Papers Relating to the Foreign Relations of the United States, 1924, Volume II
871.6363/210
The Minister in Rumania (Jay) to the Secretary of State
[Received August 14.]
Sir: I have the honor to transmit herewith by open mail copy of Note No. 38331 from the Foreign Office, together with the memorandum and enclosures handed me by the Minister for Foreign Affairs on Monday, July 21st,27 which has been the subject of the Department’s telegram #31 of July 22, 1924.28
I have [etc.]
The Rumanian Foreign Office to the Department of State
Memorandum
The Rumanian Government has taken cognizance of the note of the Government of the United States of America, and has the consciousness of not having either by its intentions or by its actions done anything contrary to “what American interests might reasonably expect on the part of the Rumanian authorities.”
Moreover why should Rumania not have treated American interests with the attention and in the friendly spirit which they deserved?
Rumania cannot forget that in the World War she was the ally of the Great American Republic, nor can she forget the determining influence which the intervention of the United States had on the final victory permitting the Rumanian people to realize their national unity. Likewise the Rumanian Government, anxious above all else to insure the consolidation of Rumania thus increased in size by the war, cannot ignore the fact that the United States represents a factor of the highest importance in the general work of the pacific and economic reconstruction of Europe.
Also we cannot dissemble our surprise at the intentions which we are purported to cherish, and we can only attribute to incomplete or erroneous information the decision taken by you to request your Minister to return to the United States for a consultation with the Department of State regarding the attitude of the Rumanian Government towards American interests.
[Page 622]We are certain that a more complete and careful examination will not fail to convince the Government of the United States that the accusations made in the note of July 10, 1924,29a are unjustified.
(1) Thus, the aforesaid note mentions in the first place the Commercial Indebtedness Law.
The majority of these debts were contracted immediately after the armistice at a time when the Rumanian exchange was still highly advantageous; but as a result of its depreciation during the years 1919–1922, our business people encountered such difficulties that the commercial life of the entire country was seriously threatened. In view of this situation the creditors themselves—in their own interest as well as in ours—proposed arrangements to scale, under certain conditions, the payment of these debts.
The first initiative was taken following the intervention of the British creditors, to whom our businessmen were most heavily indebted. This example was then followed by other countries, and arrangements were thus made with France, Switzerland, Italy and Belgium. At the request of the British creditors the law was brought in to sanction this state of affairs.
How can the Government of the United States see in this a measure directed against American interests? It seems to us rather that our businessmen could point out that the American creditors are the only ones who up to date have been unwilling to make any arrangement similar to those accepted by the other creditors. Although this is a matter of relations between private persons, the Rumanian Government has never refused, and in the future will always be ready to intervene in order to facilitate a similar arrangement between Rumanian debtors and American creditors.
(2) As regards the failure of the Rumanian Government to satisfy the just claims of American creditors, we would in the first place point out, speaking generally, that as a result of the war, of two years of enemy occupation and of post-war difficulties from which the whole of Europe has suffered so intensely, Rumania found herself with a floating foreign debt of about one billion, 400 thousand gold francs. In view of the depreciation of the exchange, the only solution was the consolidation of that debt. The Government proceeded thereto without delay.
The great majority of the bearers of these Treasury bonds accepted the conditions of consolidation. Only the American creditors refused.
As this proceeding is optional, we do not reproach them. It was their right. We could merely point out that what Was considered [Page 623] acceptable by 90% of our creditors, only appeared unacceptable to American creditors.
At all events, having achieved the consolidation, the Rumanian Government had also to consider the measures to be taken as regards the holders of Treasury bonds who did not accept the consolidation.
It was confronted by two American creditors:
- (a)
- The Baldwin Company;
- (b)
- The Transoceanic Corporation.
After having offered the Baldwin Company more advantageous conditions than other similar companies, we offered—animated precisely by our desire to comply with the requests of the American Government—exceptional conditions which prove our good faith and our will to reach a solution satisfactory to both parties.
A. As regards the Transoceanic Corporation, one of its representatives came this summer—as the American Legation knows—to treat with the Ministry of Finance; he seemed satisfied with the conditions offered him, and not having full powers, he returned to the United States to obtain them.
We have therefore every reason to believe that an arrangement can be concluded and at all events it seems to us that under these conditions it is really not possible to attribute to the Rumanian Government the intent to treat with disregard or voluntarily to neglect American interests.
Again, if there were any reason for complaint, it seems to us that it should be addressed rather to the American creditors, who were the only ones refusing what the other creditors of the Rumanian State did not hesitate to accept for much larger sums.
(3) The program of the consolidation of the Rumanian Treasury bonds—as we already had the honor to point out to you in our notes of the year 192230—was not directed against the interests of any state. This consolidation was attempted by the only means at our disposal, the improvement of our public finances and the reconstruction of our economic life. In this way the consolidation undoubtedly placed Rumania in a position to increase payments to all her creditors and ensured for her the only way to meet her obligations—which in any case she had never intended to evade. Hence the interests of the United States, as creditors of Rumania, could not but be safeguarded and strengthened by this policy and this program.
In the employment of export taxes as security for the payment of the amortization and interests of this consolidation, the Government of the United States has seen a disregard of the right of priority of the debt owed it by the Rumanian Government.
[Page 624]We believe that the United States Government is in error.
Thus, the revenue from these taxes is not merely to be employed as security for the consolidation only, but as security for the entire public debt of the Rumanian State.
This was formally stipulated in the law.
More than this, it was arranged that if the export taxes should be suppressed on all the revenues of the State, priority would be accorded to the funds intended to guarantee the payment of the entire foreign public debt, and that these funds would be deposited in the National Bank. To this end a convention was signed with the National Bank; we enclose herewith copy of this convention as well as of the text of the law31 showing that the export taxes go to guarantee our entire public debt and not merely the debt accruing from the consolidation which is the subject of your complaint.
Thus here again we cannot see how American interests have been detrimentally affected, nor in what the Rumanian Government has not shown proof of its desire to improve existing relations with the United States. Hence it cannot be anything but a misunderstanding.
(4) Likewise as regards the attitude taken by the commission sent to the United States to discuss the subsequent settlement of the Rumanian Government’s debt to the American Government. During the war, when we fought together and where our soldiers shed their blood for the triumph of the same cause of justice and of civilization, we were induced to contract in the United States a debt of 36,114,718.52 dollars.
Our Commission, which went to the United States in 1922, agreed with the American Government on the exact amount of this debt, which we never—we wish once again to state it clearly—dreamed of not recognizing.
Moreover, our Commission had instructions to inform the American Government that the Rumanian Government was also ready to subscribe to any arrangement which might be made in regard to these debts with all the other Allies.
We also enclose copy of the instructions issued to Mr. Eftimie Antonesco, chief of our Mission to the United States in 1922,32 which confirm these statements and which show that we were not even at that time reluctant to propose everything in our power.
(Enclosures A and B.)32
What more could we do? Pay now? We never believed that the American Government required that. We always believed that it did not intend to apply to us a treatment different from that of the other Allies—France, Italy, Belgium, Yugoslavia, etc.
[Page 625]Besides, taken together with the question of the reparations, this question constitutes one of the great international problems of the general liquidation of the World War.
Why should Rumania be subjected to exceptional treatment and in what has she, by reason of her attitude, shown herself less mindful of her obligations towards the United States than other countries (excepting, of course, Great Britain)?
We have made a point of explaining in detail all the points previously mentioned because we find them listed in your note; but from its very tone we see that the question to which the Government of the United States attaches the most importance, which constitutes so to speak the principal object of its move, is the mining law, recently voted by the Rumanian Parliament.
As regards this question, which is obviously of great importance to Rumania, we desire to state at once and very clearly the point of view of the Rumanian Government.
The Royal Government recognizes that in the petroleum industry, it is part of its duty to accord the most ample and complete respect to all vested rights, either of foreigners or of its own nationals. In this sense—as it had the honor to inform the American Government by its note of June 24, 192433—the Rumanian Government considered entirely legitimate all the representations addressed to it to secure the uncontested respect of those rights. It is moreover convinced that as a result of the alterations which have been successively introduced in the original draft, the mining law is now so drafted as to afford no scope for justifiable criticism.
On the other hand the Rumanian Government considers that it alone has the right to decide the future disposal of its petroleum lands. This is an essential and legitimate attribute of its sovereignty, a right which has never been contested and which in all justice could not be contested.
The Rumanian Government could only be in the wrong as regards the United States in one given circumstance, namely, if the new mining law made special conditions for any other country to the detriment of American interests.
Again in this matter, not only does the law not establish any difference between the petroleum enterprises of the various nationalities, but it allows all companies without distinction to benefit by all its advantages under certain most acceptable conditions, as is shown by their acceptance by the Franco-British, British, French and Belgian companies.
As we have already stated above, the difficulties which Rumania had to overcome after the war were especially serious.
[Page 626]By dint of unceasing effort, the Royal Government has the satisfaction of recognizing that it has succeeded in overcoming most of these difficulties. It has established order, undertaken the work of unification and reorganization in all directions, balanced the budget, consolidated floating debts, reestablished means of transportation, stopped inflation and daily increasingly normalized economic life, so that the commercial balance is now favorable.
This labor merited encouragement. Even the defeated nations—and justly so—obtained it. In her work of reconstruction, Rumania had herself and nobody but herself to count on. Even though she lacked the material support of the United States, she thought at least that she could count on its moral support and see her efforts understood and appreciated by the great American democracy.
Thus we would wish to hope that the Government of the United States—which has invariably manifested towards us a sympathy always highly prized by us—will not adopt an attitude detrimental to Rumania at the very moment when the support of America is more necessary than ever to Europe and when the entire world is placing in this support such legitimate hopes for the consolidation of peace and the economic rehabilitation of the nations.