711.61/726
Memorandum by the Chief of the Division of European Affairs (Moffat) to the Secretary of State 87
Mr. Secretary: The Soviet Ambassador, who is coming in to see you on Tuesday88 at 11 a.m., wishes to discuss Soviet-American commercial matters. He will probably reiterate several of those “grievances” set forth in a memorandum which was presented to Mr. Steinhardt on March 28. You will note from the attached telegram from Moscow89 concerning this memorandum that these “grievances” or “unfriendly actions” relative to Soviet-American commercial relations consist of (1) the application of the moral embargo; (2) the visits by Soviet specialists to American plants; (3) the application of this Government’s policy with regard to the non-export of deficit raw materials; and (4) the policy of the Maritime Commission with regard to the charter of vessels to the Soviet Union.
The Application of the Moral Embargo
In regard to the charge that the American authorities in applying the moral embargo to the Soviet Union (section one, pages 2, 3, 4) are encouraging the breaching of contracts between American firms and Soviet industrial organizations and are setting up a discriminatory regime against the Soviet Union, it is probable that Mr. Oumansky will repeat Mr. Molotov’s remarks made on March 29 in a speech [Page 264] before the Supreme Soviet of the U. S. S. R.90 to the effect that Russian-American relations have neither improved nor deteriorated “if we do not consider the moral embargo against the Soviet Union, which, now that peace with Finland has been concluded, is devoid of significance”, and that “Soviet imports were increased and could be increased even more if the United States Government did not place obstacles in the way of trade”. It can be adduced from the above remarks that the Soviet Government is inaugurating a campaign to have the moral embargo terminated so far as the Soviet Union is concerned.
It is, of course, untrue that this Government, as charged in the memorandum, has adopted a policy of encouraging the disruption of commercial contracts between American firms and Soviet economic organizations or has set up a discriminatory regime against the Soviet Union. It is true that the moral revulsion of the American people at the wanton invasion of Finland resulted in the refusal of a number of firms to sell products of a military character to the Soviet Union. It is also true that in response to popular feeling this Government has supported a policy of discouraging the sale of certain American products and technical knowledge to countries which follow the practice of bombing civilians from the air.
You are so thoroughly acquainted with our policies relative to the moral embargo that it appears unnecessary to go into that subject in this memorandum.
Your attention should be called, however, to the possibility that Mr. Oumansky will charge that the moral embargo is in violation of at least the spirit of our commercial agreement with the Soviet Union which provides in part that
“natural or manufactured products exported from the territory of the United States of America and consigned to the territory of the Union of Soviet Socialist Republics shall in no case be subject with respect to exportation and in regard to the above-mentioned matters, to any duties, taxes, or charges other or higher, or to any rules or formalities other or more burdensome, than those to which the like products when consigned to the territory of any third country are or may hereafter be subject”.
It would be absurd to interpret our commercial arrangement with the Soviet Union in such a manner as to obligate us to cooperate in the bombing of civilians from the air by the furnishing of materials or certain types of technical information.
Our intentions at the time of our entering into our agreement with the Soviet Union are evidenced by a subsequent provision in the exchange [Page 265] of notes to the effect that “nothing in the agreement shall be construed to prevent the adoption … of such measures as the Government of the United States of America may see fit with respect to the control of the export or sale for export of arms, ammunition, or implements of war, and, in exceptional cases, all other military supplies”.
The Visits of Soviet Specialists to American Plants
Mr. Oumansky may protest against the difficulty certain Soviet engineers are now encountering in regard to receiving permission to visit certain American factories. It is surprising that the Soviet Government should take the attitude that Soviet engineers have some kind of an inherent right to enter American factories. For many years Soviet engineers have been granted numerous courtesies in this respect by American industrialists, and according to the Department’s information they are continuing in relatively large numbers to inspect and study American industrial plants at the present time. They have shown a tendency, however, to take offense in case some industrialist, for military or other reasons, refuses to allow them to enter his plant. There is no reason why American factories which are engaged in providing for American national defense should be opened for inspection by foreigners. As you are perhaps aware, American citizens have never been permitted to enter Soviet military factories or related industries, and it is rare that they are admitted into Soviet factories of any kind.
The Non-Exportation of Deficit Raw Materials
With regard to the alleged action of the Chase National Bank (section one, page 4) this action would appear to be quite reasonable in view of the policies of this Government regarding the exportation of strategic raw materials. There is no record, however, which would indicate that this Department has issued the alleged orders to the Bank.
Ruling of the Maritime Commission
With respect to the failure of the Maritime Commission to approve the charter of vessels to Soviet commercial organizations in this country, Mr. Oumansky has already been informed that the charter of vessels by the Maritime Commission is guided entirely by considerations of domestic policy, such as the employment of shipping, possible naval reserve needs, and the necessity of not permitting vessels to proceed too far away from American ports and that each request for charter is judged on its own merits. There is no question of discrimination or moral embargo in this respect.