845.24/303: Telegram

The Officer in Charge at New Delhi ( Merrell ) to the Secretary of State

1. Britain’s favorable attitude toward proposed direct lend-lease agreement between United States and India (Department’s 738, December 29, 9 p.m.90) is thought to be based primarily on the fact that while India receives the benefit of lend-lease goods, it is Britain which pays for reciprocal lend-lease aid being furnished to American Forces in India. The obligation for India’s lend-lease goods is Britain’s. The reciprocal obligation has not been passed on to India according to best information available. Under proposed agreement India would of course be responsible for supplying reciprocal aid. Amount of such aid thus far given is not known but is large and just what settlement of present balances between India and Britain may be contemplated if the American agreement is concluded is not known. England might, however, reasonably expect some reimbursement for her expenditures for reciprocal aid. In view of India’s stated unwillingness to grant trade concessions any such settlement might possibly be on a financial basis and might involve either India’s sterling credits in London or the large rupee “suspense” account which has been built up in India with cash received with nonofficial orders for lend-lease goods and debits against Government departments ordering [Page 247] lend-lease goods. This account obviously large has not thus far been charged for reciprocal lend-lease aid supplied.

A further and important consideration may well be that England under present lend-lease procedure will ultimately be faced with the politically unpleasant necessity of demanding from India reimbursement in one form or another to offset Britain’s lend-lease obligation on India’s behalf to the United States. Britain may consider it more feasible to effect settlement now than to do so after the war when the value as involved would be much larger and political situation presumably in transitional state. Britain might well prefer to let the United States “present the bill” to India direct after the war.

Obvious advantages to Britain of proposed agreement would be economies in time and administrative effort and expense. From India’s point of view simplification of procedure and savings and time would be useful. It would also give India its own place in any postwar negotiations which would relieve Britain of possible charges afterward that India’s interests had not been properly guarded.

On the purely political side Britain by sponsoring direct Indo-American agreement could throw a sop to Indian Nationalists which not only would cost British Government nothing but also would work to its advantage. Such a move would be politically effective in that it would presumably involve India’s formal adherence to British master agreement91 which is regarded as first implementation of the Atlantic Charter.92 Fact that Charter has never specifically been applied to India has been a major grievance here. Thus proposed lend-lease agreement might reasonably be construed by Nationalists as indirect admission of India’s inclusion in Charter.

Report contained in second paragraph of Department’s telegram under reference does not check with statements recently made by General Wheeler,93 Service of Supply, who handles American reverse lend-lease operations here. He appears to be obtaining most of what he requires without to a [a too?] great difficulty or delay and although complications undoubtedly arise from time to time it is not believed that he is responsible for initiating this matter. However, he is known to have been disappointed several months ago when an informal proposal that he scrutinize and pass upon all of India’s lend-lease requisitions before submission to Washington was dropped for reasons never announced. This is of course highly confidential. In discussing [Page 248] the proposed agreement with him (without attribution to the Department) he made the statement that it did not matter to him whether he dealt with Britain or Indian reciprocal lend-lease matters.

  1. Foreign Relations, 1942, Vol. i, p. 750.
  2. Preliminary agreement in regard to principles applying to mutual aid in the prosecution of the war against aggression, signed at Washington, February 23, 1942; Department of State Executive Agreement Series No. 241, or 56 Stat, (pt. 2) 1433. For negotiations leading up to this agreement, see Foreign Relations, 1942, Vol. i, pp. 525 ff.
  3. Joint statement by President Roosevelt and British Prime Minister Churchill, August 14, 1941; ibid., 1941, Vol. i. p. 367.
  4. Brig. Gen. Raymond A. Wheeler, Commanding General, Services of Supply, China–Burma–India theater.