611.6131/451: Telegram
The Ambassador in the Soviet Union (Davies) to the Secretary of State
[Received July 10—11:25 a.m.]
163. Department’s 85, July 8, 6 p.m., and my 161, July 3 [9], midnight. For the Department’s information, the line taken by the Foreign Office with respect to rebates is that while our position yesterday fully and repeatedly explained to them is perhaps legally correct our Government is nevertheless morally responsible for the losses they have sustained through the coal tax by virtue of the fact that we have refused to conclude with them in past years a most-favored-nation agreement of the type now being offered despite their assurances that they were willing to take their chances on obtaining an interpretation of such an agreement exempting their coal from the tax. They feel that if they had been allowed to conclude such an agreement they would, like the Dutch, have enjoyed exemption from payment of the tax at least throughout the last few months. Therefore, in their view the present proposed agreement is only a tardy correction of discrimination exercised against them in the past with respect to the conclusion of a most-favored-nation agreement.
[Page 420]It was thought that the Department might be interested in knowing this since this argument is also being adduced to back up their reluctance to agree to 40 million dollar purchase sum.