Memorandum by the Assistant Secretary of State (Clayton) to the Secretary of State

Subject: Meeting with Secretary Morgenthau regarding Credits to Russia

Everyone is agreed—Harriman, State, Treasury and FEA—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 be separated from true postwar reconstruction credits.
There is general agreement between the Department, General York of the Soviet Protocol Committee, and FEA to proceed with the Fourth Protocol (Generals York and Wesson will draft a reply to Gromyko’s note) and to instruct Harriman, as he has recommended, to inform the Soviets that discussion of true postwar credits must be separated from consideration of wartime programs, that on long term industrial goods can be put into production until the 3–C agreement is concluded, and that we have presented our final terms on the 3–C agreement (FEA is drafting on this).
We expect Treasury to suggest different 3–C terms—no interest, a schedule of deferred payments, and no concessions on contract prices.
The Treasury will probably devote most attention to the matter of postwar credits and will probably formally present a broad proposal. We understand that the proposal may involve a very large credit at very low rates of interest tied up with an option to buy petroleum and minerals from the U.S.S.R. over a thirty or forty year period. This will raise many questions as to the form of lending [Page 954]authority which we will have to seek from the Congress, rates of interest and periods of amortization and their relation to the Export-Import Bank, International Bank and private operations, the amount of the credit and whether it should be made entirely by the United States or in part through international agencies, and the commodity and commercial policy aspects of the option arrangement.
It is recommended that today you hear the Treasury’s proposal for long term credits and perhaps engage in some exploratory discussions, but that no attempt be made to reach any decisions as the matter involves issues touching on almost the entire range of political and economic foreign policy.