Memorandum by the Chief of the Division of Eastern European Affairs (Kelley)

Recommendations and Considerations in Connection With Question of Russian Governmental Indebtedness to the Government of the United States

1. It is recommended that the items of $406,082.30 and $4,465,465.07 listed by the Treasury Department as part of Russia’s indebtedness to the Government of the United States be not presented to the Soviet government for payment.

These items represent obligations received on account of sales in 1919 of relief supplies and surplus war materials to representatives of the Kolchak26 government, which was never recognized as the Government of Russia by the United States.

2. The Soviet government should be required to acknowledge liability on the debt, or, in view of the loss of territory, on an appropriate share of the debt, incurred by the Russian Provisional Government to the Government of the United States.

No principle is more firmly established in international law than the principle that a change in the internal constitution of a State does not affect the public debt of the State, and that a new Government succeeds to the financial obligations contracted by previous Governments.

In this connection it is to be noted that the United States as a great creditor nation and as a country whose citizens are engaged in worldwide financial activities has a profound interest in the maintenance and strengthening of the principle that a new Government is responsible for the financial obligations contracted by the State under preceding Governments.

3. Inasmuch as the Russian debt represents money advanced to Russia by the Government of the United States to aid in the prosecution of the war against Germany, the Russian debt should be treated on the same basis as the debts incurred by other countries under the same circumstances.

4. In arranging a settlement of the Russian debt, consideration should be given to the fact that there is in the United States Russian governmental property, comprising bank deposits and valid claims (excluding the Russian Embassy), to the value, including interest, of ten to twelve million dollars. While this amount may not be large enough to be considered as a possible lump sum settlement of the Russian debt, it might [Page 801] well be taken in part settlement. There should be obtained at the same time from the Soviet government its formal acceptance of the disposition which has been made in the period from 1917 to date of the property of the Russian Government in the United States at the time of the revolution.

If such an arrangement is not arrived at, it will be necessary to obtain from the Soviet government an understanding (1) not to make a claim to dispose in any way of the funds and other property of the former Imperial and Provisional Russian Governments in the United States pending a settlement of outstanding claims, and (2) not to question in any way the disposition which has been made from 1917 to date of Russian governmental property in the United States.

5. An interesting consideration to be borne in mind is the circumstance that the money loaned by the Government of the United States to the Russian Government was advanced to the Provisional Government of Russia, which was established following the abdication of the Tsar. Almost all, if not all, other indebtedness of the Russian Government to foreign Governments was incurred by the Imperial Russian Government. It has been suggested that the Soviet government could undertake to honor the indebtedness of the Russian Provisional Government without modifying any position it may have taken towards the indebtedness contracted by the Russian Imperial Government.

  1. Admiral Alexander V. Kolchak headed a government in Siberia, 1918–20; he was executed early in 1920 after the collapse of his régime.