865.24/6–447: Telegram
The Ambassador in Italy (Dunn) to the Secretary of State
1398. OFLC, Rome, advise that negotiation of additional credit agreement for $10,000,000 to cover purchases of fixed installations, scrap, YMS vessels, ammunition, combat material and other items not covered by agreement of September 10 [9], 1946,1 is held up pending-further advices from OFLC Paris and Washington, concerning possibility of bulk deal encompassing all these items. These items cannot be included in original bulk deal even though total credit will not be absorbed because prices involved will be considerably less than 18.2% of government cost. Caulkins2 suggests individual sales contracts covering each class of item using same Three (C) payment terms as bulk agreement and negotiating amendment to bulk agreement to [Page 917] cover additional real estate requirements (reDeptel 734, May 21 and Embtel 1365, June 13).
In connection with the eventual instructions issued to OFLC Rome for transfer of remaining items to Italy, it is urged that the Embassy together with OFLC be allowed in our discretion to by-pass ARAR. As the Department is probably aware ARAR is constituted as the agent of the Italian Government to receive surplus and to dispose of it on a commercial basis. Because of the commercial aspect of ARAR operations, that organization is loathe to transfer material to impecunious government ministries of which the service ministries are good example. Furthermore, we are inclined to be dubious of the good will toward the US of some of the ARAR personnel. Accordingly, since the sale of surplus ground and air aviation equipment is a nominal sale without commercial aspects, we would be inclined to discuss the proposed negotiations in advance with either the Prime Minister or the new Vice President of the Council, Einaudi, who as Minister of the Budget will have control over expenditures authorized for the service ministries.4
- See Foreign Relations, 1946, vol. v, p. 932.↩
- Daniel P. Caulkins, Field Commissioner, Office of Foreign Liquidation Commissioner, Mediterranean Theater.↩
- In this telegram, not printed, Dunn pointed out that the program for reequipping the Italian army was not at the same stage as that for the air force for which SAC had received instructions from the CCS whereas none had as yet come regarding the army (865.20/6–147).↩
- In telegraphic instruction 898, June 12, not printed, the Department directed that the negotiations need not involve ARAR; and that Dunn might use his own discretion in dealing directly with the appropriate Italian authorities (865.24/6–447).↩