800.51W89 U.S.S.R./186

Memorandum by the Chief of the Division of Eastern European Affairs (Kelley)

Conversation: The Ambassador of the Union of Soviet Socialist Republics, Mr. Troyanovsky;
The Secretary of State, Mr. Hull;
The Assistant Secretary of State, Mr. Moore;
The American Ambassador to the Union of Soviet Socialist Republics, Mr. Bullitt;
Mr. Robert F. Kelley.

After some hesitation the Soviet Ambassador, in response to an inquiry by the Secretary, stated that he had discussed at length with officials of his Government in Moscow the proposal made by the United States with regard to the settlement of the question of debts and claims. He said that it was very hard for his Government to deal with this matter, since acceptance of the American proposal would make the relations of his country with other countries more difficult. Furthermore, he declared that other countries were now offering his Government much better terms than those contained in the American proposal. His Government, while desiring to have friendly relations with the United States, could not go beyond the proposal which he had presented to the Department prior to his departure.

The Secretary stated that he was greatly disappointed at the attitude of the Soviet Government. With regard to the Ambassador’s statement to the effect that a settlement of the question of debts and claims between the United States and the Soviet Union could not be reached because it would make difficult the relations of the Soviet Union with other countries, he said that Mr. Litvinoff had not mentioned this consideration when he was in Washington. If he had, the Secretary thought that possibly there might have been a different story. He said that he had sought in every way to cooperate with the Soviet Government, but had not met with much response. A settlement of the outstanding questions would have furnished a basis for cooperation in important matters of world significance. If the two Governments, however, could not deal in a statesmanlike way with what, after all, was a minor problem, there was little expectation of their being able to cooperate in larger matters.

The Ambassador stated that there was a big difference with regard to only one point. While there had been no agreement with regard [Page 171] to the amount of the indebtedness or the interest rates, the differences were not great. Furthermore, his Government was prepared to take half of the proposed financial assistance in the form suggested by the United States. But his Government could not but insist on the extension to it of a $100,000,000 loan.

The Secretary said again that he was profoundly disappointed. The United States had gone to the limit to which it could go and had made considerable concessions. In view of the position taken by the Soviet Government the negotiations would seem to have come to an end.

The Ambassador agreed and said he had no proposals to make.