File No. 861.51/283
The Assistant Secretary of the Treasury ( Leffingwell ) to the Counselor for the Department of State ( Polk )
Dear Mr. Polk : I beg to submit for your consideration the following information in regard to the disposal of Russian materials and funds:
[Page 37]Mr. Ughet 1 informs me that, substantially, all Russian purchases made here prior to our entry into the war with funds advanced by the British Government were made through J. P. Morgan & Co., and that practically all of the other direct purchases were made with funds obtained through loans placed with American banks. Russia placed in this country $11,000,000 in 5 per cent one-year notes, which have been renewed twice and which mature May 1; also, $25,000,000 of Russian 5½ per cent bonds were sold to a syndicate of bankers; and $50,000,000 was obtained through a syndicate of banks, headed by the National City Bank, and 6½ per cent certificates were issued against the unused ruble balance. In addition, some interior Russian bonds were sold here.
Mr. Ughet further states that the rails and approximately 9,000 tons of barbed wire, which are stored by Russia in this country, were purchased some time prior to our entry into the war and paid for in most part from the proceeds of loans obtained through American banks. One contract for 35,000 tons of barbed wire, which is now being delivered, was placed through Morgan’s on behalf of the British Government, and the British Government has already disposed of approximately 10,000 tons of this barbed wire to our War Department, and is applying the proceeds in reduction of Russian obligations held by Great Britain.
Mr. Ughet also informs me that the British Government, with the consent of the Anglo-Russian subcommittee, is disposing of all of the materials which were purchased through Morgan’s with British funds and applying the proceeds in reduction of Russian obligations held by Great Britain. It would seem, therefore, that the British Government is looking after its interests very well in this respect, and that they could have no claim whatever in respect to the rails and Mr. Ughet understands that the British lay no claim whatever to any interest in the rails.
The above-mentioned 9,000 tons of barbed wire are being sold to the Italian Government and Mr. Ughet is of the opinion that the proceeds from this sale should be applied in providing interest for an additional year on the $11,000,000 note issue maturing May 1, and that any other surplus funds obtained from the sale of materials purchased and paid for from the proceeds of the above-mentioned American loans should be used, as far as practicable, to [for] paying the interest on the other above-mentioned credits. Mr. Ughet’s personal opinion is that there are sufficient funds on hand to meet the actual current obligations for contracts, with the exception of the Remington rifle contract.
[Page 38]It now appears that the Russian Ambassador has ample funds in the National City Bank to meet the balance due on all contracts here (with the exception of the Remington rifles to be delivered in July and October) for purchases, freight, expenses, and interest to May 1 on all Russian loans placed through American banks.
It should be determined, therefore, what application should be made of the surplus funds derived from the sale of the rails and other materials purchased with funds advanced to Russia by American banks and by the United States Government, and whether or not entire preference should be given to the Remington rifle contract, or to the payment of interest on the Russian credits and obligations placed through American banks and the obligations held by this Government.
Referring to our conversation on the above subject, my understanding is that you are of the opinion that such surplus funds, if any, should be applied by the Russian Ambassador to payment of interest on Russian credits and obligations up to and including July 1, and to any other current obligations as they become due, rather than setting aside a specific amount for payment in July and October on the Remington rifle contracts.
Very sincerely yours,
- Serge Ughet, Russian Financial Attaché at Washington.↩