File No. 861.51/299
The Russian Ambassador (Bakhmeteff) to the Counselor for the Department of State (Polk)1
[Received April 11.]
My Dear Mr. Polk: At the time when during November last, funds belonging to the Russian Government were distributed for payments on different liabilities, it was considered proper to appropriate means for payment of interest on different credit operations of the Russian Government with private banking institutions approximately until June 1, 1918.
It appears at present necessary to foresee later payments. An attached statement2 specifies in detail payments of interest and other [Page 40] current liabilities in between June 1, 1918 and January 1, 1919, the payments during such period totaling $3,276,718.76. Including payments due early in January 1919, the total is brought to $5,276,718.76.
As funds, at present at my disposal, are not in any way adequate to meet payments of such magnitude it is necessary to provide for other sources. In regard to this I wish to bring to your attention the account of the “Section étrangère ministère des finances” with the Guaranty Trust Co. of New York. This account, amounting at present to nearly five million dollars, was established in July 1916 and has been upheld since by deposits from proceeds of different credit operations of the Russian Government in this country. The account has been in direct charge of the “Foreign Department of the Russian Ministry of Finance,” disbursements being effected on orders coming directly from Petrograd.
I have been given to understand that the Guaranty Trust Co. would be willing to release the funds on this account provided the company were to receive certain assurances from the Department of State, protecting such action of the company from interference by a future lawful government of Russia.
With regard to the above, I venture to recall that the “Section ètrangère ministere des finances” is the foreign operative department of the Chancery of Credit, which is in direct charge of questions pertaining to credit operations in foreign countries. It has been the special duty of this department to attend to payments of interest on foreign loans and to execute such payments. Under normal conditions there could be no doubt as to the absolute necessity of meeting payments of interest on time and in particular to the use, for such purpose, of funds on the accounts of the “Foreign Department.”
Referring to the present case it is hardly possible to perceive how any future government, recognized as lawful, could controvert the obvious legality of paying interest on direct and undisputable liabilities of its lawful predecessor to private citizens or corporations of a friendly country. The very fact of the recognition of the government as lawful seems necessarily to imply the consideration by such government of the validity of similar obligations.
It seems, therefore, inconceivable that the use of funds deposited to the accounts of the Foreign Department of the Ministry of Finance of Russia for the former Russian Government for payment of interest on loans raised by the same government could raise objections from any future recognized government of Russia. For this reason it is highly improbable that complications of any character [Page 41] could arise from the fact of the United States Government giving the necessary assurance to the Guaranty Trust Co.
On the other hand, in case the Guaranty Trust Co.’s funds were released, I would undertake to have the whole amount assigned to the special purpose of meeting current payments on financial liabilities resulting from credit operations of the Russian Government in this country, removing through such assignment any possible doubts which may arise as to the justification of disposing the funds for general purposes.
Hoping that, after giving these questions consideration, you will find it possible to have the funds released and thus have assured the proper payment of interest to the holders of Russian securities in this country, I remain [etc.]