124.611/267: Telegram
The Ambassador in the Soviet Union ( Bullitt ) to the Secretary of State
[Received June 4—11:45 a.m.]
223. Reference last sentence first paragraph my No. 220, June 3, 11 p.m., following is memorandum under reference:
“The following are the reasons why the reply of the Foreign Office dated March 3, 1935, in reply to the Embassy’s note of January 11, 1935, make the construction of the proposed Embassy building technically impossible.
While the United States Government requested the right to bring in such foreign workmen as it saw fit for the construction, the Soviet Government qualified this by saying that only citizens of the United States of America would be so admitted.
As there is every reason to believe it will be necessary to import workmen other than Americans, such as Finnish bricklayers, et cetera, this qualification is unacceptable.
The refusal of the Soviet Government to make any exception regarding the employment and payment of local labor necessary for the construction and their refusal to form a special Soviet economic organization for this purpose means that the American Government will be forced to incur large obligations in Soviet rubles which will have to be purchased illegally.
An additional statement that the employment, discharge and payment of such labor must be decided on the basis of general regulations and laws enforced in the Soviet Union would mean that this labor force would not be under the control of the United States Government or any organization which it may appoint to construct the proposed Embassy.
With regard to the purchase of local material, the Soviet Government refuses to give assurances that the requisite materials could be purchased at the prices decided on in Washington. The prices quoted by Torgsin which were forwarded to the Department did not include delivery at site and would be considerably in excess of the prices quoted by the Department of State.
As the experience of the Embassy has been that prices in valuta in the Soviet Union are purely arbitrary in character and based solely on the basis of charging ‘what the traffic will bear,’ to deal with Torgsin without written assurances of the Soviet Government will involve the American Government in endless haggling on prices.
Finally the refusal of the Soviet Government to quote transportation rates in dollars and the statement that these rates will be assessed in accordance with the regulations enforced will either mean that such transportation costs will be prohibitive if the conversion of the Soviet currency is made at the legal rate or, as in the case of payment of local labor, the United States Government will incur obligations payable in illegally procured currency.
The peculiar conditions existing in the Soviet Union and in particular the uncertainty of the currency system make it imperative that written assurances be obtained from the Soviet Government on [Page 277] the question of employment of local labor, cost of materials and transportation.
Without these written assurances it is impossible to foresee under what conditions the Government of the United States might be forced to undertake the proposed construction since these conditions could at any time be arbitrarily altered by the Soviet Government or any of its organizations. In addition the physical difficulties and complications of dealing with subordinate Soviet organizations (Torgsin, et cetera) would be such on the basis of our experiences as to make successful construction impossible. This belief is based on the experience of the Embassy in its dealings here. Therefore the categorical refusal of the Soviet Government to give these written assurances render the construction of the new Embassy in Moscow technically impossible.”