800.51W89 U.S.S.R/22: Telegram
The Ambassador in the Soviet Union (Bullitt) to the Secretary of State
[Received 10:10 a.m.]
13. Continuing my No. 12, March 14, midnight.5 We then discussed the State Department draft of the note in regard to claims and credits which Troyanovsky had forwarded to Litvinov a copy of which he gave to me. Litvinov expressed objection to almost every sentence of the draft.
- (a)
- In regard to the first paragraph of the note he said that the wording of the note would compel the Soviet Government to make settlements with all the other governments which had claims against the Soviet Union and objected to the sum being placed at $150,000,000. He said that he was prepared to suggest $100,000,000 to his Government but without interest. He was vehement in his objection to interest. I reminded him that the dollar had been cut to 60 percent of its former value and that the Soviet Union no longer ran the risk of the rise of the dollar to parity, that therefore the sum of $150,000,000 actually represented only $90,000,000. We had some discussion on this point and I gathered the impression that we may perhaps be able to get the full $150,000,000. We should certainly hold out for it at present.
- (b)
- In regard to the second paragraph of the note Litvinov took the surprising position that he had not agreed to pay any extra interest or any credits whatever but only on loans to be given to his Government to be used for purchases anywhere. I combated this assertion as vigorously as possible reminding him that we had had long discussions of the possibility of using frozen American credits in Germany and emphasizing the fact that the President had never had any idea of a direct loan to the Soviet Government but only of a loan in the form of credits. I pointed out that no loan could possibly be made by the United States to any foreign country at the present time and that we had assumed that he was fully aware that a loan in the form of credits [Page 67] was the only possibility. He agreed that he had known that it would be extraordinarily difficult for the Government of the United States to make any loan to the Soviet Union but insisted that he had thought the President would find a way to do so. I feel sure that the President never envisaged a loan in any other form than that of a commercial credit to be expended in the United States. An instruction from the President stating his point of view in regard to this matter with vigor would be of great assistance to me in subsequent conversations with Litvinov. If Litvinov’s physicians permit I am to see him on March 16th.
Litvinov also objected to the fixing of 10 percent as the amount of additional interest. He recalled to me that in his discussion of this matter with Secretary of the Treasury Morgenthau the Secretary of the Treasury had suggested the sum of 4 percent normal interest and 6 percent additional interest. Litvinov also recalled the fact that he had offered the Secretary of the Treasury a normal interest rate of 3 percent and an additional rate of 4 percent and finished by saying “so you see on this point also our points of view are very far apart”.
In spite of Litvinov’s highly unfavorable reception of the State Department draft I derived the impression that if we maintain our position energetically and forcibly we shall be able to arrive at a solution in large measure satisfactory to us.
- Not printed.↩