Foreign Relations of the United States Diplomatic Papers, 1940, The British Commonwealth, The Soviet Union, The Near East and Africa, Volume III

711.61/777

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

[Washington, undated.⁴⁴]

Certain Factors Affecting Soviet-American Relations

i. difficulties encountered by soviet organizations relative to the purchase and delivery of machine tools

The Soviet Union during the last ten years has perhaps been our best customer for machine tools. Soviet industry to an extent has been built up with the aid of American machine tools and is still dependent upon them. The ability to obtain American machine tools is therefore much more important to the Soviet Government than it is willing to admit.

The machine tool trade with the Soviet Union at the present time is in a state of chaos. The situation is set forth rather fully in a memorandum attached hereto which was prepared by Mr. Henderson on July 26.⁴⁵ In view of the complicated nature of this matter it has been deemed inadvisable to make a summary of the memorandum.

ii. the “freezing” of latvian, lithuanian and estonian credits in this country

The Assistant Commissar for Foreign Affairs presented to our Chargé d’Affaires in Moscow on July 20 a strong note of protest⁴⁶ against the withholding from the Soviet State Bank by American banks of gold which it claims already to have acquired from Estonian, Latvian, and Lithuanian banks. The Soviet note stated that the gold in question was acquired by the Soviet State Bank on the basis of a sale purchase agreement and was subject to transfer to the deposit of the State Bank by virtue of telegraphic orders dated July 13, 1940; that instead of immediately executing the transfer, the Federal Reserve Bank informed the State Bank on July 16 that it was soliciting the permission of the Federal Treasury for the transfer; that the Federal Reserve Bank at the same time referred to Executive Order No. 8484 of July 15, 1940⁴⁷ which prohibits such transfers; and that no further communications have been received concerning the matter since that date.

The Soviet Government, continued the note, maintained that the Federal Reserve Bank had no legal right for suspending the operation since transfer instructions had already been received prior to the issue of Order No. 8484; that, furthermore, “neither this nor any other Order can limit the rights of the U. S. S. R. to the receipt of property which it has purchased or to the disposal of this property as property of a sovereign state”. In conclusion the note stated that “the Soviet Government expects an immediate transfer to the gold which it has purchased” from the Baltic Banks and “charges the government of the United States with all responsibility for the losses inflicted upon the U. S. S. R. by the actions of the American institution”.

The Department is awaiting the comments of the Treasury Department before replying to this note.⁴⁸

iii. the difficulties encountered by soviet commercial organizations in chartering american tonnage

The Soviet Ambassador has protested informally on a number of occasions during the last few months regarding the inability of Soviet commercial organizations in this country to charter American vessels from the Maritime Commission. He maintains that outright discrimination exists since charters are granted to Japanese firms for vessels destined to Japanese ports but are refused to Soviet firms for shipments to Vladivostok. The State Department always contends that in passing upon applications for charter, the Maritime Commission is guided entirely by considerations of domestic policy, that each charter is decided upon its own merits and that there is no discrimination against any country.

Since an American tanker, the Miller, was granted a charter last week to carry gasoline to Vladivostok, and since charters had previously been refused for two Japanese shipments, it is likely that this situation has eased somewhat. The Ambassador may continue to press, however, for a promise on our part to permit American tankers and freighters to ply freely between Vladivostok and our Pacific ports. It is possible that the State Department may consider it expedient to request the Maritime Commission to take under consideration the advisability of granting charters from time to time to Soviet commercial organizations in the future unless important considerations of domestic policy prevent such action.

iv. the export of gasoline to the soviet union

On July 26 the President issued a proclamation and regulations adding aviation motor fuel, lubricating oil, and gasoline blending agents to the list of articles which, under the Act of July 2, 1940, may not be exported from the United States except when licensed by the Secretary of State.

During recent years the Soviet Union has purchased such commodities in this country in small quantities and only for experimental purposes. It has, however, purchased large quantities of ordinary gasoline for shipment to Vladivostok. Exports amounted to 1,544,000 barrels in 1937; 1,120,000 barrels in 1938; and 844,000 barrels in 1939. Exports in 1940 have been negligible because of lack of shipping.

It has been reported from the Embassy at Moscow that in the course of the Soviet-Swedish trade negotiations, the Soviet authorities have agreed to deliver substantial quantities of petroleum products to Sweden provided such exports are more than offset by oil shipments to the Far East from the United States.

At the present time we can see no objection to the sale of limited quantities of low grade gasoline to the Soviet Far East provided tankers can be obtained by Soviet commercial organizations to bear the traffic, and provided we have no reason to believe that the delivery of this gasoline results in Soviet gasoline being released to Germany.

v. the application of the “moral” embargo of december 20, 1939 concerning the delivery of plans, plants, manufacturing rights, or technical information required for the production of high test aviation gasoline

The advisability of including such plans, plants, etc., under the Act of July 2, 1940 is at present under discussion. It is likely that Soviet commercial organizations in this country will bring suit for breach of contract against certain American firms which complied with the “moral” embargo policy of this Government and which recalled from the Soviet Union engineers who were engaged there in the erection of aviation gasoline plants.

There would appear to be no reason why American companies engaged in the construction of ordinary gasoline plants in the Soviet Union (The Lummus Corporation) or ordinary lubricating oils (The Max Miller Company) should not continue construction, or if they so desire, undertake new construction provided they would not send American personnel to the Soviet Union.

vi. difficulties encountered by soviet engineers desiring to enter american industrial plants

The Soviet Ambassador has alleged on numerous occasions that American governmental officials and firms have discriminated against Soviet engineers and technicians by refusing to permit them to enter certain American plants. In answering such allegations the Department has emphasized that the American Government considers that decisions as to who may or may not visit American industrial establishments fall entirely in the field of the internal affairs of this country; that the American Government has the right to cooperate with American industrialists in taking steps to restrict to such an extent as may be compatible with American national interests the visits of aliens in all kinds of American industrial and commercial institutions. Should the Soviet Ambassador again refer to this subject, it is suggested that he be informed that such restrictions as may be laid down may not appropriately be the subject of diplomatic representations.

It should not be difficult for the Soviet Government to understand the position of this Government in the matter since that Government has for many years followed the policy of admitting aliens into Soviet industrial establishments only when it is convinced that the visits of such aliens would be to the advantage of the national interests of the Soviet Union. On numerous occasions American citizens have been refused permission to enter Soviet plants at a time when citizens of other countries were permitted to visit them.

In this connection it should be pointed out that according to such information as is in this Department’s possession, Soviet engineers and technicians are at the present time being admitted almost daily into American industrial plants and establishments on the same basis as nationals of other countries.

vii. the routing of mail to the soviet union

Early in June the United States postal authorities took the initiative in requesting the cooperation of the Soviet postal authorities in the routing of United States mails destined for Eastern Europe and the Mediterranean countries via the Pacific and Siberia. The Soviet authorities signified their willingness to cooperate. On July 2 the American postal authorities informed the Department that it had abandoned the project in view of the establishment of a regular steamship line between New York and Lisbon and that all mail for the Soviet Union would be routed in that manner.

The Soviet Ambassador informed the Department on July 11⁴⁹ that he was of the opinion that mail destined for the Soviet Union, and especially Soviet diplomatic pouches, should not be entrusted to this route. He subsequently stated that, in accordance with instructions from his Government, the Soviet Government would prefer that mail for the Soviet Union should not cross Western Europe but should be despatched via the Pacific and Siberia.

It is possible that the mail route across Siberia is more certain and perhaps even faster than that across Western Europe. The Post Office might therefore be requested to re-examine the situation with regard to American-Soviet mail only (not including mail to Eastern Europe and the Mediterranean countries) and, if possible, to take steps to re-route this mail via the Pacific and Siberia. Even if the Post Office should not see its way clear to change its policy, it would seem likely that some arrangement could be made to despatch Soviet diplomatic pouches over the route desired by the Soviet Embassy.

viii. alleged mistreatment of two soviet engineers by the pittsburgh police

On July 6 the Soviet Ambassador made strong representations to the Department regarding the alleged mistreatment of two Soviet engineers by the Pittsburgh police. The Ambassador’s story is that the engineers in question were attacked by a group of unknown persons who accused them of being communistic; members of the police arrived and knocked one of the engineers unconscious and beat up the other; they were then taken to the police station where they were further mistreated; subsequently, they were taken to the Pittsburgh office of the F. B. I.⁵⁰ where they were examined concerning their political beliefs, their connections with the Communist Party and the Soviet Government; they were released, on the day following their arrest, after having been fined.

A representative of the Special Agent of the State Department examined the matter and reported⁵¹ that the engineers had been fighting in the street; that one was found by the police lying on the ground dead drunk; and that the other was bleeding at the face and waving a bloody handkerchief and shouting, “This is my flag”. The men were arrested, according to the agent’s report, for drunkenness and disorderly conduct. Officials at the Police Station disclaimed the allegations of mistreatment and maintained that the injuries were caused by the engineers themselves. The Soviet Ambassador has not been informed regarding the findings of the Chief Special Agent since we prefer waiting for a report requested from the Governor of the State of Pennsylvania⁵² before discussing the matter further with him.⁵³

The Ambassador took special offense at the reply which Mr. Berle made to him when he informed Mr. Berle by long distance telephone from New York of the arrest. According to the Ambassador’s story, which has been confirmed to an extent by Mr. Berle, Mr. Berle informed the Ambassador in reply to his complaints, that although naturally the American Government deplored acts of violence, nevertheless, so long as Moscow-directed communists in this country continue to intervene in our internal affairs and to attempt to undermine the American Government and to attack American governmental policies, it would be difficult to prevent spontaneous expressions of resentment, some of which might take the form of physical violence, against Soviet citizens in this country.

ix. american interests in soviet-occupied territories

The occupation of the Polish Ukraine, White Russia, Bessarabia, a part of Finland, Latvia, Lithuania, and Estonia by Soviet armed forces and the incorporation of these territories into the Soviet Union has presented this Government with numerous problems relative to the protection of American citizens and interests therein.⁵⁴ Not only is the question of the evacuation of American citizens from these areas still to be solved but also the question of American property. The Soviet Commissariat for Foreign Affairs informed our Embassy at Moscow on April 26, 1940⁵⁵ to the effect that since the measures nationalizing property in the Western Ukraine and Western White Russia were approved and proclaimed by decisions of October 28 and 30, 1939⁵⁶ of the National Assemblies of the Western Ukraine and Western White Russia prior to the incorporation of these areas into the U. S. S. R., and were carried out by authoritative organs established by the people of the Western Ukraine and Western White Russia, “there is no basis for the presentation of claims to the U. S. S. R. or to its organs.” The Soviet Foreign Office continued that the U. S. S. R. had no responsibility in regard to the former owners who had lost all property rights by virtue of the nationalization decrees of the sovereign people of Western Ukraine and Western White Russia. This property, according to the Commissariat, as nationalized and as State property, had legally been transferred to the U. S. S. R.

A similar statement will probably be issued following the incorporation of the Baltic States into the Soviet Union since nationalization and confiscation legislation has already been enacted in those countries.⁵⁷

The American Government cannot accept such an interpretation and holds the Soviet Government responsible for all American property which has been confiscated, nationalized or expropriated by organs under the jurisdiction of the Soviet Government. This Government firmly believes that Soviet officials exercised full control over the governments and organs of the nations and areas which were later incorporated into the Soviet Union, and that any legislation concerning nationalization or confiscation were, in fact, legislation of the Soviet Government. This Government, therefore, cannot accept the interpretation as cited above and holds the Soviet Government responsible for compensation for any American property in the areas in question.

It may be stated that the Soviet Union has never informed the American Government regarding the status of American property in these areas.

With respect to Bessarabia it may be pointed out that all of the property of the Rumanian Telephone and Telegraph Company, which is almost entirely American owned, was seized by the Soviet authorities. Efforts on the part of the American Embassy in Moscow to ascertain the status of this property thus far have brought forth no response.

x. the treatment accorded to american citizens in soviet-occupied Poland

The Embassy in Moscow informed the Department on July 26⁵⁸ that the Soviet authorities have consistently refused to permit American citizens in Soviet-occupied Poland to proceed to Moscow for the purpose of applying for passport services. Thus American citizens with expired passports or without passports are deprived of any opportunity to appear at the Embassy in order to apply for new passports and only those American citizens bearing valid passports can be evacuated from that area. (It is believed that there are over 200 persons in the area claiming American citizenship.) The Embassy is of the opinion that the Soviet authorities are now forcing those American citizens trapped in Soviet-occupied Poland without valid passports to accept Soviet passports and Soviet citizenship. Evidence of this policy has come to the attention of the Embassy.

It is suggested that emphatic representations be made to the Soviet Ambassador with regard to this situation and that he be informed that any restrictions of the freedom of movement of American citizens in the Soviet Union and any efforts to force American citizens to accept Soviet passports and citizenship, such as have been reported by the American Embassy in Moscow, are matters of grave concern to this Government. It is also suggested that the Ambassador be informed that until this situation is corrected to the satisfaction of the American Government no real improvement in Soviet-American relations can be effected.

xi. opening of a consulate at vladivostok

At the time of establishment of diplomatic relations between the American and Soviet Governments it was planned to open a consulate at Vladivostok. This plan did not materialize because the Soviet Government showed by its attitude that it did not desire that such a consular office be opened and the State Department realized that little could be accomplished by any consular officer in Vladivostok whose presence there was not agreeable to the Soviet authorities.

Since the Soviet Government has adopted a policy of reciprocity in regard to consular offices—that is, it takes the position that no country should maintain in the Soviet Union more consular offices than the Soviet Union maintains in the second country—we might well demand that the Soviet Government permit us to open a consular office in Vladivostok. We could even go so far as to insist that unless permission is given to us to establish such an office, the Soviet Government must close its consular offices in San Francisco and Los Angeles.

It is not believed, however, that any useful purpose would be served at this time by adopting such an attitude. The Department has decided that it is preferable to request from the Soviet Government a frank statement regarding its views on the matter, since the full cooperation of the Soviet Government and Soviet officials would appear to be essential to the successful functioning of an American consular office in the Far East. It may be pointed out that arrangements have just been concluded for the opening of a German consular office in Vladivostok.

The American Embassy at Moscow was requested about two weeks ago to take the matter up along these lines with the Soviet Foreign office.⁵⁹ No reply has as yet been received from the Embassy regarding its representations. It is not believed that the question of a consulate at Vladivostok should be made a bargaining point.

xii. the treatment accorded to the american embassy in moscow

The difficulties and irritating experiences which our representatives continue to encounter in the Soviet Union strongly operate to injure the relations between the two countries. It is firmly believed that it will be almost impossible to have what might be truly called cordial relations so long as the Soviet authorities continue to employ methods which seriously hamper the proper functioning of the Embassy and alienate the American personnel.

The unprecedented regime of customs inspection to which official supplies and personal effects of American diplomatic officers must be continuously submitted, the delay which is usually encountered in the obtaining of Soviet visas, the obstructionist, and in fact discourteous treatment frequently shown to our officials, such as for instance the rudeness and lack of cooperation shown to Mr. Ward⁶⁰ on his recent trips to Lvov, the bureaucratic manner in which the Soviet authorities take advantage of their monopoly on property and services in order to cause difficulties in connection with leases for and upkeep of property used by the Embassy are but a few examples of the annoying “pin pricks” which cause constant irritation. Mention has been made of the refusal to permit American citizens in Soviet-occupied Poland to come to Moscow for passport services. It should also be recalled that persons, American citizens and foreigners, are often detained and sometimes arrested upon entering or leaving the Embassy; that the Soviet Foreign Office has refused, even as a matter of courtesy, to furnish the Embassy with information concerning the welfare and whereabouts of persons of dual (American-Soviet) nationality and has sometimes shown reluctance to cooperate with the Embassy in respect to the welfare and whereabouts of American citizens in the Soviet Union. It still refuses to permit certain Soviet wives of American citizens to depart from the Soviet Union, although for a period last year it did show more than usual liberality in this respect.⁶¹

It cannot be too strongly emphasized that the above-mentioned irritations and annoying incidents, which show no signs of decreasing, not only prevent our Embassy from functioning in a normal manner but also make it appear that the attitude of officials responsible for them is not friendly to the United States.

44. This memorandum was undoubtedly prepared between July 27 and August 1, 1940.
45. Ante, p. 324.
46. See telegram No. 885, July 20, 9 p.m., from the Chargé in the Soviet Union, vol. i, p. 395.
47. 5 Federal Register 2586.
48. See the Department’s telegraphic reply No. 423, August 9, 6 p.m., vol. i, p. 410.
49. Memorandum of conversation not printed. By letter of August 9, the Acting Postmaster General advised the Secretary of State that “instructions were issued on the 5th instant pursuant to a cable request from the Postal Administration of the Soviet Union to employ the route via Vladivostok for all mails destined for the Soviet Union, Estonia, Latvia and Lithuania.” (811.71261/7)
50. Federal Bureau of Investigation, Department of Justice.
51. Report dated July 15 of examinations made on July 10–11, not printed.
52. Report dated August 15 transmitted by Gov. Arthur H. James under covering letter of September 23, not printed.
53. See memorandum by the Assistant Chief of the Division of European Affairs, August 20, p. 382.
54. For correspondence concerning the protection of American citizens in Europe and their repatriation, see vol. ii, pp. 68 ff.
55. See telegram No. 502, May 8, 5 p.m., from the Chargé in the Soviet Union, p. 197. For Department’s reply, see telegram No. 276, May 16, 6 p.m., p. 201.
56. See telegram No. 826, October 28, 1939, 4 p.m., from the Ambassador in the Soviet Union, and footnote 83, Foreign Relations, The Soviet Union, 1933–1939, p. 785.
57. For correspondence regarding the forcible occupation of the Baltic States and their incorporation into the Soviet Union, see vol. i, pp. 357 ff.
58. Telegram No. 914, July 26, 3 p.m., vol. ii, p. 146.
59. See telegram No. 377, July 18, 6 p.m., to the Chargé in the Soviet Union, p. 460.
60. Angus Ivan Ward, Consul, First Secretary, and Chief of Consular Section of the American Embassy in the Soviet Union.
61. For earlier difficulties in connection with this matter, see memorandum by the Ambassador in the Soviet Union of a conversation with the People’s Commissar for Foreign Affairs on March 14, 1938, and footnote 34, Foreign Relations, The Soviet Union, 1933–1939, pp. 533 and 534; and despatch No. 19, August 16, 1939, from the Ambassador in the Soviet Union, ibid., p. 844.