (2) specific blocking action by Treasury. First seems more desirable to Emb as it can be represented as based on natl security interest and furthermore analogous to nationalization (that is confiscation) of US property in Czechoslovakia for which no compensation paid. Blocking action by US Treasury on other hand might be more suggestive of retaliation, might increase Czech fears general blocking [Page 1438] will follow soon, and might lead them believe no longer real prospect of earning dols for current account through trade with US if Czechs reached that conclusion our efforts re Oatis might receive severe setback.
Emb therefore recommends (1) immed requisitions steel mill; (2) that Dept send Czech Emb note informing it of action taken and stating US Govt is prepared to undertake discussion of its citizenship claims against Czechoslovakia along with release of Czech assets representing value steel mill; and (3) that Dept inform Czechs orally that although US prepared undertake such discussions, it will not relate them to Oatis case.
Shld things develop as outlined above, Czechs might, of course, refuse go forward with Oatis discussions. Distressing though that wld be, I believe that in terms basic and long-range US interests, it is preferable to take this risk than to pay blackmail or permit Czechoslovakia transfer value steel mill which represents their principal assets in US and our most important leverage in negotiating settlement US financial claims.
- Telegram 315 provided a summary of the impact of blocking Czechoslovak assets in the United States and estimated that Czechoslovakia had or could gain $5–6 million from the conversion of bank balances, forced sale of stranded equipment in the United States (not including the steel mill), and dollar returns on exports not requiring consular invoices. The Department of State was greatly concerned at the possibility of the sale of the steel mill, final payment for which had been reliably reported, and was seeking means to have the mill requisitioned by the National Production Authority (NPA) or otherwise to have sale of the mill blocked. (249.1111–Oatis, William/12–1551)↩
- This telegram in part responded to a suggestion by the Department of State that the National Production Authority take steps to requisition and dispose of the steel mill bought by Czechoslovakia. Briggs took the position that it was “unpropitious moment to rock boat” by such action which might cause Czechoslovaks to break off Oatis negotiations. (249.1111–Oatis, William/12–1551)↩