Telegram from David K. E. Bruce to Secretary of State Dean Acheson

INCOMING TELEGRAM Department of State TELEGRAPH BRANCH SECRET Action Control: 3708 Rec'd: January 9, 1951 FROM: Paris DECLASSIFIED 6 47 p.m. info Info TO: Secretary of State E.O. 12065, Sec. 3-402 State Dept. Guidelines, March 6, 1982 NO: 3910. January 9s p .M. By DEB NLT, Date 4-5,485 SENT DEPARTMENT 3910 REPEATED INFORMATION LONDON 966, BRUSSELS 178, PASS URGENTLY WILLIS TREASURY AND FOSTER ECA. Reference EMBTEL 3852 January 8 and EMBTEL 3899 January 9. .. We suggested an conversations with FONOFF and Guindey procedure using US blocking controls which should lead to cancellation orders and also to blocking US dollars held for Chinese account through European banks, Procedure is really general app 1cation of ad hoc procedure followed lease of Bank IC, Banque Belge and two Buitish banks. After reviewing with MINFIN and exchange control officials Guinday has submitted proposal to Petsche for his approval. not too complicated technically, proposals may be basis for French cabinet decision because it provides means for State industry to cancel orders without breaking contracts without intervention by French Government. Petsche discussing with Pleven before giving approval. MINFIN seem certain cabinet will either adopt this or act more directly in cancelling orders tomorrow. 2c Proposal is based on fact that nearly all trade with Crina is handled in dollars and our understanding is that contracts for steel shipments call for payments in dollars. We pointed out to Guindey that it was one thing for French Government to insist contracts made before cut-off date should be filled and quite another to permit terms such contracts to be changed after cut-off date in order insure she pment. Guindey agreed and thought French foreign ex- change control could refuse permission to suppliers to accept payment in any currency but US dollars 3. Second step is to insure necessary information given to US Foreign Assets control to enable Memsprevent any payment in free dollars by Chinese to French suppliers. We have number possibilities for obtaining information ounselves. Guindey vol unteered that perhaps French Government could supplement and confirm. car by having us provided with information on firms intermediaries, amounts REPRODUCTION OF SECRET MESSAGE IS PROHIBITED