861.51 Am 3/1

The Under Secretary of State (Olds) to the Vice President of the American Locomotive Sales Corporation (Charles M. Muchnic)

My Dear Mr. Muchnic: I regret that I have not been in a position to reply more promptly to your letters of October 17 and November [Page 654] 15, 1927,6 The delay, however, has been due to the desire of the Department to give the most careful consideration to the matter which you brought to my attention on October 14, and the salient points of which you set forth in your letter of October 17.

It is hardly necessary, I believe, for me to say that the Department is fully aware of the potentialities of Russia as a market for American products and of the interest of American manufacturers in establishing connections with that country, even under the present régime. Accordingly, while the Government of the United States has not granted recognition to the régime now functioning in Russia, no restrictions are imposed upon the carrying on of trade and commerce with that country or with the Soviet régime, and no objection has been raised to the financing of ordinary current commercial intercourse; it being understood, of course, that individuals and corporations availing themselves of the opportunity to engage in such trade do so upon their own responsibility and at their own risk. The Department has objected, however, to financial projects involving the flotation of loans in the American market, and to banking arrangements not incidental to the sale of American commodities to Russia, that have amounted to proposals for making advances to the Soviet régime, which, as you know, has repudiated the obligations of Russia to the United States and its citizens, and confiscated the property of American citizens in Russia.7

With respect to the specific transaction in which you are interested, I may state that the Department would not desire to interpose any objection to American manufacturers of railway equipment granting long-term credit to the Soviet régime on purchases of locomotives, cars, and other railway materials, and that it would not look with disapproval upon banking arrangements incidental to the financing of contracts concluded along such lines with the Soviet authorities. The Department, however, would not view with favor any financial arrangement which involved the sale of securities to the public.8

Very truly yours,

Robert E. Olds
  1. Latter not printed.
  2. See Foreign Relations, 1926, vol. ii, pp. 906 ff.
  3. On the margin of this letter, opposite this final paragraph, is the following notation in ink by Robert F. Kelley, Chief of the Division of Eastern European Affairs: “Drafted after discussion of this matter by Secretary with Mr. Mellon, Mr. Hoover and the President. RFK.”