861.51/3035: Telegram
The Secretary of State to the Ambassador in the Soviet Union (Harriman)67
766. After consultation with the Treasury and other interested agencies we suggest the following terms of interest and amortization, in connection with the supplemental Lend-Lease agreement referred to in the Department’s 510 of March 7 and 625, 626 and 627 of March 18, and your 889 of March 17, 8:00 p.m. and 996 of March 23, 1 p.m.:
(a) The same terms would apply to both Articles II and III.
(b) The rate of interest would be set at the average rate of carrying costs on the United States public debt plus ⅛ of 1 percent. Under the present circumstances the interest rate would thus be set at 2.1 percent. The Soviet Government would be notified in December of any given year of the rate applicable to the ensuing year. This procedure would assure our public that the cost of the credits advanced to the U.S.S.R. is fully paid and it would assure the U.S.S.R. that it would be getting the best terms which this Government could afford.
(c) Amortization—There would be a 3-year period of grace followed by a 20–year period of amortization.
(d) On Article II materials, interest and amortization would be dated from the date of transfer of the goods. On Article III materials, interest and amortization would be dated from the date of transfer of the materials except in the case of those materials transferred before a determination by the President that active military operations against the common enemy had ceased. For the latter goods, interest and amortization would be dated from the time of such determination.
[Page 1072]The ⅛ of 1 percent to be included in the rate of interest charged the Soviet Government covers fees and other charges and costs incidental to handling the United States public debt.
It should be carefully noted that the suggested terms of interest and amortization under the supplemental Lend-Lease agreement are entirely distinct from terms which might be laid down by the Export-Import Bank, an international investment bank, or private financial organizations for financing of post-war reconstruction and development.
(e) As for the $300 million worth of industrial equipment which we agreed to consider in connection with the Third Protocol in order to insure a constant flow of such supplies for the Russian war program, we have approved about $180 million worth, not all of which is yet in procurement. Additions to this amount will be considered in the near future, but it is not expected that the production and especially the shipping situation will permit putting into production before June 30, 1944, the full $300 million worth, nor is it felt that this is necessary to insure a constant flow of industrial equipment to the USSR. As you know, while aggregate shipments of all items during the Third Protocol period will probably greatly exceed the Protocol schedule, notwithstanding this, large quantities of industrial equipment will be on hand and on order June 30, 1944—enough to meet all that can be shipped for 8 to 12 months, exclusive of locomotives and flatcars.
(f) Your suggestion about handling industrial items in the negotiation of the Fourth Protocol is being carefully considered. We agree on the desirability of such contracts for our economy and our future trade relations with the Soviet, although we wish to avoid giving any firm or group of firms either a monopoly of trade with the Soviet or an unduly preferred position in that trade. For war production, however, we believe that contracts must be placed for all practicable items as rapidly as possible, and we emphasize that all items considered under this program must be part of the Soviet programs of war production.
(g) While we are unable to forecast specifically the amount of funds which will be available under Article III of the proposed agreement beyond the coming year, our best estimate for the next 15 months is between $300 and $500 million, with possible variations in either direction as need may appear, and the military, shipping and production situations warrant.
- Acknowledging this telegram, Ambassador Harriman replied in telegram 1175, April 4, 2 p.m., that he would not attempt to negotiate the matters mentioned with Commissar Mikoyan but would attempt to prepare his mind, if a favorable opportunity arose, for negotiations in Washington (861.51/3040).↩