861.24/2–1146

The Special Assistant to the Secretary of State and Foreign Liquidation Commissioner (McCabe) to the Chargé of the Soviet Union (Orekhov)

confidential

Dear Mr. Orekhov: Inasmuch as representatives of your Government have expressed an interest in the purchase of United States surplus property located overseas, I am glad to inform you that such property may be acquired by your Government from the Government of the United States, to the extent to which it may be made available for sale to your Government prior to January 1, 1948, but in any case in an aggregate amount not in excess of $100,000,000, subject to the following terms of payment:

(1)
A sum stated in United States dollars, equal to the total purchase price of individual sales of overseas surplus (as made by Field Commissioners of the Office of the Foreign Liquidation Commissioner to the Government of the Union of Soviet Socialist Republics), shall be paid by the Government of the Union of Soviet Socialist Republics, on or before July 1, 1976, in twenty-two annual installments, the first of which shall become due and payable on July 1, 1955. The amounts of the annual installments shall be as follows: each of the first four installments shall be in an amount equal to 2.5 percent of the amount determined as set forth above; each of the second four installments shall be 3.5 percent of said determined amount; each of the third four installments shall be 4.5 percent of said determined amount; each of the fourth four installments shall be 5.5 percent of said determined amount; and each of the last six installments shall be 6 percent of said determined amount. Nothing in this paragraph shall interfere with the right of the Government of the United States to declare the entire sum, or any part thereof, immediately due and payable in currency of the Union of Soviet Socialist Republics, as provided in paragraph (6).
(2)
Nothing herein shall be construed to prevent the Government of the Union of Soviet Socialist Republics from anticipating the payment of any installments, or any part thereof, set forth above.
(3)
If by agreement of both Governments it is determined that, because of extraordinary and adverse economic conditions arising during the course of payment, the payment of a due installment would not be in the joint interest of the United States and the Union of Soviet [Page 826] Socialist Republics, payment may be postponed for an agreed upon period.
(4)
Interest shall accrue from the respective dates specified in the individual sales contracts for the taking of delivery by the Government of the Union of Soviet Socialist Republics, and shall be paid on the outstanding balance of the total purchase price from time to time unpaid. The rate of interest shall be two-and-three-eighths percent (2⅜%) per annum, payable on July 1 of each year, the first payment to be made on July 1, 1947.
(5)
Except as otherwise provided herein, all payments shall be made in United States dollars to the Treasurer of the United States, through the Federal Reserve Bank of New York.
(6)
In the event the Government of the United States wishes to receive local currency of the Government of the Union of Soviet Socialist Republics for the payment of any or all expenditures, in the Union of Soviet Socialist Republics, of the Government of the United States and its agencies, including, but not limited to, expenditures for leaseholds, construction, materials, and labor for buildings and residences to meet the needs of the United States Embassy in Moscow and of United States Consulates, the Union of Soviet Socialist Republics agreeing to supply the same in accordance with detailed arrangements to be negotiated without delay, the Government of the United States may request at any time or times, and the Government of the Union of Soviet Socialist Republics agrees to furnish at such time or times, currency of the Union of Soviet Socialist Republics at the exchange rate most favorable to the Government of the United States current at the time when such currency is furnished in any amount not in excess of the total unpaid balance of all sums (both principal and interest) payable under the terms of this letter, whether or not then due in United States dollars. In such event, the United States dollar equivalent of the amount received by the Government of the United States shall be credited either to the installment or installments of principal in the inverse order of their maturity, or to any interest then due and unpaid, in the sole discretion of the Government of the United States.

If these terms are agreeable to you it is requested that you indicate your acceptance thereof by signing and returning to me the enclosed duplicate original of this letter. When this has been done I shall inform my Field Commissioners as to the terms in order that they may be appropriately incorporated or referred to in any sales contracts executed between my Field Commissioners and representatives of your Government.

As we have explained informally to representatives of your Government, the quantities and types of surpluses to be made available, the prices thereof, and other terms of sale are a matter for agreement between the Field Commissioners of the Office of the Foreign Liquidation Commissioner and the representatives of your Government. The purpose of this letter is to facilitate such agreements by arriving at [Page 827] an overall understanding as to credit terms and as to a maximum line of credit.98a

Sincerely,

Thomas B. McCabe

Dear Mr. McCabe:

The terms of the foregoing letter are hereby accepted.

  1. For the response to this proposal containing some suggested modifications, see the letter from the Chargé of the Soviet Union Nikolay Vasilyevich Novikov dated 13 April 1946, p. 833.