Memorandum of Conversation, Prepared in the Department of State

Proposals Made by the Secretary of Treasury to Secretary of State Regarding Postwar Trade With the Soviet Union

During the course of the conversation in Mr. Stettinius’ office on January 17, 1945, Secretary Morgenthau and Mr. Harry White of the Treasury Department outlined the following proposal for postwar trade with the Soviet Union:

Mr. Morgenthau referred to the long delay which had taken place in connection with the negotiations for a 3(c) supplementary agreement to the Master Lend-Lease Agreement by which it was proposed to make available at this time to the Soviet Union certain industrial plants which have both a wartime and peacetime use. He stated that he felt it was too bad more than nine months had passed since negotiations were started and still no agreement had been reached. He [Page 962]attributed this to the fact that we had endeavored to bargain and bicker with the Soviet negotiators instead of making a clear-cut, very favorable proposal which would be considered by the Soviet Government as a concrete gesture of our good will. He added that he did not agree96 with Ambassador Harriman’s suggestions in his telegram no. 61 of January 6, 1945, which recommended that we remain firm in the stand that we have already taken in regard to the 3–(c) negotiations and indicate to the Soviet Government that this continues to be the most favorable offer we could make.

Instead of this course of action, Mr. Morgenthau stated that Treasury experts have been giving consideration to this entire question and have come to the conclusion that we should make new proposals for the 3–(c) agreement which would offer to the Soviet Union the same amount of goods on approximately the same terms except that we should charge them no interest on the credit extended, but on the other hand we should not accept any reduction in cost as proposed by the Soviet Government.

Because of the position we had taken with the Soviet representatives in the 3(c) negotiations, which was to the effect that we could not accept a rate of interest lower than that at which the United States Government could borrow money, and because of the fact that the delays in reaching an agreement with the Soviet Government on this question had been due primarily to the Soviet Government’s reluctance to accept the terms offered, Mr. Acheson pointed out the following facts in regard to these negotiations:

He stated that early last year when representatives of the State Department, Treasury, Foreign Economic Administration, and other interested agencies were endeavoring to work out a scheme by which the Soviet Government could be immediately furnished under Lend-Lease industrial plants which took a long time to produce, had a long life, and which could be used for both wartime and peacetime purposes, it had been suggested that we might be able to offer these plants under Lend-Lease on a deferred-payment basis at no interest. This suggestion had, at that time, been vetoed by representatives of the Treasury Department who stated that we could not offer such long-term credits at a lower rate of interest than that at which the United States Government itself had to pay in order to borrow money. With this criteria in mind, there had been worked out a proposed agreement which was submitted to the Soviet Government on May 24, 1944.97 Mr. Acheson pointed out that it was not until the Soviet delegate to the Bretton Woods Conference brought up the subject that we received any concrete indication that the Soviet Government [Page 963]was interested in the suggested agreement. Mr. Acheson then gave a brief summary of the protracted negotiations emphasizing the extremely liberal terms offered in the final agreement proposed by us which, however, the Soviet Government has not seen fit as yet to accept. Mr. Morgenthau indicated that, nevertheless, he felt that it would be advisable, from a good will point of view, to make a new 3(c) offer without interest. It was indicated that this matter would be given consideration.

Apart from this proposal for the immediate extension of approximately a billion dollars credit at no interest, Mr. Morgenthau referred to a memorandum to the President prepared by Treasury98 which proposed the granting of an immediate credit of ten billion dollars to the Soviet Government in order to finance postwar trade. He stated that he felt that we should go beyond the suggestion recently made by the Soviet Government to grant a six billion dollar thirty-year credit at two and one-fourth percent interest by offering them a ten billion dollar thirty-five year credit at two percent interest with the proviso that the United States Government would be given the option to take in re-payment certain strategic materials, a supply of which was becoming greatly depleted in the United States. Mr. Morgenthau indicated that he felt that such a gesture on our part would reassure the Soviet Government of our determination to cooperate with them and breakdown any suspicions the Soviet authorities might have in regard to our future action.

Mr. Morgenthau suggested to the Secretary that they should both recommend to the President that he make such a concrete proposal to Stalin at the forthcoming meeting.

  1. Penciled marginal revision as follows: “He indicated that he was inclined not to agree”.
  2. Foreign Relations, 1944, vol. iv, p. 1087.
  3. Dated January 10, p. 948.