Office of the Historian

65. Telegram From the Embassy in Poland to the Department of State0

Warsaw, September 27, 1962, 4 p.m.

606. Reference: Deptel 448.1 I realize that it is probably now impossible to do anything about MFN in view of Conference Committee’s action.2 Nevertheless, it seems to me important to point out that this action is not only breach of a commitment which was certainly implied but also stupid from viewpoint our most immediate interests. I think it probable that Poles will immediately default on nationalization agreement alleging that we have broken agreement and perhaps adding that congressional action makes it impossible to secure means to continue service on agreement (Embassy A–27).3

I am also somewhat apprehensive of effect congressional action will have on outstanding PL480 Agreements. Embassy has evidence from various sources that Poles are effecting number of economies in their foreign exchange budget. This is probably a reflection of the relative shortage of grain throughout bloc this year and consequent necessity of further hard currency purchases in West coupled with strain of Canadian grain purchases already undertaken. It also probably reflects uncertainty regarding new PL 480 Agreement. Moreover difficulties in fulfilling plan for industrial exports West are apparently causing concern. It is our impression that Poles are genuinely short of foreign exchange to cover what they consider minimum necessary import program.

Question of Polish dollar commitments under present PL480 Agreements will of course not arise for nearly 5 years. Nevertheless, I consider it increasingly doubtful whether Poles will or indeed could meet these commitments since most Polish trade with other Western countries is tied to bilateral arrangements and hard currency surplus to repay PL480 commitments was scheduled to come largely from increased access to US market. This in turn should presumably be taken into account in any negotiations we undertake regarding new agreement. Poles can be expected to apply increasing pressure for elimination [Page 131] of hard currency repayment provision as date for first payment approaches using line that we have disposed of useless agricultural surpluses and are now demanding dollar repayment while refusing Poles opportunity to earn dollars in US market on equitable basis. On the other hand we must realize that to refuse to enter into a new agreement because of the difficulties which Poland would undoubtedly have in meeting service on such an agreement under present circumstances would result in sacrificing all gains in our relations for past five years and would probably lead to as chilly a period as chilliest of cold war.

In any event, I consider it a waste of time to discuss further any possibility of a bond settlement.

Cabot
  1. Source: Department of State, Central Files, 611.4841/9–2762. Limited Official Use. Repeated to Belgrade.↩
  2. Telegram 448, September 26, reported that congressional action on removing MFN status from Poland and Yugoslavia had been taken in spite of President Kennedy’s intervention. (Ibid., 711.48/9–2662)↩
  3. Regarding the congressional action on MFN, see Document 130.↩
  4. Airgram A–27, July 13, forwarded the text of a Polish aide-memoire on P.L. 480. (Department of State, Central Files, 611.48/7–1362)↩