800.51W89 U.S.S.R./49: Telegram
The Secretary of State to the Ambassador in the Soviet Union (Bullitt)
77. Your 81, May 13, noon. Confident you will endeavor to base the agreement on our previous proposal but if you must make concessions following suggestions may be helpful.
Debt to be paid in 20 years provided in that time additional interest on credits is sufficient for that purpose, but provided further that, on portion of debt remaining unpaid at end of period, arrangement shall continue until payment in full. These provisos which furnish the Soviet Government a very advantageous assurance should influence action.
Since there has been much reference made to the “Kerensky” obligations, Soviet Government should realize that amount received on debt would be mainly for the benefit of claims of our nationals, although we can not make any stipulation to that effect.
With reference to interest rates, there should be a rate of 3 per cent and certainly not less than 2 per cent on the debt. There should be a rate of 5 per cent on credits, but if there is difficulty on this point, you can advise us. There should be additional interests on credits of 10 per cent and certainly not less than 8 per cent, that to be applied on principal and interest of debt.
While the Bank is anxious to proceed and can be relied on for immediate large credits, it can not be expected to specify in advance the total credits for any one year or the maximum or minimum of individual transactions. Credits will be negotiated between Bank and exporter on basis of a general agreement with Soviet Government covering [Page 97] character and amount of exports and imports. Of course, as heretofore stated, Bank must reserve its right to approve any and all transactions since otherwise it would be placing the business of this country with the Soviet Union under the control and direction of the Soviet Government.
Endeavor to provide that in case of war we may suspend shipments.
President has seen this.