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

In accordance with the suggestion of Assistant Secretary Moore, I discussed with Mr. Skvirsky the situation confronting our Embassy in Moscow in connection with the closing of Torgsin stores1 and the proposed monetary changes,2 in particular the question of the increase demanded by Intourist3 in the rental of a garage. I told Mr. Skvirsky that we had been paying to Intourist a rental of $80 a month for a garage, and that Intourist had informed the Embassy that it could not accept dollars in the future and that commencing January 1st the rental would be 1730 rubles. I said that this represented an increase from $80 to approximately $346,—converting the rubles at the official rate of five rubles to the dollar,—or over 300 per cent. I said that I hoped Mr. Skvirsky realized that such a rental was exorbitant and that the American Government would not submit to extortion of this nature. I said that we had instructed our Embassy to tender $80 and, if the dollar payment were declined, the equivalent number of rubles at the recently established official rate of five rubles to the dollar.

I said that I was bringing the matter to his attention in the hope that he would make clear to his Government our attitude in the matter. I said that the garage rental was the first concrete case arising out of the proposed monetary changes, and that, while the situation had not yet entirely clarified itself, the Department was confronted with a serious problem, since the Embassy had reported that, if the announced plans were carried into effect, the expenses of the Embassy and the American personnel would be increased five to six times. I [Page 282] pointed out that the Department would have to go before Congress in order to get any additional funds needed to meet increased expenditures in Moscow, and I was sure that Mr. Skvirsky would appreciate that raising the matter in Congress at the present time, especially the explanation of the cause of the increased expenses, would afford very effective ammunition to persons opposed to the maintenance and development of relations between the United States and the Soviet Union. I pointed out in this connection that the cost of the various municipal services, such as light, heat, and electricity, to the Embassy on the basis of five rubles to a dollar would be fantastic. I said that we had to work on the basis of five rubles to the dollar because members of the Soviet Foreign Office had informed our Embassy that it would be impossible to get rubles at any other rate. I did not see how Congress and the American public could avoid getting the impression that the Soviet Government was bent upon exploiting the American Government and Americans resident in Moscow.

I said that we were convinced that, if there were good will on the part of the Soviet Government, things could be so arranged that the difficulties referred to above would disappear. Prices could be fixed for municipal services at a reasonable rate in rubles, or some Soviet agency could be authorized to contract for such services in foreign currency. Burobin,4 for instance, could take over the renting of the garage. I said that it was quite possible, of course, that his Government, engrossed in the working out of the monetary changes, had not as yet had time or opportunity to give consideration to the difficult situation in which would be placed foreign Missions in Moscow as a result of the proposed changes. I hoped that he would impress upon his Government that the situation was giving serious concern to the American Government, and urge that steps be taken promptly to alleviate it.

Mr. Skvirsky said that he would immediately take the matter up with his Government.

Robert F. Kelley
  1. All-Union Combine for Trade with Foreigners.
  2. By decree of November 14, 1935, the Soviet Government announced plans for closing the Torgsin stores and for the stabilization of the ruble. A decree of February 29, 1936, established an exchange rate of one ruble equal to three French francs, effective April 1, 1936.
  3. The official Soviet Travel Agency.
  4. Central Bureau for Service to Foreigners.