611.6131/455: Telegram
The Secretary of State to the Ambassador in the Soviet Union (Davies)
93. Your 170, July 13, 11 p.m. References are to your numbered sections.
Your 1. For the fundamental reasons previously given and, in addition, in view of the Soviet insistence upon exceptions in favor of certain eastern and Baltic countries, the Department considers that the inclusion of a bilateral clause is definitely out of the question.
Your 3. You should continue to press for a purchase figure as near $40,000,000 as possible and not less than $36,000,000 in accordance with Section 2 of Department’s 89, July 10, 4 p.m. You should again point out the increased benefits which the Soviet Union will receive from the proposed agreement as outlined in Section 4 of Department’s 77, July 1, 3 p.m., namely, unconditional most-favored-nation treatment and the exemption of Soviet coal from tax, which latter will alone result in a financial benefit of approximately $1,000,000 to the Soviet Government.
Your 2. As stated in the last paragraph of the Department’s 91, July 12, 8 p.m., the Soviet request for the inclusion of an exportation clause introduces a new element and raises issues the necessary consideration of which will seriously delay the negotiations. In pointing this out you should make it clear to the Soviet officials that the exportation clause of Article I of the Netherlands Agreement is accompanied by certain essential exceptions embodied in paragraph 2 of Article XI of that Agreement, and that such exceptions would necessarily form part of any exportation clause which might be considered [Page 427] for inclusion in the proposed Agreement. You should further point out that the present Neutrality Act74 was enacted after the conclusion of the Netherlands Agreement and that, therefore, consideration would have to be given to a possible revision and extension of certain of the reservations made in paragraph 2 of Article XI of that Agreement, since any such reservations made now after the passage of the Neutrality Act would establish a precedent for future agreements.
- Approved May 1, 1937; 50 Stat. 121.↩