861.24/1–645: Telegram

The Acting Secretary of State (Grew) to the Ambassador in the Soviet Union (Harriman)


173. Everyone here—State, Treasury, and FEA—is agreed that the matter of aid to the U. S. S. R. in acquiring industrial equipment of war significance (that involved in the proposed 3-C agreement) must [Page 322] be separated from true postwar reconstruction credits (your telegrams 29 and 61).1 Separate telegrams will be sent to you regarding our reply to Ambassador Gromyko’s note of January 4,2 indicating that we will proceed with the Fourth Protocol; and instructing you to reply to Molotov’s aide-mémoire with special reference to the 3-C agreement. The present message is to provide you with background information regarding Washington views on post-war credit possibilities.

A study prepared in the Department which will be sent to you for comment highlights the following points in Russia’s interest in foreign credits:

Russia’s war loss is estimated at $16 billion of fixed capital or about one-quarter of the pre-war total. Inventory losses may total an additional $4 billion.
It is estimated that Russia with no foreign loans and only limited use of its gold reserves (estimated at $2–2½ billion) and production ($200 million a year), plus reparations deliveries, could reattain by 1948 the pre-war level of capital investment.
Thus the U. S. S. R. will be in a position to take a highly independent position in negotiations regarding foreign credits, especially since $2 billion in credits would only speed up reconstruction by some 3 or 4 months.
Pre-war exports from the U. S. S. R. to the U. S. averaged only $26 million annually, enough to pay for only limited amounts of capital goods, special machines, and know how.
The annual gold production could service about $3 billion of credits at 4 percent and 20 years; or $6 billion at 2 percent and 40 years.
Russia may be expected to borrow only up to the amount which she is sure she can service; only if the terms appear satisfactory to her (she has demanded exceptional terms in the 3-C negotiations); and she will repay unless she feels it politically desirable not to do so.

The Treasury has suggested a $10 billion credit at 2 percent, 35 years, coupled with an option for United States purchases at reasonable world prices of petroleum and minerals from the Soviets over a like period.

Preliminary views of the Department are that such a proposal can of course be made only after Congressional action of some sort; that it would be preferable to obtain blanket loan authority rather than seek specific loan authorization for the U. S. S. R. or any particular nation; that the rate of interest entails many complications in our relations with other countries, with general Export-Import Bank [Page 323] operations, with proposed transactions of the Bretton Woods bank, and with private investment; that from a tactical point of view it would seem harmful at this time to offer such a large credit and lose what little bargaining exists in future credit extensions; and that the suggested commodity arrangement would probably not be as strong an argument with the Congress as the Treasury believes, would arouse the opposition of petroleum and mineral interests, would not provide a fully distinctive basis for offering special credit terms to the U. S. S. R., and might raise questions of general commercial and commodity policy.

The general matter of credits to Russia has been discussed with the President who has displayed a keen interest and believes that it should not be pressed further pending actual discussions between himself and Marshal Stalin and other Soviet officials. Meanwhile the Department would appreciate your further comments on the Soviet proposal and your views on the Treasury suggestion.

Grew , Acting
W. L. C[layton]
  1. Ante, pp. 310312, 313315.
  2. Not printed.