Foreign Relations of the United States, 1948, Eastern Europe; The Soviet Union, Volume IV

861.24/1–1948

United States Minutes of Second Combined Meeting on Lend-Lease Settlement Negotiations ¹

secret

[ Washington ,] January 19, 1948.

Present

u.s.	u.s.s.r.
Mr. W. L. Thorp, U.S. Chairman	The Soviet Ambassador, Mr. Alexander S. Panyushkin
Mr. H. R. Labouisse, Jr., (U.S. Deputy Chairman)
	Mr. A. A. Arutiunian
Mr. G. E. Truesdell, U.S. Assistant Secretary	Mr. I. A. Eremin
	Mr. Koulatov [Kulakov] (Interpreter)

Mr. Thorp opened the meeting by reviewing briefly the progress which had been made to date. He said that he had received the Soviet note of December 16, 1947 (File No. 20–1, D–61)² and would reply within the next few days. He stated that he had met with the former Soviet Ambassador, Mr. Novikov,³ to open the discussions and thereafter Mr. Labouisse⁴ had met with Mr. Arutiunian⁵ several times. In describing the basic problems he explained that the United States in making lend-lease settlements with other countries had attempted, to the greatest extent possible, to make uniform agreements based on similar principles. Sometimes this had been difficult because of varied circumstances. The case of the U.S.S.R. program presented such a variation in that it had included more civilian-type equipment than had any other program. In the lend-lease settlements, the United States has followed the practice of dividing the aid into three categories: (1) items used up in the war for which the U.S. asks no payment, (2) items which the U.S. has asked be returned under U.S. law or for other reasons, such as the tankers and the one merchant vessel which the U.S. has already asked be returned, and (3) items not consumed in the war which are the items for which the U.S. wishes compensation. Mr. Labouisse explained that the third category of articles remaining at the end of hostilities is further divided into two subcategories: (a) items of civilian type and (b) combat items for which no payment is asked. He said that the items in category (b) are retained by the lend-lease recipient but the U.S. retains the right to recapture these items but does not intend generally to exercise this right.

Mr. Thorp requested Mr. Labouisse to outline various other aspects of the settlement which had been included by the U.S. side in its proposals of June 25, 1947⁶ (File No. 12, D–35) but which had not been mentioned in the Soviet counterproposals of December 16, 1947. Mr. Labouisse, in response, pointed out the following: (1) the U.S. claim for ocean freight charges for material shipped by the U.S.S.R. to the U.S. on lend-lease vessels for account of the commercial contract of the U.S.S.R. with the Defense Supplies Corporation, (2) the U.S. claim for the proceeds of any losses of insured lend-lease cargoes over and above the premiums paid, (the U.S. had asked for a statement of proceeds and premiums paid to establish the amount due the United States over and above the $7,000,000 already paid.), (3) the commitment of the Soviet Union with respect to commercial policy as set forth in Article VII of the Agreement of June 11, 1942 and, (4) the U.S. proposal regarding the provision of buildings and other properties in the U.S.S.R. which the U.S. desired in lieu of dollars in the settlement. He also pointed out that the Soviet proposals of December 16 made mention of the patent problem but did not go so far as had the proposals of the U.S. in this respect.

The Soviet Ambassador replied that the position of his Government regarding a lend-lease settlement had been expressed in a memorandum presented on June 11, 1947⁷ (File No. 11, D–31) and in the Embassy’s note of December 16, 1947. From the documents which he has seen and from the explanations given by Mr. Thorp and Mr. Labouisse, he believed that there were no misunderstandings or discrepancies. Mr. Thorp repeated that he would forward a note within the next few days outlining the U.S. position.⁸ The Ambassador asked if this note would reflect the principles which had been expressed by Mr. Thorp and Mr. Labouisse today. Mr. Thorp replied that in general the note would reflect what had been stated.

Ambassador Panyushkin observed that if a review were made of the principles of the two governments toward the settlement, there would be found a difference in approach to the problem. The U.S.S.R. principles, he stated, were based upon the Agreement of June 11, 1942. He proceeded to explain fully the Soviet basis. (1) In the Agreement of June 11, 1942 it is stated that it is a preliminary agreement postponing a final settlement until the progress of events makes clear the benefits which have accrued to each country. (2) The Agreement of June 11, 1942 makes reference to lend-lease as a part of the common effort in the fight against the common enemy, being one of the forms by which the United States made its contribution and one of the means by which the defense of the United States was secured. (3) The President of the United States has declared the defense of the U.S.S.R. as vital to the defense of the United States.⁹ The Ambassador stated that it was on these basic principles of the Agreement that the U.S.S.R. had based its principles of a final settlement and therefore the U.S.S.R. could not agree with the unilateral interpretation given to the Agreement of June 11, 1942 by the U.S. party. He added that the U.S.S.R. had considered its war effort in the same terms as had the President of the United States who had stated that the cause of defense of the U.S.S.R. is the cause of defense of the U.S. He said that the advantage received by the U.S. from the U.S.S.R. in the war was greater than the amount received by the U.S.S.R. in the form of lend-lease and, therefore, the U.S.S.R. considers the division of supplies delivered into three categories as an arbitrary division by the U.S. He observed that a detailed analysis of the U.S. views brought out contradictions in the U.S. principles. For example, he noted in the first category that the U.S. had included all military supplies, while at the same time many naval vessels had been used up in the war. Mr. Labouisse explained that all items regardless of type, which had been lost, destroyed or consumed in the war were in the same category. The Ambassador continued that the U.S.S.R. considered it senseless for the U.S. to claim compensation for items in the first group and that he considered that this category included all vessels and also all military items delivered by the U.S.A. and distributed to consumers in the U.S.S.R. This he observed was the principle expressed in the memorandum delivered by Mr. Arutiunian to Mr. Labouisse on June 11, 1947.

The Ambassador stated that in the opinion of the U.S.S.R. the Lend-Lease Act was a political Act, not a normal trade transaction, and he hoped the U.S. agreed with this point of view. He again emphasized that this view was in accord with the Agreement of June 11, 1942 and that it was not reasonable to treat lend-lease supplies as normal goods in a normal transaction. It was more reasonable to treat them as a whole, all as goods delivered in the defense of the United States. The Ambassador concluded his discourse by stating that the U.S.S.R. was willing to come to an agreement with respect to civilian vessels in an attempt to meet the requests of the United States and suggested that a settlement be concluded on the basis of the Embassy’s note of December 16, 1947. He also expressed his belief that agreement could be reached on the specific points touched upon by Mr. Labouisse. He felt that most of these points were within the Soviet proposals of December 16.

Mr. Thorp stated that he was embarrassed in that he had to leave shortly for a special meeting of the National Advisory Council which had been called only at noontime. However he stated that he had some general comments which he wished to make on the points he had already mentioned. He emphasized that the total lend-lease account of $11,000,000,000 should be kept in mind but that since we participated in a common cause with the U.S.S.R. the United States was not thinking of $11,000,000,000 as a settlement.

Mr. Thorp stated that the U.S. position was based on Article V of the Agreement of June 11, 1942 wherein the U.S.S.R. made a commitment to return to the U.S. such articles as were not lost, destroyed or consumed and which were determined by the President to be of use to the United States. Mr. Thorp observed that Article V was a direct statement which left no room for argument. The U.S. is modifying Article V by agreeing to sell the residual supplies instead of demanding their return. Any vessels lost, destroyed or consumed are not being considered. He emphasized that the U.S. side considered it to be very clear that the United States is entitled to the return of those items which still exist. Referring to the statement presented by Mr. Arutiunian of June 11, 1942, he observed that he cannot know in what category the U.S.S.R. places freight cars or machinery but the President of the U.S. has the right to request their return. The U.S. has not requested the return of civilian goods but is willing to settle for them on basis of their value at the end of the war. Mr. Thorp stated that he could see no relationship to Article V of the question as to whether or not the goods had been distributed. If not lost, destroyed or consumed they are returnable to the United States. Mr. Thorp asked the Soviet Ambassador to review Article V.

Mr. Thorp then stated that the problem which remained was one of evaluating the items remaining at the end of the war. In the case of the U.K. an inventory of such items had been prepared which was the basis of settlement. He reiterated that there was no basis for settlement other than Article V.

Before taking his departure, Mr. Thorp stated that the eight vessels which had been the subject of recent notes (File No. 2, D–60, D–62, D–63), were clearly items not lost, destroyed or consumed and they were clearly subject to return under Article V. The President has determined these vessels to be of use to the United States and the need for them in the United States is great for the movement of oil from the southern states to New England. The one dry cargo vessel included in the note is an Italian vessel which we are committed to return to Italy.

Mr. Thorp suggested adjournment in view of his pressing engagement but stated that a note would be forwarded to the Soviet Ambassador by Wednesday, the twenty-first, after which time the discussions could be continued. He again suggested that the U.S.S.R. review Article V of the Agreement of June 11, 1942 which has a clear meaning to the United States.

The Soviet Ambassador replied that the principles put forward by the Soviet side took Article V into consideration. He stated his regret that he had no time for explanation.

The meeting adjourned at 4:10 P. M.

1. These are not agreed combined minutes. This meeting was held in the Department of State, beginning at 3:15 p. m.
2. Foreign Relations, 1947, vol. iv, p. 715. The file number in parentheses indicates the location of a copy in the collection of papers in the US–USSR–LL–Set. series.
3. Nikolay Vasilyevich Novikov had been the Ambassador of the Soviet Union in 1940–1947. Ambassador Panyushkin presented his credentials as successor on December 31, 1947.
4. Henry R. Labouisse, Jr., was special assistant to the Director of the Office of European Affairs.
5. Amazasp Avakimovich Arutyunyan (Arutiunian) was an expert on Soviet international economic relations. He was Deputy to the Soviet ambassadors in the negotiations for a lend lease settlement agreement in 1947–1948, until he departed to lead the delegation of the Soviet Union to the Sixth Session of the United Nations Economic and Social Council (ECOSOC) at Lake Success, New York, February 2 to March 11, 1948.
6. Foreign Relations, 1947, vol. iv, p. 696.
7. See memorandum dated June 10, 1947, ibid., p. 692.
8. Infra.
9. Foreign Relations, 1941, vol. i, p. 857.