File No. 861.51/381

The Ambassador in Russia ( Francis ) to the Secretary of State

[Telegram]

521. Containing [continuing] my 513, October 24, 3 p.m. British financial expert Harvey had a conference last evening with President, Minister of Finance, and Lindley.1 Harvey claims financial scheme not British Government’s but proposed by private interests for adoption by provisional government. Scheme provides fixed rate of exchange of forty rubles to the pound and for every reserve pound deposited in the Bank of England the Government can issue forty rubles here. British Government offers to purchase Rs. 100,000,000 for paying military naval forces and other expenses here against which deposits two and a half million pounds sterling Bank of England, such rubles redeemable in London in gold at [Page 81] value one-fortieth pound. When the President asked whether redeemable in other Allied countries Harvey replied that the government could arrange for redemption in New York, Paris and elsewhere through its financial agents at the same rate. The President agreed with my suggestion that would not adopt plan without conference with Allied chiefs and after due deliberation but remarked that government in financial straits while saying that if project accepted would lose half its value if America did not cooperate, meaning thereby that northern province would have commercial relations with the United States equal to England. Plan also provided that provisional government could issue maximum of one half outstanding secured notes on its own credit only without depositing reserve.

Project not thoroughly discussed with Harvey who claims that British projectors offered to pay his expenses and compensate for his services, but he refused both remarking that his only master was the scheme itself; did not explain how expected to reap reward for his outlay and services.

I told government that inferior currency invariably drives better from circulation consequently new ruble would disappear immediately and remain hidden until old Russian ruble appreciates in value to exceeding one fortieth of pound; that America and France must agree before adoption of rule whereby supplies for civilian relief could be purchased only for such ruble. President assented.

Total rubles circulation was nineteen billion until Soviet government installed which continued issuing same notes as Provisional Government, commonly called Kerensky’s, total issue of which unknown but estimated fifty to sixty billions. Archangel under Bolshevik rule authorized issue one hundred million Archangel notes redeemable in Russian rubles not otherwise specified, consequently includes Kerensky’s which daily growing scarcer and imperial rubles seldom seen. Bolsheviki when deposed had issued twenty-six million Archangel notes taking seventy-four with them.

If British project adopted will have conversion office to convert rubles into new, the rate of conversion changing from time to time. Present rate would be about five old rubles for four new. Old rubles circulate throughout Russia, consequently new can not approximately supplant the old.

I advised President that if scheme adopted should call new rubles by some distinctive name such as Archangel or Northern Province otherwise would have effect of reducing permanent value of Russian rubles to equivalent of one fortieth of pound if issue enlarged to meet requirements of all Russia.

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Would such issue interfere with plans of War Trade Board? Problem complicated requiring much consideration. I have inquired whether British Government submitted scheme to our Government as Lindley told me it had but I have received no reply. I believe project originally governmental but changed because Allies withheld concurrence. Understand War Trade Board representative stationed Stockholm. Can not he come here? Is able and experienced. Whether scheme is British Government’s or not, it would undoubtedly give England commercial advantage.

Francis
  1. Francis O. Lindley, British Commissioner in Russia.