800.51W89 U.S.S.R./131: Telegram
The Ambassador in the Soviet Union (Bullitt) to the Secretary of State
[Received 3:30 p.m.]
328. In the course of a conversation with Krestinski and Rubinin yesterday reference was made to the matter of debts and claims. Krestinski said that he hoped I would urge my Government to accept the proposal submitted recently by Troyanovsky. I replied that it was impossible for the Government of the United States to give a loan in any form or in any amount. Krestinski then said that an appropriate solution would be to let the matter drop[;] thereupon with considerable emphasis I expressed the opinion that the people of the United States had little confidence in the Soviet Government and that the failure of the present negotiations might well be a death blow [Page 150] to the development of really friendly and intimate relations between our countries.
Krestinski and Rubinin seemed to be somewhat disturbed by my remarks.
I then requested them to cease asking impossibilities and to attempt to collaborate with the Government of the United States in finding a solution acceptable to both parties. I asked for suggestions on the understanding that anything said on either side should be considered merely an expression of personal opinion which might be withdrawn at once, not a proposal from government to government.
Krestinski first suggested that two entirely separate agreements might be made:
- (a)
- An agreement on the basis of commercial credits which would bear an interest rate sufficient to cover our demands for repayment of our claims and debts but without any statement to this effect.
- (b)
- An entirely separate agreement annulling all claims of both Governments and/or their nationals.
I replied that the President had no constitutional right to cancel debts, that any agreement would have to be submitted to Congress, that the President would have to say to Congress that interest above 4½% would be applicable to debts and claims, that the two documents might be separate but would have to be simultaneously adopted, that the President would have to explain to Congress why the commercial agreement constituted a satisfactory debt settlement. Krestinski said that in case of settlement via a commercial credit his Government would have to deny that any extra interest had been paid in settlement of American indebtedness, that the position of his Government remained that a payment of indebtedness could only be acknowledged in return for a loan. He seemed much interested by this line of thought and said that he would try to think of ways to escape the obvious American objections.
Further conversation developed another line of thought which Krestinski discussed as a possibility which he might submit to higher authorities. I have no idea whether he will do so or not but I feel that I should attempt to inform the Department with regard to this idea so that I may know if under any circumstances it might be acceptable to our Government. In the statement which follows I have attempted to reduce a diffused conversation to concrete terms and I must warn the Department that I may have been unable to present accurately all features thereof: [See infra.]