File No. 861.51/133

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


1161. Your 1295. For Secretary of Treasury:

Had two conferences with Minister of Finance who says loan would be highly appreciated by Council of Ministers and all Russia. Russia would expend entire proceeds in the United States by direct purchases and not through British intervention as heretofore. Estimates requirements at $500,000,000 provided tonnage therefor can be secured. Is understood, he states, loan of $500,000,000 each being made by us to England and France or $1,000,000,000 jointly, and says would be injurious to new government and humiliating to Russia if she were not granted the same terms. After deliberation and conferences with colleagues he suggests that Russia issue 5 per cent bond in dollars to the extent of $500,000,000 and that our Government advance 95 to 97 per cent thereon as required to pay for purchases, such advances, bearing 97 [5?] per cent, to be repaid by Russia one year after peace treaty is signed if not sooner liquidated by sale of bonds.

Russia will announce new 5 per cent loan, called liberty loan, in a few days amount of which is unlimited and underwritten to the extent of $3,000,000,000 by Russian bankers who will offer to public at 85 charging no commissions. Such bonds mature in 49 years but reductions of loan will begin by drawings in 1922 and it is expected entire loan will be liquidated in 21 years. Russia’s total debt is Rs. 28,788,000,000. Annual interest Rs. 1,474,000,000. Circulation Rs. 10,777,000,000 outstanding against which has gold reserve of Rs. 3,602,000,000 of which Rs. 2,141,000,000 is on special deposit in England, the remainder in Petrograd. Some outstanding bond issues of 1905, 1906, and 1909 specify gold value of rubles in which principal and interest are payable and such bonds are selling much higher than other loans not containing such specifications, Witte in 1897 reduced the gold in the ruble which depreciated its value in our money from almost 75 cents to 51½ cents consequently there is some fear that similar action may be taken by this Government or its successor. The Minister of Finance however says there is no possibility thereof. This arrangement would not be affected by any decline in value of ruble from any cause whatever as the bonds and interest thereon would be payable in American dollars in America.

Russia owns boundless forests, immeasurable deposits of ores and oils, and immense areas of tillable lands. This loan in my judgment [Page 3] would be absolutely safe. Furthermore it is advisable from every viewpoint of policy.