IP-320 - FINANCIAL TRANSACTIONS ON DOLLAR ACCOUNTS OF CZECHOSLOVAKIA

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79T01049A000700140003-3
• Release Decision: RIPPUB
• Original Classification: K
• Document Page Count: 16
• Document Creation Date: November 9, 2016
• Document Release Date: April 26, 1999
• Sequence Number: 3
• Publication Date: November 13, 1952
• Content Type: MEMO

Approved For Release 1999/09/21 : CIA-RDP79TO1049A000700140003-3
DIR 13 November 1952
25X1A
Chief, D/S
Through s Chief. S/T?
20 - Financial Transactions on Dollar Accounts of Czechoslovakia
Reference s 25X1 A
With the exception of bank deposits and other short-term assets
in the United States, information about Cseohoslovakiae a dollar ac-
counts is scanty. Bank deposits and other short-term assets were re-
duced by two-thirds in a period of 8 months to. a total of $:51 thous
at the and of June 1952. The use of cloaked dollar accounts seems to
be increasing in importance. Czechoslovakia has used U.S. (hand-to-
hand) currency to pay for imports. The size of holdings of this type
is unknown. Not lessee than $26 million in gold was exported from
Czechoslovakia during the period November 1951 - June 1952, but neither
the origin nor the ultimate ownership of the metal has been ascertained.
Dollar balances will be augmented if Czechoslovakia is able to sell in-
dustrial equipment, now blocked in the United States, which had an ori-
ginal cost of approximately $16 million.
A dollar shortage has resulted from the abrogation by the United
States, in November 1951, of tariff concessions to Czechoslovakia under
GATT. As a consequence# Czechoslovakia has been handicapped in obtain-
ing, needed imports.
In order to obtain dollars Czechoslovakia is attempting to export
to the United States through third countries. An export drive to other
countries in the United States dollar area and to countries with curren-
cies freely convertible into United States dollars seems to be underway.
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&. The status of these dollar accounts, according
4 IM.Rre,. &-a -- f.-
-.VW-'A ~LMWWOJ' all"
holdings of United motes currency (hand-to--hand cash). Potential sow
ces of dollars are the Czechoslovakian gold stock and, perhaps, induus-
t,.4 ml a.?,,4 w--..J. _- Lt _ _._ 3 . -- -
I. Czechoslovakian dollar accou ,ta are defineed to include deposits in
_~.. ..~.., . vu -i+ - svUer 4. 3.* f isDie! W s1 ows the status Of these t
on a monthly basis for the period January 1950 - dune 1952.
1. Bank deposits for the account of Czechoslovakian principals
and other short-term assets (of l#. tle practical significance) amounted
e
r
own atccounts, oaS
which include Czechoslovakian holdings. Czech dollar holdings of this
type are impossible to ascertain on the basis of present information.
Determination of the amount in-aked accounts would necessitate an
investigation of records of foreigners maintaining dollar accounts.
2? Cloaked mounts, that is, deposits in flM + b
k
a:s s
n
:ne d, by non-Czechoslovakian inci a
3~' is fdr ti~
i
3. United States currency holdings. The amount of dollars
of United States currency indicates that theACsechs do hold and use
s
.. Gold.. on 31 march 1952 total gold
on f, ? the period November 1951 - June i9
Table 2.
dings of Czechoslova],a
Amt at $25 ad blot .
J LLOn was exported from Czechoslovak:
Czechoslovakian gold stocks-
that a
ascertained whether this gold came
was in transit.
5. Bl.oeked equipment in the gaited Mates. Table 1 shows that
approximately 316 21131on has been reported quarterly by the Treasury
Department as oter snort term liabilities owed by the United states to
C"zechoslovakia. bl Practically all of this amount represents, the value
of pre-paid +e s. at manufactured in the United States, for
C~etchctslct
akia. but for which
x
t
e
por
l censesx hat b
ve noeen grsnted.7
B. The flow of the Caregoi
;counts has been as follows x
Ported bank deposits and short-term assets of Czeechoslo -
I M ha o- b
. - - -
een
t Ianu_
ary 19W through dune 1952. A circa
rF 2~
2
MAY 95952)
aa
) fr th Stt S
omeae 1Bank of Czechoslovakia to all national enterprises engaged in foreign
trade indicates the desire of Czechoslovakia to maintain minimum dollar
bas es in the United States,, especially in New York State. In order
to accomplish this end, various instructions were given.,, the most in-
dicative of which was the one ordering use -if neutral iro banks for
ed opening ease
Approv a1 ) ~t80 QQ 8~Qite #a
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Several bank transfers reported by United States banks regarding
Czechoslovakian doll" holdings are shE3waa in Table 3.These figures
are included as indications of the flow of Czech dollar holdings, but
should not be c onaidimed a flow pattern as the sample may not be repro
sentati.
2. 'loaked dollar accounts have probably been Increasing
relative to balance,* held directly for the account of Czechoslovakian
principals. Since the status of these cloaked accounts is not known,
a categorial statement indicating an absolute increase is impossible.
As a matter of conjecture, they have probably decreased absolutely be-
cause of the indicated dollar shortage, particularly since November 1951.
Nevertheless,: the importance and use of cloaked accounts is pointed up
by the desire of the Czechs to maintain minimum balances in their own
now, by the transfer of funds to then accounts,, and the following state-
ments and transactions:
It was reported than in December 1951 or January' 1952 the
bank of Brussele* sent "checks" to l ico totaling 4300 thousand in
amounts, of $10 thousand and thousand eaeah, payable to bearer. These
checks or drafts (it is not clear whether they were drawn on the Chase
National Bank or on another New York bank and merely sent through that
bank's representative in Mexico City) were accepted by the Banco del
Ahorro gacionaal, whi,th credited the proceeds to an accouiat in Mexico
(presumably a United States dollar account) in the name of a Czechoslo-
vakian representative. The funds were then in a form usable for the
O.S. dollar financing of a Czechoslovakian purchase of 200 tons of
coppers ostensibly for the Renault Auto 'Works of Prance. After the
purchase, a 470 thousand balance remained in the account, as of 8 March
295225X1 X
hocks" were received from Belgian or mss banks
'
t" t{
,
see-
; a h
New York. The checks were purchased through several persons so that
the selling banks were ware of the actual Yaucchasers. Belgian checks
were payable to bearer.1
According to a State despatch in Decembar 19,51., the Czbch
State Bank requested a { .to bank not to remit dollar payments to New
York, as it bad in the past., but rather to re4 to the anion frank of
Switzerland, for credit of its dollar roue t
..,W;
It was reported that in 1952 the Swiss firm of save S.A.
is acting as negotiator and/or; financier for the commercial department
of the C z e e c h c s l Legation in Berns, Switzerland. The = , a . c =Y of
this firm draws hard currency f such transactions from the Banco di
Rome per 3a Svizzera, Lugano.l,l This manna reportedly had $5 million
at his disposal in the Chase National Bank?
25X1X
since January 1952 the Czechs have de-
po en uyaere of Czech-owne k equipment blocked in the United
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n presumed to be the Bank of Brussels.
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States clear payments through mss banks. The transfer of Czech dollar
funds to,3 itseriand has been widely discussed in United States banking
25X1X
25X1X
the oaassibil.ity of Poland big
scarce rchan -ise fr~omr Czechoslovakia .wpith payment in dollars.
Swiss francs are gaining favor with
Czechoslovakia In Latin American and other countries where goods are
needed.' Hq stated that mss franca are as usable as United States
dollar asr.l
3. The flow of United states currency cannot be judged. Pos-
sible indications of its use were as f olllows
It vaa reported that in May 1952 itetraans (Czechoslovak In-
ternational ?oru. ar omr , Ltd.) bought 3,000 tons of copper
Feim a firm in Holland. "It was scald against cash payments in dollars ..." 11/
the Czech commercial attache in Rico
paid 17 thousand in August 1.951, $30 thousand in September 1951 and $13
thousand later for purchases of lead. Settlement was in United States
currency which was brought into Mexico ' iplomatic pouch in bills in
denominations up to one-hundred dollars 25X1 X
25X1 X arding purchases of strategic commodities in Italy_,
in Marc 1952 that the Czechs used Italian liras which
were obtained by selling dollars on the black market. These dollars
were provided br Frantiaxek Mares, Czech Counsellor in Berne, Switzerland.. d+
S. An estimated minimum flans of gold from Czechoslovakia is
Indicated in Table 2. This estimate is prevented as a possible source
of dollars, but care -should be exercised in drawing conclusions from the
figures. Table 2 was constructed by tabulating individual shi.paa nt3 of
gold, most of which were shipped to Holland by air, in which the con-
signor was indicated to be a Czechoslovakian national enterprise or air
life. The volume of gold shipped appeared in the documents in kil.algram
weights. Some of the shipments were indicated as "gold coins" or "gold
and coins". Values shown in Table 2 more derived by using a standard of
)5 per troy ounce. Gold coin e were figured at the sale rate. some
shipments indicated *destination", some "consignee".. some a geographic
area and others "unknown.,, amples listed under such categori--a wweres
Zurich, Saudi Arabian;; Netherlands; Bullion Exchange Co., Lausanne; 1#ol-
la a Bank Unie, Rotterdam. Richard and Co., Geneva; Societe Hollan-
daise de Banque et de Gestion, Tangier; Banka Commerciale Itatil o-,,,
Milano; !Reehnu.ng' Comitbanca, Milan.
5. Czechoslpv ki.a has been trying to seal equipment blocked
in the United States-L91 Sale of this equipment for dollars, even at
a substantial loss, would augment ech dollar balances. In the latter
part of 1951, a Czech representative succeeded in selling a portion
ApprovfdrF4Meka s.d9 S ggl1 P GCWAM 0M: 3 a discount of
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g non- l at tar ev.
ech dollar holds are
a c7antrte . Table
tes for the PerW Jam
e.i;i. (cost, inalw&nce, fro
The do produced a '$V T
Justaaats have bey ax using a statue of lu
or 10 per o f for G achoa1o kt f trade with buropee
a:auu` ee a ctive .
oa aeun Irra Table fit. Catch mthly
;:malaw
thousand de ficil
deficits with
tai.r ailig minim
C si derin
xa 192, it seems
6 thoumnd our,
,,OZ8 thm
. The change in 5 ,taerlaad"s posit
the evidence that Osechoglevaida, is exporting tbrough
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uuctiaQW4s
( olvALM t lea aacaunt5
f trade by arm
babiy plain gr Table 1
Z down by Czechoslovakia of her United mates
%9,279 tho i :_ deflait
ataupleed4 with the Czech pli.:.cy of main-
teen. Table 6 shows
in 1952 or $9,012
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2. The ao,rce of Czechoslovakian dollar holdings in cloaked
accounts is probably found in: Czech proceeds from the Sale of goods
and services; gold; and the transfer from undisgkiised accounts.
25X1X
3. The sources of Czechoslovakian United States currency hol-
dings are obscurs. Procurement methods probably include black market
operations, Czech civilian exploitation, and the use of non-Gzechoslovakian
i xtermediarie.s. The following examples are indicative.-
as of .gust 1951 the Czechoslovakian
population eras allowed to buy goods in the domll is market for hard cur--
rency without identification of the purchaser.
It was reported that as of June 1952 Antwerp diamond bro--
ka were buying industrial dial zeds and dust for the Czechoslovakian
Le ation in Antwerp. These brokers paid dollars in bills of small de-
nominations. The source estimated the purchase in on weer of 2,500
carats of dust at an average price of O7 per carat. 23
A report indicated that in Czechoslovakia gift packages from
the United Staten require exhorbitant charges payable in swl nd Western
currency
4. "he amount of Caec gold holdings =. s unknown. Domestic
gold production was estimated at proximately $73 thousand (.2,09O fine
ounces a 4`35 per ounce) in M7-2 The total gold hold a of Czecho-
slovakia as of March 1952 were estimated at X25 million.2/ Therefore,
if the figures in Table 2 are correct, Czechoslovakia may have received
gold from an outside source or another country is shipping gold through
Czechoalo'aakia. It has been in i that the LI .h possibly sent gold
to Czechoslovakia before 1951.2 7
attempt by the Czechoslovakian government to procure gold
the domestic market is indicated by the following:
25X1X
the Czech government induces the pope--
l.aation to deliver rings, earrings, bracelets, etc? in exchange for scarce
goods. Coupons are received by the people in excl
D. Lhe ultimate destination of the proceeds of the dollar balan-
ces of Czechoslovakia are areas where purchases have bow made or other
Czech liabilities incurred. These transactions are indicated in A.,
B., and C. above.
11.. The effects on Czechoslovakia of the United States, withdra
November 1951 of tariff concessions under GATT are indicated by the
following citations l
A. It was reported that in Me co in November 1951 only 200 tons
of electrolytic copper were contracted for by Czechoslovakia out of an
offering of 700 tons because Metall:mex (Im :ort and Export of fires and
.zan
.r talc Cam Ltd.) did not -ave sufficient o a AVj
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in Mexico in February 1952 a Czech dollar
25X1X
25X1X
25X1X
transaction was eventually consummated
shortage delayed the purc arse of 320 tons of lead. The Czechs could
guarantee only 41 thousand by 10 March l242. (Se arce believed that the
tags of dollars. L'
oblem facing Czecho-
many dollars and raw
Information indicates that in 1951 a transaction involving 2,000
tons of copper fror4 Chile was not consummated because of a Czech sror-
materials as possible..-.-
ovakia in Latin er is that of obtain:
the ma,
voices and that Czech dollar requirements were greater than earnings-
It was reported that in early 1951 the Czechoslovakian Ministry of
Foreign Trade was greatly concerned over the suspension of consular in-
Czechoslovakia probably lost 0 million
of the United States action in November 1951%6
sechoeigvakia- needed dollars for direct trade
or black market operationns.?ii
State telegram indicated that Czech brown coal briquettes., 1W
25X1X
25X1X
ted by Czechoslovak" only when strategic goods were received in exchang
It was reported that in September 1952 Czechoslovakia was negotia-
ting for the purchase of an inferior grade of aluminum from the Swiss
because of inability to pn .sure high grade aluminum from the United
States.2Wi
thousand tons, were imported into Federal Germany via Belgrade, lu;o-
slaviaa.. Yugoslavia purchased 1 million Western European goods with
dollars derived from Fries funds and sent these goods to Ozechoslovakia
in exchange for the briquettes. The briquettes: were then sold to C*er-
many at a profit. It was noted that in the past brown coal was expor-
Information indicated that dollars would not be ava3 hale for a
Czechoslovakian chase of nickel antil September 1)52.29J
as a result of United States trade restric-
tions zechoslovakia was to further negotiations with Central America
as a potential source of dollars.!/
B. available .reformation indicates that the November 1951 action
of the United Mates Goverment has had adverse effects in Czechoslo-
vakia.These effects have been direct and indirect. Although this paper
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Page 7
deals primarily with the effects on Czechoslovakian dollar holdings,
one must not lose sight of a more basic consideration, namely the
"raison dtetre" of such dollar holdings. Czechoslovakia wants dollars
for the strategic goods and services which can be purchased with them.
if, therefore,some other currency could be used; Swiss francs, for in-
stance, to purchase strategic goods, diminishing Czech dollar balances
would not be so grave as supposed. As Western trade controls have been
in operation, before and since November 1951, direct strategic purchases
by Czechoslovakia have been denied or quantitively c.ntrolled. Sven if
Czechoslovakia had the dollars, strategic geode c7..1ci not be sold legally
by those countries which cooperate in the export crntrol policy. In the
past, dollars have been required or preferred in ur hods . transactions
where procurement methods have evaded estern controls. If the preference
for dollars by suppliers of strategic goods were to change, `Czecho could
still procure these goods provided she had sufficient holdings of other
acceptable currencies. Considered in this light, the acquisition by
Czechoslovakia of a significant amount of other currencies, particularly
Swiss francs, would be a means of circumventing, to some extent, the
American actin of November 1951.
III. Technique used by Czechoslovakia to regain dollars lost as a result
of the United States cancellation of tariff concessions to Czechoslovakia
under GAT T .
AttelUpts to 14teare t`dollArp htr +,Pjm,A- m44-- #.
Cates by the following excer xt a:
It was reported that in dune 1952 a newspaper in Honduras
the sale of Czech pencils for the first ti
;
me
n a rxber of
. The L. Porting firm is a partnership; on,. of the partners was
'~" rx inc. r. S, 0 _. X. i L
'
Intl
ernae f udit
of ao ua'~s. - _a ng ?: u v.tvea of Tone central
25X1 C700140003-3
January 1952 the Charge 9$ f
l
s
res
in Quito, uador was instructed t
i
o
ncrease Ca
-
uadorian, and Peruvian trade with Czech 1
wa
25X1X
s cvai irrange-
, Or dollar
palnts were to be made for Cz"h. goads. ,.
----' __ _ _ W vial AWXA UUU 6,1 ye Jae Placement of ordef? s. Czech
exports included Bohemian crystal, tiles, costume Jewelry, sewing m a -
c h i n . li2ht nl,a i n il
s
A fow&au , W= casflsere and linen cl of --?
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25X1 C
25X1X
Payeent for these goods was to be made by means of letters of credit
In dollars or pounds sterling opened in the European port of 1*2b&r-
kation'. Pa v nt by sight draft or against documents was allowed in
,some cases -
2. Attempts to re
indicated by the following:
Czech goods to the meted States are
the United States in order to evade the cox
Czech cameras with Swiss leases were being shippedjr? Switzerland
K State Department - .rgram indicated the possibilit
t-1 State Airgran indicated that the Depart-merit believed that
attempts. were b i;ng made in Latin America to remark goods of Caeahoslo-
r
25X6
App
 5X1A
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 Involving Czechoslovakia
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Date of
2
ansaction
1951 Cmeeh S-
1 or 19
21 March 1952
2 March 1752 lbrodowy Bank
rolski
7 April 1952 Czech State Bank
tvia S)
July 1952 State Bank
(via K? tb 'k)
European
Bank Account
DGur a r
one de Nord,
Perris
anque de
Preumelles
Bank,
redieXp 53 ZIk
Courtrai,
3elgit
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Pair
Aunt
in
Dollars
60,E
Banque do
Breuxelles
Transfer
'Onion Bank
Switzerland
2h6, 00
Clem State
246,0
Bank
!;o,oo
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Thv%i; .
ebr eaury
Feuer
1951
69,252
2,630,008
265,627
2, 251x., 515
277,520
,598
133,133
3,629,012
66,379
6,973
65,533
363,5
79,962
ip5779864
24,639
136146,586
15, 3.8
1,7314,1140
100
2,2213Uls
2,867
1,1409
1952
3,0284
201,539
1,187
212, 741
13160
155, 516
436
126,21
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csechoal.o
Canada
itzeriand
Japan
'Philippines
Costa Rica
Cuba
r1aiti.
Austria
Denrk
Qer xr
Iceland
lrelaad
Italy
'etheria do
Norway
Radon
Taste
United King
do a
Finland
Spain
Ar 1.o- g tiara u
Cyprus
Bg)t
Gold Coast
Nigeria
Southern Rhode
Southwest Africa
Union of S. Africa
Australia
Bur
Ceylon
Hong Kong
India
ala;
'Near Zealand
British rulana
Chile
Beig -Luru n rg
Fran"
Portugal
Turkey
Angola
Belgian Congo
Syria
TOTAL
fin