800.51 W89 U.S.S.R./171: Telegram
The Chargé in the Soviet Union (Wiley) to the Secretary of State
[Received February 3—1:40 p.m.]
45. My 39, February 1, 6 p.m.7 The Soviet papers this morning have published in full your press release of January 31, 1935, together with a statement by Litvinov. The translation of this explanation as set forth in the Moscow Daily News is as follows:
“The basic principles of the agreement for the liquidation of the mutual Soviet American monetary claims were worked out during my personal negotiations with President Roosevelt about a year ago.8 These principles were in full accord with the reiterated statements of the Soviet Government of its readiness to discuss the question of old debts only provided its counter claims were recognized and a monetary loan was advanced to it. I therefore left Washington with the full confidence that the further negotiations would affect only the details of the agreement and would not therefore present any difficulties.
To our regret in the subsequent negotiations begun by Mr. Bullitt, American Ambassador, with me in Moscow and continued subsequently by the State Department with Comrade Troyanovski, one of the basic factors of the agreement reached in Washington, namely, that of a loan, was placed in doubt. The Soviet side in its proposals strictly remained within the confines of this agreement, making concessions to a point beyond which the whole of the Washington agreement would begin to be revised. We refused to enter this path which might have led to the complete annulment of the results secured in Washington and the necessity of new negotiations on the principles of the agreement. We naturally regret very much that the negotiations [Page 175] have so far failed to bring the desired results but, nevertheless, believe that this fact must not affect the relations between the two states including trade relations,9 the development of which has been rather hampered by the negotiations conducted up to this time. Besides the Soviet” Union and the United States as other peace loving states are confronted with more serious general objects for which it is possible to work without injuring the material claims of this or that state. The difficulty of solving the problem of mutual monetary claims between states has now become a general phenomenon of international life but it does not interfere with international co-operation in the development of trade relations or in the preservation of peace.”
This translation has been checked with the Russian text by the Embassy and has been found satisfactory.
Soviet newspapers also state that in response to an inquiry whether the breakdown of the debt negotiations might affect diplomatic relations, you replied that you had not heard such a possibility mentioned. When questioned whether the Department planned any further move you are quoted as replying you knew of no other move for us to make.
Soviet newspapers also publish a United Press message from Washington to the effect that State Department officials have denied reports that Mr. Bullitt intends to resign.
Impression from Rubinin and other Soviet officials is that they consider present development to be of routine nature. Am reliably informed that Soviet tactics are based on conviction that American business interests will bring effective pressure on Government to extend credits irrespective of results of our negotiations.
Am lunching with Karakhan today and will privately and discreetly present our point of view.