661.6231/224: Telegram
The Ambassador in the Soviet Union (Steinhardt) to the Secretary of State
[Received August 21—11:10 a.m.]
453. My telegram No. 452, August 20.4 A Tass announcement in today’s press reports the conclusion after long negotiations on August 19 of a commercial credit agreement between the Soviet Union and Germany,5 signed by the Soviet trade representative, Babarin, and Schnurre. The report continues: “The commercial credit agreement envisages the granting by Germany to the Soviet Union of a credit in the amount of 200 million German marks at 5% interest maturing [Page 336] in 7 years for the purchase of German goods within 2 years from the date of the signature of the agreement. The agreement envisages also the delivery of goods on the part of the Soviet Union to Germany during the same period, namely, within 2 years in the amount of 180 million German marks.” According to the German Embassy here the agreement was signed at 2 a.m., on August 20 but is apparently considered as of August 19.
Pravda and Izvestiya this morning devote their leading editorials to the new agreement. Both editorials emphasize that, although the negotiations were difficult because of the strained political relations between the two countries, nevertheless in view of the desire on both sides to improve the commercial relations an agreement was successfully reached. The Izvestiya editorial, after reviewing the decline in Soviet-German trade which resulted from the tension in political relations, states that “it is possible to state boldly that the new agreement is a turning point in the business relations between the two countries.” In respect of the agreement itself both editorials state that the 200 million mark credit is in reality a financial credit since it is guaranteed 100% by the German Government and will enable the Soviet trade representative in Germany to pay in cash for the goods purchased. In addition the editorial states that the German Government has agreed to prompt fulfillment of Soviet orders and will for this purpose assist the Soviet trade delegation in its dealings with individual German firms. Mention also made of the low rate of interest in comparison with previous credits and also the length of time for repayment which will be seven years on an average with 30% repayable within six and one-half years, 40% in seven, and the remaining 30% within seven and one-half years. Both editorials forecast that the credit agreement will result in a wide expansion of trade between the two countries and Pravda concludes with the following words: “The new commercial credit agreement between the Soviet Union and Germany which was born in an atmosphere of strained political relations is summoned to relieve this atmosphere. It may represent a serious step in the matter of the further improvement of not only the economic but also the political relations between the Soviet Union and Germany”.
Although full details of the agreement are not yet available, it would appear from the information contained in the Soviet press that it follows in general along the lines indicated in the Embassy’s telegram No. 79, February 19 [20], 1939, and presumably provides for Soviet purchases in Germany of goods in the amount of 380 million marks within the next 2 years and Soviet Russian exports to Germany amounting to 180 million marks during the same period, the discrepancy to be met by the operation of the credit.