Memorandum by the Under Secretary of State for Economic Affairs (Clayton)1
[Washington,] February 26, 1947.
- No replies have been received from the Soviet Government to our repeated requests for initiation of lend-lease settlement negotiations, the purchase or return of lend-lease merchant vessels, and the return of three lend-lease Navy icebreakers. (See Attachment I)
- Unless satisfactory replies are received prior to your arrival in Moscow,2 it is recommended that you personally press these matters with Soviet officials.
- The Congress and press have commented strongly on a Soviet breach of faith in not acknowledging our requests and have criticized Soviet retention without payment of lend-lease merchant vessels alleging competition with the United States Maritime industry. (See Attachment II)
- Satisfactory settlements have been effected with the largest lend-lease recipient, the United Kingdom, and with France. India, Belgium, Australia, New Zealand and Turkey. Settlement negotiations are now in progress with the Netherlands, Norway, and the Union of South Africa. The Chinese and certain smaller accounts remain to be settled.
- Total lend-lease aid to the U.S.S.R. during the period of hostilities amounted to approximately $11 billion, the second largest amount provided to any nation. Reverse lend-lease aid from the U.S.S.R. was negligible amounting to about $3 million.
- Lend-lease articles value at $225,000,000 have been transferred to the U.S.S.R. since the cessation of hostilities and articles valued at $9,000,000 are in process of transfer on a long-term credit basis under the U.S.–U.S.S.R. “pipeline” Agreement of October 15, 1945. However, [Page 659] transfer of goods valued at $16 million is being held up pending review by the Congress of a proviso in an appropriation act of July 1946 which has been construed as prohibiting shipment of any lend-lease goods after December 31, 1946 even though committed for delivery under existing agreements made in good faith under the clear authority of Section 3(c) of the Lend-Lease Act.
- The Soviet Master Lend-Lease Agreement sets no specific date for the beginning of settlement discussions although it implies that discussions will be held at the end of the emergency. The Agreement provides for the return of lend-lease articles desired by the United States upon a declaration by the President of the end of the emergency. Should Soviet officials argue that, in the opinion of their Government, settlement negotiations are not timely or if they should state that the return of lend-lease vessels is not mandatory at the present time, they may be told that notwithstanding the presence of this same technicality other Governments have acted upon our requests without protest.
- If Soviet officials persist in such objections, they may be told that a suitable declaration of the end of the emergency will be made at the earliest possible moment. This declaration would provide legal basis for our demands for the return of ships. The return of certain other articles might then be demanded for the purpose of persuading the Soviet Government that its own interests required it to negotiate a settlement.
- A general declaration by the President of the end of the emergency may be made in the near future. If it is not, a declaration may be requested of the President for the limited purpose of all Master Lend-Lease Agreements, or for the specific purpose of the Soviet Agreement. It is not proposed immediately to request that a declaration be made for the purposes of the lend-lease agreements or for the purpose of the Soviet Agreement alone, unless further overtures to the Soviet Government regarding lend-lease matters fail to produce satisfactory arrangements. (See Attachment III)
- The lend-lease settlement proposed for the Soviet Union is based on the general principles already adopted in settlements with the United Kingdom, France and other countries. Under these principles the United States would require long-term payment for, and would transfer title to non-military items remaining in Soviet inventory on V–J Day; “military items” would be left in Soviet custody without payment but with the right of recapture remaining with the United States. “Military items” in the British, settlement included all lend-lease items in the hands of the British armed forces on V–J Day irrespective of their military or civilian character whereas, in the case [Page 660] of the proposed U.S.S.R. settlement, “military items” would be limited by item definition to strictly combat items such as fighter aircraft, armored vehicles, guns and ammunition, irrespective of the military or civilian status of the holding agency. Payment on credit terms would be sought for only the post-war economic value of non-military items. British and French lend-lease settlement discussions were parts of discussions of broader economic topics including long-term loans of new money. Our attempts to reach agreement on an agenda for similar discussions with the Soviet Government failed. In view of this failure and the improbability of U.S. approval of a loan, lend-lease discussions were proposed independently. The Soviet Government, before agreeing to discuss an independent lend-lease settlement, may attempt to revive our previous agenda proposals which required discussion of a lend-lease settlement and other economic questions in conjunction with the discussion of a loan. (See Attachment IV)
- Although no inventory of goods on hand as of V–J Day has been received in response requests, estimates of such an inventory have been prepared by the Department and are believed to be adequate for settlement purposes. Analysis of these estimates indicate the U.S. cost, depreciated to V–J Day, of non-combat items in the inventory to be about $2.3 billion. The fair post-war economic value of such items, for which payment will be sought, is a matter for negotiation.
- This memorandum concerning the Lend-Lease negotiations with the Soviet Union and the return of ships was drafted by George E. Truesdell, economist in the Division of Lend-Lease and Surplus War Property Affairs, and was directed to the Secretary of State.↩
- Secretary of State George C. Marshall attended the Fourth Session of the Council of Foreign Ministers, which met in Moscow March 10–April 24. For documentation on this session, see vol. ii, pp. 139 ff.↩
- Foreign Relations, 1946, vol. vi, p. 854.↩
- Ibid., p. 830.↩
- Ibid., p. 852.↩
- Foreign Relations, 1946, vol. vi, p. 855.↩
- Ibid., p. 865.↩
- Ibid., p. 828.↩
- Ibid., 1945, vol. v, p. 1034.↩
- Brackets appear in the source text.↩