711.61/804
Memorandum of Conversation, by the Under Secretary of State (Welles)
The Soviet Ambassador called to see me by arrangement this afternoon.
The Ambassador brought up the question of the status of the machine tools negotiations and I said that I had not as yet received any final word from the Treasury Department with regard to the priorities matter and with regard to the requests I had made of the Secretary of the Treasury. I said that as soon as I received these replies, I would inform the Ambassador and that I thought it was consequently better for us to postpone any further discussion of the machine tools [Page 687] matter until our next regular session when Mr. Atherton and Mr. Henderson would be present. To this the Ambassador agreed.
The Ambassador then said that inasmuch as I had agreed in principle to settle the problem of the moral embargo, he would like to suggest that there be no longer any postponement of the final settlement of the gold purchase matter and of the formal assurances with regard to the facilitation of tonnage for the Soviet Union. I replied that it was quite impossible for me to agree to this proposal. I said that, as the Ambassador knew, at the outset of our negotiations the Ambassador and I had agreed that the objective of these negotiations was the satisfacory settlement of difficulties of an economic and commercial character which had arisen between the two countries in order that the foundation might be laid for a normal and mutually profitable relationship between the Soviet Union and the United States. I said that from our standpoint, one of the essential prerequisites to such an arrangement was the agreement by the Soviet Union to accept compensation for the machine tools and other articles manufactured for the account of Soviet agencies or under process of manufacture for Soviet agencies which had either been requisitioned or had been diverted by order of the United States Government. I said that until the time came when this question was liquidated to our satisfaction, I could not conceive of there being afforded the opportunity for the two countries to place their commercial relations on a sound basis and that, in my judgment, both the facilitation of the tonnage question and the gold purchase question were inevitably and inextricably involved in the commercial relationship between the two countries. I said, therefore, that he must regard my reply as final and I said that I did not consider myself to be in a position to give him official assurances concerning the two matters in which the Soviet Government was interested until such time as the machine tools question was settled to the satisfaction of this Government.
The Ambassador limited himself to saying that he regretted receiving this statement from me, but he made no further argument with regard thereto.
He said, however, that the need of the Soviet Union for three ships for which it had requested a charter from the Maritime Commission, in order to transport to Vladivostok material purchased in the United States was exceedingly great, and he trusted that the preliminary assurances which I had given him two months before, to the effect that there would be no discrimination against the Soviet Union in the granting of charters for merchant shipping, would be carried out. I told the Ambassador that I was glad to let him know that this matter had already been taken up at my request with the Maritime Commission and that I hoped the Maritime Commission would find a way to meet the wishes of the Soviet Union in this regard. On the other [Page 688] hand, I said, the Ambassador must surely be aware of the very great stringency of commercial shipping facilities for United States interests both as a consequence of the requisitioning of American flagships in commercial service by the War and Navy Departments, as well as because of the withdrawal of foreign flagships under Allied control from inter-American maritime commerce. The Ambassador quite frankly admitted that he was aware of this situation and that he was by no means alleging any discrimination but that he hoped, as an act of accommodation to the Soviet Union, that steps would be taken to charter at least the three ships desired by the Soviet Union.
I said to the Ambassador that under present conditions, one of the difficulties which the Maritime Commission encountered in granting facilities for chartering American flagships to the Soviet Union was the fact that on the return journey from Vladivostok to American ports these ships had very little cargo. The Ambassador replied that this question was obviously even more in the interest of the Soviet Government than in the interest of this Government, and he reminded me that some months ago, upon the initiative of Secretary Morgenthau, he had discussed the possibility of the payment by the Soviet Union to the United States of strategic materials required here which would pass through Vladivostok and afford the return cargo required. He mentioned as products which could economically be shipped by rail to Vladivostok chromium, flax and platinum. He said, furthermore, that while manganese could not be shipped profitably by way of Vladivostok, the Soviet Government was prepared at any time to enter into arrangements with the United States for the shipment of manganese across the Caspian Sea and from there by rail across Iran. He stated that this operation would be both feasible and economical. I replied that I was glad he had brought this matter to my attention and that I would make inquiries in order to ascertain what possibility there might be of undertaking further negotiations in this regard.