861.77 Chinese Eastern/1442: Telegram

The Ambassador in the Soviet Union ( Steinhardt ) to the Secretary of State

7. The Soviet press on January 1st published the text of the following agreements reached between the Soviet and Japanese Governments on December 31, 1939:

An agreement providing for the measures of the last installment due to the Government arising out of the sale of the Chinese Eastern Railway to which the Japanese Government guarantees immediate payment to the Soviet Government by “Manchukuo” of the sum of roughly 5,800,000 yen.2 A “Manchukuo” claim of some 1,200,000 yen against the Soviet Government is to be discussed in Tokyo in connection with certain Soviet counter claims. The agreement provides that two-thirds of the sum paid by the “Manchukuo” Government shall be used by the Soviet Government for the purchase of Japanese Manchurian products provided the types of products desired by the Soviet Government are available at normal prices.
A protocol extending the fisheries agreement of April 2, 1939, based on the convention and the supplementary extensions thereto until December 18, 1940, unless superseded before the expiration of that period by a new convention, negotiations for which are to be carried on between the two Governments.

The press likewise publishes the text of a note from Molotov3 to the Japanese Ambassador4 setting forth in detail certain lots and canning factories which are to be granted the Japanese under the extended agreement, and method of payments therefor.

An article in Izvestiya in referring to these agreements refrains from comment with the exception of the statement that “the significance of the agreements is obvious from the extent and character of the questions which were regulated.”

The agreement as published appears to constitute a moderate success for the Soviet Union in that without direct compensation the [Page 634] Japanese Government guarantees payment of the final installment by “Manchukuo” arising out of the sale of the Chinese Eastern Railway and as will be recalled from the Embassy’s despatch No. 2251, April 13, 1939,5 the fisheries agreement of April 2, 1939, which is now extended without change was made on terms more favorable to the Soviet Union than Japan. Although the Japanese Ambassador and members of the Japanese Embassy here have been quite specific in their statements that no political questions have been discussed between the Soviet and Japanese Governments in the course of the recent conversations, the political importance of the progressive settlement of the various questions which have disturbed Japanese-Soviet relations for quite some time, is sufficiently obvious to require no elaboration. The impossibility in a country such as the Soviet Union of separating economic and political matters renders the discussion of specific economic questions a matter of policy and while it may be true that questions of a political nature have not been raised by either side in the course of the discussions between the Japanese Ambassador and Molotov, the political significance and implications are undoubtedly fully appreciated by both sides. As I have previously reported, the future development of Soviet-Japanese relations appears to depend primarily upon the attitude of the Japanese Government. I have no reason to alter my opinion that the Soviet Government has been for some time and still is prepared to conclude a general settlement along political lines with Japan. It is extremely probable, however, that recent events in Finland6 have increased Japanese reluctance to risk the further impairment of its relations with Great Britain and the United States for the sake of “friendship” with a country whose military weakness and incapacity have now been publicly demonstrated. Consequently it may be that the Soviet Union would now find itself faced with the necessity of paying a higher price for an agreement with Japan involving among other things the cessation of Soviet aid to China.

  1. In telegram No. 23, January 5, 3 p.m., Ambassador Steinhardt advised that Moscow press reports stated that this payment had been made (761.94/1179).
  2. V. M. Molotov, Soviet Commissar for Foreign Affairs.
  3. Shigenori Togo.
  4. Not printed.
  5. For correspondence on the Finnish-Soviet war, see Foreign Relations, 1939, vol. i, pp. 952 ff. See also ante, pp. 269 ff.