711.00111 Armament Control/Military Secrets/919

Memorandum by the Chief of the Office of Arms and Munitions Control (Green) to the Secretary of State

In a recent conversation you told me that you might wish to mention in Cabinet recent developments in connection with the proposal of the Carp Export and Import Corporation, agents of the U. S. S. R., to purchase in this country one or more battleships for the Soviet Government.

The facts are:

Carp has for some time had $200,000,000 on deposit in New York and Philadelphia banks. He has been attempting to close contracts with American naval architects and ship builders, and particularly with the New York Shipbuilding Corporation and the Bethlehem Shipbuilding Corporation, Limited. Several American companies, including the two mentioned, have apparently been disposed to enter into contracts with Carp, but none has done so and Carp has apparently abandoned the attempt to purchase battleships in this country.

During the course of the negotiations over a period of nearly a year, representatives of Carp and of the interested American companies have been fully informed by the Department of the laws relating to such transactions as those proposed and to the policy of the Government in respect to the proposed transactions. In the initial stages, the Department, after consultation with the Navy Department, expressed objection to the proposed installation of 16 inch guns on a battleship to be constructed for export and to the proposal that the Navy Department cooperate extensively with the ship builders even to the extent of inspecting and testing material and armament. The first objection was withdrawn when the Japanese Government refused to enter into an international agreement to limit the caliber of naval guns; the proposed contract was modified so as to eliminate the grounds on which the second objection was made. The ship builders seemed to be convinced that they could construct a ship which would not contain any features considered military secrets. The Department, complying with the mandatory provisions of the law, issued export licenses for material and armament for the proposed battleships to the value of $10,030,100. All possible obstacles to the carrying out of the proposed transaction seemed to be removed. I have been informed [Page 489] on what appears to be trustworthy authority that the reason why the proposed transaction was abandoned is that subordinate officers in the Navy Department have repeatedly told the ship builders and the representatives of other interested American companies not to enter into contracts with representatives of the U. S. S. R., and that the ship builders and others concerned did not dare to enter into transactions contrary to the desires of naval officers who deal with matters relating to contracts with the United States Navy.

Joseph C. Green