871.00/9–1145

The British Embassy to the Department of State

Memorandum

The Foreign Office have had under consideration the trade agreements recently concluded between the U.S.S.R. on the one hand, and Roumania, Bulgaria and Hungary on the other. These agreements, of whose provisions the State Department are doubtless aware, fall into two categories, first, the agreements for economic collaboration signed between the U.S.S.R. and Roumania and the U.S.S.R. and Hungary, and, secondly, the commodity exchange agreements which the U.S.S.R. has signed with all three countries.59

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2.
The conclusion of the Soviet-Roumanian agreement for economic collaboration is, in the view of the Foreign Office, contrary to the obligation of the Allied Powers inter se to abstain from negotiating peace arrangements with a common enemy. A formal state of war with Roumania still exists and it follows from this that no one ally should unilaterally enter into arrangements which might prejudice the position of the other allies in the eventual peace settlement. The Soviet-Roumanian agreement undoubtedly contravenes these principles and it is particularly improper in that it has been concluded with a government which owes its existence to active Russian intervention. There can be no question but that the agreement will militate against existing and future British and other Allied interests in Roumania.
3.
No authoritative text of the corresponding Hungarian agreement has yet been received. It appears, however, that it is very similar to the Roumanian, and if this proves to be the case the above objections would apply with equal force.
4.
On the other hand, the commodity exchange agreements signed with all three countries do not appear to be open to the same objections, since the right of the Soviet Government to enter into direct commercial relations with Hungary, Bulgaria and Roumania can scarcely be contested. However, as the State Department will be aware from Mr. Balfour’s conversation with Mr. Byrnes on August 25th and from the Aide-Mémoire 60 which Mr. Balfour left with Mr. Byrnes on that occasion, the Foreign Office consider that it is desirable to treat the Danubian states as an economic unit. The diversion to the Soviet Union of substantial quantities of supplies from these three countries, in addition to the far larger quantities removed from two of them as reparations etc., undoubtedly militates against this principle.
5.
The Foreign Office would therefore propose that these matters might be discussed at the Council of Foreign Ministers. They are of course closely related to the question of supplying food to Vienna, about which, as the State Department will be aware from the second paragraph of the British Embassy’s Aide-Mémoire of September 3rd regarding Austria,61 the Foreign Office are already preparing detailed proposals for submission to the Council. Consideration might be given in addition to the possibility of including in the Roumanian, [Page 125] Bulgarian and Hungarian peace treaties a most favoured nation clause drawn on wide terms to cover not only external trade but also participation in the economy of these countries. Such a clause would of course be entirely incompatible with the economic collaboration agreements which the Russians have negotiated with two of these countries.
6.
The Foreign Office hope that the Department of State will agree with the views put forward in the preceding paragraphs and that the United States Representative will be able to support the British Representative in the Council of Foreign Ministers in raising these matters along the lines proposed.
  1. Rumania and the Soviet Union concluded an economic collaboration agreement at Moscow on May 8, 1945, and Hungary and the Soviet Union concluded a similar agreement at Moscow on August 27, 1945. For the text of the Rumanian-Soviet agreement, see British and Foreign State Papers, vol. cxlix, p. 876; the Hungarian-Soviet agreement is described in Department of State Bulletin, September 1, 1946, p. 394. The Soviet Union concluded trade agreements with Bulgaria on March 14, 1945, with Rumania on May 8, 1945, and with Hungary on August 27, 1945. For descriptions of these agreements, see ibid., pp. 392, 396, 397, and 394, respectively.
  2. Presumably, the reference is to the British aide-mémoire of August 24, 1945, to the Department of State, p. 101. No record has been found of the conversation between the Secretary of State and Mr. Balfour, British Chargé in Washington.
  3. The British Embassy’s aide-mémoire of September 3, 1945, is not printed. The Department’s answer is contained in the memorandum of September 14, to the British Embassy, vol. iii, p. 594. For additional documentation regarding the problem of the Danubian basin as a long-range food supply source for Vienna and Austria, see ibid., pp. 571622.