459.119/9–651
The Acting Secretary of Defense (Lovett) to the Administrator of the Economic Cooperation Administration (Foster)1
Dear Mr. Foster: I believe that you are aware of the deep concern which the Department of Defense feels with respect to the proposed shipment of United States automotive parts to Denmark for Poland. It is my understanding that the decision at the August 29 meeting of the National Security Council2 authorized the Department of State to direct, as a last resort measure, the issuances of appropriate export licenses.
A careful study indicates that United States coal can be furnished to the Danes to the extent required. This conclusion is borne out by studies made by your Administration and inter-agency working groups. A letter from your Administration to the Executive Secretary, National Security Council, dated August 28, 1951, shows that 670,000 tons of coal would be only 67 days supply inventories for Western European countries. The only real problem is that of financing.
[Page 1178]Such financing arrangements would involve three related periods. The first of these would require the short fall of 670,000 tons at an approximate cost of $15 million for the balance of this calendar year. The second and third, based upon the Danish estimate of 100,000 tons per month for the calendar year 1952, would involve approximately $14 million for each half year. The first of these is the last half of the fiscal year 1952; the second, is the first half of the fiscal year 1953. Thus from the 1952 fiscal year funds, $29 million would be required and $14 million would be required from fiscal year 1953 funds.
Such financing arrangements must be provided so that the United States Government is in a position to assure the Danes that they have an alternate source of coal. The Department of Defense feels that if the Danes could be assured of such an alternate source of supply for their coal requirements, they would be in a position to negotiate a favorable trade agreement with the Poles. Such assurances and resultant trade agreement would in turn make unnecessary the expenditure of all such funds.
Without doubt, the Poles recognize their present advantageous bargaining position in East-West trade by virtue of their coal resources. The time has arrived for counter measures in order to avoid the Soviet Bloc’s expanding economic offensive. It is believed that it is important that the Poles should not be successful in this case as this is a part of the Bloc’s offensive to obtain highly important strategic deficits.
The furnishing of economic funds to make possible the availability of coal would in this case support the defense effort and at the same time provide an effective counter measure to the Soviet Bloc’s economic offensive. It is recommended that ECA financing be utilized to make possible such an alternate coal source available to Denmark.
Sincerely yours,