USE OF US CREDITS TO FINANCE FREE WORLD TRADE WITH THE SOVIET BLOC (BRIEFING MEMORANDUM FOR DCI)

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP64-00014A000100270001-2
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 3
• Document Creation Date: November 9, 2016
• Document Release Date: July 13, 1998
• Sequence Number: 1
• Publication Date: May 1, 1956
• Content Type: MEMO

Sanitized - Approved For Release : CIA-RDP64-00014AO00100270001-2
C IA INTERNAL USE ONLY
USE OF U.S. CREDITS TO FIUNCE FREE WORLD
TRADE WITH THE SOVIET BLOC
Brie iw I U&" for D.;
Economic Defense Division
Office of Research and Reports
Central Intelligence Agency
Project 11(33
1 *y 1956
CIA INTERNAL USE ONLY
Sanitized - Approved For Release : CIA-RDP64-00014AO00100270001-2
 Sanitized - Approved For Release : CIA-RDP64-00014AO00100270001-2
CI', INNT }Wi.L U1r. ONLY
1 May 1956
MEMORANDUM FOR: Director of Central Intelligence
SUBJECT: Use of U.S. Credits to Finance Free World
Trade with the Soviet Bloc
L, At the National Security Council meeting on 26 April 1956,
a question was raised concerning the use of U.S. bank credits to
finance Free World trade with Soviet Bloc countries, particularly
through the extension of U.S. dollar credits to European banks
involved in this traded I am summarizing in this memorandum the
information available on this subject.
2. United States Foreign Assets Control Regulations prohibit
governmental and private credits to Communist China, North Korea,
and North Vietnam, including the use of United States dollar
facilities by foreign banks in connection with transactions with
these areas. The UoSo Government has, since 1947, not made any
credit available for trade with the USSR and the European Satellites,
and, as a matter of policy, does not extend Export-Import Bank
credit insurance on exports to Bloc countries., The extension of
private dollar credits by U. S. banks to foreign banks engaged in
financing trade with the USSR and the European Satellites violates
no existing law or regulation of the U.S. Government.
3. Many foreign banks, including Communist-controlled banks,
maintain dollar balances in U.S., banks, and utilize them for various
purposes, including the financing of Free World trade with the USSR
and the European Satellites, There have been rumors that, in
addition, UoSo banks have provided lines of short-term credit to
European banks, which have facilitated their financing of non-
strategic trade with the USSR and the European Satellites.
4~ The only known recent case involving the possible extension
of U.S. bank credit for the purpose of financing East-West trade
concerned a proposal by the Soviet-controlled Banque Commerciale de
L'Europe du Nord (BCEN), to the Chase Manhattan Bank, on
19 September 1955, requesting Chase to establish credits of up to
$1,500,000 and # 500,000 sterling in favor of BCEN for the purpose
of financing Free-World exports to "Eastern European" countries..
CIA INTERNAL USE ONLY 11
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CIA INTE1 NAL USE ONLY
BCEN is known to have been involved in financing trade with Communist
China in dollars. As a result, the Treasury Department recommended in
May 1955 that $337,000 of the bankos funds in the U.S. be blocked. The
U.S. Government has not yet taken affirmative action on this recommendation.
5c When the Chase Bank consulted the State Department in September
1955 regarding the BCEN proposal, the Treasury action against BCEK for
financing trade with Communist China in dollars was pending:. Consequently,
State did not look with favor upon the establishment of the proposed line
of credit, and as a result Chase reportedly turned down the BCEN proposal.
On 18 April 1956, John F. McCloy, Chairman of the Board of Chase,
telephoned John W. Hanes, Special Assistant to the Secretary of State,
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reportedly regarding this matter. has kept in
touch with these developments and, on 27 April,?received information
25X1 X6 that the Bankers Trust Company and The First National City l1 ad made
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The AD/OO is reporting these developments to you in
a separate memorandum.
6. For your information, on 26 April, Admiral DeLany, MCA Deputy
Director for MDAC, was questioned before the House Foreign Affairs
Committee on what use was being made of U.S. dollars and U.S. dollar
credits in East-West trade. Admiral DeLany replied that he would supply
an answer to this question.
7. No evidence is available to us indicating thatncredit facilities
to finance the movement of controlled goods to the Soviet Bloc have
been extended in other COCOM countries. However, credits have been made
available in these countries to finance trade in non-controlled
camodities. (A discussion of Government credits in East-West trade
is included in the attachment to this memorandumo)
OTTO E. GUTHE
Assistant Director
Research and Reports
Attachment:
Government Credit in East-West Trade
Distribution:
Original & 1 m Addressee
2 - DD/I
2 ? AD/ER
25X1A92 V C h D RR
4?EICISRR
EIC/S/RR: em/3707 (1 May 1956)
CIA INTERNAL USE ONLY
D/E/RR:
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Sanitized - Approved ForReTb.Tse ?CIA-RDP64-00014A000100270001-2