861.50/3–1549: Telegram
The Chargé in the Soviet Union ( Kohler ) to the Secretary of State
660. Following are requested comments Deptel 108, February 25.1
Embassy expects completion Department’s analysis of Soviet gold tactics and strategy will reveal broad outlines of program being pursued, based on double but not inconsistent aims: (1) short-run utilization Soviet and satellite stocks in manner calculated most effectively to add to currency instability in important target nations outside orbit and obtain critically required supplies through circumvention ECA controls; (2) over-long run maintain or implement present stocks for purposes basing establishment of ruble currency bloc at some future date.
Thus, with probable wide representation and great strength in separated critical markets, Soviets, through adherence normal speculative operations, could cumulate speculative swings of free market, thereby complicating financial problems of government affected and, over given period, anticipate at least usual rate speculative profits from transactions. These activities would then fit into regular pattern Soviet black-marketing operations and profits therefrom, utilized together with diamonds and hard currency acquisitions to obtain illegally ECA supplies authorized for legitimate consumers.
Re paragraphs (b), (c), and (d), while fully realizing importance of effective control and enforcement and appreciating difficulties involved other methods. Embassy does not consider them sufficient. We doubt if study Soviet-US bank reserves would reveal 1948 increment paralleling value favorable USSR trade balance with US over past year. In other words, dollars, which more effective valuta than gold, and partially earned through exchange luxuries, have been utilized to further basic Soviet objectives—strikes, unrest, propaganda, stockpiling and circumvention. Thus maximum denial Soviet access these dollars at source constitutes equally important and interdependent element any restriction policy, and we hope Department will continue study every possibility this end, including legislation. Peculiarly Soviet furs and caviar would be especially vulnerable targets.
Re paragraph (d), seems necessary re-emphasize continued heavy economic dependence USSR on West, which often underestimated. In Embassy’s opinion, US export control policy offers major remaining area, where real prospects success exist in achieving major objective US policy, i.e., compelling USSR return peacefully to confines her own borders. We convinced that export policy in relatively short history has had real impact on Soviet capital development, hence [Page 95] long-range military program. It has resulted in tremendous planning complications and been important factor behind recent shifts in allocation basic internal and external resources. Politburo undoubtedly counting on inability competitive capitalist countries adhere to such policy for relatively long period, and thus expects finally obtain critical supplies at compensating reduced costs.
Hence, in our view, policy must be adhered to and even strengthened, with particular attention devoted bearings, spare parts for USSR’s tremendous inventory foreign machinery, petroleum and rail transport equipment; also all most recent equipment prototypes as well as advanced scientific information/Goods of small value often of greatest import due their high bottle-neck significance.
It would indeed be tragic, if efforts minority commercial groups to undermine program of such consequence were permitted to succeed, particularly in view of overwhelming popular support behind our foreign policy/Frank policy statements, at high official levels in this regard, should do much to head off such pressures, prior their development, effectively answer currently developing Soviet propaganda re US discrimination East-West trade, and mobilize more genuine cooperation participating OEEC nations. We do not see how such statements could fail to be effective, when placed in framework publicity avowed Kremlin purpose develop Soviet Union as base world communism overtaking and surpassing West in economic might. They might well: (1) indicate USSR’s Government has only self to blame in view their striving make all exchanges, commercial, scientific and intellectual, a one-way street; (2) appeal to all free manufacturers everywhere to forego illusory short-term profits from such trade, and suggest they turn their interests to support world program for development backward areas; and (3) suggest undesirability American people buying Soviet furs and caviar, sale of which supports programs aimed at suppression religious and other liberties behind Iron Curtain.
Pouched Belgrade, Bucharest, Budapest, Geneva for Porter, Helsinki, London, Paris for Harriman, Praha, Sofia, Warsaw.