Papers Relating to the Foreign Relations of the United States, 1922, Volume II
550.E1/316
The Ambassador in Italy (Child) to the Secretary of State
[Received June 1.]
Sir: I have the honor to transmit herewith an English translation of the Russian reply to the Allied and Associated Powers’ Note of May 2nd.25 …
I have [etc.]
The Delegation of Soviet Russia at the Genoa Conference to the Delegations of Italy, France, Great Britain, Japan, Poland, Rumania, Switzerland, and Sweden
C.G. 24
Before examining the clauses of the Memorandum signed by a group of Powers and enclosed with the letter of Mr. Schanzer, [Page 793] President of the Political Sub-Commission, which was communicated to the Russian Delegation on May 2nd, the latter, to its great regret, feels compelled to observe that this Memorandum does not provide the equitable solution of the Russian problem which was hoped for, and that in certain respects it is less satisfactory than the conditions accorded to Russia by the Agreement of the Villa [de] Albertis of 20th April, and even than the London Memorandum.26 At the same time, the contents of the Memorandum of May 2nd constitute a marked deviation from the lines laid down for the Genoa Conference by the Cannes decisions.27
The Inviting States, in convening [inviting] Russia to the present Conference at the same time as the other States, gave as the reason for the invitation “the necessity of remedying the paralysis of the European system”. The means for the attainment of this object were to be the “economic reconstruction of Central and Eastern Europe”. It was unanimously agreed that Russia was the State whose economic reconstruction was of the greatest importance for Europe and for the whole world.
In its first Memorandum, sent as a reply to the London Memorandum, the Russian Delegation had drawn the attention of the Conference to the fact that the problem of the reconstruction of Russia should be the basis of its work. The Russian Delegation declared its willingness to consider, in conjunction with the other Powers, this fundamental problem, the solution of which, by restoring to the industry of the world 140 million consumers and an immense quantity of raw material, would contribute towards the alleviation of the present crisis, the prevention of unemployment, and the relief of the misery due to the World War, the intervention and the blockade.
In compliance with the Cannes invitation, the Russian Delegation came to Genoa with a number of schemes and proposals regarding the credits and loans required by Russia in exchange for real guarantees, and specifying the legal guarantees already embodied in Russian legislation, for the purpose of ensuring to foreign nationals desirous of bringing to Russia their technical knowledge and their capital, security for their property, rights and profits. It was the intention of the Russian Delegation to present a list of industrial, mining, agricultural and other concessions which it was desirous of according to foreigners.
Up to the present, however, this, the most important aspect of the Russian problem and of the economic problem of the world, has not even been touched upon.
[Page 794]The efforts of the Russian Delegates to bring this question before the Committee of Experts appointed to examine the Russian question were of no avail.
The Committee of Experts laid down, as a preliminary condition of any examination of these questions, the obligation on the part of Russia to agree to the repayment of State debts and private claims. This method was bound to frustrate the most important part of the work of the Conference. Instead of beginning by examining those aspects of the Russian problem which would give rise to least controversy, both the Committee of Experts and the Memorandum of May 2nd gave precedence to a question which, owing to its political and legal complexity, was bound to give rise to most animated discussions.
As a result of this initial mistake, the problems of the future, which affect everyone, have been subordinated to the interests of the past which affect only certain groups of foreigners. The statement that the recognition of the debts of former Russian Governments and of private claims is an essential condition for the co-operation of foreign capital in improving the credit of the new Russia, is contradicted by the fact that many capitalists have begun to contribute towards the recovery of Russia without waiting for the settlement of the question of debts. Capital will not be attracted to Russia by any one solution of this question; that will depend on the guarantees which the Russian Government can provide for the future and on the international consolidation of its position which will result from its de jure recognition.
Suspicion has been cast upon the attitude of the Russian Government towards future creditors owing to its reluctance to agree blindly to proposals of too onerous a nature; this suspicion arises from interested motives.
The repudiation of the debts and obligations contracted under the old régime, which is held in abhorrence by the people, cannot in any way predetermine the attitude of Soviet Russia, the product of the revolution, towards those who may come forward with their capital and their technical knowledge to assist in her recovery. On the contrary, the fact that the Russian Delegation, in considering the question of the settlement of debts, pays most careful attention to the interests of the Russian people and to the economic possibilities of Russia, proves that it only desires to contract obligations which it is certain that Russia will be able to carry out.
It may be observed that more than one of the States present at the Genoa Conference has in the past repudiated debts and obligations which it had contracted, and that more than one has confiscated or sequestered the property of foreign nationals, as well as of its own [Page 795] nationals, without for that reason being exposed to the ostracism inflicted upon Soviet Russia.
It is difficult to explain the persistence with which certain Powers are endeavouring to exclude Russia from international economic and political intercourse, and to refuse her equality of treatment, by the mere fact that certain financial claims have not been met. If one reflects upon the cost of this attitude to the world at large, to the States which have adopted it, and to Russia herself, which, for nearly five years, has suffered from its disastrous consequences, it will seem scarcely credible that the only interests involved are those of bond-holders, or of former holders of nationalised property. The discussions of the last few days, particularly on the question of the restitution of nationalised property to its former owners, show clearly that a purely material question has been complicated by the introduction of a political issue. The controversy which is being waged at Genoa on the Russian problem has a wider and deeper significance. The political and social reaction which in most countries followed the war, is aiming at the complete triumph of capitalistic individualism through the defeat of Soviet Russia, which represents collectivist tendencies in the organisation of society. The Soviet Delegation has refused, and still refuses, to introduce political considerations of any kind into the negotiations in progress, but it cannot refrain from pointing out that this attempt to secure at Genoa the triumph of the programme of one party or of one social system is contrary to the letter and to the spirit of the First Cannes Resolution. If the work of the Conference is jeopardised, the responsibility will rest entirely with those Powers which are thwarting the general desire for agreement by placing the interests of certain social groups above the common interests of Europe.
Examination of the Preamble of the Memorandum of May 2
The Russian Delegation realises that the preamble of the Memorandum of May 2 seeks to justify the opinion that the prolonged economic isolation of Russia would be harmful to her alone, while the rest of Europe would always find means of escaping from its economic embarrassments. The object of this assertion is clear: Russia, which needs the cooperation of the other Powers for her economic restoration, must alone bear the sacrifices which that cooperation entails.
This assertion is contrary to public opinion, which, as shown by the expressed views of competent judges and by the repeated manifestations of the working masses, insists that Russia cannot be replaced and that her absence from the world’s market causes a dislocation for which there is no remedy. Russia’s place can be filled [Page 796] by no other country. The isolation of Russia leads to political consequences which are no less disastrous than its economic consequences. The safety of Europe and the peace of the world require that this abnormal state of affairs should be brought to an end. As long as Russia remains in a kind of economic and political quarantine, certain States which are near or distant neighbours of Russia will be encouraged by this provisional state of affairs to embark on military enterprises and, by arrogating to themselves the functions of a “police force of European civilisation”, will seek to trouble the peace of the world and to seize the territory and riches of Russia and of the other Soviet Republics. The solution of the Russian problem will not, therefore, be brought a day nearer unless the Powers assembled at Genoa fully realise that the sacrifices which they require of Russia must find their counterpart in similar sacrifices on their side.
In its letter addressed to Mr. Lloyd George on April 20,28 the Russian Delegation made important concessions, but at the same time raised the question of the credits and loans to be granted to the Russian Government. At the first meeting of the Committee of Experts, the Russian Delegation requested the members of that Committee to undertake the detailed examination of this question. The Committee, however, as has already been noted rejected the proposal. This question which is so important for Russia remains unanswered in the Memorandum of May 2. Instead of specifying the credits to be granted to the Russian Government, the preamble of the Memorandum merely enumerates the credits which the various Governments are prepared to grant to those of their nationals who desire to trade with Russia. This question, however interesting it may be for the private traders of other countries, has nothing to do with the question raised by the Russian Delegation. Moreover, private traders and manufacturers themselves could not make use of the credits to the desired extent, if the financial resources necessary for restoring the productive forces of the country were not assured to the Russian Government; and this restoration is an indispensable condition of commercial relations of any importance between Russia and other States. If the Russian Government has not financial resources or credits for restoring industry and agriculture, for renewing means of transport and for establishing a currency with a stable exchange value by stopping the issue of constantly depreciating paper roubles, it will be practically impossible to realise any substantial volume of trade with foreign countries. Furthermore, measures designed to achieve the restoration of Russia can only be carried into effect by the Government itself, and in accordance with a prearranged [Page 797] plan. It was the intention of the Russian Delegation to submit to the Conference a scheme on these lines, drawn up by qualified scientific and industrial experts.
Examination of Clause I
(a) prohibition of subversive propaganda
The Russian Delegation notes with some surprise a striking contrast in the Memorandum of May 2. Whereas, in the main part of the Memorandum, which deals with the restoration of Russia, no exact proposals are put forward, but only general considerations, the question of the settlement of State debts and of private claims is dealt with in the form of a definite Agreement, in which an attempt has been made to provide for the smallest details.
The Russian Delegation is no less surprised to find that political clauses, which have never yet been mentioned in the discussions of the Russian Delegation with the other Delegations, have been included in this financial Agreement at the head of all the other Clauses.
From among the Cannes Resolutions which were of a political character, and which moreover were accepted by the Russian Government, the Memorandum singles out one provision, the fifth, concerning subversive propaganda, and gives it a new meaning, by transforming it into a unilateral obligation for Russia. The Russian Government has more than once proved that the really subversive propaganda, carried on by means of the organisation and despatch of armed bands, has been the work of certain countries which are the neighbours of Russia and which have actually signed the Memorandum.
By an extension of the meaning of this Resolution, the Memorandum requires that Russia shall “suppress all attempts in its territory to assist revolutionary movements in other States.” If, by this phrase, the Memorandum means prohibiting the activity of political parties or of workers’ organisations, the Russian Delegation cannot agree to such prohibition, except in cases where the activity in question is contrary to the laws of the country.
In the same clause, the Memorandum requires Russia to “refrain from any action which might disturb the territorial and political status quo in other States.” The Russian Delegation regards this proposal as a veiled attempt to make Russia recognise the treaties concluded by other States. Russia is prepared, at the proper moment, to discuss this political question with the Powers concerned.
Another political question which has been imported without relevance into the Memorandum is that of the relations between Roumania [Page 798] and Russia, provided for in clause 13. As this question forms part of the general body of political, territorial and other questions in dispute between Russia and Roumania, it cannot be considered apart from them.
(b) re-establishment of peace in asia minor
The Russian Delegation is particularly surprised to observe that allusion is made in the Memorandum to the question of peace in Asia Minor. This is the more surprising, seeing that Turkey was excluded from the Conference of Genoa in spite of Russia’s proposal that she should be invited. The presence of Turkey at the Conference would, as a matter of fact, have greatly contributed to the re-establishment of peace in Asia Minor. Russia also, in view of her friendly relations with Turkey, would have contributed to the achievement of the object in view.
The strict neutrality which the Memorandum of May 2 demands from Russia in the war which is being waged on Turkish territory cannot differ from that imposed upon all the Powers by International Law and International Conventions.
Financial Clauses
With regard to the other clauses of the Memorandum, the Russian Delegation must point out that the claims which they contain are as a whole based upon the changes consequent upon the Russian Revolution.
It is not for the Russian Delegation to defend that great movement of the Russian people before an assembly of Powers, many of which have experienced more than one revolution in the course of their history; but the Russian Delegation feels obliged to recall the principle that revolutions which constitute a violent break with the past give rise to new legal standards in the external and internal relations of States. Governments and administrations created by revolutions are not bound to respect the obligations of the Governments which have been overthrown. The French Convention, from which modern French [France] claims direct descent, proclaimed, on September 22nd, 1792, that “the sovereignty of peoples is not bound by the treaties of tyrants.” In conformity with this declaration, revolutionary France not only destroyed the political treaties entered into with foreign countries under the old régime, but also repudiated her National Debt. She only consented to pay one-third of it, and that for motives of political expediency. This was the “Tiers consolidé”, the interest upon which was not regularly paid until the beginning of the nineteenth century.
[Page 799]This procedure, exalted into a doctrine by eminent legal experts, has been almost universally followed by Governments created by revolutions or by wars or [of] liberation.
The United States repudiated the treaties of their predecessors, England and Spain.
Moreover, the Governments of the victorious countries, during the war, and, above all, at the time of the conclusion of the Peace Treaty, did not hesitate to seize property belonging to nationals of the vanquished countries, situated in their territory, and even in foreign territory.
In conformity with these precedents, Russia cannot be forced to assume any responsibility towards foreign Powers and their nationals for the cancellation of national debts and for the nationalisation of private property.
Another point of law may be submitted. Is the Russian Government responsible for damage caused by the civil war to foreign property, rights and interests beyond such damage as was caused by the action of the Government, in cancelling debts and nationalising property? Here again, legal tradition is in favour of the Russian Government. The Revolution, which, like all great popular movements, was an enforcement of the will of the majority, does not admit any obligation to indemnify those who suffered by it. When the Tsarist Government was asked by foreign nationals, supported by their Governments, to compensate them for the losses which they had suffered during the revolutionary disturbances of 1905 to 1906, it rejected their claims, basing its rejection on the fact that, since it had not granted compensations to its own subjects for similar losses, it could not place foreigners in a privileged position in this respect.
The Cannes Conditions
From a legal point of view, Russia is therefore in no way bound to pay debts contracted in the past, to restore property or compensate its former owners, or to pay indemnities for other losses occasioned to foreign subjects either by the legislation established by Russia in the exercise of her sovereignty, or by the events of the Revolution. Nevertheless, in a spirit of conciliation, and in the hope of reaching an agreement with all the Powers, Russia has accepted the principle contained in the third of the Cannes Conditions, under reserve of reciprocity. Such reciprocity—that is to say, the obligation of all Governments to compensate for losses occasioned by their action or negligence—has already been established by the official interpretation of the third of the Cannes Conditions, which was referred to in the first Russian Memorandum.
[Page 800]The war debts having been incurred for a specific purpose, were automatically cancelled by the fact that Russia, having retired from the war and having had no share in its advantages, could not be expected to share its cost. With this exception, the Russian Delegation has expressed its readiness to agree to the payment of state debts, on condition that the losses caused to Russia by intervention and blockade are recognised.
In law, the Russian counterclaims are far more justified than the claims of foreign powers and their nationals. Tradition and practice both lay down that the responsibility for losses caused by intervention and blockade should be borne by the Governments which were the authors of these measures. It will be sufficient to recall the decision of the Court of Arbitration of Geneva on September 14th, 1872, by which Great Britain was condemned to pay the United States fifteen and a half million dollars for losses caused by the privateer Alabama, which, during the Civil War between the Northern and Southern States, had assisted the latter.
The campaign of intervention and blockade carried on by the Allies and neutrals against Russia constituted official acts of war. The documents published in Annex II of the first Russian Memorandum proved clearly that the chiefs of the counter-revolutionary armies were such only in appearance, and that the real commanders of these armies were the foreign generals despatched specially for that purpose by certain Powers. These Powers not only took part directly in the Civil War, but were the actual authors of it.
In its desire to obtain a practical agreement, however, the Russian Delegation, following on the conversations which took place at the Villa de Albertis, decided to pursue a policy of liberal concessions, and expressed its readiness to abandon its counter claims on certain conditions and to assume the obligations of the Governments which have been overthrown in exchange for a series of concessions on the part of the Powers; the most important of which is the placing at the disposal of the Russian Government of real credits to an amount fixed in advance. Unfortunately, this condition has not been fulfilled. The memorandum says nothing of the credits which the signatories are definitely and finally prepared to grant to the Russian Government: moreover, the credits which they undertake to grant to their own subjects for the purpose of trading with Russia are purely optional.
Similarly, the memorandum raises again in its entirety the question of war debts, the cancellation of which was one of the conditions on which Russia was willing to abandon her counter claims. The memorandum also raises the question of the moratorium and the [Page 801] cancellation of interest on pre-war debts, referring the final decision on this question to an arbitral tribunal, instead of deciding it in the Agreement itself. This again is contrary to the provisions of the London Memorandum.
In so doing, the signatories of the memorandum release themselves from their obligations, and recognise that the opposite party is equally released. In this way, the laborious negotiations which led to the Agreement of the Villa de Albertis have been rendered vain. The Russian Delegation has no desire to fix the responsibility for this on any particular Power: but in any case, Russia is not to blame.
The negotiations have been rendered still more difficult by the persistent attempt of certain States to impose on Russia, in Article VII, obligations inconsistent with her social system and with Article I of the Cannes Resolutions.
Private Property. Clause 7
Clause 7 begins with an admirable preamble recognising the sovereign right of Russia to regulate within her own territory as she thinks fit her system of ownership, economy and government, but the operative part of the clause is in flagrant contradiction to its preamble. The sovereignty of the Russian State becomes the sport of chance. It may be impaired by the decisions of the Mixed Arbitral Tribunal consisting of four foreigners and one Russian, which will decide, in the last resort, whether the property of foreigners should be re-instated, restored or compensated.
On this question, the Russian Delegation must point out that, in the consideration of disputes of this kind, the particular points of disagreement will inevitably lead to the pitting one against the other, of two forms of ownership, the confliction between which has assumed today for the first time in history a real and practical importance. In these circumstances, there cannot be an impartial supreme arbiter, and, under the provisions of Clause 7, the part of supreme arbiter would inevitably be taken by one of the interested parties. This would necessarily lead to the intervention of foreigners in the internal affairs of Russia, and would in practice do away with the inviolability of the system of ownership existing in Russia, which is recognised at the beginning of Clause 7.
Moreover, the Russian Delegation can see nothing of any practical importance in Clause 7. Its inclusion in the Memorandum of May 2 can only be explained as the result of a desire to satisfy certain class or party resentments, rather than of any adequate knowledge of the state of affairs in Russia. Apart from the perpetual [Page 802] conflicts between claimants and the Russian Government, and between the latter and foreign Powers, to which this Clause will give rise, Clause 7, so far from creating that mutual tolerance between the Soviet régime and the capitalist régime which is the condition of any fruitful co-operation, will only embitter the relations of these two systems. Foreigners, coming to Russia, not as the result of an amicable agreement with the Russian Government, or for the purpose of working under the protection of the Russian laws, but by virtue of the decision of a Mixed Arbitral Tribunal, would soon be conscious of a general feeling of hostility against them.
In order to make it possible for the former owners of nationalised property to apply their technical knowledge and their capital in the economic restoration of Russia for their own profit, the Russian Government has, on its side, recognised their preferential right in all cases in which their former property is the subject of a concession, either in the form of a lease or in the form of a mixed partnership between State and foreign capital, or in any other form providing for the participation of foreigners.
The Russian Delegation also notes that the States concerned, reserving all their solicitude for a small group of foreign capitalists, and maintaining on theoretical points a quite inexplicably uncompromising attitude, have sacrificed a large number of foreign capitalists who are desirous of profiting by the facilities and guarantees afforded them by the Russian Government to enable them to return and resume work in Russia. They have also sacrificed the interests of the numerous small holders of Russian bonds, and small foreign proprietors whose property has been nationalised or sequestered, whom the Russian Government intended to include amongst the claimants whose claims it recognised as just and equitable. The Russian Delegation cannot refrain from expressing its surprise that the Powers, such as France, whose nationals include the majority of the small Russian bondholders, should have insisted most strongly upon the necessity of restoring property, thus subordinating the interests of small holders of Russian bonds to those of certain groups which demand the restoration of property.
Conclusions and Proposals
The Russian Government sent its representatives to the Genoa Conference in the hope of concluding there an agreement with other States which, without affecting the social and political régime established as a result of the Revolution and of the successful repulse of the attempts at intervention, would lead not to an aggravation but to an improvement of the economic and financial situation of Russia, [Page 803] and would at the same time pave the way for an improvement in the economic situation of Europe.
But the achievement of this end presupposed the willingness of the foreign powers which had organised armed intervention in Russia, to cease employing towards Russia the tone of victor to vanquished, since Russia was not vanquished. A common agreement could only have been reached if the tone adopted had been that of States negotiating on a footing of equality. Russia is ready to consent to substantial concessions to foreign Powers in order to ensure the success of the negotiations, but only on condition that equivalent concessions will be made by the other contracting Party in favour of the Russian people. The Russian masses cannot be a party to an agreement in which the concessions made are not balanced by real advantages.
Another solution suggested by the difficulties of the situation would be the reciprocal cancellation of claims and counter claims arising out of past relations between Russia and the other Powers. But even in the event of such a solution, the Russian Government fully intends to respect the interests of small bondholders.
If, nevertheless, the Powers desire to find a solution of the financial differences between themselves and Russia, it is suggested that since this question requires a most exhaustive examination of the nature and the scope of the claims presented to Russia, and a more precise estimate of the credits available for her, the work might be entrusted to a mixed committee of experts appointed by the Conference. This Committee would begin work at a date and in a place to be fixed by agreement.
The Russian Delegation observes that the chief obstacle which the Conference has met up to the present time is the fact that all the Powers are not yet sufficiently imbued with the idea of reciprocity referred to above. At the same time, the Delegation cannot but emphasise the fact that the negotiations which have taken place have paved the way for a closer understanding between Soviet Russia and foreign Powers. The Russian Delegation considers that the divergencies of view which have arisen in the discussion of the financial differences between Russia and foreign Powers should not constitute an obstacle to the settlement of other problems which affect all countries alike, and, in particular, those problems which concern the economic recovery of Europe and Russia, and the establishment of peace—problems which can and must be settled here at Genoa. Russia has come to the Conference in a spirit of conciliation, and still cherishes the hope that her efforts will be crowned with success.