800.51W89 U.S.S.R./84: Telegram
The Ambassador in the Soviet Union (Bullitt) to the Secretary of State
[Received 10:15 p.m.]
195. It is I believe opportune to review our understanding of the commitment accepted by Litvinov in Washington with regard to claims and indebtedness.
[Page 118]I was present at all conversations between the President and Litvinov. It was clearly impossible that the Government of the United States should give either a loan or an uncontrolled credit and Litvinov never indicated that he expected either a loan or uncontrolled credit. I was as you know astounded when he took that position after my arrival in Moscow. The President and I talked over the matter repeatedly and there was in our minds never the faintest idea of a straight loan or uncontrolled credit. Furthermore, we were both convinced that Litvinov had agreed to pay extra interest on all loans or credits of whatsoever nature obtained from any American individual or corporation for both the President and I discussed the question of whether or not we should hold up recognition until the debt agreement had been worked out in detail as were all other agreements. The President felt that this was not necessary as he thought his understanding with Litvinov was clear and because as a result of changes of personnel at the Treasury Department it was somewhat difficult for us to go into the details of any financial matters. You will recall that Mr. Morgenthau had been charged with control of the economic and financial questions involved in our negotiations with Litvinov; that he was appointed Secretary of the Treasury at the crucial moment and was so occupied with urgent Treasury business that he was unable to organize his office in time to present concrete proposals to Litvinov. The single concrete detail mentioned in Litvinov’s talks with Morgenthau was that of interest rates which was touched upon inconclusively. Litvinov said that he was ready to offer only 7 percent as a total rate to cover both interest on credits and extinguishment of indebtedness. Morgenthau greeted this with laughter and indicated that the total rate would have to be at least 10 percent.
The President and Litvinov discussed in detail the total sum to be paid, the President indicating that he felt he could not get Congress to accept less than $150,000,000, Litvinov offering $75,000,000, but promising to recommend the payment of $100,000,000 provided the President after examining all the facts should consider such a sum fair.
When I asked Litvinov how he could have imagined ever that he was going to get a straight loan or uncontrolled credit in view of the opposition of the people of the United States to further loans abroad, he replied that the President had used the word “loan”, that he had felt it would be most difficult for the President to obtain the money but that he thought the President could find a way to get it. Litvinov’s position is based on the fact that from time to time in speaking of credits the word “loan” was used synonymously therewith by the President. It is my impression that the word “loan” was even used in the one conversation of which a memorandum was made.
[Page 119]However, the general tenor of all conversations was such, the general position with regard to loans and credit was so well known that it is difficult for me to imagine that anyone could have derived the impression that the President had a loan or uncontrolled credit in mind.
The subject of claims and indebtedness was never discussed in my presence by Litvinov except in the conversations with the President and Morgenthau referred to above.
I personally believe as did the President that Litvinov was ready to pay extra interest on all loans or credits from any American sources, public or private, until the agreed amount of indebtedness had been extinguished.