800.51W89 U.S.S.R./140: Telegram
The Ambassador in the Soviet Union (Bullitt) to the Secretary of State
[Received 11:25 p.m.]
342. Continuing my No. 341, October 5, 6 p.m.,70 Litvinov asserted that he had not yet had time to read Troyanovsky’s telegrams with regard to his recent negotiations in Washington. He expressed the hope that I would remain in Moscow for at least 3 weeks after Troyanovsky’s arrival. I told him that it was your view and that there was no point in further conversations unless he was ready to agree that the matter of a loan or unrestricted credit was out of the question.
He said that until he had talked with Troyanovsky he could make no such promise, that the matter was most difficult.
I then developed at considerable length and as seriously as possible the effect on relations between the Soviet Union and the United States which would be produced by a total failure of the negotiations.
Litvinov instead of replying in his usual belligerent manner sat silent looking profoundly discouraged. He said that the only obstacle to a settlement was the difficulty of finding a formula which would not make trouble for the Soviet Union with England and France. He said that the proposals that Krestinski had discussed with me (reported in my No. 328) had been left by him in Krestinski’s hands as alternative proposals to be brought forward if everything else should fail. He asked me if it might not be possible to settle the entire question by way of a transaction with the Export-Import Bank, no mention being made in any formal agreement that extra interest was being paid in settlement of debts and claims.
I replied that the President would have to explain in detail to Congress that the interest over and above a certain amount paid to the Export-Import Bank was in effect a payment on debts and claims and asked him if that would not make his proposal impossible. He replied that it would make the matter more difficult but that it might be acceptable. I told him as personal opinion that I felt that the interest rate charged by the Bank in any such settlement would have to be at least 9½%. He said that the Soviet Union had recently been offered [Page 156] credits by Germany at 7%. I told him that so far as I knew the Soviet Union had never yet got credits below 11%.
Litvinov spent all yesterday in the Kremlin and had obviously not had time to talk with either Rubinin or Krestinski. I did my [best?] to produce in him as complete a state of gloom as possible with regard to the future of Soviet-American relations if no settlement should be made and I hope that I may have prepared somewhat the ground for Troyanovsky’s arrival. I shall see Litvinov again to say goodbye before I leave Moscow on October 10th.
I propose to take steamer from Vladivostok to Tsurugu, Japan, on October 20th, proceeding from Tsurugu to Tokyo and thence to other points in Japan. I shall inform the Department by cable with regard to my future movements. It is impossible to determine at this distance if it is desirable to proceed to China by way of Shanghai or Tientsin. It seems necessary to me to avoid under all circumstances entering the territory of the so-called state of “Manchukuo.”
I desire, unless the Department disapproves, to take with me Mr. Offie who has been acting as my private secretary. I shall be glad to pay his traveling expenses. I assume that his salary might continue to be paid as usual.