893.00/3–546: Telegram

The Chargé in the Soviet Union (Kennan) to the Secretary of State

650. To the letter which I addressed to Molotov on February 11 in response to Department’s 253, February 9, concerning Chinese-Russian negotiations about disposition and control of industrial enterprises in Manchuria, he has now replied as follows (sent to Department as 650; repeated to Chungking as 34):

“In answer to your letter of February 11 concerning negotiations between the Chinese and Soviet Governments on the former Japanese industrial enterprises in Manchuria I inform you that the negotiations in question concern the question of the creation of Chinese-Soviet stock companies for the exploitation of a portion of the enterprises which served the needs of the Japanese Kwantung Army and which, in consequence of that, constitute trophies of the Red Army which smashed the Japanese Kwantung Army.

“Insofar as this is a matter of trophy property it is impossible to agree with the proposition set forth in your note that the question which is being considered in the course of the Soviet-Chinese negotiations is directly connected with the problem of Japanese reparations since the question of reparations is subject to consideration separate from the question of war trophies.

“It is also impossible to agree with the statement that the creation of the above mentioned Chinese-Soviet stock companies could lead to the establishment of exclusive Chinese-Soviet control over all industrial establishments in Manchuria, since, as is indicated above, only a portion of the industrial enterprises is being transferred to the administration of the Chinese-Soviet stock companies. As regards the statement that the above mentioned Chinese-Soviet negotiations constitute discrimination with respect to Americans and are in conflict with the principle of the Open Door, that statement, as will be seen from the above, is without any substantiation whatever.”

Department will note from this reply following points:

Molotov defines as “war trophies” any property which “served the needs” of Kwantung Army and maintains that such property does not come into question from standpoint of reparations.
He implies that USSR is sole judge of what property comes under this category. This interpretation would apparently make it possible for Russians to seize without limitation and remove from possible reparations fund any property which pleases their eye in Manchuria since it leaves no room for questioning of their decision by any other government.
This attitude is flatly in conflict with our proposal for treatment of Japanese reparations as set forth in Department’s 349, February 28.33 (This proposal has not yet been communicated to Russians.)
Molotov quotes me incorrectly in referring to an assertion that creation of Chinese-Soviet companies could lead to establishment of exclusive Chinese-Soviet control over all industrial establishments in Manchuria. My letter nowhere stated this. Pertinent passage of my letter was as follows:

“It is therefore disturbing to my government to receive reports that discussions are under way which might result in the establishment of exclusive Sino-Soviet control over industrial enterprises in Manchuria. Under present conditions when free access to Manchuria is not open to nationals of other powers and equality of opportunity in seeking participation in the economic development of Manchuria is denied Americans and other Allied nations, it is felt that negotiation of agreements between the Chinese and Soviet Governments with regard to industries in Manchuria would be contrary to the principle of the Open Door, would constitute clear discrimination against Americans who might wish an opportunity to participate in the development of Manchurian industry, and might place American commercial interests at a distinct disadvantage in establishing future trade relations with Manchuria”.

Last paragraph of Molotov’s letter constitutes admission that proposed arrangements would result in establishment of exclusive control of some enterprises.

  1. Not printed.