862.24/1–1747: Telegram

The Secretary of State to the Embassy in the Soviet Union


83. For Ambassador.1 New ruling by General Accounting Office that July legislation2 prohibits shipment regardless of source of funds for accessorial charges and administrative expenses halted deliveries under all pipeline agreements on Jan. 103 (further our 2170 Dec. 234 and 2198 Dec. 315). New ruling upheld after appeal to GAO at high level. Only remaining recourse Congressional action.6 Soviets aware of situation [Page 655] but no formal advice given as yet. Damages to Sov Gov from non-delivery under pipeline can be taken into account in final settlement. Please cable receipt of lend-lease settlement documents transmitted with instruction no. 1607 Dec. 237 from Ness.8

  1. Lt. Gen. Walter Bedell Smith.
  2. Third Deficiency Appropriation Act, approved on July 23, 1946; 60 Stat. 600, 604.
  3. In a memorandum of December 5, 1947, by Michael H. Cardozo of the Office of the Legal Adviser, in reviewing the facts surrounding the export of Lend-Lease material to the Soviet Union in 1947, he wrote this explanation: “The policy of continuing pipeline deliveries by means of funds deposited by the foreign governments could not be carried out without the approval by the General Accounting Office of warrants allocating the funds so deposited. This provided assurance that nothing would be done, regardless of the approval by officials of the Departments of State and Treasury, that was not in accord with Congressional intent. It was, of course, the disapproval by the General Accounting Office of these warrants on January 10, 1947, that suspended operation of this program.” (861.24/12–547)
  4. Foreign Relations, 1946, vol. vi, p. 860.
  5. Not printed; but see ibid., footnote 53, p. 865.
  6. For correspondence between the Under Secretary of State for Economic Affairs, William L. Clayton, and the Lend-Lease Administrator, Chester T. Lane, with Senator Styles Bridges, arising from the confusion caused by this legislation, see Department of State Bulletin, February 23, 1947, pp. 343–346, 360.
  7. Not printed.
  8. Norman T. Ness, Director of the Office of Financial and Development Policy.