File No. 861.00/2641

The British Chargé (Barclay) to the Secretary of State

No. 980


His Majesty’s Chargé d’Affaires presents his compliments to the Secretary of State and has the honour to inform him by direction of His Majesty’s Government that the difficulty of financing necessary expenditure in north Russia indicates the necessity for introducing a new note for local circulation. Owing to the fluctuating value of the existing rouble notes and to the difficulty of securing a regular supply it is impossible to continue to rely on them. The proposal of His Majesty’s Government is to found a local office note issue under Russian auspices attached to such Russian governmental authority as the Allies may recognize which will issue a new rouble note secured to a limited extent by obligations of such governmental authority but in the main by sterling reserve held at the Bank of England. This reserve would be built up by the purchase from the Russian office note issue for sterling at a fixed rate of exchange all notes required by the Allies in north Russia. The reserve would be inalienable property of office note issue and would be available to redeem notes at the same rate of exchange as that at which the notes were issued. The Allies would thus be paying their bill as they go and no one would be able to reproach them for living on the country. The Allies could gain no possible pecuniary profit and such methods would show a very desirable contrast to the methods practised in Ukraine by Germany.

His Majesty’s Government presume that this course will be approved by the State Department and they are hurrying on with the details as the financial requirements are urgent, particularly at Murmansk. His Majesty’s Government will keep the United States representative at Archangel informed.