800.51W89 U.S.S.R./26

Memorandum by the Secretary of State

During his call, the Soviet Ambassador took up the question of the failure or indisposition of the Russian Export-Import Bank here to function, by cooperating with the Russian Government and American exporters in taking care of the credit situation involved. I stated to the Ambassador that I must be entirely frank and say that the President, Mr. Bullitt, Assistant Secretary Moore, and others who participated in the Russian debt conversations with Mr. Litvinoff when he was here during last November, were greatly surprised and keenly disappointed to learn that Mr. Litvinoff offered a contention and a version of the debt understanding, entered into at the time of his visit here, entirely different from anything the American officials [Page 71] thought they were discussing and entirely different from anything they were thinking about; that our Government could not for a moment justify to Russian creditors in this country a settlement for a given amount of money payable without any interest at the end of 20 years. I said that since a fair rate of interest would double the principal within a 20-year period, it was patent that merely to propose payments in 20 years was equivalent in a large sense to nothing at all. I finally suggested that my government officials were so surprised and disappointed at this, to them, new and strange and unexpected contention of Mr. Litvinoff, which showed such a wide misunderstanding, that it would perhaps be best to bring all commercial and financial relations to a standstill until there could be a clarification of these misunderstandings; that this included the deferment of credits by the so-called Russian Export-Import Bank here.

The Ambassador also brought up another point, to the effect the Court of Appeals of New York State had recently held that certain Russians in Paris were not entitled to the sum of $46,000 which they claimed a right and title to in connection with certain corporate holdings in New York. The Ambassador further suggested that under the agreement in the conversations with Litvinoff in November last, amounts going to nationals of either country should be turned over to their respective governments and handled through them. He said that he and the Russian claimants felt, or at least they felt, they were entitled to attention by our Government to the effect of this New York Court decision. I stated to him that Assistant Secretary Moore was a good lawyer and also sat in the conversations with Litvinoff, and that I would ask him to present this matter to Mr. Moore, which he gladly proceeded to do.

C[ordell] H[ull]