800.51W89 U.S.S.R/28: Telegram
The Ambassador in the Soviet Union (Bullitt) to the Secretary of State
[Received 10 p.m.]
43. Your 31, April 5, 1 p.m., and 35, April 7, 5 p.m. I had a completely unsatisfactory discussion with Litvinov this afternoon. He was angry and adamant. He refused to take the State Department draft as a basis of discussion either now or hereafter alleging that it was in absolute contravention of his understanding with the President. I replied that our belief, on the contrary, was that it was in accordance with his understanding with the President. He said that any fair-minded person could judge that the State Department draft contemplated not a loan or a credit but a taxation of Soviet trade; that the same proposal had been made by the French Minister de Monzie years ago; that it had then been rejected and all similar proposals would continue to be rejected by the Soviet Government.
He asked me what reply the Department had made to his proposal. I told him that his proposal was entirely unacceptable even as a basis of discussion and asked him if he had anything to add to it. He said he had nothing to add. With the explanation that my question was personal I asked him if the Soviet Government might be willing to put up actual metal security in addition to its promise to pay. He [Page 80] replied that the Soviet Government had never done so and would never do so.
I asked Litvinov if he had considered the consequences of his attitude pointing out that the credit markets of the United States would be open to nations not in default and would remain closed to the Soviet Union until an agreement has been reached. He said that he was fully aware of this and was not disturbed. He added that the Johnson bill presumably applied to England, France and Italy, as well as the Soviet Union and said “we shall be in very good company”. He then said: “This means that we shall buy nothing henceforth in the United States. We can cover all our needs in other countries and shall do so”.
I replied that such a course would not lead to the development of the sort of relations between our countries which we both hoped might develop. He answered that the relations of the Soviet Union with France, England, Italy and other countries had been amicable without the settlement of debts and claims and that there was no reason why the relations of the Soviet Union with the United States should not remain amicable under similar circumstances. He added that our private claimants would receive no consideration whatever.
I asked him if there were nothing that he could invent as a counterproposal which might have some chance of acceptance. He said that he had said his last word and made his maximum offer to me the last time we had discussed the matter; that so far as he was concerned the matter was closed. I said to him that if he should adhere to this attitude it might become necessary for the Government of the United States to announce that no credits of any kind would be permitted for Soviet trade. He replied that that had already been announced in Washington and added that the public announcement by the Board of Directors of the Export-Import Bank that no credits would be extended to the Soviet Union had been a badly advised threat designed to bring pressure on the Soviet Union. He said that the Soviet Union would never be moved by such a threat. I denied that any threat had been intended and I told him that I could not contemplate without deep regret and apprehension the development of our relations if he should adhere to his point of view. He said that he had no apprehensions. I told him that I saw no chance of an alteration in the point of view of my Government and that there was nothing to be done unless he should change his point of view. He said that he would not change his point of view.
I am not in a position to judge the general considerations of national policy involved in the decision we now have to make. I have not discussed Litvinov’s recent proposal in detail with him owing to the Department’s and my own objections of principle to it. I cannot [Page 81] therefore indicate authoritatively for the Department’s information what modifications of detail he might make in it if the Department should wish to take it as the basis of discussion. My impression is however that he might raise the basic 4 percent to 5 and the additional 3 percent to 5 and make provision for a sinking fund. Nevertheless he is so belligerent and intransigeant at the moment that even if the Department should wish to make his proposal the basis of discussion I should not favor doing so until he has had time to be impressed by an attitude of complete negation on our part.
I shall continue therefore to cultivate tranquil personal relations and to act as if the question of debts, claims and trade did not exist. I recommend that the Department should avoid any initiative in the matter with Troyanovsky and that when Rubinin arrives on April 19 he should be received with the greatest personal courtesy and official firmness. We should leave the next move to the Soviet Government.
In view of the above I believe that we should abandon the idea of opening consulates in Vladivostok and Odessa this summer; that the staff of the Consulate in Leningrad should be drafted from the officers and clerks now in Moscow; and that immigration visas should continue to be issued in Riga.