800.51W89 U.S.S.R./121: Telegram
The Secretary of State to the Ambassador in the Soviet Union (Bullitt)
246. Your 292, September 9, 5 p.m. There can be no objection to your talking with Stalin.
In view of fact that apparently there will be no difficulty in agreeing total amount of indebtedness to be paid us, (a) the time within which it shall be paid, and (b) the rate of interest it shall carry, the vital differences are as follows, it being assumed that Stalin will acquiesce as to (a) and (b):
- 1st.
- We are willing until debt is paid to support credit transactions through the Export-Import Bank equal to the amount of the debt, that to constitute a revolving fund. The credits are to carry an interest rate of around 4½ percent for the benefit of the Bank which will include its expenses and such an added interest rate to be applied on the principal of the debt as will give some assurance of the debt being paid within the time specified. This added rate should be not less than 5 percent. The counter proposal of the Soviets, which cannot be accepted, provides that $100,000,000 shall be an open credit available for the purchase independently of the Bank at any and all times of supplies in this country. That would make possible, for example, the use of say $100,000,000 for the immediate purchase of munitions of war. Our insistence is that anything of this kind would be a departure from the original intention which was simply for the Bank to support credit transactions. The proposal further provides that another $100,000,000 shall be used to support credit transactions.
- 2d.
- We are willing to grant a maximum of 5 years for the repayment of the Bank credits, the term to vary according to the categories of goods, say 1 to 1½ years on consumers’ goods, 2 to 3 years for light capital goods and 4 to 5 years for heavy capital goods, which are more advantageous than terms granted by any other country under a government guarantee arrangement. We are also willing to agree that the President may exceed the 5-year limit in exceptional cases, that being left to his discretion. Should Stalin decline to consider dividing the 5-year period according to the character of the goods purchased, the President might possibly allow that length of credit on all purchases, but this, you will recognize is undesirable since there [Page 146] is no reason whatever why goods belonging to the first two categories above mentioned should not be paid for in much less than 5 years.
If you can reach an understanding with Stalin on the essential questions indicated, you can advise of any details that should be considered here.
Of course, any general plan approved by the two Governments should embody a provision affording us proper exemption from extending credits during the progress of a possible war.
The President has approved the above.
You can, of course, feel free to discuss all features of the matter with Stalin. The amount to support credit transactions might be increased.
With reference to your No. 298, September 13, you are entirely correct in your view of the opinion in this country. It is rather surprising that Skvirsky is raising the difficulty at this late day which was not urged by Litvinoff when here and has not been made pivotal by Troyanovsky.
Personally I have little idea that the Soviet officials will come to any reasonable agreement. Litvinoff won his victory when he obtained recognition and regards everything else as of minor importance.
I am sure the Executive Order relative to the exchange matter65 will become effective as soon as the President returns to Hyde Park in a few days. Moore mentioned it to him when he was there Thursday66 but it had not then been approved by the Attorney General.