711.61/732

Memorandum of Conversation, by the Assistant Chief of the Division of European Affairs (Henderson)

Participants: Mr. Feis, Adviser on International Economic Affairs;
Mr. Moffat, Chief, Division of European Affairs;
Mr. Loy W. Henderson, Assistant Chief, Division of European Affairs;
Mr. Constantine A. Oumansky, Ambassador of the Soviet Union;
Mr. Andrei A. Gromyko, Counselor of the Soviet Embassy.

Mr. Oumansky referred to the conversation of April 4 of which the present conference was a continuance, and asked if any one desired to raise any questions before he proceeded with the presentation of the Soviet views. After having received a reply in the negative, he said that the next matter which he desired to discuss was the difficulty which Soviet agencies were encountering in chartering tonnage in United States Pacific ports for Vladivostok.

Mr. Oumansky pointed out that early in January he had brought to the attention of Mr. Henderson, of the Department, the refusal of the Maritime Commission to approve Amtorg’s charter of the steamship Ogon. He had informed Mr. Henderson that the Soviet Government was of the opinion that the refusal of the Maritime Commission to approve the charter represented a discrimination against the Soviet Union, and he had expressed the hope that the State Department would take up the matter with the Maritime Commission. Mr. Henderson promised him that the matter would be referred to the appropriate authorities and would be discussed with Mr. Oumansky at a later date. Mr. Oumansky said that he had hoped that as a result of his conversation with Mr. Henderson the Soviet Embassy would receive assurances that no discrimination was being planned against Soviet cargoes by the Maritime Commission, as well as a satisfactory explanation of the reasons for the refusal of the charter of the Ogon.

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Mr. Oumansky continued that almost a month had elapsed before Mr. Henderson had replied to his representations.99 Mr. Henderson’s reply was that officials of the Department had discussed the matter with the Maritime Commission and had been informed by that Commission that it was not discriminating against the Soviet Union. The Maritime Commission, according to Mr. Henderson, had also informed the Department that the decision with respect to each application for the approval of a charter was based upon the merits of the individual case and that in passing upon applications the Maritime Commission was guided by considerations of domestic policy, such as the number of American vessels available, the advisability of permitting vessels to proceed to distant ports, possible naval reserve needs, and so forth. Since the refusal of the Maritime Commission to approve the charter of the Ogon that Commission had also disapproved the chartering by Amtorg of two more vessels, the California and Liberty Glow. In all three cases the charters had been disapproved after all arrangements had been made with the owners of the vessels to transport commodities, for the most part industrial equipment purchased in the United States, from United States Pacific ports to Vladivostok. At almost the same time that the Maritime Commission disapproved the chartering by Amtorg of these vessels, it approved the chartering of vessels for the transport of freight from United States Pacific ports to Japanese ports. For example, exporters in this country to Japan had been successful in chartering the steamships Clifton and the City of Alma (name doubtful).

Mr. Oumansky appreciated the reply which Mr. Henderson had been able to give to him, but the Soviet Government was not satisfied in view of the obvious discrimination against Soviet shipping. The Soviet Government did not wish to exaggerate its need for American tonnage. It had needed that tonnage, however; it needed tonnage at the present time; and it was possible that it would need tonnage still more in the future. The disapproval of the three charters by Amtorg had cost the Soviet purchasing agencies more than $450,000. He hoped that the matter would be taken up again with the Maritime Commission with the purpose of bringing about a change in what appeared to be the fixed policy of the Maritime Commission to discriminate against cargoes destined for the Soviet Union.

Mr. Moffat stated that he did not agree that such was the fixed policy of the Maritime Commission; that it had already been pointed out to Mr. Oumansky that the Maritime Commission decided each case of an application for charter upon its own merits; and that he was unable to add to the explanation of the procedure and policies of the Maritime Commission which had already been furnished. There were a whole [Page 279] series of factors which entered into decisions relating to the approval of charters and it was unjustifiable to make charges of discrimination merely because circumstances caused the Maritime Commission to disapprove a number of charters.

Mr. Oumansky replied that he could not be satisfied with statements of the kind which Mr. Moffat had made. Although there was not perhaps de jure discrimination, there was certainly discrimination de facto, and he would appreciate it if the Department would make a more thorough investigation of the whole matter.

Mr. Moffat stated that the matter would again be brought to the attention of the Maritime Commission, but he was not sure that more information than that already given could be obtained. The Department of State had no authority to review the decisions of other Departments, particularly when such decisions related primarily to matters of domestic concern.

Mr. Oumansky said that in his opinion the Department should be interested in any matter which tended to prevent the flow of products from the United States to another country. The Department of State should be interested, for instance, in ascertaining why Japan received more favorable treatment than the Soviet Union in this respect.

Mr. Moffat insisted that the responsibility with respect to the approval of charters rested with the Maritime Commission, but that the Department was quite willing to pass on to that Commission the views expressed by Mr. Oumansky.

Mr. Oumansky said that the Soviet Government must be left a margin in which it could decide for itself, based on such information as is available to it, the question whether or not acts of discrimination were taking place. The Soviet purchasing agencies would like to discuss with the appropriate American shipping authorities the whole question of cargo needs on a purely commercial basis. They desired to make clear just what space they would need and to ascertain what space may be available to them. If it should become clear that discrimination was intended, the Soviet Government, of course, could then draw its own conclusions.

Mr. Oumansky stated that he wished again to take up the question of the refusal of American governmental authorities to permit Soviet engineers to enter the plant of the Wright Aeronautical Corporation. He referred to the conversation which he had had in January with Mr. Moffat on this subject and in which he had been informed that the restriction on the Soviet engineers was not connected with the moral embargo. In spite of the explanation which Mr. Moffat had given him, namely, that engineers of only those countries which were actually making purchases were being admitted into the plant, the Soviet Government took the view that the refusal of the American authorities to [Page 280] permit Soviet engineers into the plant while at the same time allowing British, French and Japanese engineers to enter, was a most serious act of discrimination against the Soviet Union.

Mr. Oumansky went on to explain that the engineers, according to a contract of long standing between Soviet purchasing agencies and the Wright Aeronautical Corporation, had the right to enter the Wright plant in order to keep in touch with the latest processes and inventions. This contract was along the lines of numerous agreements which the Soviet Union had entered into with various American firms in accordance with the well-established Soviet policy of linking up foreign technical assistance with foreign purchases. The obtaining of foreign technical assistance was one of the most important features of the Soviet foreign trade policy and any actions on the part of American Governmental officials which would tend to deprive Soviet industry of American technical assistance must be regarded as serious.

Mr. Moffat drew Mr. Oumansky’s attention to the fact that according to the terms of the contract between the Wright Aeronautical Corporation and the Soviet purchasing agency the Corporation had a right to close its factory to inspection by Soviet engineers whenever it was requested so to do by the War and Navy Departments. Mr. Oumansky replied that most of the Soviet contracts calling for the giving of technical assistance contained clauses of this kind and that the fact that the War and Navy Departments should take advantage of these clauses so far as Soviet engineers were concerned while they were permitting engineers of other countries to visit the plant constituted discrimination. He again stated that the whole Soviet foreign trade system was based on the obtaining of technical assistance from abroad.

Mr. Moffat stressed the fact that the Soviet engineers who were refused admittance to the plant had desired to enter it in order to obtain technical assistance, whereas the other foreign engineers who were admitted entered the plant in order to make or inspect purchases. He failed to see, therefore, any justification for charges of discrimination on the basis of nationality.

At this point Mr. Moffat received a message that his presence in the Office of the Secretary was necessary, and he was compelled to leave the conference.

Mr. Oumansky stated that he regretted that he could not finish his conversation on the subject of the engineers with Mr. Moffat since the matter of the exclusion of Soviet engineers from the Wright plant was regarded with so much seriousness by his Government.

Mr. Henderson remarked that the Department had demonstrated its willingness to talk with Mr. Oumansky regarding the situation in the Wright plant; that in general the Department desired to take a reasonable attitude in discussing matters of this kind since it wished to [Page 281] remove any false impressions which Mr. Oumansky might have relative to discrimination against the Soviet Union; Mr. Oumansky should, nevertheless, understand that decisions as to who might or might not visit American industrial establishments fell primarily in the field of the internal affairs of the United States. The American Government, in cooperation with American industrialists, must have the right to restrict to such extent as may be compatible with American national interests, the visits of aliens at American industrial and commercial institutions. It should be understood that the decision of American authorities not to permit an alien or several aliens to inspect an American plant did not justify the Government of the country of which such alien might be a citizen to bring charges of discrimination. American governmental authorities who are charged with protecting national interests may take many factors into consideration when refusing to permit an alien engineer to visit an American plant, and they could not permit their decision to rest entirely upon the fact that a national of some other country had been or had not been admitted into the plant in question. The fact that the national of one country in a certain set of circumstances was permitted to visit a plant did not mean that the nationals of all countries should have the right to enter that plant. In other words, the American Government had no obligation to permit any alien to enter American plants and did not feel that it was necessary for it to explain to any other Government why an alien had been refused admittance to an American plant.

Mr. Henderson added that it was his understanding that at the present time more Soviet engineers than engineers of any other country were visiting American industrial plants and that he was certain that Mr. Oumansky could not substantiate charges of discrimination.

Mr. Oumansky said that Mr. Henderson’s remarks shed an entirely different light upon the problem; that he was surprised to learn that the American Government did not consider that the right to enter American plants rested on a most-favored-nation basis. He said that furthermore he did not agree with Mr. Henderson’s statement that at the present time Soviet engineers were being permitted freely to visit American plants. During previous years such might have been the case; unfortunately the situation had greatly changed.

Mr. Feis asked if Mr. Oumansky would like to place the right to visit industrial plants on a reciprocal basis, that is, would he desire to make the suggestion that an arrangement be entered into whereby Soviet engineers should be permitted freely to visit American plants provided American engineers should be permitted freely to visit Soviet plants.

Mr. Oumansky said that he did not know whether Mr. Feis was joking or not; that the situation in the Soviet Union was quite different [Page 282] from that in the United States; that it was his understanding that in the past more American technicians had been admitted into Soviet plants than the technicians of any other country; that the American Military Attaché in Moscow had on occasions been admitted to plants which no other Attaché had ever inspected; that unfortunately the situation in this respect had also changed recently, but that if the American Government desired the reestablishment of close commercial relations with the Soviet Union he saw no reason why the régime in which the Americans were the most favored visitors could not be reestablished. In fact, he thought that he might be willing to accept Mr. Feis’ challenge, provided it should be understood that American engineers who visited Soviet factories would be doing so for the bona fide purpose of making purchases or the visits should be in connection with purchases that had already been made, as was the situation with respect to the visits of Soviet engineers in American plants.

Mr. Feis said that his remark had not been intended as a challenge, that he, of course, had no authorization to propose an agreement of the kind referred to; his statement had been intended merely as an aid in clarifying the discussion.

Mr. Henderson said that he quite agreed that during certain periods in past years American engineers had been admitted into Soviet plants probably in larger numbers than the engineers of other countries, but that many instances had come to his attention while he was in the Soviet Union in which American nationals were not permitted to visit Soviet plants to which technicians or engineers of other countries had been admitted. The American Embassy in Moscow, however, had not at the time made any representations on the subject since it had taken the attitude that the Soviet authorities had the right to decide who should be admitted into their plants. At no time, however, had the Soviet authorities been as generous in admitting Americans into Soviet plants as the American authorities had been in allowing Soviet nationals to visit American plants. Since 1937 practically no Americans had been admitted in Soviet plants, whereas hundreds of Soviet engineers had been thronging through American plants.

Mr. Oumansky said that he wished to return to the subject of the Wright Aeronautical plant. He hoped that the State Department, which, after all, is the only organization to which he could appeal, would have sufficient interest in the development of Soviet-American commercial relations to discuss the situation in the Wright plant again with the appropriate American authorities and would endeavor to prevail upon them to remove the discriminatory regulations. Mr. Henderson asked Mr. Oumansky if he had in mind any other cases of alleged discrimination against the visits of Soviet engineers [Page 283] in American plants. Mr. Oumansky said that several instances of such discrimination had come to his attention, but that he was not prepared to advance them at the present time. In fact, he desired to focus the full attention of the American Government on the situation in the Wright plant, and he hoped that for the sake of Soviet-American relations the State Department would approach the War and Navy authorities again on the subject.

Mr. Henderson replied that a final decision must remain with the Army and Navy authorities since responsibility for safeguarding the public interests in this respect rested with them. Nevertheless the Department would undertake to convey the views which he had expressed to these authorities. Mr. Oumansky stated that he hoped that when this matter was discussed with the War and Navy officials the State Department would not fail to stress the international aspects of the matter.

Mr. Oumansky said that he was now prepared to discuss the question of the recall from the Soviet Union of the experts of the Universal Oil Products Company and of the Lummus Company who had been engaged in lending technical assistance to the Soviet Government in the construction of aviation gasoline plants in the Soviet Union. He had discussed this matter in January with Mr. Moffat. During the course of that discussion Mr. Moffat had informed him that the State Department had not requested the companies to recall the experts. The companies in question, however, had informed the Soviet Government that these experts had been recalled at the request of the State Department. Apparently the statement of Mr. Moffat conflicted with the statements of the oil companies. He regretted that Mr. Moffat was not present in order to assist in obtaining a clarification of the facts.

Mr. Henderson said that he had read Mr. Moffat’s memorandum of the conversation, and he did not believe that Mr. Oumansky had accurately repeated the statements made by Mr. Moffat. Mr. Henderson suggested that before discussing the matter it might be advisable to examine Mr. Moffat’s memorandum of that conversation. At Mr. Henderson’s telephonic request, Mr. Page, of the European Division, brought in Mr. Moffat’s memorandum of January 18,1 and Mr. Henderson read the following extract from it:

“The Ambassador … came to the question of the article in the Herald-Tribune, according to which the United States Government had advised the representatives of oil firms in Russia to leave the country, and inquired whether this was true. I told him that it was not true as stated; that the engineers had been recalled by the companies; but that the companies’ action had been taken in accordance with an announced expression of policy by the United States Government. [Page 284] I agreed that the practical effect was not very different from that contained in the article, even though the development of facts contained in the article was inaccurate. The Ambassador then said that in effect we were asking firms unilaterally to breach their contracts with Soviet Russia. I replied that we had set forth our policy, and the firms in question without any pressure on our part were endeavoring to carry out this policy as they understood it.”

Mr. Oumansky stated that the situation as he understood it was that the moral embargo had been extended by the American Government in such a manner as to prohibit the lending by American companies of technical assistance to the Soviet Union in the construction of aviation gasoline plants; that the American Government had informed the various interested companies that this extension of the moral embargo was to apply not only to future transactions but also to contracts already entered into. In other words, the American Government had informed the interested companies that in order to conform with American Governmental policies they should breach existing contracts with the Soviet Union. Such action on the American Government’s part was a double discrimination against the Soviet Union in that it placed the Soviet Union in a worse position even than Japan, the other country to which the moral embargo applied. In enforcing the moral embargo against Japan, the American Government, according to his understanding, had not taken the position that it applied retroactively. The Soviet Union, therefore, in insisting that the moral embargo upon the lending of this type of technical assistance be not applied retroactively was merely requesting that it be given a position no worse than that of Japan. He would be interested in learning why the American Government apparently desired to place the Soviet Union in a worse position than Japan.

Mr. Henderson said that Mr. Oumansky was apparently laboring under a false impression; that the moral embargoes applied with equal force and in the same manner to both the Soviet Union and Japan. Mr. Oumansky replied that he had facts to back his statements; that he could show that for months after the application of the moral embargo upon Japan airplanes and airplane parts were being shipped to Japan. Mr. Henderson stated that it was his understanding that since the announcement of the extension of the moral embargo American firms had also been executing their contracts with the Soviet Union which called for the delivery of airplanes or airplane parts. Mr. Oumansky said that he begged to differ with Mr. Henderson; that he had with him a communication from the Bendix Company in which the Bendix Company stated its inability to carry out an agreement entered into some time ago to supply certain airplane parts on the ground that for it to do so would be a violation of the policies of the American Government. Mr. Henderson stated that [Page 285] since the announcement of the extension of the moral embargo cases had come to his attention in which American companies had been permitted to send airplane parts to the Soviet Union in conformity with contracts entered into before the bombing in Finland had taken place.

Mr. Oumansky said that he had been given to understand that the American Government had not only requested the American firms in question to withdraw their engineers but that it had refused to grant passports to other engineers to go to the Soviet Union to complete the construction of the plants. He would like to know precisely what the policy of the American Government was in this respect. Had the American Government taken the attitude that it desired American firms to break contracts with the Soviet Union?

Mr. Feis said that he personally was not prepared to enter into a detailed discussion of this matter. Mr. Henderson said that he also was not prepared to enter into a detailed discussion of the so-called moral embargo. Mr. Moffat perhaps would have been in a better position to continue conversations which he had already had with Mr. Oumansky on the subject. Mr. Oumansky suggested that this matter be postponed for further discussion.

Mr. Oumansky thereupon again raised the question relative to the status of Amtorg. He said that he hoped that it would not be necessary for Amtorg to reply to the communication of the Department in which the suggestion had been made that Amtorg inform the Department that it intended to adhere to the policy of the American Government with respect to the moral embargo. Mr. Feis said that he wished to take this occasion to hand Mr. Oumansky the aide-mémoire which he had promised him during the course of the last conversation relative to the policy of this Government with respect to the exportation of certain strategic materials and to the attitude of Amtorg with regard to that policy.

Mr. Oumansky said that before accepting this memorandum he would like to know if it was a circular addressed to all governments, or whether it was applicable particularly to the Soviet Union. He did not wish to give consideration to a document the delivery of which might be an additional act of discrimination against the Soviet Government.

Mr. Feis said that this memorandum had been drawn up particularly for Mr. Oumansky, but that the policies laid down in it applied equally to all governments, and that in case reason therefor should arise he would not hesitate to present a similar memorandum to the representative of any other government. A copy of this memorandum is attached hereto.2

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Mr. Oumansky examined the memorandum and said that the figures in it tended to confirm his previous statements that Amtorg had not during the past few weeks been engaging in transactions which were not in harmony with the policies of the American Government.

Mr. Feis replied that it was true that the figures set forth in the memorandum showed that the Soviet Government had of late made few purchases of articles the export of which it was the policy of this Government to discourage. Nevertheless it was only fair to point out that the figures were low because Amtorg had been unsuccessful in making purchases of these articles and not because Amtorg had been endeavoring to adhere to the policies of this Government. During the last sixty days at least thirty dealers in tin and rubber had informed the Department that Amtorg had been attempting to purchase one or another of these commodities from them.

Mr. Oumansky stated that he was glad to have this information. It was quite new to him. He would give the memorandum his closest consideration.

In reply to Mr. Oumansky’s question whether Amtorg should answer the Department’s letter, Mr. Feis said that he had not had an opportunity to discuss the matter further in the Department and he was not prepared to give a definite reply. It was his personal belief, however, that it was much more important that Amtorg adhere to the policies of this Government than that it should state that it intended to do so. Mr. Oumansky replied that he was relieved to hear this since it would be extremely embarrassing for Amtorg to reply to the letter from the Department.

Mr. Oumansky said that he desired to revert to his general questions regarding the future of Soviet-American trade. He would like to know what the American Government’s policy was in that respect. Did it desire to encourage trade with the Soviet Union or was it no longer interested in the development of that trade?

Mr. Feis replied that he thought the best answer to the question was the fact that trade between the two countries was proceeding; that commercial transactions were taking place between the two countries every day. Mr. Oumansky could be sure that if this Government were endeavoring to bring about a cessation of trade, the present volume of Soviet-American trade would not be as large as it was. Mr. Oumansky said that the Soviet-American trade could be much larger; that the spirit of Soviet foreign trade policy was non-discriminatory; and that the Soviet Union desired that the principle of equality remain the basis of foreign trade. The Soviet Union hoped to increase its trade with the United States, and that trade could be increased without difficulty. Soviet-American trade had grown steadily during the past nine years. He hoped that the American Government would not permit [Page 287] this flourishing business to be pushed into the shadows by war-purchase activities of other countries. It would be unfortunate if the demands of certain countries for munitions and machinery of war should be allowed to prevent the Soviet Government from satisfying its needs for industrial equipment. Commercial difficulties between the two countries could be removed. The Soviet Government was prepared to take all appropriate steps on its part to see that there should be no obstacles to Soviet-American trade. The Soviet Government could not remain quiescent, however, in the face of measures which gave the Soviet Union a position even less favorable than that of such a country as Japan.

Mr. Oumansky emphasized his hope that two specific problems could be solved favorably. One was the admission of Soviet specialists into the Wright plant. The other was connected with the aviation gasoline experts. He hoped that the American Government could see its way clear to permit American engineers to go to the Soviet Union in order to complete the unfinished aviation gasoline plants. He would not press for an early conference with respect to the moral embargo because he was more anxious that the outcome of such a conference should be favorable than he was that the conference should take place in the immediate future. If the American Government would consent to the return of the aviation gasoline experts to the Soviet Union, he was certain that the Soviet Government would not raise further questions with regard to past applications of the moral embargo or with regard to the breach of contracts. It would be content to drop the past if it could be assured of the future.

  1. See footnote 54, p. 249.
  2. Missing from Department files; for a summary, see telegram No. 54, January 25, 7 p.m., to the Ambassador in the Soviet Union, p. 250.
  3. Infra.