800.51 W89 U.S.S.R./85½
The Assistant Secretary of State (Moore) to the Assistant Secretary of State (Sayre)
Dear Mr. Sayre: Attached are the notes exchanged by the President and Mr. Litvinov, as printed.39 There was another note, of a confidential character,40 the purport of which is sufficiently indicated in that part of a memorandum attached hereto,41 marked “A”, which refers to the amount expected to be paid by the Soviet in settlement of all indebtedness. The phraseology of this memorandum, which is perhaps to be shown Troyanovsky, may be changed, without, however, changing the substance.
As you know, Mr. Litvinov left here with everything undetermined except recognition. When he and Mr. Bullitt got together in Moscow, he insisted that our Government should make a straight cash loan to the Soviet, to be expended as it might think proper, or as an alternative a straight, uncontrolled credit, enabling it to make purchases in this country at will, with all of the possible discrimination and confusion certain to result. Should either thing be done, it will of course be within the power of the Soviet to make use of the cash or credit for the purchase of war materials, or to place manufacturers of the same product in bitter competition with each other. Considerations of that character, coupled with the fact that the Export-Import Bank was organized for the very purpose of controlling such [Page 120] credit as might be granted, led the President to say that a loan in either form, whether in cash or by pledging the credit of our Government, without the Government having any control, is unthinkable.
There was a complete breakdown of the negotiations at Moscow, and Bullitt has reported that upon his suggestion, they are being shifted to Washington. A short time ago, he advised that Litvinov was sending a courier to Washington with instructions to Troyanovsky to proceed with the negotiations, but placing him under restrictions that in the opinion of all of us who have kept up with the matter leave little probability of a conclusion being arrived at.
In order to obtain a very clear statement from Bullitt that it might be desirable to show Troyanovsky of what occurred when Litvinov was here, I requested Bullitt to give me his recollection, and a copy of his despatch of yesterday, hereto attached,42 marked “B”, is a response to that request.
The debt agreement, so far as concerns the possible amount of payment, is not in itself very important. In no event can we expect the Soviet to promise to pay more than $100,000,000, whereas the total amount of claims on file in the Department is beyond $600,000,000, including the Czarist bonds held by citizens of this country and the Kerensky obligations held by our Government, but we must insist upon some payment being made.
Litvinov now is really trying to shelve the debt question, as he has done with England and other countries. One of his reasons for this is that he fears that other countries will contend that a payment to the United States is a recognition of the Kerensky debt, and that they should have similar treatment. But as you will notice on reading the paper marked “A”, no mention is made of the Kerensky debt, it being stated generally that whatever amount is agreed on shall cover the balance due this country and its nationals, after taking into account all of our claims and all of the counter claims. I may tell you that in a conversation with Troyanovsky, at which I was present, Mr. Roosevelt clearly stated to him that in the event of an agreement Congress would be asked to allow nearly all of the amount received to be applied to the private claims instead of the Kerensky debt.
The Russians have talked a good deal about the injustice of the Johnson Act, but the truth is that that Act does not affect the situation. Under that Act, we could finance trade transactions with the Soviet, but that is prevented by the Resolution of the Export-Import Bank determining that such transactions should be held up, pending a debt agreement, and you will perhaps remember that that Resolution was stressed in the House of Representatives while the Johnson bill was being considered.
[Page 121]I think I have given you a memorandum showing how limited is the trade between this country and the Soviet, and perhaps you have seen recent figures showing what a falling off there is in the trade between the Soviet and other countries. If we are to have any real activity in Russia, there should of course be Consulates established at Leningrad, Odessa and other points, but this we have discouraged until we have some performance on the promises relative to debts made by Litvinov to the President.
Beautiful plans have been made for the construction of official buildings at Moscow, and Bullitt thinks we should not indicate any weakening of our intention to build, but unless we are to continue very friendly and growingly close relations with the Soviet, I gravely doubt the policy of expanding [expending?] more than a million dollars there in the near future. One reason that influences Bullitt’s opinion is that unless we manifest a purpose to go forward with the construction, we may lose the highly desirable site of 15 acres of which we are promised a lease.
I am writing you in very general terms, and should you think there is any further specific information you should have, I will be glad to try to supply it.
- Department of State, Establishment of Diplomatic Relations With the Union of Soviet Socialist Republics (Washington, Government Printing Office, 1933).↩
- See memorandum of November 15, 1933, p. 26.↩
- Not printed; the contents were embodied in the memorandum handed to the Ambassador of the Soviet Union on July 25, 1934, p. 122.↩
- See telegram No. 195, July 17, 5 p.m., supra.↩