Foreign Relations of the United States, Diplomatic Papers, 1945, Europe, Volume V

861.24/4–1145: Telegram

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

Moscow, April 11, 1945—6 p.m.
[Received 7 p.m.]

1127. In reply to the Department’s telegram addressed to me personally (No. 807, April 6, 8 p.m.), I fully concur to the preliminary opinions of the Department expressed in its 173, January 26, 11 p.m. relative to the Treasury’s suggested 10 billion dollar credit to the Soviet Union. I do not, however, find myself in full agreement with the study prepared in the Department regarding Russia’s interest in foreign credits, as highlighted in the second message referred to above. This study overlooks the determination of the Soviet Government not only to reestablish its capital investment destroyed by the war but to embark upon an ambitious program of expanding her industrial machine. The Department will recall that in conversation with [of?] Marshal Stalin with Eric Johnston³⁹ the above program was exposed and I had an opportunity to ask him, for example, how large it was planned to expand Russian steel production. In reply he said 60 million tons, which is some three times the prewar production. He did not specify the time element but this gives us a measure of the scope of the enormous plans for the expansion of industrial production during perhaps a 15 or 20 year period. It will be recalled that Mikoyan has mentioned to me that the Soviets were now planning on a 15 year program. To accomplish the above the Soviets intend to exact the maximum reparations from Germany and to buy from US and other countries on credit the other required capital equipment. In the case of the US it is obvious that they will limit their purchases, because of our higher prices, to those items where the type or quality cannot be obtained from any other source and which are therefore essential items in carrying out their entire program. It is evident that the Soviets estimate this to be, at a maximum, 6 billion dollar in the immediate postwar years, as this is the sum for which they have asked credits. Thus on the one hand we should discard the Treasury estimate of 10 billion dollars and on the other the statement contained in the Department’s study “that the Soviet Union will be able to take a highly independent position, since 2 billion dollars in credits would speed up by only 3 or 4 months its reconstruction program”. In my opinion the Soviets are keen to obtain from US a credit up to 6 billion dollars to enable them to carry out their program. In this connection I also believe that they have figured their possibilities of repayment very carefully and therefore will attempt to stand firm on the terms proposed in Molotov’s memorandum handed to me.

Turning to the question of how large a credit we can safely extend to the Soviet Union:

1. It would seem that the first question of policy which we must consider is the extent to which we are prepared to accept gold in repayment. I would not be surprised if the Soviet gold production was already in excess of 200 million. This alone would service large foreign credits if they were at low interest and long term repayment. This question involves our overall gold policy and I will not attempt to discuss it in the compass of this message.

2. Although I am in sympathy with the Treasury proposal for stock piling strategic materials as a defense measure, I am not in a position here to estimate the value of the strategic materials which we might wish to obtain from Soviet production for this stock pile. It certainly should be borne in mind that our basic interests might better be served by increasing our trade with other parts of the world rather than giving preference to the Soviet Union as a source of supply. For example, we must weigh the advantages, economic and political, of purchases of manganese from Brazil and British possessions (West Africa and India) as against Russia. In any event it would not seem that our purchases from the Soviet Union for stock pile could play a major role in the repayment of as large a credit as under consideration.

3. In spite of the adverse political influence of special business interests at home I earnestly endorse the concept that the US should enter on a program reasonably to conserve our natural resources, in order that their life may be extended over as long a period as practicable. There is no better time to begin this policy than in the immediate postwar period when the world needs American products and will have large productions of raw materials stimulated by the war to offer in direct repayment for purchases or to serve credits. The extent to which such a policy can be implemented will naturally have a substantial influence on the possible imports from the Soviet Union to serve credits extended to her.

4. Certainly before any definite figure can be fixed as a maximum credit to Russia certain basic decisions must be made and information must be obtained from the Soviet Government as to its export policy in connection with commodities which we might wish to acquire.

Turning now to the Department’s preliminary views, I heartily endorse the view that blanket foreign loan authority should be obtained from Congress rather than specific loan authorization for the USSR. Although I feel that it is to our interest to give the most favorable possible interest and repayment terms to the Soviet Union I see no advantage to US in selecting them alone for especially favorable treatment. I also feel strongly that the administration should retain within its control the current decision as to which countries loans are to be granted, bearing in mind our changing economic and political interests. I have discussed this policy in further detail in my No. 1038, April 4.⁴⁰

Although I am hopeful that the Bretton Woods Bank may play a very important part to promote international trade, I believe that we should obtain authority for the Export and Import Bank to extend loans direct when it is in our interest to do so. I certainly agree that we should not grant large irrevocable credits to Russia without retaining to ourselves the power to restrict or reduce them as we may see fit.

Our experience has incontrovertibly proved that it is not possible to bank general goodwill in Moscow and I agree with the Department that we should retain current control of these credits in order to be in a position to protect American vital interests in the formulative period immediately following the war.

In conclusion I further recommend that we continue to give the Soviet Government encouragement to feel that we are favorably and sympathetically disposed toward assisting its postwar reconstruction, that we should make every effort to obtain from Congress the loan authorization as discussed above and enter into active negotiations with the Soviet Government as soon as possible. It would be inadvisable to give the Soviets the idea that we were cooling off on our desire to help, although we should at all times make it plain that our cooperation is dependent upon a reciprocal cooperative attitude of the Soviet Government in other matters.

Harriman

39. Eric A. Johnston was president of the United States Chamber of Commerce. For reports concerning his visit to the Soviet Union June 1–July 7, 1944, to discuss future trade possibilities, see Foreign Relations, 1944, vol. iv, pp. 955–979, passim.
40. Ante, p. 817.