File No. 861.51/317

The Assistant Secretary of the Treasury (Leffingwell) to the Counselor for the Department of State (Polk)

My Dear Mr. Polk: For your information, I am sending herewith copy of a letter just received by Mr. Davis from Mr. Ughet, Russian financial attaché, together with copy of the letter attached thereto from the Russian Ambassador to the National City Bank, dated April 30, in reference to the extension of the $11,000,000 Russian notes which matured on May 1, 1918.

Very sincerely yours,

R. C. Leffingwell
[Enclosure]

The Russian Financial Attaché (Ughet) to the Assistant Secretary of the Treasury (Davis)

My Dear Mr. Davis: Herewith enclosed I am sending to you a copy of a letter addressed by the Ambassador to the National City Bank of New York in reference to the extension of the eleven million ($11,000,000) dollar notes.

I am [etc.]

S. Ughet
[Subenclosure]

The Russian Ambassador (Bakhmeteff) to the National City Bank of New York

Dear Sirs: Referring to the dollar notes of the Russian Government, aggregating $11,000,000, held in this country, maturing on May 1, 1918, I propose that these notes shall not be presented for payment until May 1, 1919, except for the sanction of the Department of State of the United States or at the request of the Russian Government. In consideration of the compliance with this proposal by the holders of all the said notes, I hereby agree that the Russian Government will pay interest on the said notes at the rate of 6 per cent per annum, semiannually, on November 1, 1918, and on May 1, 1919, without, however, any commission. The amount of the said interest, $660,000, shall be forthwith paid to you by Mr. Ughet, financial attaché, and, upon acceptance of my proposal by the holders of all said notes shall be held by you in a special account and paid out by you at the times above stated, to the holders of the said notes, without further authorization from me. Should, however, the said dollar notes be paid in full before May 1, 1919, the interest thereon shall be paid at the said rate up to the time of such payment on the principal; and the balance of said sum of $660,000 shall be forthwith paid by you to me. On the balance of the said sum of $660,000 at any time remaining with you, interest is to be allowed at the rate of 2 per cent per annum.

In further consideration of the compliance with my proposal by the holders of all the said notes, I hereby pledge to you, as collateral security for the said notes, the Interior War Loan ruble notes of the Imperial Russian Government, issue of 1916, aggregating an amount of 147,050,000 rubles, which are now on deposit with you, subject to my order or to the order of my financial attaché. The said notes shall be held by you as pledgee, in trust for the [Page 48] equal benefit, pro rata, of the holders, from time to time, of the said $11,000,000 of dollar notes. In case the said dollar notes shall not be paid in full, with interest on May 1, 1919, you shall have the right to dispose of the said collateral in any legal manner agreeable to the Department of State of the. United States. In such case, the overplus, if any, of the proceeds above the amount of the said dollar notes and interest, shall be returned to me; and the. Russian Government shall remain liable pro rata to the holders of the said notes, for any deficiency arising from such disposition.

Should the said dollar notes be paid on or before May 1, 1919, the ruble notes, so pledged as security, shall be returned.

This proposal is dependent upon its acceptance by the holders of all the said dollar notes and upon the presentation of all of such notes at your office for the purpose of stamping thereon in the presence of my financial attaché or his representative the following:

This note is not [to] be presented for payment until May 1, 1919, except by consent of the State Department of the United States or at the request of the Russian Government.

Yours very truly,

B. Bakhmeteff