800.51W89 Estonia/75

The Minister in Latvia (Skinner) to the Secretary of State

No. 423

Sir: The Department will read, no doubt, with interest, the enclosed confidential letter from our Chargé at Tallinn to myself in regard to the debt owing by the Estonian Government to the United States. On May 6th, last, I discovered that the Estonian budget for 1932/33 apparently contemplated no payments of any kind to the Government of the United States. At that time the impression was also forming itself in my mind that the various European Governments were in consultation with each other and were endeavoring to organize a united front and by this means to avoid making any payments to the United States. I asked Mr. Carlson, therefore, to “make discreet inquiries and ascertain whether the amounts normally due to the United States are included under some general heading or whether it is proposed by the Estonian Government to avoid payment altogether.” In Mr. Carlson’s final reply, which is now enclosed, he shows that the Estonian Government was not proposing to make payments to the United States, and at the present time is earnestly hoping to secure reconsideration of its obligations.

Respectfully yours,

Robert P. Skinner
[Enclosure]

The Chargé in Estonia (Carlson) to the Minister in Latvia (Skinner)

Sir: I have the honor to refer to your letter of May 6, 1932, on the subject of the budgetary preparations made by Estonia for the resumption after July 1, 1932, of normal payments upon its funded indebtedness to the United States and to the several preliminary replies which have already been sent to you in reply thereto.

During the period which has elapsed since your first letter in this matter was received, I have made a number of guarded inquiries in order to determine whether or not the Estonian budget for 1932/1933 makes any provision for the servicing of the above-mentioned loan. My questions on this subject were at first addressed to subordinate officials at the Estonian Foreign Office. It soon became clear to me that these officials did not wish to commit themselves and that the Foreign Minister himself would be the [Page 602]only person from whom I might expect to receive a direct reply with regard thereto. Hence there was nothing to do but to await a favorable moment for broaching the subject to him.

My opportunity came last Saturday just after he had handed me the Estonian counter-proposal32 to our request for legalization of the one year debt postponement proposal, concerning which information has already been sent to you. For some reason or other the Foreign Minister made the delivery of the above document a very formal procedure since it took place not only in my presence but also in that of the Assistant Foreign Minister Mr. Hellat and of the Chief of the Foreign Office political bureau, Mr. Laretei. After the business of giving me the counter-proposal had been completed, I took the liberty of bringing up the question of the resumption of normal debt payments by Estonia. Foreign Minister Tönisson seemed to be willing enough to discuss the question. After he had pointed out the fact that both he and Mr. Hellat had been in the Government which had agreed to the purchase of the war supplies which forms the basis for the Estonia’s funded indebtedness to the United States, he told me quite frankly that the Estonian budget for the fiscal year ending March 31, 1933, did not include provisions for the making of the payments on the above debt which are to fall due on December 15, 1932. He also said that Estonia would therefore be obliged to avail itself of the possibilities afforded by the funded debt agreement for the postponement of these payments.

The Foreign Minister was visibly agitated while making these remarks to me. He said that his Government regretted exceedingly its inability to live up to the obligations which it had taken upon itself through the acceptance of the above agreement. The situation had, however, altered materially since the date of the signing of the agreement, and he trusted that in passing upon this matter the United States would take this, as well as the following matters into consideration. He then proceeded to present what seemed to me to be a comparatively ardent plea in favor of the reduction if not the complete cancellation of Estonia’s funded debt to the United States. The substance of his remarks was approximately as follows:

Estonia’s obligation to the United States is based upon purchases of materials from war supplies left by the United States army of occupation in France. At the time Estonia was engaged in the fighting of a war against the bolsheviki and it had been obliged to secure supplies at any cost. There was no time for reflection or for [Page 603]bargaining. It had to take supplies where it could find them and to leave the making of settlements therefor to a later date.

Estonia had been told, however, at the time, by the American agent with which negotiations had been carried on, that there was a strong possibility that the supplies would be given to it practically gratis. It was evident that the United States was not contemplating the return of the supplies to the United States and that unless purchasers were found they would eventually have to be given away.

In the second place, the war in which the supplies were used was not one which concerned Estonia alone. It was true to be sure that Estonia was fighting to maintain its recently regained independence. Nevertheless, in addition thereto, it was engaged in the still greater task of stemming the wave of bolshevism, and of placing a barrier before the onward rush of this new danger which was threatening the civilization not only to Europe but of the entire world.

Nevertheless Estonia had in 1926, entered into negotiations with the United States for the funding of the debt33 which was brought about through the acquisition of the above supplies. On this occasion, however, it had by no means been given as favorable terms as were accorded other countries with which similar negotiations were conducted. While its total indebtedness had been reduced by 25%, it had subsequently learned that other countries had been granted reductions up to 50% and even more.

Estonia had, however, accepted the debt funding agreement and met all of its obligations thereunder as long as it had been possible for it to do so. The Hoover moratorium had been of much help to it, but, nevertheless, the Estonian Government would not, at the conclusion of the “Hoover Year,” in view of the continued economic depression, be in a position to resume the servicing of its funded debt to the United States. The Foreign Minister hoped, therefore, that the United States, in judging Estonia’s position on the subject of debt payments, would give thoughtful consideration to the facts which he had presented to me with respect thereto.

I assured Mr. Tönisson that I was certain that the United States appreciated the difficulties with which Estonia was now faced in the above matter, and that I would communicate his views thereon to my Chief, the American Minister at Riga, by whom they would no doubt be given the utmost consideration. At the same time I took the liberty of calling his attention to the circumstance that I had no authority of any kind to act in this matter and that I was not in a [Page 604]position to discuss any of the questions which he had raised with regard thereto. The Foreign Minister replied that this was perfectly clear to him.

With that my conference with Foreign Minister Tönisson ended. As far as I am concerned, his remarks were of value from one point at least in that they showed quite clearly the trend of Estonian thought on the subject of debt payments to the United States.

I have [etc.]

Harry E. Carlson
  1. See telegram No. 2, May 28, 5 p.m., from the Chargé in Estonia, p. 599.
  2. Combined Annual Reports of the World War Foreign Debt Commission, 1922–1926 (Washington, Government Printing Office, 1927), pp. 205–217; the Agreement was signed at Washington, October 28, 1925.