The Secretary of State to Mr. Fred L. Eberhardt 6

Sir: Your letter of February 11, 19337 has been received, and the constructive spirit in which you comment therein regarding the policies of this Government with respect to the present régime in Russia is appreciated.

The Department is not in a position at the present time, of course, to make any statement with respect to the attitude which will be taken towards the matters discussed by you by the administration which will come into office on March 4, 1933. I can assure you, however, that those who have participated in the formulation of the policies of this Government with respect to the Soviet régime have given much thought to the question of how trade relations between this country and Russia may be conducted most advantageously under present conditions, and that they have made decisions of policy with respect to Russia only after a careful consideration of the various factors involved, including the effect which such decisions might have upon the interests of American manufacturers and producers.

It would appear from your letter that you have already made some study of the reasons which have prompted this Government to refrain from according recognition to the present régime in Russia. For your further information in this connection, there is being enclosed certain [Page 781] material,8 an examination of which will disclose the fact that this Government has taken the position that it would be unwise for it to enter into relations with the Soviet régime so long as the present rulers of Russia persist in aims and practices in the field of international relations which are inconsistent with international friendship.

It has been the desire of this Government to see established a sound foundation upon which trade and intercourse between the United States and Russia may develop and flourish to the benefit of the peoples of both countries. This Government has been of the opinion, however, that any real or lasting benefit to the people of the United States would not be attained by the establishment of relations with Russia until the present rulers of that country have given evidence that they are prepared to carry out in good faith the international obligations which experience has demonstrated are essential to the development of friendly intercourse and commerce between nations.

As you are aware, this Government, although not prepared to enter into diplomatic relations with the present régime in Russia, imposes no restrictions on trade with that country, nor has it objected to the financing incidental to ordinary current commercial intercourse between the two countries or to banking arrangements necessary to finance contracts for the sale of American goods on long term credits, providing such financing did not involve the sale of securities to the public. As is pointed out by Mr. Kellogg in a statement made when he was Secretary of State, a copy of which is enclosed,9 the Department has endeavored to reduce to a minimum the difficulties affecting commercial relations between the United States and Russia. During the years 1924–1931, inclusive, a substantial trade developed between the two countries in which your firm appears to have participated. The marked decrease in our exports to Russia which took place during the last year has not been due to the absence of diplomatic relations between the United States and Russia, but primarily to the decline of Russia’s purchasing power and to the circumstance that credit terms more favorable than American exporters have been willing to grant have become available to Soviet purchasing agencies in various other countries, such as Germany, England, Italy, et cetera, as a result of the fact that the Governments of those countries have been underwriting credits extended by their nationals to such agencies.

It is not believed that the mere act of recognition of the Soviet régime would make it possible for the Soviet authorities appreciably to increase their purchases in the United States. There is no question that at the present time the rulers of Russia are desirous, in their own interests, [Page 782] of purchasing more goods in this country. Their inability to increase their purchases appears to arise from the circumstance that they are unable either to pay in cash, or, as your letter suggests, to obtain credit terms acceptable to them.

In my opinion, recognition would not appreciably alter the factors responsible for the credit standing of the Soviet régime in this country, and therefore would not be likely to bring about any material improvement in the credit terms offered to that régime. You will find that recognition of the Soviet régime by the Governments of other countries has not resulted in any material change in the attitude of the business men of those countries with respect to the risks involved in granting credits to that régime. According to the Department’s understanding, the discount rate of Russian trade acceptances which are not covered by governmental guarantees is practically the same in those countries as it is in countries the Governments of which have not recognized the Soviet régime. It is my belief, therefore, that the establishment of relations with Russia under present conditions would not appreciably alter the attitude of your banking connections with respect to Russian trade acceptances.

In concluding, I desire to emphasize that the American Government has not failed to realize the importance to American firms, during the present period of depression, of obtaining foreign orders, and that the present situation with respect to Russian-American trade has not developed as a result of the indifference of the Government to the interests of its nationals engaged in manufacture and commerce.

Very truly yours,

For the Secretary of State:
W. R. Castle, Jr.

Under Secretary
  1. President of Gould & Eberhardt, manufacturers of machine tools, Newark (Irvington), N. J.
  2. Not printed.
  3. Only one of the enclosures is printed; see footnote 9 below.
  4. The enclosure (an excerpt from a statement entitled “Foreign Relations”) is printed in Foreign Relations, 1928, vol. iii, p. 822.