The Chairman of the President’s Soviet Protocol Committee ( Hopkins ) to the Ambassador in the Soviet Union ( Harriman )33
Personal to W. Averell Harriman. In reply to your Numbers 56, 67 and 68. Your suggestions regarding aid for post war reconstruction in the USSR are closely related to certain problems arising under Lend Lease. Consideration here of these problems has suggested a method which, to a large extent, would be a start toward effectuating your suggestions concerning reconstruction.
As you know, the Third Protocol contains a provision of approval of orders for 300 million dollars worth of industrial equipment for delivery after June 30, 1944. Under this provision the Russians have requested oil refineries, and power plant, metallurgical plant, and other types of capital equipment. All of this equipment has a dual use—a war use and post war use. Most of the equipment will take many months to produce and to get into operation. Because of uncertainty as to when the war would end, some quarters were hesitant about putting equipment into procurement, the production of which might be only partially completed when the war ends. However, since no one can now determine when the war will be over, it seems preferable that there should be no interruption in the procurement of supplies for the USSR war program in the event that hostilities should continue beyond normal expectations and, at the same time, that there should be an assurance that after the termination of hostilities [Page 1044] the USSR will accept such items as are undelivered and have a post war use and will agree now as to the method of repayment for such items.
As a result of considerable discussion within the Government, it is the prevalent view here that we should go ahead and procure this type of equipment as soon as possible and in a manner consistent with our normal allocation procedure for materials in short supply, provided an understanding can be reached with the USSR as to the disposition of equipment not shipped before the end of hostilities against the common enemy. If hostilities continue beyond June 30, 1944, delivery of equipment in the 300 million dollar category will, in all probability, be covered by a Fourth Protocol and supplied on a straight Lend Lease principle. In the case of equipment contracted for but not shipped before the cessation of hostilities, an agreement ought to be worked out with the USSR for repayment on a credit principle. Such a credit principle might be repayment over a long period of years either in cash or commodities, or both, as mutually agreed upon.
The same principle of obtaining repayment for items contracted for before but shipped after the cessation of hostilities could be extended to other items in the Third Protocol, with the possible exception of munitions and foodstuffs. Items like copper, aluminum, steel, communications equipment and railroad equipment, for example, are also likely to be useful both for war purposes and for purposes of reconstruction.
At any given time, there is likely to be more than a billion dollars worth of Protocol supplies in procurement or inventory. Under the Lend Lease Act34 as it now stands, these supplies could be delivered to the USSR up to July 1, 1947, to the extent necessary to carry out a contract with the Soviet Government. Accordingly, it is considered advisable to propose to the USSR a supplementary agreement to the Third Protocol, the principle of which can also be incorporated in the Fourth Protocol, along the following lines. The United States should undertake to supply and the USSR should undertake to accept materials and supplies to be mutually agreed upon which are useful for both war and reconstruction purposes and which are contracted for but not shipped before the cessation of hostilities against the common enemy. The USSR would agree to pay for such supplies in cash, or goods, or both, over a period of time as mutually agreed upon in the agreement. If this kind of agreement is consummated, the programming of a larger amount of dual purpose supplies can probably proceed on a more realistic basis because, if the war is still on they can be used for war purposes, but with the assurance that when hostilities [Page 1045] end the Russians will take items not delivered before that time and will pay us for such items on an agreed basis. The large quantities of supplies which could be covered by such an agreement would be useful in the war and might also be a big start for the USSR reconstruction program.
To the extent that this arrangement may cover the goods needed for post war reconstruction, it would accomplish some of the results you envisage. It would differ, however, from your proposed credit arrangement in that it would not require the extension of separate credits and would be effectuated practically as an integral part of the Lend Lease Agreement with the USSR.35
Items which may not have a war use but which will be needed by the USSR for purely reconstruction purposes could have their procurement facilitated by the extension of credits in the manner suggested by you.
Until such time as we are able to ascertain to what extent an agreement along the lines suggested above permits the effective procurement of articles having both a war and reconstruction use, it seems advisable that we do not attempt to reach a definitive understanding with the USSR regarding the extension of credits for the procurement of supplies for reconstruction alone. Inasmuch as the agreement outlined above can be consummated as a supplement to the agreement between the United States and the USSR in the Third Protocol, I believe it may be advisable to conduct the negotiations here in Washington, while keeping you fully advised of what is being done and calling on you for help if necessary in Moscow.
With respect to expert personnel such as engineers, the same criteria would apply as in the case of Lend Lease supplies, i.e., if their services are connected with a war purpose, Lend Lease funds could be used at least until the termination of the war. As you know, the services of experts have been frequently furnished under Lend Lease for the installation, operation and maintenance of projects vital to the war. After the termination of the war, their services could be compensated for on an agreed basis. If their services are needed in connection with projects having no relation to the war, other arrangements, of course, could be made.
It is requested that you advise on the following:
- Do you share our thought that a considerable portion of the USSR requirements for immediate reconstruction after the cessation of hostilities could be fulfilled through an agreement of a type discussed above, if items having no connection with the war are covered by separate credit arrangements?
- Do you think that the possible excess stockpiling of Lend Lease goods you mention has been so serious as to make it advisable to attempt to formulate a principle and to reach an agreement on reimbursement for Lend Lease supplies, on hand after the termination of hostilities, useful for rehabilitation or reconstruction purposes?
- Would enlargement of your staff be required under the proposed arrangements and would enlargement for those purposes be acceptable to the USSR?
Since, as suggested, the agreement outlined above would be supplementary to and directly connected with the Protocol, negotiations on this subject would be conducted in Washington. We are agreed that negotiations with the Soviet Government relating to American participation in purely postwar reconstruction, and having no relation to Lend Lease, will be conducted by you in Moscow.
- Copy of telegram obtained from the Franklin D. Roosevelt Library, Hyde Park, N.Y.↩
- Approved March 11, 1941; 55 Stat. 31.↩
- Master Lend-Lease Agreement between the United States and the Soviet Union, signed at Washington, June 11, 1942; for text, see Department of State Executive Agreement Series No. 253, or 56 Stat. (pt. 2) 1500.↩