861.24/8–244: Telegram
The Acting Secretary of State to the Ambassador in the Soviet Union (Harriman)
1869. ReDepts 1834 of August 2. Following is summary of the third talk we had with Stepanov on August 2:
1. After discussing the question with Treasury, Stepanov was advised that it might be difficult for the United States Government to accept his suggested gold clause providing for payments to be made in United States dollars or gold at the rate of 35 dollars an ounce. Stepanov was told that it would be necessary for him to discuss this question with Treasury. We have since learned that Treasury officials think that it might be possible for them to work out a gold clause somewhat similar to that suggested by the Soviets. We will report results of these conversations as soon as possible.
2. Considerable further discussion took place regarding the rate of interest. Stepanov was assured that the amount of principal on which interest would be charged would be based upon the aggregate cost of the various items furnished under the agreement as calculated by cost formulae which are to be worked out.
In this connection he raised the following points:
- a.
- Stepanov stated that after studying our proposals he still felt that 2½ percent was too high since this rate was the rate at which the U.S. Government sells its taxable bonds and that roughly speaking one-half of one percent is returnable to the Government as taxes.
- b.
- While the repayment of principal on U.S. 23–28 year, 2.4 [2.5?] percent bonds does not begin until at least the 23rd year, the Soviet Government plans to start amortization payments in 5 or 10 years and thus the average time of the outstanding Soviet indebtedness would be shorter than 30 years and therefore Stepanov felt the interest rate should be lower than that charged for U.S. thirty-year bonds.
We promised to give consideration to these points.
3. While Stepanov admitted and agreed that of course the President, in the agreement, has the discretion to determine the date upon which active military operations against the common enemy have ceased, he nevertheless suggested that he thought it would be advisable throughout the agreement to change the phrase “active military operations” to read “military actions.” He explained that it was felt some ambiguity might arise from the use of the present phrase and he therefore hoped that a new phrase could be worked out. We promised to give consideration to his suggestion and after studying the question, plan to suggest that the phrase “military resistance of the common enemy has been overcome” be used to replace “active military operations.”
[Page 1112]4. A lengthy discussion took place on point 1 in the telegram under reference regarding where the negotiations on the items to be included in each schedule should take place.
Acheson outlined the following suggested procedure for further talks:
- a.
- We would continue to discuss the textual provisions of the agreement with Stepanov and endeavor to settle all questions therein.
- b.
- In order to settle the question of what categories of goods should be listed in schedule I or schedule II, we provisionally proposed that we might give to the Soviet authorities as soon as possible our tentative offerings under the Fourth Protocol indicating which items we consider to be in schedule I and which in schedule II with the remainder falling under straight lend-lease. The offerings with the indicated classification would be transmitted by Stepanov and the Department to Moscow in order that you and the Soviet authorities could study them and thus ascertain whether, under the classifications which must of necessity be decided by us, the Soviet authorities desire to obligate themselves to take the supplies offered under the terms and conditions to be worked out in the 3c agreement.
Acheson explained that while it might be decided that a general category of goods should fall within schedule I, there might be special items in this category such as special presses which take a comparatively long time to produce and have a long life, which have to be classified under schedule II despite the fact that presses in general were classified under schedule I. Acheson further explained that we should have the right to decide into which category any supplementary requisitioned item should fall if such item had not been included in the original Fourth Protocol offerings. In this connection, Stepanov suggested that it might be possible to define carefully the categories in such a manner that there would be no question about special items being transferred from schedule I to schedule II. We feel this would unnecessarily complicate matters, might be almost impossible to define and therefore are of the opinion that all such basic decisions should be made in Washington where both the American and Purchasing Commission technicians are familiar with all classification problems while in Moscow neither any of your staff nor the Soviet staff has this knowledge.
Stepanov argued at some length that you and General Spalding together with Soviet officials should be the ones to decide in which schedule various items of the Fourth Protocol should be placed and he indicated that he had already telegraphed Moscow suggesting that these discussions should be carried on simultaneously with the talks here. We again explained that while we felt that discussions should take place in Moscow to determine what supplies the Soviet Government desires to obligate themselves to take under the terms and conditions of the 3c agreement, we could not agree that the Soviet [Page 1113] Government should have final decision regarding the category in which various items should fall.
As a tentative alternative, Mr. Acheson suggested that perhaps after reaching provisional agreement on the textual part of the agreement, Stepanov could: 1) either go to Moscow to discuss categories which the Soviet Government would desire to obligate themselves to take under 3c; 2) remain here and have this question worked out by you with the Soviet authorities and telegraphed here for final approval; or 3) reach an agreement here on as many categories as possible and have Stepanov discuss the remaining categories after returning to Moscow.
5. After having made the above tentative proposals to the Soviet representatives the lend-lease authorities have studied the question further and now plan to propose the following arrangement to the Soviet representatives: instead of submitting the full list of offerings under the Fourth Protocol they plan to revise the third paragraph of schedule I submitted with the proposed agreement to the Soviet authorities on May 24, 1944, and to submit a new schedule I showing in greater detail the various items which we are prepared to offer under the agreement. It is felt that the submission of a more detailed schedule I will make it easier for Moscow to decide which items they are willing to obligate themselves to pay for under schedule I and under the terms of the proposed agreement.
It is also proposed that in addition we will furnish to Stepanov a breakdown detailed list of all items which we are also prepared to furnish under the agreement, in order that the Soviet authorities, if they so desire, may make additional requests for the inclusion of categories beyond those which we propose in the revised schedule I.
It is also planned to deliver to Stepanov a list of projects which the Soviet authorities have already expressed an interest in and which we are willing to consider under schedule II. This list would also contain the conditions which we would have to impose before final approval could be obtained of projects under schedule II.
We are working on the revised schedule I and the rewording of the third paragraph of schedule I and hope to get it to you as soon as possible.