845.515/529
The Administrator of the Foreign Economic Administration ( Crowley ) to the Secretary of State
Dear Mr. Secretary: As you are aware, discussions have been going on since last summer with respect to a request from the Government of India for the lend-leasing of 100 million ounces of silver to be used to combat inflation in India and to provide a stabilization reserve there. The proposal contemplates an agreement for the return of the silver on an ounce for ounce basis at the end of five years. The proposal was initiated by the Government of India representatives here, with the knowledge and agreement of the representatives of His Majesty’s Government in Great Britain. Mr. Morgenthau and Mr. Stettinius participated in the discussions from the American side.
Mr. Morgenthau has recently addressed a letter to me stating that the Treasury Department is now prepared to proceed with the lend-leasing of this silver as soon as an appropriate agreement for the return of the silver has been made by the Foreign Economic Administration. [Page 254] Vice Admiral F. J. Home has written Mr. Morgenthau on behalf of the Joint Chiefs of Staff, stating that they have no objection from the military point of view to the proposed operation, and Mr. Donald M. Nelson, Chairman of the War Production Board, has written Mr. Morgenthau, stating that it will not interfere with the domestic need of silver for use in the war effort.
The Foreign Economic Administration is prepared to approve the transaction in general principle. A question has arisen, however, as to whether the transaction and the return agreement should be arranged directly with the Government of India or with His Majesty’s Government in Great Britain on behalf of the Government of India.
The advantages of handling the transaction with His Majesty’s Government in Great Britain are the greater financial security provided, in view of the uncertainties of the post-war status of India, and the avoidance of creating possible ambiguities with respect to the present constitutional relations between India and Great Britain.
The advantages of dealing with the Government of India are the greater simplicity of this method of operation and the fact that it is believed that the Government of India, which initiated the discussions, would take serious umbrage at being regarded as not in position to undertake international obligations of this sort on its own responsibility.
The latter point is the more important because discussions are now in process between the Government of India, the Department of State and the Foreign Economic Administration with respect to the execution of an over-all agreement for the provision of reciprocal aid for lend-lease purposes by the Government of India to the United States. The general terms of this latter agreement, I believe, were agreed to in principle by the Department of State representatives on December 15, 1943.44 The United States Government, if the second alternative method of handling the silver transaction be adopted, may therefore be in the somewhat difficult position of taking one attitude towards the Government of India with respect to mutual aid for lend-leasing purposes, and a contrary position with respect to the direct lend-leasing of silver.
I have the honor to ask your opinion as to the more appropriate method of arranging the proposed lend-leasing of 100 million ounces of silver for the use of the Government of India, under the conditions set out above. Because the Government of India desires to use part of the silver for coinage, and because the reserve of silver now in the [Page 255] hands of the Government of India is shrinking rapidly and will probably last less than two months more at the present rate of reduction, it is urgent that a decision be reached and the necessary steps taken at as early a date as possible.
Sincerely yours,
- For exchange of notes between the two Governments on October 6 and December 15, 1943, see Foreign Relations, 1943, vol. iv, pp. 279 and 282, respectively.↩