Foreign Relations of the United States, Diplomatic Papers, 1944, Europe, Volume IV

861.24/9–1644: Telegram

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

Washington, September 16, 1944—11 p.m.

2226. The following is the written text of the final draft of the agreement submitted to Stepanov on September 14. The list of items in Schedules I and II, which, except for minor changes, are the same as enclosures 6 and 7 of the Department’s instruction of August 14,³⁴ but which were submitted with the draft given to Stepanov, are because of their length not included in this message:

“The Government of the United States has provided, and is continuing to provide, vital war supplies, services and information to the Government of the Union of Soviet Socialist Republics under the Act of Congress of the United States of March 11, 1941, as amended, and pursuant to the Mutual Aid Agreement of June 11, 1942 between these two Governments.

The Governments of the United States and the Union of Soviet Socialist Republics desire to insure the continued flow of such supplies, services and information required for the war program of the Union of Soviet Socialist Republics without interruption owing to uncertainty as to the date when the military resistance of the common enemy will cease; and desire to insure further that supplies maintained in inventory or procurement in the United States for the purpose of providing war aid to the Government of the Union of Soviet Socialist Republics shall be disposed of, following the cessation of the military resistance of the common enemy, in an orderly manner which will best promote their mutual interests.

For the purpose of attaining the above stated objectives, the Government of the United States and the Government of the Union of Soviet Socialist Republics agree as follows:

Article I. The Governments of the United States, the Union of Soviet Socialist Republics, the United Kingdom, and Canada have under discussion and negotiation a Protocol for the period from July 1, 1944, to June 30, 1945, setting forth certain types and amounts of war supplies to be stated therein to be made available by the United States and to be dispatched to the Union of Soviet Socialist Republics.

The provisions of this Agreement, except those of Article III, refer to transfers by the Government of the United States of certain categories of supplies set forth in this Agreement after a determination by the President of the United States that the military resistance of the common enemy has ceased. All supplies undertaken to be provided by the Government of the United States under this Agreement shall be made available under the authority and subject to the terms and conditions of the Act of Congress of March 11, 1941, and acts amendatory or supplementary thereto.

Article II. Within such periods as may be authorized by law, the Government of the United States undertakes to transfer to the Government of the Union of Soviet Socialist Republics, after a determination by the President of the United States that the military resistance of the common enemy has ceased, and the Government of the Union of Soviet Socialist Republics agrees to accept, those supplies included in the categories set forth in Schedule I annexed to and made a part of this Agreement which the Government of the United States shall have agreed to make available in order to provide war aid to the Government of the Union of Soviet Socialist Republics and, prior to said determination of the President, shall have contracted for or shall have in inventory and which shall not have been exported or otherwise transferred to the Union of Soviet Socialist Republics prior to said determination.

The Government of the Union of Soviet Socialist Republics undertakes to pay the Government of the United States in dollars, for the supplies transferred under the provisions of this Article, an amount to be determined as set forth in said Schedule I, and interest thereon, according to the terms and conditions set out in that Schedule. The obligations of the Government of the Union of Soviet Socialist Republics to make payment in dollars in accordance with the terms of this Agreement may be discharged by the delivery of gold, which will be valued at the buying price for gold provided in the provisional regulations issued under the Gold Reserve Act of 1934³⁵ as the same may be in effect at the time of each delivery.

Additional categories may be added to the categories in Schedule I from time to time prior to said determination by the President by the mutual agreement of the parties. When so added, the financial arrangements set forth in Schedule I shall apply.

Article III. Within such periods as may be authorized by law, the Government of the United States undertakes to transfer to the Government of the Union of Soviet Socialist Republics, and the Government of the Union of Soviet Socialist Republics agrees to accept, those items of capital equipment needed in the Soviet Union’s programs of war production, requiring a long period to produce, or to reproduce if already constructed, and having a long period of useful life, which may by mutual agreement be included from time to time in Schedule II annexed to and made a part of this Agreement and which the Government of the United States shall have contracted for or shall have title to prior to the determination by the President that the military resistance of the common enemy has ceased.

The Government of the Union of Soviet Socialist Republics undertakes to pay the Government of the United States in dollars, for the supplies transferred under the provisions of this Article, an amount to be determined as set forth in said Schedule II, and interest thereon, according to the terms and conditions set forth in that Schedule. The obligation of the Government of the Union of Soviet Socialist Republics to make payment in dollars in accordance with the terms of this Agreement may be discharged by the delivery of gold, which will be valued at the buying price for gold provided in the provisional regulations issued under the Gold Reserve Act of 1934 as the same may be in effect at the time of each delivery.

Article IV. The Government of the Union of Soviet Socialist Republics shall be released from its obligation to accept supplies under the provisions of Article II and of Article III upon the payment to the Government of the United States of any net losses to the United States, including contract cancellation charges, resulting from the determination of the Government of the Union of Soviet Socialist Republics not to accept such supplies.

Delivery of any supplies under the provisions of this Agreement may be cancelled by the United States without cost to the Union of Soviet Socialist Republics if the President of the United States shall determine that the security of the United States so requires, after due consideration is given to the needs of the Union of Soviet Socialist Republics.

Article V. The Government of the United States agrees that the provisions of Article V of the Mutual Aid Agreement of June 11, 1942, shall not apply to supplies made available to the Government of the Union of Soviet Socialist Republics under the provisions of Article II or of Article III of this Agreement.

Article VI. Nothing in this Agreement shall modify or otherwise affect the final determination, under the Act of March 11, 1941, as amended, and the Mutual Aid Agreement between the two Governments of June 11, 1942, of the terms and conditions upon which the Government of the Union of Soviet Socialist Republics receives aid, except for the aid made available under the provisions of this Agreement.

Article VII. The Government of the United States, after the determination by the President of the United States that the military resistance of the common enemy has ceased, will, so far as it is consistent with the security of the United States, use its best efforts to supplement the shipping available to the Government of the Union of Soviet Socialist Republics to effect the prompt and orderly movement to the Union of Soviet Socialist Republics of the supplies provided under this Agreement. The two Governments will discuss at an early date the manner in which and the terms upon which such supplementary shipping may be made available.

Article VIII. This Agreement shall take effect as from this day’s date. It shall continue in force until a date to be agreed upon by the two Governments.

Schedule I

The terms and conditions upon which the supplies in the categories listed below are to be transferred by the Government of the United States to the Government of the Union of Soviet Socialist Republics under the provisions of Article II of this Agreement are as follows:

Unless otherwise provided by mutual agreement, transfers of supplies shall take place, and title and risk of loss shall pass to the Government of the Union of Soviet Socialist Republics, immediately upon loading of the supplies on board ocean vessel in a United States port; provided, that those supplies which, prior to the end of the periods authorized by law referred to in Article II of this Agreement shall have been delivered by the contractor to the United States Government and shall not have been transferred to the Union of Soviet Socialist Republics as above set forth, shall be transferred, and title and risk of loss shall pass to the Government of the Union of Soviet Socialist Republics, upon the last day of said periods.

The amount which the Government of the Union of Soviet Socialist Republics shall pay the Government of the United States, for supplies transferred under the provisions of Article II of this Agreement, shall be the sum of the following items, as determined by the President of the United States, or an officer of the United States Government designated by him:

1. The price of the supplies, which shall be determined as follows:

In the case of standard supplies the price shall be the current sale price or the adjusted contract price, whichever is lower; provided, that in the event the current sale price is not determined, the price shall be the adjusted contract price less five per cent of such adjusted contract price.

In the case of non-standard supplies which shall have been delivered to the United States by the contractor prior to thirty days following the date of the determination by the President that the military resistance of the common enemy has ceased, the price shall be the current sale price or the adjusted contract price, whichever is lower; provided, that in the event the current sale price is not determined, the price shall be the adjusted contract price less five per cent of such adjusted contract price. In the case of non-standard supplies which shall have been delivered to the United States by the contractor subsequent to thirty days following the aforesaid date of the determination by the President, the price shall be the adjusted contract price.

The determination of the said price of supplies by the President, or an officer of the United States Government designated by him, shall be made in accordance with the following definitions:

The term ‘standard supplies’ shall mean those supplies which have been contracted for by the United States Government in accordance with standard United States specifications. The term ‘non-standard supplies’ shall mean those supplies which have been contracted for by the United States Government in accordance with non-standard United States specifications. It is understood that those supplies which are standard except for minor non-standard features, attachments or adjustments shall be deemed to be standard supplies.

The term ‘adjusted contract price’ shall mean the contract purchase price f.o.b. point of origin paid by the United States Government to the contractor, less five per cent of such contract purchase price, or, if such contract purchase price cannot be determined for the particular supplies transferred, the estimated average contract purchase price f.o.b. point of origin paid by the United States Government for similar supplies during a period of three months preceding the aforesaid date of the determination by the President of the United States, less five per cent of such average contract purchase price.

The term ‘current sale price’ of particular standard or non-standard supplies transferred to the Union of Soviet Socialist Republics, shall mean the price at which similar standard supplies of comparable quality and in comparable quantity have been sold by the United States Government, at or about the time of transfer of the particular supplies to the Union of Soviet Socialist Republics, to any foreign or domestic buyer. It is understood that ‘foreign or domestic buyer’ shall be deemed to exclude United States Government agencies, States and political sub-divisions thereof, United States public, charitable, or educational institutions, relief organizations, and any persons or organizations which may purchase supplies on special financial terms provided by law.

2. The cost of storage, if there be any storage, after the aforesaid date of the determination by the President and prior to the time of transfer, which shall be determined as follows:

When railroad or commercial storage facilities are used, the cost of storage shall be the storage and handling charges paid by the Government of the United States. When United States Government storage facilities are used, the cost of storage shall be the storage and handling costs as determined by the President of the United States, or an officer of the United States Government designated by him, but shall not exceed an amount computed at the following rates:

Storage charge per month, or fraction thereof, in covered storage facilities	$1.00 per ton
Handling cost into storage	1.00 per ton
Handling cost from storage	1.00 per ton
Exception—heavy lift articles weighing over 10,000 lbs. per unit
Handling cost into storage	2.00 per ton
Handling cost from storage	2.00 per ton
Storage charge per month, or fraction thereof, in open or ground storage facilities	$ . 40 per ton
Handling cost into storage	1.00 per ton
Handling cost from storage	1.00 per ton
Exception—heavy lift articles weighing over 10,000 lbs. per unit, requiring use of mechanical handling equipment
Handling into storage	2.00 per ton
Handling out of storage	2.00 per ton

It is understood that the selection of storage facilities shall be made by the United States Government and that, when they are available, railroad or commercial storage facilities shall be used so far as is practicable.

3. Inland transportation and accessorial charges incurred by the United States Government after the aforesaid date of the determination by the President and prior to the time of transfer, based upon published commercial export rates wherever available to the United States Government. Said accessorial costs shall include handling, trucking, demurrage, dock, loading, lighterage, and similar charges, but shall not include administrative expenses of the United States Government. It is understood that the selection of the means of inland transportation shall be made by the United States Government.

Payment of the total amount determined as set forth above for all supplies transferred under the provisions of Article II of this Agreement shall be made by the Government of the Union of Soviet Socialist Republics, on or before the last day of the thirtieth year following the last day of the month in which the President has determined that the military resistance of the common enemy has ceased, in 22 annual instalments, the first of which shall become due and payable on the last day of the ninth year following the last day of the month in which the said determination by the President has been made. The amounts of the annual instalments shall be as follows: each of the first four instalments shall be in an amount equal to 2.5 per cent of the amount determined as set forth above; each of the second four instalments shall be 3.5 per cent of said determined amount; each of the third four instalments shall be 4.5 per cent of said determined amount; each of the fourth four instalments shall be 5.5 per cent of said determined amount; and each of the last six instalments shall be 6 per cent of said determined amount. Nothing herein shall be construed to prevent the Government of the Union of Soviet Socialist Republics from anticipating the payment of any of the instalments, or any part thereof, set forth above.

If by agreement of both Governments, it is determined that, because of extraordinary and adverse economic conditions arising during the course of payment, the payment of a due instalment would not be in the joint interest of the United States and the Union of Soviet Socialist Republics, payment may be postponed for an agreed upon period.

Interest on the unpaid balance of the amount determined as set forth above for any supplies transferred under the provisions of Article II of this Agreement, shall be paid by the Government of the Union of Soviet Socialist Republics, irrespective of the time when the determination of said amount is made, at a fixed rate of 2⅜ per cent per annum from the first day of the month following the month in which transfer took place. Interest shall be payable annually, the first payment to be made upon the expiration of twelve months following the last day of the month in which the President has determined that the military resistance of the common enemy has ceased; provided, that in respect of supplies for which said amount has not been determined as above set forth prior to the time when interest would be payable on such amount, if determined, interest from the first day of the month following the month in which transfer took place shall be included in the annual interest payments, provided for above, following the time when the said amount has been determined.

The following categories of supplies are those referred to in Article II of this Agreement, and except as otherwise noted correspond to categories listed in ‘United States of America, Standard Commodity Classification, Volumes I and II, United States Government Printing Office, Washington: 1943 and 1944’. These categories shall not include any supplies requiring a long period to produce, or to reproduce if already constructed, and having a long period of useful life, with respect to which requisitions are approved by the United States subsequent to the execution of this Agreement. Such supplies shall be listed by mutual agreement in Schedule II referred to in Article III of this Agreement.

(List of Schedule I items follows in text submitted to Stepanov.³⁶)

Schedule II

The terms and conditions upon which the supplies listed below are to be transferred by the Government of the United States to the Government of the Union of Soviet Socialist Republics under the provisions of Article III of this Agreement are as follows:

Transfers of supplies shall take place, and title and risk of loss shall pass to the Government of the Union of Soviet Socialist Republics, upon the same terms as are set out in Schedule I annexed to this Agreement.

The amount which the Government of the Union of Soviet Socialist Republics shall pay the Government of the United States, for supplies transferred under the provisions of Article III of this Agreement, shall be the sum of the following items, as determined by the President of the United States, or an officer of the United States Government designated by him:

1. The contract purchase price paid by the United States Government to the contractor.

2. The cost of storage, if there be any storage, prior to the time of transfer, which shall be determined according to the same terms as are set forth in Schedule I annexed to this Agreement.

3. Inland transportation and accessorial charges incurred by the United States Government prior to the time of transfer, which shall be determined according to the same terms as are set forth in Schedule I annexed to this Agreement.

Payment of the total amount determined as set forth above for all supplies transferred under the provisions of Article III of this Agreement shall be made by the Government of the Union of Soviet Socialist Republics upon the same terms and conditions as are set out in Schedule I annexed to this Agreement.

Payment of interest on the unpaid balance of the amount determined as set forth above for any supplies transferred under the provisions of Article III shall be made by the Government of the Union of Soviet Socialist Republics upon the same terms and conditions as are set out in Schedule I, with the exception that in the case of supplies transferred prior to the determination by the President that the military resistance of the common enemy has ceased, the date of transfer shall be deemed to be the date of said determination by the President.

The supplies listed hereunder are those referred to in Article III of this Agreement. The undertakings of the United States and the Union of Soviet Socialist Republics in Article III refer to such of these supplies as the United States shall have contracted for or shall have title to prior to the determination by the President that the military resistance of the common enemy has ceased. All items listed below are subject to the following conditions:

1. Individual applications for such equipment will first be reviewed by appropriate United States Government agencies.

2. After approval of individual applications it will be necessary for the Union of Soviet Socialist Republics to complete arrangements under which patent or other property rights are protected to the satisfaction of their owners.

3. New production of equipment will not be undertaken whenever in the judgment of responsible United States authorities such equipment can be supplied from United States surpluses or from cancelled orders, account always being taken of conditions peculiar to the Union of Soviet Socialist Republics which will govern use of the equipment.

4. Approval for new production will be given only to the extent that equipment required for United States programs of comparable urgency is being approved and priority ratings, where required, will correspond to ratings granted such United States programs.

5. The United States will not undertake to effect delivery of the equipment during a fixed time period, except as provided in Article III of this Agreement.”

(List of Schedule II items follows in text submitted to Stepanov.³⁷)

There is quoted below the text of the letter sent by General Wesson to General Eudenko on September 12 regarding procedural matter:

“Since your letter of September 2, 1944, to Mr. John Hazard, regarding the procedure for making applications for projects to be furnished under the Fourth Protocol upon the terms of Article III of the proposed amendment to the Mutual Aid agreement of June 11, 1942, I have had this matter further reviewed. I am setting forth below the procedure which the representatives of WPB, Treasury Procurement and FEA believe to be most suitable under the circumstances.

Although WPB Form 3649 must be executed before materials can be allocated for the manufacture of these projects, we shall make other arrangements to have the form filled out so that it will not be necessary for your Government to do this.

In order that we may expeditiously handle this program, however, we believe that your Government should make application for each project in a preliminary letter form and submit such application to this office in quadruplicate. This application should contain as much information as possible relating to the specifications of the products to be produced, capacity of the plant, and all utilities required.

In consideration of this application we may wish to consult with your engineers on technical details regarding designs and equipment to be supplied.

Upon approval of the application a recommendation will be submitted to your Government as to the detailed information to be included in a formal requisition to be submitted to the Foreign Economic Administration for processing.

Treasury Procurement in securing contractors to design or supply equipment in accordance with approved requisitions has given assurance that:

(1) Your Government may select the engineering firms, provided that adequate justification is given for the selection made. It must be understood that any negotiations by Treasury Procurement with engineering firms are subject to the statutory limitations applicable to the United States Government.

(2) Negotiations will be carried on with engineering firms and suppliers by Treasury Procurement, which may solicit the participation of the Soviet representatives in the negotiations.

(3) Prime contracts will be placed with firms designated by your Government, provided that justification is given which meets the requirements of Treasury Procurement, and prime contracts will be placed only after agreement between Treasury Procurement and the Soviet representatives concerning contract prices.

Your attention is invited to the fact that the U.S. Government will not contract in your behalf, or be obligated in any way, for patent rights, royalty payments, technical information and know-how, etc. Financial arrangements for such items must be consummated by your Government with the parties concerned.

All matters of procedure and detail having to do with the transfer and acceptance of supplies under articles II and III of the proposed agreement should be discussed and worked out by the representatives of our two Governments as soon as possible.”

Hull

34. Not printed.
35. Approved January 30, 1934, 48 Stat. 337; for proclamation of January 31, 1934, see 48 Stat. (pt. 2) 1730.
36. Reference is to the revised detailed list of Schedule I items included with the instruction of August 14, 1944 (not printed, but see telegram 1965 of August 17, to Moscow, p. 1115). This list comprised 12 pages of items similar to many of those in Groups I, II, III, V (especially those preceded by the symbol “II”), and VI as printed in the detailed Annex II to the Fourth (Ottawa) Protocol signed on April 17, 1945. See Department of State, Soviet Supply Protocols, pp. 96–141.
37. Reference is to the revised detailed list of Schedule II items included with the instruction of August 14, 1944 (see footnote 36, p. 1144). This list comprised 8 pages of items similar to many of those in Group V (especially those preceded by the symbol “III”), as printed in the detailed Annex II to the Fourth (Ottawa) Protocol signed on April 17, 1945. See Soviet Supply Protocols, pp. 111–128.