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

811.20 (D) Regulations/5434

Memorandum of Conversation, by Mr. Edward Page, Jr., of the Division of European Affairs

[Washington,] October 15, 1940.

Participants:	Mr. Constantine A. Oumansky, Soviet Ambassador;
	Mr. Atherton, [Acting] Chief of [the Division of] European Affairs;
	Mr. Page.

Mr. Atherton opened the conversations by remarking that he had requested the Ambassador to come in for the purpose of informing him of the results of the preliminary studies of the Ambassador’s memorandum;⁴ that he wished the conversation to be of an informatory and not controversial character and that there could be no question of negotiations since neither Mr. Atherton nor Mr. Page were empowered to negotiate the questions at issue. Mr. Oumansky agreed to keep the conversation on this basis.

Mr. Atherton then explained that the Department was prepared to furnish the Ambassador with the following three lists of applications for export licenses for machine tools:

(1) Applications rejected during the period July 1–October 1;

(2) Applications previously approved and contained on the lists of approved licenses handed to the Ambassador on October 14 which had subsequently been revoked;

(3) Applications which have previously been rejected but which may now be resubmitted for consideration. Mr. Atherton added that in addition to the above there existed a further list of thirteen applications to the value of approximately $250,000 which the Defense Commission intended to revoke. This list was still under consideration and could not be given to the Ambassador.

The Ambassador was then informed that in the preliminary conversation with Colonel Maxwell and other interested officers the Soviet position, as stated in the Ambassador’s memorandum, had been fully explained; that the Department had been advised that one of the basic policies of the Defense Commission was to keep machine tool plant capacities free for future Government orders and for this reason it was quite impossible to make any definite commitments for future deliveries of Soviet orders; that it was strongly recommended that Soviet purchasing agencies in this country resubmit their orders for machine tools for which export licenses had been rejected to the President’s Liaison Committee and that these agencies inform the Committee which tools were most urgently needed. Mr. Atherton added that should the Ambassador agree to this course it was likely that Mr. Welles would recommend to the Committee that special consideration be given to Soviet replacement orders.

The Soviet Ambassador received the above remarks with considerable displeasure. After brief references to the illegality of the retroactive effect of the President’s Proclamation of July 2,^4a the Ambassador stated that it was evident that the American authorities were not prepared to authorize the automatic renewal of existing contracts as provided for in point 4(a) of the Ambassador’s memorandum; that since these authorities were demanding that new applications should be made, the possibility existed of new rejections and postponements. He stated that he would willingly discuss all new orders with the Liaison Committee but that his present instructions were limited to the liquidation of the past which did not include the course suggested by the Department of considering renewal orders as new orders. He continually maintained that the Soviet Government was entitled to be permitted to renew automatically contracts for machine tools not released for export. Mr. Atherton remarked that the present conversations were of an informatory and not controversial character and suggested that Mr. Oumansky’s attention be directed to the lists prepared by the Soviet Embassy and by the Department. The Ambassador stated that according to his figures applications for licenses for machine tools and other equipment to the value of $7,592,558 had been denied or had not been acted upon. He itemized the figures as follows: Applications denied for machine tools already in United States ports—$845,466. Applications denied for machine tools in American factories—$3,335,176. Applications, the disposition of which is unknown, $2,503,466. Machine tools contracted for which have been taken over (“requisitioned”) by American manufacturers $907,450, and total $7,592,558.

The Ambassador added that Soviet purchasing agencies had accepted all the tools in American ports, tools to the value of $849, 133 of the “unknown disposition” category and tools to the value of $264,718 orders in “requisition” by American manufacturers or a total of $1,959,317. He stated that he assumed that the second part of point 3 of the Soviet memorandum had been accepted by the American Government. He was informed that just the contrary was true since the President’s Proclamation referred to exports and not to the acceptance of equipment by Soviet purchasing agencies. The Ambassador again commented on the retroactive effect of the Proclamation and stated that as far as he could see the conversations had not advanced during the course of the last seven weeks.

Mr. Atherton suggested that the Ambassador study the new lists and then inform the Department which machine tools the Soviet Government desired to replace. The Ambassador stated that he believed that his Government would probably wish to replace practically the entire list.

Summing up the conversation, the Ambassador stated that it would appear that the American and Soviet Governments were still as far apart in the matter of the principle of the application of the President’s Proclamation as they were at the last conversation and especially so with regard to point 3 and 4(a) of the memorandum; that insofar as the practice was concerned the situation had greatly deteriorated since now rejections amounted to about 50%, whereas on August 1 such rejections amounted to 30% and on August 15 to about 35%.

It was explained to the Ambassador that our defense program had changed drastically in the last 2 to 4 weeks; that early in August we believed that this program would not seriously interfere with our export business in machine tools, but that in the development of the program it became clear that we had been prematurely optimistic, and that there was now a tendency to manufacture tools only for United States defense industries.

Mr. Atherton then informed the Ambassador that he had been called to the Secretary’s office. Before leaving he again strongly advocated that the Soviet purchasing agencies in this country approach the President’s Liaison Committee with regard to their problems.

Mr. Oumansky, Mr. Page and Mr. Schnee⁵ discussed several minor details concerning the disposition of applications not yet acted upon and it was suggested to the Ambassador that after study of the new lists he advise the Department concerning those applications still not heard from. He requested the investigation of an application for the export of a catalyst cracking unit to the value of $74,000. Mr. Schnee promised to look this matter up.

4. Dated October 7, not printed.
5. Department of State Bulletin, July 6, 1940, p. 12.
5. Alexander Schnee, of the Division of Controls.