Foreign Relations of the United States Diplomatic Papers, 1940, The British Commonwealth, The Soviet Union, The Near East and Africa, Volume III

711.61/780½

Memorandum of Conversation, by the Assistant Chief of the Division of European Affairs (Henderson)

[Washington,] December 16, 1940.

Participants:	Mr. C. A. Oumansky, Soviet Ambassador;
	Mr. Sumner Welles, Under Secretary;
	Mr. Ray Atherton, Acting Chief, Division of European Affairs;
	Mr. Loy W. Henderson, Assistant Chief, Division of European Affairs.

At Mr. Welles’ suggestion, the Soviet Ambassador called upon him at 4 o’clock this afternoon in order to continue the discussions which had been in progress regarding various phases of Soviet-American relations. Mr. Atherton and Mr. Henderson of the Division of European Affairs were also present.

Machine Tools

Mr. Welles informed the Ambassador that as a result of efforts made by the highest officials of the American Government—efforts in which the head of the United States Government himself had shown an interest—it has become possible to arrange for the release to the Soviet Union of an additional 21 machines out of the list of 61 which the Ambassador had submitted to the Department a number of weeks ago. Mr. Welles reminded the Ambassador that these 61 machines formed a group which had already been manufactured and delivered and were lying in warehouses awaiting export. He pointed out that 29 of these machines had already been released; that with the release of the additional 21 plus one machine which was an aeronautical device rather than a machine tool, the situation with respect to the 61 items on the list was now as follows:

Released to the Soviet Union	51
Requisitioned by the American Government	5
Turned over to American firms with the consent of Stankoimport	2
Airplane parts still held in the United States	3
Total	61

Mr. Oumansky expressed his appreciation of the interest which Mr. Welles and other officials of the American Government had displayed in the matter. He said that the release of these machine tools must be regarded as an indication of a friendly spirit on the part of the American Government towards the Soviet Government. He nevertheless felt that it was his duty to point out that his Government was disappointed that the American Government had not been able to adopt his suggestion that all the machines lying in port ready for shipment be released; that the American Government had decided to divide them into two groups, one group to be detained in this country and the other to be exported to the Soviet Union. He said that although the release of 51 of the 61 machines was now being permitted, it was necessary to point out that the American Government during recent weeks had requisitioned machine tools from its list of 61 in the value of $851,354. He pointed out that the five machines which had been requisitioned were apparently worth over $800,000, whereas the 51 which had been released were valued at less than $1,200,000. The concessions which the American Government had made were not as great as it would seem when one considered the value of the machines which had been detained.

The Ambassador asked Mr. Welles if he had any additional information to impart regarding the lists of machine tools known as “List C” which he had given to Colonel Maxwell. This list, the Ambassador stated, as amended, was made up of 118 machines at a value of approximately $4,300,000. The machines in this list had already been ordered and some were in the various stages of manufacture but no export licenses covering them had as yet been obtained. After a number of conversations on this subject with Colonel Maxwell. Colonel Maxwell had informed the Ambassador that one machine valued at $7000 could be exported. Subsequently, it had been agreed that licenses could be issued for machines in the C list to the value of an additional $72,000. The picture was most disappointing. The Soviet Government had in good faith placed orders in the United States for machine tools amounting to over $4,000,000 and it had been informed that from these machine tools it could have items valued at less than $100,000. Another most disturbing matter had come to the attention of the Ambassador. Mr. Seldyakov of Stankoimport had engaged in some discussions with Mr. Mason Britton, Chief of the Machine Tool Division of the Advisory Committee to the Council of National Defense, with regard to the question of priorities for Soviet machine tools. Mr. Britton had frankly informed Mr. Seldyakov that the American machine tool industry was at present so choked with orders for machines necessary for national defense that the delivery of machines to the Soviet Union for which licenses had already been granted would probably have to be postponed until the end of 1941 or until 1942. The Ambassador said that therefore there were two urgent problems which still remained for discussion: (1) the granting of licenses for the export of those tools set forth in List C which had already been ordered; (2) the question as to how soon it would be possible for American machine tool shops to turn out machine tools for which export licenses had already been granted. The Ambassador added that he felt that thus far the American officials in the Administration for Export Control and in the Defense Commission had failed to take into consideration Soviet needs. He had been treated with great courtesy by these officials but had obtained the impression that they were thinking only of the interests of American national defense and were ignoring entirely the problems of Soviet industry. A full satisfaction of Soviet needs would require only two percent of present American machine tool shop production. It seemed to him, therefore, that without any great sacrifice of American interests, more consideration for the Soviet position should be shown.

The Ambassador added that he was particularly disappointed that Mr. Welles had not informed him that more of the machine tools contained in List C could be released. He had spoken with Colonel Maxwell on the subject recently and Colonel Maxwell had given him to understand that the Administration for Export Control had not been asked by the Department of State to reconsider the decision which it had made with respect to the machines on List C.

Mr. Welles told Mr. Oumansky that it had been the feeling of the American officials with whom he talked that the machine tools on the docks belonged to a special category and that, therefore, they had made every possible effort to obtain the release of such of them as could possibly be spared. As a result of their efforts, the American Government had retained only 10 items out of the 61. The 51 which had been released were also needed by the American Government and their release represented considerable sacrifice. With regard to machine tools belonging to other categories which had not already arrived at the dock ready for shipment, he must frankly state that it would be possible to release them only when the national defense program of the United States permitted. Soviet needs would be given consideration, however, when decisions were made with respect to the delivery of such machine tools. There must be some misunderstanding regarding List C since Mr. Welles knew personally that the Colonel had been making a study of the list in the hope that it might be found possible to release to the Soviet Union certain tools set forth in it. Mr. Welles thereupon handed to the Soviet Ambassador a second list containing six additional items which it had been found possible to release. Mr. Oumansky asked whether these items had been set forth in List C. Mr. Welles replied that in his opinion some of them had been contained in that list. In any event, the decision to release them, Mr. Welles said, showed that Colonel Maxwell was continuing his efforts to release as many machine tools as could be spared for Soviet use.

Mr. Oumansky said that he would appreciate it if:

(1) Mr. Welles would find it possible to advise Colonel Maxwell to do what he could to expedite decisions with regard to the issuance of export licenses, since the first of the year was approaching and the Soviet Government should know without further delay what it might expect to be able to purchase in the United States. The Soviet economy was planned and therefore the Soviet Government must have some idea in advance regarding markets in which it could buy;

(2) Steps could be taken to clarify as far as possible the possibilities of the manufacturing of goods for which licenses had been issued or would be issued. Mr. Britton had stated that it was possible that in some instances licenses might expire several times before it would be possible for American industry to produce the machine tools covered by such licenses. As he had already pointed out, Soviet orders would require only two percent of the production capacity of American machine tool plants. His Government believed, therefore, that it would be possible without injury to the American defense program to give a reasonable degree of priority to Soviet orders. The Soviet Government must realize that in the priority order, place No. 1 must be given to tools needed for American consumption. What place would Soviet orders have? Some kind of stability seemed to be necessary in order to make it possible for the Soviet purchasers to continue their activities in the United States.

Mr. Welles said that he was sure that Colonel Maxwell was doing all that he could to expedite decisions with regard to the issuance of licenses covering orders already placed. He added that he felt that the Soviet Government was fully entitled to such clarity as could be obtained with respect to the possibility of obtaining merchandise already ordered and for which licenses had already been issued. He would take steps to inquire into this matter.

Mr. Oumansky stated that there was still a third point to be discussed:

(3) It was important that the Soviet Government should know what the attitude of the American Government might be with regard to orders which had as yet been unplaced and which the Soviet Government desired to place as soon as it had received authorization so to do. About ten days ago applications for permission to place orders aggregating approximately $1,200,000 had already been submitted to Mr. Buckley of the President’s Liaison Committee. It was hoped that these and future applications would be given favorable consideration so that the Soviet Government could continue to obtain a fair share of its needs for machine tools in the United States.

Mr. Oumansky said that to sum up, he would like to discuss the manner in which the compromise suggestions which he had advanced on October 7 had been carried out. In his memorandum of that date,²⁶ he had suggested, (1) that the American Government release all machine tools on the docks; (2) that in considering applications for export permits the American Government would take Soviet needs into consideration; (3) that a system of compensation be adopted which would be similar to that used by the American Government during the last World War. Unfortunately, none of these three suggestions had thus far been followed by the American Government. With regard to suggestion No. 1, apparently about 40 percent of the machine tools on the docks in terms of value had been retained in the United States. With respect to No. 2, results make it evident that Soviet needs have not been taken into consideration. With regard to the means of compensation, the Soviet Government has as yet had no answer. So far as compensation is concerned, the question of principle is really more important than that of the amounts involved.

Mr. Welles replied that the Soviet Government must recognize the fact that the American Government had gone very far in endeavoring to meet the Soviet desires. The American Government had made a real sacrifice in releasing so many of the machine tools lying on the docks. Furthermore, the American authorities were examining still further the possibility of releasing certain tools contained in List C. The question of compensation was also receiving the attention of the American Government. The procedure for the items which had been requisitioned would probably be the procedure which would be followed in case of additional requisitioning. As soon as the two Governments had reached an agreement with regard to the machine tools contained in List A—that was, just as soon as the Soviet Government agreed that the matter of List A was closed—the American Government was willing to begin negotiations with respect to the matter of compensation.

The Question of the Moral Embargo

The Soviet Ambassador pointed out that negotiations had been going on for a period of five months. He said that he was personally willing to continue them indefinitely. The question involved was not, however, that of his personal pleasure but that of promoting the interests of his Government and increasing economic intercourse between the Soviet Union and the United States. In spite of numerous conversations which had taken place, the moral embargo was still in force. The Ambassador was aware of Mr. Welles’ suggestion that the question of the lifting of the embargo be discussed when the machine tool problem was definitely settled. So far as he could see, however, the machine tool problem would probably continue for some time to come. It seemed that the question of machine tools would be active for almost an indefinite period.

Mr. Welles replied that it was his hope that at the very next conference the general questions and policies with respect to machine tools would be definitely settled so that the machine tool problem would be considered to be out of the way. Of course, there would be certain details to be worked out, but the main outline could be agreed upon. The Ambassador replied that the possibility of an agreement would be greatly facilitated when a clarification of the three points which he had already raised could be made.

Financial Transactions Between the Soviet and Rumanian Governments

The Ambassador said that according to a financial agreement which had been reached in July 1940 between the Rumanian and Soviet Governments, the Rumanian Government was to pay to the Soviet Government the sum of approximately 110,000,000 leigin final payment of salaries due railway employees in the Province of Bessarabia. The Rumanian Government on December 11 had therefore applied to the Treasury Department for a license to pay that amount, which represented $501,907.25, to the Soviet Government from the account of the National Bank of Rumania in the Chase National Bank of the City of New York.²⁷

The Ambassador said that the Rumanian Legation in Washington had already requested that a license for the release of this shipment be issued.

Mr. Welles suggested that the Soviet Embassy prepare a memorandum or a note on the subject and said that upon the receipt of such memorandum or note the matter would have the attention of the appropriate Government authorities.

Difficulties Encountered by Soviet Engineers in the Wright Aeronautical Plant

The Ambassador asked Mr. Welles if he had as yet succeeded in obtaining information regarding the difficulties encountered by the Soviet engineers in the Wright Aeronautical Plant at Paterson, New Jersey. He reminded Mr. Welles that in a previous conversation he had pointed out that the system governing the movements of these engineers, which had been worked out by the Navy, was not satisfactory since it failed to take into consideration the fact that the engineers were in the plant in accordance with a technical assistance contract. Mr. Welles said that he had taken the matter up but had as yet received no answer. He asked Mr. Henderson to make inquiries, with regard to the subject, of Mr. Orme Wilson of U–L.²⁸

“Secondary Matters” Relating to the Work of the American Embassy in Moscow

The Ambassador said that in the previous conversation with Mr. Welles, Mr. Welles had brought to his attention certain “secondary matters” and “everyday questions” relating to the work of the American Embassy at Moscow. He had referred the matter to his Government and he had been able to obtain the following information on the subject:

The Soviet Government had been leaning over backwards in its endeavors to make sure that persons in the Western Ukraine and Western White Russia who stated that they were American citizens and who might possibly be American citizens be given the opportunity to go to the American Embassy at Moscow to verify their American citizenship and obtain passports. It had therefore permitted numbers of such persons who did not possess valid documents showing themselves to be American citizens, to appear at the American Embassy. It would appear that 60 American citizens have been permitted to leave. Mr. Steinhardt had said that there were 140 American citizens still in that portion of the Soviet Union, and the American Embassy in a later note had said that there were 350 American citizens. The Soviet authorities, after careful examination of these cases, had ascertained that the bulk of them were really former Polish citizens and, therefore, had become Soviet citizens. For instance, the American Embassy at Moscow had written to the Soviet Government about a certain Rozkowsky.²⁹ The Embassy had maintained that Rozkowsky was an American citizen in jail. The Soviet Government, after investigating the matter, had learned that the person in question was not an American citizen, and he had never been in the United States. It seemed, however, that on January 8, 1939 he had applied for his first papers. The case of Rozkowsky is a typical case. The Under Secretary said that there must be a mistake since no one could take out first papers without being in the United States. Mr. Henderson stated that he felt sure that certain circumstances not mentioned by the Ambassador must be involved since the American Embassy would not claim that Mr. Rozkowsky was an American citizen unless it was in possession of some information which caused it to believe that he had a claim to American citizenship. Mr. Oumansky said that if there were any special circumstances, he knew nothing with respect to them.

Mr. Oumansky then took up the question of American citizens in prison in the Soviet Union. He said that of the six persons in jail in the Soviet Union whom the American Government considered to be American citizens, only two had turned out to be American citizens. Of this number, one had already departed for the United States and the other, who had been visited in prison by the Ambassador and a member of his staff, could leave the Soviet Union whenever funds for that purpose were received from the United States.

With respect to the Soviet wives of American citizens who could not leave the Soviet Union, the Ambassador said that only six cases, so far as he knew, were pending. Since the definite departure of these persons meant loss of Soviet citizenship, their applications to leave the country must necessarily be considered by the highest Soviet authorities. The procedure was rather elaborate and much time must necessarily be consumed before final decisions could be made.

With respect to the issuance of visas permitting American citizens coming out of the Western Ukraine and Western White Russia to remain in Moscow long enough to obtain American passports, he said he had been advised that orders had now been issued which would permit them to remain in Moscow for five days.

The Ambassador then said that one of the complaints of the Embassy apparently was the lack of sufficient living and office space. He had been instructed by his Government to state that two apartments would be furnished the Embassy in December and five more in January. He said that anyone who had lived in Moscow must realize, in view of the shortage of housing in that city, that the furnishing of these apartments represented a real sacrifice on the part of the Soviet Government.

He then referred to a complaint of the American Embassy that the Soviet Government would not permit a gasoline container to be sunk in the court of the Embassy. He said that the permit could not be issued since it was contrary to the Soviet fire regulations to permit a large supply of gasoline to be stored so close to a residence. The Soviet Government was, furthermore, surprised that the Embassy should make such a request since no limitation had been placed upon the amount of gasoline which the Embassy might use. He said that the Soviet Government had no intention to limit the Embassy’s supply of gasoline and that new regulations which had been issued curtailing the use of gasoline in the Soviet Union would not be applied to the American Embassy.

The Ambassador said that he felt that the Customs difficulties which the Embassy had encountered with respect to the shipment of food supplies were for the most part due to misunderstandings. The Embassy had stated recently that a large shipment which had arrived in Vladivostok was composed entirely of canned foods. Later, however, it had been learned that bottled beverages were also in the shipment. Since there was a great difference between the cost of the freight of canned goods and that of bottled beverages, much delay had been encountered in separating the contents of the shipment and cataloguing them for the purpose of calculating freight rates.

With regard to the request that four former employees of the American Legation at Kaunas be permitted to leave Lithuania, the Soviet Government regretted that it could not permit them to leave the country. These persons, he said, were former Lithuanian citizens and were now Soviet citizens and therefore subject to Soviet laws and regulations.

The Ambassador said that Lozovsky had instructed him to state that the Soviet Government could not accept from the American Government such minor complaints as those about which he had just discussed as set-offs to Soviet representations of real importance. The Soviet Government felt that the matters which the Soviet Ambassador had been instructed to discuss with the Under Secretary pertained to the basic economic relations between the two countries, and should not be confused with minor irritations. The Ambassador said that on the Soviet side there were numerous matters relating to difficulties encountered by Soviet officials in this country which he could take up during these conversations. He did not feel, however, that it would be appropriate to deal with them in this manner. His secretaries were taking them up from time to time with Mr. Page and Mr. Henderson. The Ambassador said that, for instance, questions arising from laws relating to fingerprinting and to registration for the draft had already given rise to an unpleasant incident and probably would occasion more difficulties in the future. For some reason the American Government was refusing to issue any documents to Soviet officials in the United States which would show that they had been registered with the Department as Government officials and, therefore, were not required to have their fingerprints taken or to register for the draft. A week or so ago a Soviet official while in the hospital was disturbed by the American authorities who insisted that while he lay ill he should register as an alien and have his fingerprints taken. They refused to listen to his explanation that he had been registered in the State Department as a Soviet official and therefore was not required to register as an alien. The Ambassador said that it seemed to him that it should be to the interest of the American Government as well as the Soviet Government to take steps to prevent incidents of this kind from occurring.

The Under Secretary said that he thought it was a reasonable request that foreign officials in the United States be furnished with some kind of document in order to show that they were Government officials and were therefore not required to register for the draft or as aliens.

Mr. Henderson informed the Under Secretary that he understood that the matter had been discussed in the Department of State and with the Department of Justice and it had been decided that since no documents were issued to aliens who had registered, it had been decided that there was no necessity for issuing documents to those aliens who were not required to register. Mr. Henderson said that although the American Government was not issuing such documents, he could see no reason why the Soviet Embassy could not furnish Soviet officials in the United States with documents showing that they had been registered with the State Department as Government officials and therefore should not be required to register either for the draft or as aliens.

Mr. Oumansky said that he had suggested such a procedure some time ago and had obtained the impression that it would not have the approval of the American Government.

Mr. Welles said that he felt strongly that some steps should be taken in order to prevent incidents such as that which had taken place in the hospital from occurring and requested Mr. Henderson to give him more information regarding the matter so that he could give it his personal attention.

Mr. Welles stated that he did not wish the remarks of the Ambassador to the effect that the American Government was endeavoring to introduce minor irritations in the discussions to pass unanswered. He wished it to be understood that it was not his intention to oppose complaints by the Soviet Government with statements regarding the various difficulties encountered by the American Embassy at Moscow. He had referred to these difficulties only because it had been his understanding that the purpose of these conversations was not only to solve certain problems in Soviet-American relations but also to eliminate as far as possible various sources of irritation between them. He was glad to learn from Mr. Oumansky’s explanations that steps had been taken by the Soviet Government for the purpose of removing some of the obstacles to the functioning of the American Embassy at Moscow.

Statement of the Foreign Policy of the Soviet Union

The Soviet Ambassador stated that in his previous conversation with Mr. Welles several questions had been raised with regard to the foreign policy of the Soviet Union. The Ambassador said that he was prepared to formulate his answers to those questions and expressed his certainty that these answers represented the point of view of his Government. The Ambassador’s statement was as follows:

“The Soviet Government stands on its position of a policy of peace and remains out of war. At the same time the Soviet Government endeavors to maintain normal political and economic relations with all Powers, including the belligerents. The character of the Soviet Union’s relations with China remains invariably good neighborly and is guided by the spirit of the Chinese-Soviet non-aggression pact of 1937.³⁰ The Near Eastern policy of the Soviet Union is determined by the principle of further improvement of economic and political relations with all Near-Eastern States.”

Mr. Welles replied that it was his understanding that during the previous conversation Mr. Oumansky had agreed with him that the policy of the United States towards China was similar to that of the Soviet Union. It is the present intention of the United States, Mr. Welles continued, to increase assistance to China in such manner as might be further possible. He added that he assumed that the Soviet Government had similar intentions. The Soviet Ambassador replied that in his opinion there could be no doubt that the intention of the Soviet Government to continue aid to China could be read into the statement which he had just made,³¹ in view of the wording of the non-aggression pact of 1937 between China and the Soviet Union.

Mr. Welles stated that the statement which had just been made was of the utmost importance and was most gratifying to the Government of the United States.

Mr. Welles said that he had no further official business to discuss but he would like to mention a matter informally which was very much on his mind. That pertained to the desire of the many friends in the United States that Rabbi Schorr, one of the outstanding Jewish scholars, who at the present time is in or near Lwow, be given an exit visa so that he may come to the United States. Mr. Welles said that he thought that probably Mr. Oumansky was familiar with the case and that therefore it would not be necessary to go into it in detail. He pointed out that not only a great section of the Jewish community in the United States was interested in the matter but also some of the most important officials of the American Government.

The Ambassador said that he would look into the matter and take it up with his Government.

Supplementary Statement of the Soviet Ambassador

The Soviet Ambassador subsequently informed Mr. Henderson that during the conversation with Mr. Welles on December 16 he had failed to stress properly the desire of his Government that in case export licenses should be revoked or refused covering machine tools produced in the United States under order of the Soviet Union, steps be immediately taken which would make possible the replacement of such tools. The Ambassador said that one of the conditions under which the Soviet Government had expressed a willingness to permit the American Government to retain some of the machine tools manufactured for the Soviet Union was that licenses be issued at once permitting the manufacture of identical tools for export to the Soviet Union.

The Soviet Ambassador also stated that careful checking of the lists which had been given to him thus far showed that with respect to value, only 57 percent of the machine tools which had been delivered at the docks to Soviet foreign trade agencies had been released. The Ambassador said that he hoped that during the conversation with Mr. Welles he had made it clear that his Government continued to adhere to the conditions set forth in his memorandum of October 7, 1940. In presenting that memorandum, his Government had made certain sweeping concessions in order to contribute to the breaking of the deadlock in negotiations. These concessions had been made on certain conditions. Although the American Government had taken notice of the concessions it apparently had not given due attention to the fact that they were conditional. The situation at present, therefore, was that the Soviet Government had made contributions to the breaking of the deadlock and the American Government had not met it half way. The Soviet Government had asked that 100 percent of the machines already at the docks be released for use in the Soviet Union. Only 57 percent of them had been released. The Soviet Government had asked that Soviet needs be taken into consideration when decisions were being made with respect to the release of machine tools for which orders had already been placed. So far, with respect to values, less than one-eighth of a percent of the machine tools ordered, not yet manufactured,—that is, those contained in List C—were being released.

26. Not printed.
27. Rumanian assets in the United States had been frozen by Executive Order No. 8565 of October 10, 1940. For text, see 5 Federal Register 4062. For the regulations issued by the Treasury Department on October 10, 1940, see 5 Federal Register 4063.
28. Liaison Officer, Liaison Office of the Under Secretary of State.
29. Mieczyslav Ignatyevich Roszkowski, born at Fall River, Massachusetts, on October 29, 1920, had been seized in Soviet-occupied Poland on June 29, 1940, for alleged illegal possession of firearms and had eventually been sentenced to 3 years imprisonment. This term had been reduced to 1 year. After intercession by the American Embassy in Moscow, Roszkowski was finally deported to the United States in 1941. Correspondence on this case will be found in Foreign Relations, 1941, vol. i, pp. 926–954, passim.
30. Signed at Nanking August 21, 1937; for text, see League of Nations Treaty Series, vol. clxxxi, p. 101.
31. See memorandum of December 17 by the Assistant Chief of the Division of European Affairs, p. 238.