Foreign Relations of the United States, The Soviet Union, 1933–1939

861.00/11786

The Ambassador in the Soviet Union (Davies) to the Secretary of State

[Extracts]⁵⁶

No. 1341

Moscow, June 6, 1938.
[Received June 25.]

Sir: Supplementary to the oral reports on conditions in the U. S. S. R. and the discussions had with the President, the Secretary of State, and with the Department, with reference to the policy of the United States, which under present conditions in contrast to those of several years ago, would now seem advisable, I respectfully submit the following general review and summary report of the situation here.

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VI. What Are the Possible Significances of the U. S. S. R. in World Relations?

The future significance of Russian man power and resources and wealth as a factor in world conditions is obvious from the foregoing facts. Barring war, the future holds possibilities of the continued existence of this regime intact for a considerable time. Based upon the industrial and economic progress of the past eight years and the accretion of wealth during that period, as is evidenced by the fact that the U. S. S. R. has had an actual favorable balance of trade for the past two years, an enormous increase in production of gold, and many other physical indications, it is probable, and it is generally believed here that the wealth and economic power of this situation will continue to increase. The natural wealth is enormous. The technical equipment is excellent. Labor and administrative cost are low and in comparison with the capital investments are relatively negligible. There are no capital charges on investment.

Again in the development of water power, where already the production is second in the world, still greater capital investments are being planned. The agricultural wealth of the country is reproducing itself each year and is also being increased.

There are great inefficiencies and wastes that are necessarily incident to bureaucratic administration. Nevertheless, the resources are so great, that it is probable that the net result will be still further large additions to national wealth and economic power. Such a condition will inevitably have repercussions and far-reaching effects upon both world economy and upon world politics. The effect which the threatened shipments of two hundred million dollars in gold into the London markets last May had upon the exchanges of New York and London is illustrative.^*

There is still another factor in the situation. The man power here is comparatively that of a fresh, young race. The Russian country youth for the first time in history are afforded opportunities for education and technical equipment, and they see the opportunity that for the first time gives them “escape” from the restrictions of the peasant caste. In the city of Dnieperpetrovsk [Dnepropetrovsk] (population 600,000) there is a university in which it is alleged 25,000 students attend. The country boy has come to town and is “on his way”. I was deeply impressed by the earnestness, ability, and balance of the men (all young) who are in charge of these huge industrial plants which I visited. This large class of youthful population are fired by the opportunities which open up new vistas to them through the application of science and industry to the great natural wealth of their country. It is quite reasonable to assume that regardless of who might be at the top of this Government this force will not be denied. They have tasted the fruits. With its natural mineral and agricultural wealth, tremendous actual and potential water power, cheap inland water transportation, low labor costs, and the appreciation of the possibilities of the application of science and machinery to natural resources, this situation appears to me to be analogous to that imminence of rapid development, which confronted the United States seventy years ago.

It will probably be a number of years before this production will affect world markets. All that can be produced, for a time, will be required for local consumption, which, as President Kalinin stated to me, was enormous and like a “consuming fire”. If, however, this regime, or a similar successor persists for some time, the world will have to reckon not only with the potentialities, but the actualities of a very substantial factor in the world economy. Its repercussions on economic and political developments in Europe and in the world will be far-reaching.

A possible alternative, that the future affords, is that this territory might be subdivided by internal revolution into several large independent autonomous subdivisions. Similarity of interests would group them naturally into White Russia (Western Russia), the Ukraine, the Oriental Caucasus, Mongolia, the Eastern Provinces, and Siberia.

Under these conditions it is interesting to note that the R. S. F. S. R.⁵⁷ comprises that section of Western Russia from Finland to the Caspian and Black Seas, excluding the Ukraine, and is said to contain 50% of the population and 80% of its territory. It has been said that a line drawn from Leningrad to the Caspian Sea would bound on the east that section of Russia that contains 80% of the agricultural productivity, 70% of the population, and a very large part of its water power, coal, steel, and other basic resources. Were this section to be cut in two, nevertheless the potentialities, economically and politically, under the promise of continued development would be very substantial, and would materially affect both European and world conditions.

A third alternative that the future affords might be the possible but remote contingency of conquest by, or union of, Germany and Russia. It need scarcely be pointed out that if German scientific and industrial methods and German managerial capacity and discipline were applied to the resources of man power and wealth here the effects upon Europe and the world would be very great.

It is probable that it is, in part, because of these considerations that the great western European powers, as well as other nations, maintain diplomatic representation here; and some of them in the face of wellnigh intolerable conditions.

VII. What Are the Possible Significances of the U. S. S. R. to the United States?

The traditional relationship between the United States and the Russian people has been one of friendship and good will. Catherine the Great refused the importunities of George the Third to loan or hire her troops for use against the American colonies. Past historical events and other considerations account for the fact that there is undoubtedly great friendliness on the part of the Russian people toward the United States.

As stated in a previous despatch, the authorities of this Government have gone so far as to expressly state to me, that their Government would do more to accommodate the United States than it would do for any other capitalistic country. They have given recently some proof of this attitude (notably in the Hrinkevich and Rubens cases).

As for ourselves—this system is a tyranny, clothed in horror. While a dictatorship of the most ruthless and cruel type exists here, it appears to differ from a fascist dictatorship, at least in one respect. Dictatorship over the proletariat is not the objective or end this system professes to seek, as is the case with fascist ideology. The fact of dictatorship is apologized for here. It is justified on the ground that it is a realistic expedient, resorted to only to protect the masses of the people, until they can themselves rule under a system where ideologically the individual and not the state shall be supreme. Moreover, there is no doubt of the present sincerity of this regime in its desire to maintain Peace.

Considered objectively, and without regard to ideological conflicts, there are certain facts which vitally affect the United States.

The resources of Russia, strategic and necessary in time of war, complement and supply the lack of those existing in the United States.

There are no conflicts of physical interests between the United States and the U. S. S. R. There is nothing that either has which is desired by or could be taken by the other.

The territory of the U. S. S. R. is contiguous to and lies to the west and north of “Manchukuo” and north and east and west of Japan. As stated heretofore, the U. S. S. R. supports in this region a complete and self-sufficient army, variously estimated at from 350,000 to 450,000 men. This armed force is equipped with modern armament, and it is alleged that it has sufficient supplies, independent of western Russia for a two-year aggressive campaign. It is reported to be the fixed policy of this Government to constantly maintain in this region two Soviet soldiers for every one Japanese soldier in “Manchukuo”. (This was stated to me by the Japanese Ambassador.⁵⁸)

The Soviet Union is making great efforts to build up its Navy. It is now claimed that they have 40 submarines in Pacific waters.

Vladivostok and the Eastern Provinces are the bases for a large number of Russian bombing planes and pursuit planes (probably 1,500), all within cruising radius of Japanese cities that are largely built of wood.

Consul Blake, of our Service, arriving here from Japan recently, advised that there is much discussion among Japanese business men of the danger arising from Russian airplanes.

The London Times of April 8, 1938, under a Tokyo date line stated: “To adduce Japan’s refusal to give information on her naval building plans as the reason for the invocation of the escalation clause by Britain, the United States, and France was a ‘mere transparent trick,’ declared Rear Admiral Noda, spokesman of the Admiralty, in an interview with the foreign press this morning.…⁵⁹ Admiral Noda, speaking as Admiralty spokesman, then went on to complain that the defense line of the United States Navy, which had hitherto consisted of the American coasts and of the Panama Canal, was now ‘advancing’ farther west in the Pacific.”

There is one situation, where a very serious issue might develop. That is the possible intrusion of the U. S. S. R. through the Comintern into the local affairs of the United States. Fortunately that has been measurably eliminated by the agreement entered into between President Roosevelt and Commissar Litvinov in 1934 [1933].⁶⁰ Apparently there is very little activity on the part of the Comintern. The French Ambassador⁶¹ here has stated to me that in his opinion the Stalin Government is desirous of lessening contacts with world revolutionary forces and would reduce its interest in the Comintern, but for the fact that the Government here desires to use the Comintern as an adjunct of military defense in case of war with aggressor states. Recent developments, however, make it clear that the Comintern will not be abandoned. Along with the Red Army and Secret Police, the “Workers of the World” are held up as the defenders of Russia against fascist attack.

A common ground between the United States and the U. S. S. R., and one that will obtain for a long period of time, in my opinion, lies in the fact that both are sincere advocates of World Peace.

In my opinion, there is no danger from communism here, so far as the United States is concerned. To maintain its existence, this Government has to apply capitalistic principles. Otherwise it will fail and be overthrown. That will not be permitted by the men presently in power, if they can avoid it. I expect to see this Government, while professing devotion to Communism, move constantly more to the Right, in practice, just as it has for the past eight years. If it maintains itself, it may evolve into a type of Fabian socialism, with large industry in the hands of the State, with, however, the agricultural and smaller businesses and traders working under capitalistic, property, and profit principles.

Summary

I

The extent of territory, the natural wealth—agricultural, mineral, water power, fisheries, natural ways, and man power of the U. S. S. R.—present a situation pregnant with potentialities of tremendous economic development and power.

II

The Bolshevik regime floundered on the verge of anarchy and chaos for ten years, but during the last ten years under the Five-Year Plans a most extraordinary record of hydraulic, industrial, communication, social, educational and Army development is quite apparent. It is undoubtedly due to the driving force of Stalin. It has been characterized by a marked departure from the communistic principle in practice. The profit motive had to be resorted to in order to make the system work.

III

The weaknesses in the system are many and apparent. Communism will fail here. Human nature cannot be changed in two generations. The system is now a type of capitalistic state socialism. Its continued existence and development cannot be forecast, as there are too many imponderables in the problem, such as European war, etc. It is generally considered that if the present Government were overthrown from “within” by a military dictatorship or otherwise, a type of state socialism would still obtain, due to the education of each succeeding class of children during the last twenty years, all educated in the religion of their theories.

IV

The strength of the present regime is found in the resolute, bold, ruthless, and able leadership of Stalin. He has complete control of the Army, the Secret Police, the newspapers, the radios, and the schools. Stalin is fast becoming, along with Lenin, the “superman” ideal of the masses. For the present this regime is firmly entrenched. There is always, however, the threat that hangs over dictatorships. Barring accident or assassination coupled with a coup d’état, the present regime will persist for some time.

V

The military strength of the U. S. S. R. is impressive. In both quality and numbers the man power is extraordinary. The standing army of approximately 1,500,000 men is divided into two self-contained units, one in the west and one in the orient—about 70% in the west and 30% in the east. It is well equipped with side arms and well disciplined and trained to fanatical devotion to communism. Its mechanized units are very good. The air force personnel is excellent—their equipment good in pursuit planes, poor in bombing equipment. Numerically the air force is probably the strongest of the great powers. In air equipment, generally speaking, they probably are two or three years behind the western nations.

The Government is supremely confident that it could successfully resist simultaneous attack by Japan and Germany.

It would be exceedingly difficult to conquer or annihilate these forces, with their ally the Russian winter.

The weakness lies, perhaps, in the second line of defense—the industrial production back of the lines and adequate supplies of high-grade petroleum products.

VI

The significance of this situation to Europe and the world is very great. Regardless of what regime, or what character of government exists, the forces that have been set in motion, as applied to this enormous natural wealth, will inevitably develop an economic factor of substantial character that will make its influence felt in Europe and in world affairs.

VII

The significance to the United States is quite clear. If Japan should go berserk by any chance, the fact that Russia is at her back door is of consequence to us.

The Soviet Union is more friendly to the United States than to any foreign power. That is quite clear.

If the U. S. S. R. should be excluded from the proposed Four Power Pact and become isolated (as it now seems to be convinced it will be), there is reason to believe that it may continue to live unto itself and develop indefinitely. It may develop into a very potential threat to world economic and political stability.

Communism holds no serious threat to the United States. Friendly relations in the future may be of great general value.

Respectfully yours,

Joseph E. Davies

56. For a mass of miscellaneous material relating to affairs and conditions within the Soviet Union contained in this despatch, and published with few significant omissions or alterations, see Joseph E. Davies, Mission to Moscow (New York, 1941), pp. 377–410.
57. This gold situation is illustrative of the potential significance of this situation. Gold as a stable measure of value as a medium of exchange has as one of its chief supports for long-range stability the fact that under the operation of the law of supply and demand, the production of gold has responded to the law of supply and demand, dependent upon the cost of production. The supply of gold has adjusted itself to changing conditions dependent upon costs. When gold prices are high, high-cost producing mines come into production. When the price goes down automatically they go out of production. Thus do costs, and the law of supply and demand adjust the gold supply to world commodities and conditions. A new factor in this established equation is possible if any part of the world produces gold without labor costs in money or without regard to costs of production. That factor is of far-reaching significance. Potentially it exists here. [Footnote in the original.]
57. Russian Socialist Federated Soviet Republic.
58. Shigemitsu Mamoru.
59. Omission indicated in the original despatch.
60. Ante, pp. 28–29.
61. Robert Coulondre.