The Chief of the Division of Eastern European Affairs (Kelley) to the Under Secretary of State (Phillips)
Mr. Phillips: In connection with the President’s proposed message to the head of the Soviet State, I recommend that the Secretary bring to the President’s attention, along the lines contained in the letter which it was proposed be sent to the President last week regarding loans and recognition,15 the desirability of retaining in our hands one of the most effective weapons we have to obtain from the Soviet Government some measure of conciliation in reaching a solution of outstanding problems,—namely [Page 791] Government financial assistance, in the form of loans or credits, to facilitate American exports to Russia. It would, I believe, be particularly unfortunate were any arrangement or agreement to be arrived at by our financial agencies which would take from our hands this weapon at the very time when consideration is being given to the question of entering into negotiations with the Soviet authorities for the purpose of reaching a settlement of existing difficulties. Judging from the experience of other countries, there is no doubt that unless we utilize every available means of exerting pressure on the Soviet Government in order to obtain a settlement of outstanding problems, there is little likelihood that such problems can be satisfactorily solved.
It therefore seems essential (1) that any pending discussions looking to our granting financial advances to Russia be held in abeyance until we have ascertained the willingness of the Soviet Government to reach a solution of outstanding problems, or (2) that, if it be deemed desirable to continue such discussions, it be immediately made clear to the Soviet authorities that the conclusion of any definite agreement is conditional upon the reaching of a general settlement of existing difficulties.