124.615/377: Telegram

The Ambassador in the Soviet Union ( Steinhardt ) to the Secretary of State

476. As the Department is aware, the exchange value of the ruble has for some years past been arbitrarily maintained by the Soviet [Page 870] authorities at 5.3 to the dollar, a rate which bears no relationship to the actual value of the ruble in terms of commodity prices. Furthermore, there has been no free exchange market. In consequence and by reason of the excessive disparity between the nominal value of the ruble and its actual purchasing power, it has been the custom of this Mission ever since it was opened, as well as of all other Missions in Moscow, to acquire its rubles at favorable rates of exchange outside the Soviet Union and to bring them to Moscow by diplomatic courier. This practice has had the tacit consent of the Soviet authorities.

For some time after the outbreak of the war, rubles were available in various cities including Paris, Warsaw, Stockholm, Helsinki, Riga, and Bucharest in quantities sufficient to satisfy the requirements the entire Moscow Diplomatic Corps. These markets were gradually eliminated however until by the summer of 1940 the only source outside the Soviet Union from which rubles were obtainable was Tehran. The average ruble rate obtained by the Embassy during the calendar [year] 1940 was 25.25 to the dollar.

As I have previously reported (see my 299 of February 18, 3 p.m.59) the ruble rate has been progressively declining in Tehran since December and during the past few weeks it has been quoted at 14 to the dollar. Moreover, the supply has been inadequate to meet the requirement of the Diplomatic Corps in Moscow.

As a result of this development which it is generally believed was deliberately brought about by the Soviet Government, the German Ambassador60 as Dean of the Diplomatic Corps has been carrying on conversations with the Commissariat for Foreign Affairs in an endeavor to have rubles made available in Moscow to foreign missions at an agreed rate. The Soviet authorities having agreed in principle to supply rubles to the Diplomatic Corps at a fixed rate, the Ambassador suggested that the rate be fixed at 30 to the dollar. The Commissariat countered with an offer of 10 to the dollar. The negotiations have now reached the point at which the Commissariat for Foreign Affairs has made the categoric statement that the Soviet Government will not agree to a rate better than 12 to the dollar. The German Ambassador has informally advised several of his colleagues including myself that he regards it as hopeless to endeavor to obtain a better rate.

He is as yet without information from the Commissariat as to the quota which would be made available to each mission at this rate or any other details of the plan which the Soviet Government may intend to impose. He has told me informally, however, that it has been intimated to him that, once the proposed arrangement has been made effective, the Soviet Government will not permit members of the Diplomatic [Page 871] Corps to bring rubles into the Soviet Union and that drastic punitive steps will be taken against any individual found attempting to do so.

An analysis of the practical effects of the plan contemplated by the Soviet Government, in so far as it will affect this Mission, will be submitted in a subsequent telegram.61

Steinhardt
  1. Not printed; but see footnote 62, p. 871.
  2. Friedrich Werner, Count von der Schulenburg.
  3. See the Ambassador’s telegram No. 538, March 19, 9 p.m., below.