The Ambassador in the Soviet Union ( Steinhardt ) to the Secretary of State
[Received February 18—4:30 p.m.]
186. My telegram No. 172, February 13, 1 p.m. The following information concerning the Soviet-German Agreement of February 11 has been supplied by Commercial Counselor of the German Embassy83 with the request that it be held in strict confidence.
The Agreement of February 11 is entirely apart from and supplementary to the Commercial Credit Agreement of August 19, 1939.84 The figures of Soviet-German trade under the Agreement of February 11 alone will surpass the highest level reached since the world war and the Soviet deliveries to Germany will in value be equal to or even greater than those of 1929, the highest level heretofore attained. The Agreement of February 11th is entirely on a barter basis expressed however in terms of Reichmarks at the official rate. At the beginning of the negotiations the Soviet officials were insistent upon balancing the respective deliveries at the end of each year but finally accepted the German contention that this was impossible due to the longer period required for the fulfillment of Soviet orders for machinery in accordance with specifications so that under the Agreement as signed even at the end of 1940, when the sum total of Soviet deliveries agreed upon will have been received by Germany, the full equivalent in German machinery and equipment will not yet have been delivered to the Soviet Union.
The following are the quantities of the principal types of raw materials which the Soviet Union will deliver to Germany under the Agreement of February 11. While some of these figures have been forecast in previous telegrams it is now possible to give them definitively as follows: 900,000 metric tons of oil products consisting of crude oil, refining and lubricating oil, automobile and aviation gasoline; 100,000 metric tons of good quality cotton; 500,000 metric tons apatite; 300,000 metric tons manganese; 800,000 tons of fodder; 200,000 tons of grain for human consumption; approximately a million metric tons of various mineral ores of which 600,000 metric tons are iron ore, 100,000 metric tons chrome ore and the balance made up of small quantities of other types of ore used in metallurgy; 15,000 tons of flax; timber worth 18,000,000 marks in value.
It was stated that the figure for manganese deliveries had been somewhat reduced as Germany needed no more than the official figure [Page 547] agreed on. No specific figures are forthcoming as to deliveries of leather and platinum and in regard to soy beans and similar products which will come from the Far East it was indicated that the problem as concerns the Soviet Union was more one of transit than of supply. My informant emphasized that the foregoing figures are exclusive of the deliveries under the Commercial Credit Agreement of August, whereby the Soviet Union would furnish Germany with 18,000,000 marks worth of raw materials and in this connection it was stated that the quantity of oil in the neighborhood of 100,000 tons provided for in this Agreement had already been delivered to Germany. In regard to the problem of transportation the opinion was expressed with considerable conviction that despite the admittedly overstrained condition of the Soviet railroads no serious difficulties were anticipated in shipping the quantities agreed upon to Germany. It was stated that aside from the technical assistance contracts for the installation of German machinery in Soviet factories no attempt had been made by Germany to “persuade” the Soviet authorities to accept German specialists but that it had been agreed that should the Soviet Government desire the services of such German specialists as could be spared for any special branch of Soviet industry, the question would be settled by special agreement at a future date.
On the whole, the Commercial Counselor, who took a leading part in the negotiations and whose familiarity with the Soviet Union is unquestioned, seemed to be well satisfied with the results achieved and stated that the care and realism with which the Soviet foreign trade officials had examined the various questions involved, while causing considerable delay in the negotiations, nevertheless in his opinion had removed any doubt in his mind as to the seriousness with which the Soviet Government viewed the expansion of its economic relations with Germany. He added that there had been little difficulty in the negotiations in respect of Soviet deliveries to Germany but that the necessity for drawing up careful specifications and enumeration of the types of machines and equipment which Germany is to supply the Soviet Union had occupied a greater part of the time of the negotiations.
Repeated to Berlin.