845.515/545
Memorandum of Conversation, by Mr. Calvin H. Oakes of the Division of Middle Eastern Affairs
| Participants: | Mr. K. C. Mahindra, Chief of the Indian Supply Mission |
| Mr. Alling42 | |
| Mr. Oakes |
Mr. Mahindra called at his request in connection with the proposed lend-lease of 100 million ounces of silver for use by the Government of India. He commenced his conversation by stating that he had been astonished and distressed to find that arrangements now contemplated [Page 251] would render Great Britain responsible for the return of the silver; that it was his understanding that when this question was discussed last August in connection with the supply of 20 million ounces for coinage purposes it was decided that the return of silver provided to India would be an obligation of the Government of India. Mr. Stettinius, according to Mr. Mahindra, had indicated at that time that this would be the case.
It was pointed out to Mr. Mahindra that it was our understanding that the transaction effecting the 20 million ounces of silver had been simply an ad hoc agreement, and that arrangements made with regard to that transaction did not affect the present one. Mr. Alling asked Mr. Mahindra why he thought that the Government of India should be held responsible for the return of the silver rather than Great Britain.
Mr. Mahindra replied that, first, India was one of the United Nations and was regarded as a separate entity among those nations; and that, secondly, to refrain from making India responsible would suggest that we were concerned lest the Government of India would not honor its debt. He was sure that we did not have any such feeling, but that if we did he must consider it as an insult to his country.
Before any very precise reply had to be given to that observation, Mr. Mahindra continued his remarks with reference to the firm financial position which his country enjoyed, its past financial history, and implied that of the two Governments the Government of India was more solvent than the United Kingdom.
Mr. Alling replied that we were well aware of India’s large sterling balances and that we questioned the solvency of neither Government. Mr. Alling asked, however, whether the Government of India was entirely independent financially.
Mr. Mahindra insisted that it was, except for the fact that the rupee was pegged to the pound. He admitted that his Government did not control the dollar balances accruing to it, but maintained that this was because of American insistence that empire credits be considered as a whole. He added confidentially that his Government expected shortly to have an independent dollar balance for purchases in the United States.
Reverting to the reason for Mr. Mahindra’s call, Mr. Oakes stated that failing convincing argument to the contrary it appeared to the Department that the Government of the United Kingdom was the Government which should be expected to see to the return of the silver, in as much as lend-lease of the silver was being effected through the lend-lease agreement with the British Government, and in as much as it was the British Ambassador who had made representations to the Department on the subject.
[Page 252]Mr. Mahindra replied that he was in disagreement, in that the transaction was not really one of lend-lease in that there was the promise to repay which did not exist in true lend-lease transactions; and, secondly, that it was the Government of India which had pressed for the loan of the silver. The British Ambassador had entered the picture only because it had been thought desirable to make representations on as high a plane as possible. The British Ambassador represented in the United States, moreover, not only the Government of the United Kingdom but the Government of India. In the earlier representations Mr. Mahindra had advanced the matter for the Government of India, assisted by Sir Cecil Kisch of that Government. Sir David Waley of the British Treasury had assisted in these representations only because a silver expert was needed in connection with the conversations on the subject with the United States Treasury.
Mr. Mahindra continued that if we felt that the Government of India was worthy of receiving a note from us asking for reciprocal aid, he could not understand why his Government should not expect us to deal directly with it in so far as the present transaction is concerned. The lend-lease agreement with Great Britain simply provided a convenient means of effecting the transaction. He intimated that if we did not wish to treat his Government as an entity, his Government might well be justified in declining to provide reciprocal aid under the arrangement now contemplated.
Mr. Alling asked whether Great Britain was not assisting India in making available to the United States the materials requested as reciprocal aid. Mr. Mahindra replied in the negative, stating that the Government of India alone was responsible for furnishing these materials and that the British entered into the picture only to the extent of having suggested in the first instance that we make the request of the Dominions and of India.
Mr. Alling observed that he had been under a somewhat different impression. He continued that frankly, with regard to the general picture, he could not see quite where the Government of India began and where the Government of Great Britain ended; that we had reason to believe that the Indian people viewed lend-lease with considerable suspicion; that we did not wish to do anything which would suggest to the people of India that we were attempting to entrench ourselves in India; and that hence it appeared best that the return of the silver be made an obligation of Great Britain rather than of India.
Mr. Mahindra replied that there was some suspicion on the part of the Indians and that he was compelled to remark that American protestations did not always coincide with American actions. However, he himself understood why certain recommendations advanced by us [Page 253] had not been implemented, but that the average Indian did not; that in making the silver available to the Government of Great Britain rather than to India direct there would be the feeling in India that this was a further indication of our tendency to strengthen the British yoke; and that, in fact, we would be increasing Britain’s hold upon India.
Mr. Alling replied that Mr. Mahindra could be sure that in any of our actions regarding India we were motivated by a desire to do what was in the best interests of the Indians; that in this case there appeared to be an honest difference of opinion as to what the reaction would be among the Indians; that we felt that certainly from the long-range view there were apt to be less unfavorable repercussions if Great Britain was made responsible for the debt rather than the present Government of India.
Mr. Alling requested that Mr. Mahindra put on paper his views on the subject and promised that they would be given consideration. Mr. Mahindra agreed to send Mr. Alling a memorandum.43 In parting he emphasized that he was most anxious that a prompt decision be made as delay in securing the silver was occasioning his Government great concern.