Foreign Relations of the United States, 1964–1968, Volume XVII, Eastern Europe

47. Telegram From the Embassy in Czechoslovakia to the Department of State¹

Prague, February 28, 1967, 1500Z.

1412. Ref: Prague 1393.²

1. Czech note and increasingly active campaign to recover Nazi-looted gold point up fundamental tactical dilemma facing us on econ financial settlement: whether to (a) take active steps to conclude this affair more advantageously for US claimants in immediate or near future, (b) let pressure continue to build up to point where our failure release gold could prove genuinely embarrassing, or (c) wait for passage East/West Trade Act³ with subsequent MFN grant to soften hitherto adamant Czech position that initialled 1961 agreement was negotiated in good faith by both sides and is only basis for comprehensive settlement.

2. On basis our contacts with Czech officials since Kazan expulsion, atmosphere is now, even taking Viet-Nam into account, as good as it is likely to be for early attempt at renegotiating economic package, and I believe we should be considering concrete steps to open way for placing US-Czech relations on more rational, promising basis. Despite added leverage restoration MFN via passage of E/W Trade Act would give us in demanding higher claims settlement figure, pinning hopes on uncertain future of this legislation could leave us hanging in present limbo vis-á-vis Czechs.

3. In circumstances of post-1948 US-Czech relations, unilateral restitution of gold, despite legitimate Czech claim to it, and however heavy Czech pressure becomes, is clearly out of the question. Since we are forced to maintain logical and essential connection between claims and restitution, the trick is somehow to induce Czechs that a higher figure is in mutual interest and that they should join in working toward it. This unlikely to be achieved, however, by simply setting higher sum and negotiating downward to something both sides would be willing accept. The package must be given different, more attractive face, something Czechs can digest before they will even consider reopening question.

4. I am sure Dept also seized with this problem and is considering possible steps to solve it. Two alternatives—and I am sure others exist—appear to merit some study. First and probably most practicable would be that originally suggested in A–206, January 6,⁴ namely, a ten to fifteen year stretch out of payments in return for predetermined increase in excess of $2 million contribution Czechs agreed to in 1961. Secondly, some kind of possible bookkeeping device whereby the Czechs could pay any additional agreed amount, or portion thereof, in crowns to underwrite USG local expenditures with the dollar equivalent being remitted to the claimants.

5. Strong argument we can use in justifying increase is that in course of period of deferred payment MFN likely to be restored through passage E/W Trade Act which administration continues to press for. Realize we ourselves might have problem in releasing 22 million in gold to Czechs at present time but something can be made of fact current trade balance in US favor and Czechs likely to continue heavy US purchases.

6. We should be under no illusions Czechs will fight hard for conclusion of the 1961 accord as it stands and will exploit their public relations advantage in the matter of their right to looted gold. Consequently rather than accepting the prospect of long drawn out negotiations at the start, I would strongly favor a form of one-shot package offer to the Czechs based on adjustments within the 1961 accord. If Dept interested, would be happy to suggest in Limdis telegram increase I think we could obtain in claims figure. In any event believe we should not give detailed written reply to Czech note but should propose initiation of discussion based on plan of our own. Even if Czechs rejected it I firmly believe our tactical and public position would be enhanced by our offer of a ration-ally defensible easement which would enable the Czechs to go measurably higher on claims in the interest of removing an intractable bloc in our bilateral relations.⁵

Beam

1. Source: Department of State, Central Files, FN 19 CZECH. Confidential.
2. Telegram 1393, February 24, forwarded the substance of a Czech note on the gold issue. (Ibid.)
3. Congress took no action on the East-West trade bill during its 1967 session.
4. Airgram A–206 reviewed U.S.-Czech relations in the light of the Vietnam war and the actions of the Czech secret police. (Department of State, Central Files, POL 1 CZECH–US)
5. In telegram 158340 to Prague, March 25, the Department of State forwarded a draft reply that outlined U.S. insistence that the gold issue had to be resolved in the context of the settlement of other outstanding financial issues. (Ibid., FN 19 CZECH)