611.6131/452: Telegram
The Ambassador in the Soviet Union (Davies) to the Secretary of State
[Received July 11—2:20 p.m.]
167. Department’s telegram No. 89, July 10, 4 p.m. Conference with Foreign Office officials this afternoon has revealed the following.
1. The Soviet Government is prepared to give the letter regarding limitation of exports of coal to 400,000 tons, as submitted in my telegram 162, July 10, 10 a.m.
[Page 422]2. They accept the termination clauses as worded in section 4 of the Department’s telegram under reference.
3. They accept the safeguard clause as worded in section 5 of the Department’s telegram under reference.
4. With respect to the press release concerning the limitation of coal exports, they would prefer that the letter itself be published or that the release follow its exact language. They state however that they have no objection to any rendering of the contents of the letter which we may wish to give to the press, as long as this is done on our own responsibility and they are not asked to approve it.
5. They have flatly refused to yield on either the question of the unilateral character of the most-favored-nation provisions or on raising the total sum of their promised purchases for the coming year to a figure higher than $30,000,000. They state that their instructions on these points are definite and categoric, for the present moment.
We have the distinct impression that they do not intend to yield on the question of unilateral most-favored-nation treatment and are holding out on the total purchase sum as a bargaining point. If we were to yield on the character of the most-favored-nation provisions they would probably be willing in my opinion to grant us the $40,000,000 figure, or something very close to it as a quid pro quo.
It was emphasized by the Soviet officials that they themselves were forced to insist on the bilateral feature on grounds of precedent and principle. They further pointed out, however, that it might have a tangible value for us in at least one specific respect, namely, that of the treatment of transit shipments through the Soviet Union. They stated that they had information to the effect that American interests in Afghanistan and Iran had been investigating possibilities of shipping goods across Soviet territory between those countries and the outside world, and they added that, unless most-favored-nation treatment was provided by international agreement, these American interests would have no right to expect it from the Soviet authorities.
Would appreciate further instructions on these points.
6. I should like to make it clear that the Soviet authorities are awaiting a reply from us, independently of the above points, concerning the exportation clause.