Memorandum by the Chief of the Division of Financial and Monetary Affairs (Collado)44

Subject: Treasury Proposal Regarding Reconstruction Aid to the Soviet Union

The Secretary of the Treasury has written the President stating that he has a comprehensive plan for aid to Russia during her reconstruction period that does not involve Lend-Lease or relief but rather “an arrangement that will have definite and long range benefits for the United States as well as for Russia.” He is “convinced that if we were to come forward now and present to the Russians a concrete plan to aid them in the reconstruction period it would contribute a great deal towards ironing out many of the difficulties we have been having with respect to their problems and policies.”
Although the Treasury does not indicate the nature of its plan, I believe from talks I have had previously with Mr. White45 that [Page 939]the Treasury proposes to ask the Congress for a specific loan authorization of several billion dollars at 1 or 2 percent interest and amortizable over 40 to 60 years.
We have discussed credits to the U.S.S.R. a number of times with Ambassador Harriman and last spring, with the President’s approval, instructed him to begin negotiations for a Lend-Lease 3–C agreement46 covering certain types of capital goods necessary for war production. These negotiations have languished (see attached memorandum prepared for the proposed Big-3 meeting47 background material.)
We also informed Ambassador Harriman48 that the question of long-term reconstruction and development credits would depend on Congressional action with respect to the Bretton Woods Bank,49 the Export-Import Bank, and the Johnson Act,50 although our general policy would be, if so authorized, to extend such credits to the U.S.S.R. and other nations.
Legislative action has of course not yet been taken. A program of financial legislation is ready for discussion and clearance at the highest levels.
There is attached a memorandum51 analyzing Russia’s interest in foreign credits which highlights the following points:
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.
Ambassador Harriman and the Department have been thinking in terms of completing the 3–C agreement, which might involve during one year of continued war $500–800 million in capital equipment on a long-term credit basis, and discussing an Export-Import Bank credit of perhaps $500 million at once and as much as $1 billion eventually. Additional credit needs of the U.S.S.R. might properly be handled by the Bretton Woods Bank. This program could be handled within the authority envisaged in our legislative program.
We do not view with great favor Mr. White’s suggestion of requesting special legislation for credits on special terms for the U.S.S.R. or Britain. The Congress is not likely to be willing to take the full responsibility for specific loans and their terms. (It fought shy of a loan to Finland in 1939–40 and we made it through the general powers of the Export-Import Bank.52 The special Chinese case of January 194253—right after Pearl Harbor—does not appear to be a satisfactory precedent.) Moreover, if we ask special consideration and terms for some countries we will be in an untenable situation with respect to others. It is to avoid all of these difficulties that the administrative mechanisms of the Export-Import Bank and the International Bank have been conceived.
It is recommended that the Secretary should of course ask the Secretary of the Treasury for details of his plan and indicate a willingness for the two Departments to sit down and consider this important subject.
  1. Addressed to the Director of the Office of Economic Affairs (Haley), the Assistant Secretary of State (Clayton), and the Secretary of State. Mr. Haley made a notation on January 4: “I agree. B. F. H.” Mr. Clayton on January 6 asked Mr. Haley to prepare a letter for the Secretary to Mr. Morgenthau and wrote: “I agree that the Secretary should ask the Secretary of the Treasury for details of his plan of financial aid to Russia and should say that he will be very glad to have representatives of the Department of State meet with representatives of the Treasury Department to carefully consider every aspect of this important subject” (861.51/1–645). For letter to Mr. Morgenthau on January 15 from the Acting Secretary of State, see p. 953.
  2. Harry Dexter White, Assistant, to the Secretary of the Treasury and Director of Monetary Research.
  3. For text of proposed agreement, see telegrams 625–627, March 18, 1944, noon, to Moscow, Foreign Relations, 1944, vol. iv, p. 1065. For text of Lend-Lease Act approved March 11, 1941, see 55 Stat. 31; as amended on March 11, 1943, 57 Stat. 20; on May 17, 1944, 58 Stat. 222; and on April 16, 1945, 59 Stat. 52.
  4. President Roosevelt and Prime Minister Churchill met at Yalta with Marshal Iosif Vissarionovich Stalin, Chairman of the Council of People’s Commissars of the Soviet Union, February 44–11, 1945. For documentation, see Foreign Relations, The Conferences at Malta and Yalta, 1945. Briefing memorandum not attached to file copy of this document.
  5. See telegram 1965, August 17, 1944, 10 p.m., to Moscow, Foreign Relations, 1944, vol. iv, p. 1115.
  6. For setting up of the International Bank for Reconstruction and Development, see documentation on the United Nations Monetary and Financial Conference at Bretton Woods, New Hampshire, July 1–22, 1944, ibid., vol. ii, pp. 106 ff.
  7. Approved April 13, 1934; 48 Stat. 574.
  8. Not attached to file copy.
  9. See telegram 436, December 14, 1939, from Helsinki, Foreign Relations, 1939, vol. i, p. 1029; telegram 142, March 12, 1940, from Helsinki, ibid., 1940, vol. i, p. 313; and telegram 85, April 2, 1941, from Helsinki, ibid., 1941, vol. i, p. 17.
  10. See Foreign Relations, 1942, China, pp. 419 ff.