Foreign Relations of the United States Diplomatic Papers, 1934, General, the British Commonwealth, Volume I

800.51W89 Latvia/157

The Latvian Minister for Foreign Affairs (Ulmanis) to the American Chargé in Latvia (Cole)⁶⁴

Riga, June 12, 1934.

Monsieur le Chargé d’Affaires: I have the honour to refer to the correspondence exchanged between the Ministry for Foreign Affairs and the American Legation regarding the indebtedness of Latvia to the United States and to refer, in particular, to the Aide-Mémoire of January 26th, 1933,⁶⁵ in which the United States Secretary of State announced that “the President would be glad to receive separately at Washington a representative or representatives of the Latvian Government for discussions having a similar scope and purpose (as those conducted with the British Government) after the proposed discussions with the British Government had been completed”, and to the Note, dated June 21st, 1933,⁶⁶ in which Mr. William Phillips, Acting Secretary of State, stated that “the representations of the Government of Latvia with regard to the entire debt question between our two countries will be gladly heard at a date to be agreed upon between us.”

As you are aware, the situation had undergone no change by the end of 1933, when a further instalment on the Latvian war debt to the United States Government was due, and for the reasons explained to you in the Note of my predecessor, dated November 22nd, 1933,⁶⁷ the Latvian Government offered a “token payment” on the instalment due on December 15th, 1933, which was accepted by the United States Government.

To prove their earnest desire to carry out their obligations, the Latvian Government would have been prepared to make a further “token payment” on June 15th, next, similar to those made on two previous occasions, in acknowledgment of their debt and without prejudice to their right to present the case for its readjustment, on the assumption that they would not be considered in default. They understand, however, that the course pursued by them on previous occasions is barred in consequence of recent legislation passed in the United States, and that the procedure adopted by common agreement in 1933 is no longer practicable.

On the other hand, the financial and economic situation of this country, reference to which was made in the Aide-Mémoire presented to His Excellency Monsieur Skinner on December 3rd, 1932,⁶⁸ and in various Notes at other times, has, so far, shown no signs of improvement. The foreign trade returns for 1933 and for the first quarter of 1934 reveal the effects of the universal economic difficulties to be still acutely felt, and the Latvian trade balance continues to be increasingly adverse in general, and in particular inasmuch as trade with the United States is concerned. Only at the cost of heavy sacrifices and by adopting restrictive measures of the utmost rigour has it been possible for my Government to maintain the stability of the currency and to protect the national economic system from dangerous shocks.

Such a state of affairs does not permit my Government to resume payment in full towards the settlement of a debt which cannot be compensated by goods or by services, and they are fully aware of the grave complications which are likely to be caused by the transfer of a sum as important as that falling due on June 15th, which would impose too severe a strain upon the national resources.

The Latvian Government therefore deeply regret that, having had no opportunity to discuss the question of their debt with the United States Government and it being impossible for them to contemplate a resumption of the payment of the instalment which becomes due on June 15th, they feel compelled, in view of the reasons stated above, to suspend all payments pending the final revision of the Debt Funding Agreement of September 24th, 1925.⁶⁹ They wish to reiterate that, having no intention of repudiating their obligations, they will be prepared to enter upon a further discussion of the subject at any time when such a discussion would be agreeable to the United States Government.

I avail myself [etc.]

K. Ulmanis

[See also Department of State, Press Releases, June 16, 1934, page 401; ibid., January 12, 1935, page 20.]

64. Transmitted to the Department by the Chargé in Latvia in his despatch No. 355, June 14, 1934; received June 26.
65. Foreign Relations, 1933, vol. i, p. 893.
66. Ibid., p. 896.
67. Ibid.
68. Foreign Relations, 1932, vol. i, p. 786.
69. Combined Annual Reports of the World War Foreign Debts Commission 1922–1926, p. 184.