Office of the Historian

849.331/1–1652

No. 4
Memorandum by the Special Assistant to the Assistant Secretary of State for Economic Affairs (Schaetzel) to the Secretary of State

secret
[Washington,] January 16, 1952.

Subject:

  • Blocking of Czech Steel Mill

Problem

Secretary Snyder may raise at the NSC meeting this afternoon the proposed blocking of the Czech steel mill, suggesting that this brings to the forefront the broad question of whether we should block all Soviet area assets.1

Background

The Czech steel mill is held in warehouse in the United States. It cost the Czechs approximately $17 million; they have now finished payment for the mill. There is no chance of their getting an export license to move the mill out of the country, and they know it. In the last few months there has been some indication that they have been moving their assets out of the United States.

Our objectives with respect to the mill are:

(1)
To disassociate it from the Oatis case so that we are not placed in the position of using either the mill or its dollar value as ransom for Oatis.
(2)
To see that the dollar value of the mill does not escape from U.S. jurisdiction, as it might if the Czechs were able to sell the mill [Page 7] to a speculator and perhaps make arrangements for payment through a Swiss bank.
(3)
To relate the dollar value of the mill to the nationalization claims.

The present tactical situation in this matter is that NPA doubts whether it has legal authority to requisition this mill, which was tailored to European specifications, produces strip steel, which is not in particularly short supply in the United States, and would be very costly to convert for use in U.S. industry. As a consequence, we have been in touch with Treasury and requested that they take specific blocking action against the mill under the Trading with the Enemy Act, giving as justification that the Government is doing this while it explores how this mill can best be related to the general defense program.

As suggested above, Secretary Snyder’s interest in this may be to consider the implications it has with regard to general blocking. We feel that this pitfall has been avoided by relating the blocking to only one asset and that, in turn, to the defense program. Our present position is one of opposition to general blocking of Soviet area assets for the following reasons:

1.
We have not wanted to get blocking involved in the Oatis case because, as a practical matter, it would be difficult, if not impossible, to unfreeze Czech assets after the action had been taken.
2.
General blocking in the case of Czechoslovakia, for instance, would undoubtedly create a public furor here which would force the United States into an across-the-board blocking of Soviet area assets.
3.
Through export controls and import restrictions, specifically in the case of Czechoslovakia, Soviet area trade and dollar earnings are at an all-time low, so that by and large we are enjoying the practical benefits of blocking. Furthermore, there are certain commodities we are interested in getting from Eastern Europe. The present system permits the importation of these commodities, such as goose feathers from Hungary, while general blocking would make this importation extremely difficult.
4.
Finally, we have felt it would be desirable to hold in reserve this last and most drastic weapon of economic warfare in case of more serious future need.

Recommendation

1.
That Secretary Snyder be urged to take specific blocking action forthwith so that the risk of subsequent embarrassment to the Government of the escape of the dollar value of the mill does not occur.
2.
That you indicate that the type of action proposed in this case does not seem to raise the question of general blocking.
  1. According to the memorandum of discussion at the 111th meeting of the National Security Council, Jan. 16, the subject of the steel mill was not discussed during the formal session. (Truman Library, Truman papers, PSF–Subject file) In a memorandum of Jan. 16, however, Acheson indicated to Schaetzel that he and Snyder had discussed the matter at the conclusion of the meeting and that Snyder had agreed to take the action recommended at the end of this memorandum. (849.331/1–1652) The formal letter conveying Snyder’s decision to Acheson was dated Jan. 17. (849.331/1–1752)↩