Foreign Relations of the United States Diplomatic Papers, 1937, The British Commonwealth, Europe, Near East and Africa, Volume II

661.00251/4

The Chargé in the Soviet Union (Henderson) to the Secretary of State

No. 532

Moscow, September 3, 1937.
[Received September 21.]

Sir: I have the honor to report that the following recent informal conversations which I have had with officials of the People’s Commissariat for Foreign Affairs relating to the possibility of the Amiranian Oil Company, the American firm which recently was granted certain oil concessions in Iran and Afghanistan, being permitted to ship across Soviet territory machinery and supplies destined for Iran and Afghanistan, I have been informed by those officials as follows:

(1) Since the Soviet Government has no treaty with Afghanistan providing for the shipment of transit goods destined for, or emanating from, that country across the territory of the Soviet Union, it is unable to grant permission to American firms or to any foreign firms to send merchandise to Afghanistan across Soviet territory.

(2) The Soviet Government does have a treaty with Iran providing for the shipment across the territory of the Soviet Union of transit goods destined for that country. Only certain countries which have clauses in their commercial agreements relating to transit traffic have the right, however, to send their products across the Soviet Union to Iran. Nevertheless, as a gesture of international amity, the Soviet Government sometimes permits the products of countries which do not have commercial agreements with the Soviet Government possessing such clauses to be sent in transit across Soviet territory. The Soviet Government as a friendly gesture is willing to permit the Amiranian Oil Company to ship through the Soviet Union to the Iranian frontiers supplies and machinery destined for Iran.

Since the circumstances which resulted in the above statement are somewhat peculiar and are indicative of the interest with which the Soviet Government is regarding the operation of the American concessions in Central Asia, I feel that I should furnish them in some detail to the Department.

Shortly after the world press had announced the granting of the concessions, the Afghan Ambassador informed me that he had heard that the Soviet authorities were displeased that the Afghan and Iranian Governments should have made such important agreements with a foreign firm without first discussing the matter with the Soviet Government. He said that although no Soviet official had dared to mention the matter to him in view of the brusque manner with which he is accustomed to reply to any Soviet inquiries which might imply that the Soviet Union has any special interests in Afghanistan, he had heard that officials of the Commissariat for Foreign Affairs had reproached the Iranian Ambassador for the failure of the Iranian Government to notify the Soviet Government in advance of its intentions to grant the concession.

Several days later a member of the Iranian Embassy informed me that it was quite true that officials of the Commissariat for Foreign Affairs had expressed their annoyance that Iran would complete so important and far reaching a business transaction without first discussing it with the Soviet Union.

In the spring of the present year, Mr. Stomaniakov, the Assistant People’s Commissar for Foreign Affairs, during the course of a conversation on another subject, referred to the concessions. He said that the Soviet Government had no objection to an American firm operating oil concessions in northern Afghanistan and Iran provided the firm was controlled by American capital only and provided its members and employees were American citizens. He pointed out that his Government did have a certain amount of concern, however, lest German capital, or capital of some other country the interests of which in Central Asia were opposed to Soviet interests, might gain control over the firm and might subsequently make use of the concession for political purposes.

I told him that I was not fully informed regarding the persons who were the financial backers of the Company but that I was confident, from such information as happened to be in my possession, that the Company was not in any way under the influence of non-American capital and that there was no danger that it would in the future fall under the control of non-Americans. He told me that he would appreciate it if I would make informal inquiries in this connection and let him know the results thereof.

Before the pressure of other business of the Mission would permit me to make inquiries on behalf of Mr. Stomaniakov to the Department, the Embassy received copies of despatches No. 1018 of March 18, 1937, and No. 1025 of March 27, 1937, from the American Legation at Teheran. I observed from these despatches that the Soviet Embassy in Teheran had been informed fully regarding the American and non-political character of the concessions. I thereupon told Mr. Rosenblum, the Chief of the Economic Division of the People’s Commissariat for Foreign Affairs, who was aware of the substance of Mr. Stomaniakov’s remarks to me, that, according to my understanding, the Soviet Embassy in Teheran had already been placed in possession of the information desired by Mr. Stomaniakov and asked if, in view of that fact, Mr. Stomaniakov desired me to pursue the matter any further. Mr. Rosenblum replied that the information received by the Soviet Embassy in Teheran was of so satisfactory a nature that there seemed to be no longer any reason for me to make inquiries relating to the subject.

On July 17, 1937, Mr. Linn M. Farish, a representative of the Amiranian Oil Company, called at the Embassy for the purpose of discussing the possibility and probability of making use of the Soviet railways in transporting materials and supplies for the company across Soviet territory to Afghanistan and Iran. Mr. Farish had already been in the Soviet Union for several days in his capacity as a delegate to the International Geological Congress which was convening in Moscow. He said that the experiences which he had already encountered while in the Soviet Union had tended to confirm the feeling which he had before coming to that country, namely, that it would be preferable for his Company to endeavor to build up a line of communications to the scenes of operation which would render it absolutely independent of the Soviet Government. He added that he would appreciate it, nevertheless, if the Embassy would endeavor to make an appointment for him with some Soviet official who would be able to inform him what the Soviet attitude might be in case his Company should desire to make use of the Soviet railways in transporting certain types of material to Iran and Afghanistan.

During the course of the conversation Mr. Farish said that he would appreciate any suggestions that I might be able to give him which, in my opinion, might be useful to him or to his Company. I replied that I assumed that his Company had already been advised regarding the extreme delicacy of the problems which lay before it. I said that his Company was probably already aware of the fact that the Soviet Government was inclined to view the activities of foreigners in Central Asia adjacent to Soviet territory with suspicion; that it seemed to me that his Company should use every reasonable care to prevent any incident from taking place which would arouse the hostility of Soviet officials towards the concessions since undoubtedly the Soviet Government with its numerous ramifications in Central Asia would be able, in case it seriously set out to do so, to cause the concessionaires considerable difficulty. I added that in order to quiet Soviet fears and to lessen the likelihood of the development of political complications of an unpleasent nature, the Company might find it advisable to adopt the following policies:

(1) Select with the greatest care every person to be despatched to Iran and Afghanistan regardless of the type of work which he was expected to perform;

(2) Make sure that only American citizens and, preferably, only native born American citizens without European ties be selected;

(3) Send no person not of a high grade of intelligence or a high moral character;

(4) Give all employees, before their departure from the United States, a careful training in the manner in which they are to conduct themselves. It should be impressed upon them, in particular, that they are not to engage in political discussions of any kind or to show any interest in political matters.

(5) Give all employees to understand that they would be discharged immediately if it should be found that they were making disparaging remarks regarding any of the countries bordering on Afghanistan or engaging in any other acts reflecting an unfriendly attitude towards those countries.

Mr. Farish stated that his Company already realized the importance of its personnel problem and had made it a rule to send to Central Asia only American citizens of good character and high intelligence. He said that if I should perceive no objection thereto, I might in conversation with Soviet officials state that he had told me that the Company would immediately discharge any employee if it should find that he had been guilty of engaging in political activities directed against the Soviet Union or any other neighbor of Afghanistan or Iran.

Several days later I discussed the matter with Mr. Rosenblum of the Commissariat for Foreign Affairs. I asked Mr. Rosenblum if it would be possible for him to arrange for Mr. Farish to discuss the transit problem with the appropriate Soviet officials. During the course of the conversation I told Mr. Rosenblum what Mr. Farish had said to me regarding the policy which his Company had adopted towards political activities on the part of its employees and of the measures which his Company would take in case it should find any of its employees had engaged in such activities. Mr. Rosenblum replied that there was no need for Mr. Farish to discuss the transit question with the Soviet authorities since the matter was one to be settled between the American and Soviet Governments rather than between a representative of a private firm and Soviet railway officials. He said that after he had taken the question up with the appropriate Soviet officials he would be in a better position to discuss it with me.

Mr. Rosenblum added that he was very much interested in what I had to say regarding the determination of the Company not to permit any of its employees to engage in political activities directed against countries bordering on Afghanistan and Iran. Frankly, he said, the Soviet Government had been somewhat apprehensive lest some Power unfriendly to the Soviet Union might endeavor to introduce agents into the service of the Company. He wondered if I would object to writing him a letter stating that I had been assured by the Company that it would discharge any employee found guilty of engaging in activities unfriendly to the Soviet Union. I replied that I could not for a single moment consider writing a letter of that kind; that such a letter might be construed as some sort of a promise made by the Company through the American Government; that such remarks as I had made to him had been made merely for the purpose of furnishing him with background with respect to the policies of the Company and that I hoped he would not construe them as any undertaking on behalf of the Company or of the American Government. I added that the Company was a purely private organization not connected in any way with the American Government and that the interest which the American Government had in the Company was precisely that which it would have in any private American enterprise engaged in doing business abroad. Mr. Rosenblum said that he had not suggested a letter with the idea that it was to be in the nature of a pledge. He had mentioned it because he felt that it would help to quiet the apprehension of the authorities charged with promoting Soviet interests in Central Asia. He then asked me if in my opinion the Company would be willing to discharge one of its employees in case the Soviet Government would adduce convincing evidence to the effect that he was carrying on political activities of a nature hostile to the Soviet Union. I replied that I had no authority to speak for the Company but that it was my personal opinion, gained from my conversation with Mr. Farish, that if the Company should become satisfied that one of its employees was engaging in such activities it would immediately ask him to leave its service. Mr. Rosenblum then asked me if, in case the Soviet Government should ascertain that one or more of the Company’s employees were engaging in political activities of an anti-Soviet nature and should inform the Embassy of its findings, the Embassy would have any objection to conveying the information imparted to it to the officials of the Company. I replied that I had no instructions whatever from my Government to discuss matters of this kind with him and that therefore I could give him no reply except one based on my own personal opinion. On that basis, I said, I could see no objection to the Embassy in Moscow conveying informally to officials of the Company such messages as the Soviet Government might desire to send to them.

When I reported a portion of my conversation with Mr. Rosenblum to Mr. Farish, the latter informed me that he was sure that his Company would appreciate it if the Embassy would convey to its officials any information which might come to it from the Soviet authorities regarding improper political activities on the part of the Company’s employees in Central Asia.

It was not until the middle of August, subsequent to the departure from Moscow of Mr. Farish, that Mr. Rosenblum informed me that if I would call at the Commissariat for Foreign Affairs he would give me a reply to the questions raised by Mr. Farish. Upon my arrival at the Commissariat I found both Mr. Rosenblum and Mr. Weinberg, Acting Chief of the Third Western Political Division, awaiting me.

Mr. Rosenblum opened the conversation by stating that since the American Government had no treaty with the Soviet Government which contained transit traffic provisions and since it was not even entitled to most-favored-nation privileges with respect to transit traffic, he felt that he should make it clear that American products had no rights whatever insofar as transit traffic through the Soviet Union was concerned. The Soviet Government, he continued, during the course of the recent commercial agreement negotiations³⁹ had offered to grant American products most-favored-nation treatment, but for some reason the American Government had rejected the offer.

I replied that although the American Government did not have most-favored-nation right by treaty, I was nevertheless certain that the Soviet Government did not desire to embark upon a policy of discrimination against American products, particularly after the American Government during the recent commercial treaty negotiations had demonstrated most clearly its earnest desire to discriminate in no way against Soviet products. Furthermore, I added, it was my understanding that the United States had already been classified by the Commissariat for Foreign Trade as being among the “commercial treaty countries” insofar as transit traffic privileges were concerned.

Mr. Rosenblum asked me upon what I based my understanding and I showed him the article which I had with me on the subject of transit of foreign goods through the U. S. S. R, written by Mr. Rabinovich of the People’s Commissariat for Foreign Trade and published in Foreign Trade No. 13, of 1936^* It will be recalled that this article lists the United States as being among the countries which enjoy the greatest privileges with respect to transit traffic through the Soviet Union. Mr. Rosenblum stated that Mr. Rabinovich’s views had been discredited and that the United States was classified among those countries which had normal diplomatic relations with the Soviet Union but which had no agreements granting rights with respect to transit traffic. He then proceeded to make the formal statement to be found in the opening paragraph of this despatch. I thanked him for the information which he had given to me and told him that I would convey it to my Government which in turn would convey to the Amiranian Oil Company such portions of it as might interest that Company.

Several days subsequent to this conversation, the Afghan Ambassador returned to Moscow after a month’s sojourn abroad. He had heard of the visit to Moscow of Mr. Farish and inquired regarding the situation with respect to transit traffic. I told him that the Soviet authorities seemed unwilling to permit the Company to ship materials and supplies through the Soviet Union to Afghanistan. He replied that he had expected this answer since the Soviet Union in its endeavor to force Afghanistan to enter into a commercial treaty extremely disadvantageous to the latter country was permitting no transit merchandise to go to or to come out of that country. He said that in any event he earnestly hoped that the concessionaries would not make any plans based on the use of the Soviet railways. He felt that they should endeavor to build up a transportation system which would be entirely independent of the Soviet Union, and that it would be much wiser to invest in the building of roads and to pay for long hauls than to endeavor to economize with respect to time or money in arranging routes across the Soviet Union which would give the Soviet Government a means for exerting pressure upon the concessionaries whenever it might see fit.

I am inclined to feel that the advice of the Afghan Ambassador is sound. Conversations which I have had during the last three years with various members of the Afghan, Iranian, and Chinese Missions in Moscow have convinced me that it would be definitely unwise for the Amiranian Company to place itself in such a position as to make it dependent upon the good-will of the Soviet Union for the successful exploitation of its concessions.

Respectfully yours,

Lot W. Henderson

39. See Foreign Relations, The Soviet Union, 1933–1939, pp. 405 ff.
40. See Embassy’s despatch No. 2073 of November 17, 1936. [Footnote in the original; despatch not printed.]