360 Embassy in Washington to Department of External Affairs

Cablegram 820 WASHINGTON, 7 September 1949, 7.34 p.m.

EMERGENCY SECRET

F.E.C. 116.

Late this afternoon we were called to the State Department by Allison who, under instruction from Butterworth, reported at length the United States position with regard to the transfer of gold from Japan to Thailand and France.

2. Following is summary of his comments:

(a) The decision to take this step was approved by President Truman personally after consultation with the Departments of Defence, State, Treasury and the Attorney General.

(b) The United States Government is certain that they are legally correct in transferring gold otherwise they would not have taken this decision. The State Department is preparing a factual memorandum about the legal position for distribution to friendly powers.

Stressed again that Thailand's legal right to earmark gold was not connected with Austr[al]ia's claim for compensation from Thailand.

(c) Allison pointed out that U.S.A. believes that U.S.A. is entitled to a Major portion of the gold belonging to Japan.

Therefore, if this amount is not accepted as belonging to Indo- China and Siam, it may be claimed later by the U.S.A. for occupation costs.

(d) They stressed the political significance of proposed move in order:

(1) To contain Communism in Asia and, (2) To assist the French in the interests of the Western Union and the Atlantic Pact. [1]

Referred to the geographical position of Australia and expressed the opinion that we might view the situation in its widest aspects.

(e) Said that if this issue were raised by Australia at F.E.C.

meeting tomorrow, it would give the Soviet a 'chance for a field day'.

Suggested that we ask you not to raise the issue in the meeting tomorrow. In this event, the United States would delay the issuance of a directive to S.C.A.P. for a further week to allow time for further negotiation (i.e. for another fortnight).

(f) Allison gave the impression that the United States had made firm decision to issue directive.

3. We felt you should be advised of the foregoing immediately.

1 i.e., respectively, the Treaty of Brussels (1948) and the North Atlantic Treaty (1949)

[AA:A1838/2, 479/10/11]