861.24/12–1647

The Secretary of State to the Ambassador of the Soviet Union ( Panyushkin )

Excellency: I have the honor to acknowledge the receipt of the Embassy’s note of December 16, 1947 Which is in reply to the lend-lease settlement proposals of this Government presented to the Soviet delegation on June 25, 1947.

The Government of the United States has taken note of the statements made in the preambles to the proposals contained in the Embassy’s note with respect to the contribution of the Union of Soviet Socialist Republics to the Allied victory. This Government fully recognizes the importance of the Soviet contribution to this common effort. [Page 957] By the same token, the Government of the Union of Soviet Socialist Republics doubtless recognizes the important contribution of the United States to the victory in Europe while at the same time it was carrying forward to victory the war against Japan. However, the Government of the United States does not consider it necessary or appropriate, in the present negotiations, to enter into a discussion of relative contributions to our common victory. This is particularly the case in light of the fact that, as has been repeatedly stated to the Soviet delegation, the Government of the United States is not asking the Government of the Union of Soviet Socialist Republics to make any payment for lend-lease materials furnished by the United States to the Union of Soviet Socialist Republics which were lost, consumed or otherwise destroyed during the period of hostilities. Nor does the Government of the United States ask payment for the use of lend-lease articles prior to the defeat of our common enemy on September 2, 1945.1 Moreover, the Government of the United States asks no payment for military articles remaining in the possession and control of the Government of the Union of Soviet Socialist Republics on September 2, 1945, but is willing to leave certain of these articles in the custody of the Soviet Government subject only to the continuing right of the Government of the United States to require their return under arrangements similar to those now in force under the provisions of Article V of the Agreement of June 11, 1942 and as provided in lend-lease settlement agreements with others of our Allies. The direct cost to the Government of the United States of the lend-lease articles and services for which the Government of the United States asks no payment amounts to more than $8,000,000,000.

The Government of the United States asks only that the settlement agreement relate to lend-lease articles not destroyed, lost or consumed at the end of hostilities on September 2, 1945. The Government of the United States asks and expects (a) that certain of such articles be returned pursuant to the provisions of Article V of the Agreement of June 11, 1942, and (b) that satisfactory arrangements be made for payment to the Government of the United States of the fair and reasonable value on September 2, 1945 of articles not returned, other than the military articles to be left in the custody of the Soviet Government as stated above.

On September 2, 1945, there remained subject to return by the Government of the Union of Soviet Socialist Republics to the United States under Article V of the Agreement of June 11, 1942, substantial [Page 958] quantities of lend-lease articles. With the exceptions as stated, the Government of the United States is willing to discuss further the amount to be paid as consideration for the transfer to the Government of the Union of Soviet Socialist Republics of full title to all such remaining lend-lease articles of civilian type.

The Government of the United States cannot accept the proposal of your Government as contained in the Embassy’s note of December 16, 1947, that payment be made only for those lend-lease supplies “not distributed to ultimate consumers” on September 2, 1945, as enumerated in the list presented by Soviet representatives on June 11, 1947. Nor can this Government accept the proposition, as stated in the preamble to the proposals of your Government, that only those lend-lease articles are subject to return to the United States which were “unused” at the moment of the termination of hostilities. Article V of the Agreement of June 11, 1942 provides that the Government of the Union of Soviet Socialist Republics will return to the United States at the end of the present emergency such articles as shall not have been “destroyed, lost or consumed” and as shall be determined by the President to be of use to the United States.

With respect to the question of merchant vessels, the Government of the United States is prepared to transfer to the Government of the Union of Soviet Socialist Republics, as a part of the over-all settlement, full title to all pre-war-built merchant vessels, except the Lev Tolstoi (ex-White Clover), on a cash basis at the prices stated by the United States on June 25, 1947. The Government of the United States is also prepared to transfer to the Government of the Union of Soviet Socialist Republics, as a part of the over-all settlement, full title to all war-built merchant vessels except tankers at the prices stated on June 25, 1947, on a cash basis or on the cash and credit terms set forth in the Merchant Ship Sales Act of 1946. The dry cargo vessel, Lev Tolstoi, and the war-built tankers which have been the subject of an exchange of notes between our two Governments must be returned to the United States as specified in the note from the Assistant Secretary of State for Economic Affairs to the Soviet Embassy dated December 11, 1947.

With respect to vessels of the United States Navy transferred to the Government of the Union of Soviet Socialist Republics pursuant to the Act of Congress of March 11, 1941 and the other applicable laws and regulations of the United States, reference is made to the repeated requests of the Government of the United States for the return of three icebreakers of the United States Navy: CR 96, CR 98 and CR 99. The Government of the United States again requests the return of [Page 959] these vessels as a matter of urgency. With reference to the 28 PF Frigates of the United States Navy transferred to the Soviet Government, as previously indicated in the settlement discussions, the Government of the United States is not prepared to discuss any disposition other than their return to the United States, and their prompt return is hereby requested.2 As to the remaining vessels of the United States Navy, the Government of the United States is willing to consider the possibilities of selling, after their constructive return to the United States, a portion of these vessels as surplus property. If the Government of the Union of Soviet Socialist Republics wishes to purchase any of these remaining vessels, a list of those desired should be delivered to the Government of the United States forthwith for its consideration. If agreement is reached as to the terms of sale of such vessels, the purchase price therefor may be included in the credit arrangements agreed upon for the over-all settlement. Any vessels not sold in this manner must be returned to the United States.

With respect to the other matters included in the “Outline of Main Points of Settlement Proposed by the U.S. Side” of June 25, 1947, I have noted the proposals of your Government with respect to patent matters under Article IV of the Agreement of June 11, 1942 and with respect to the provision by your Government of local currency as a credit to its dollar obligations under the settlement agreement. These proposals are not fully responsive to the proposals on these subjects set forth in the above mentioned Outline. Moreover, certain other proposals made by this Government on June 25, 1947 are not covered by the Embassy’s note of December 16, 1947. Among the subjects not covered are the return to the United States of 260 40 mm anti-aircraft gun assemblies (single) transferred by the Department of the Navy of the United States, the disposition of lend-lease vessels transferred by the Department of the Army of the United States, compensation to the United States for certain claims, and matters covered by Article VII of the Agreement of June 11, 1942. It is proposed that these topics, together with those discussed above, be the subject of further discussion immediately for the purpose of arriving at a complete and final settlement at the earliest possible date.

Accept [etc.]

For the Secretary of State:
Willard L. Thorp
  1. For the instrument of surrender by Japan to the Allied Powers signed aboard the U.S.S. Missouri in Tokyo Bay on September 2, 1945, see photostatic copy in Department of State Bulletin, September 9, 1945, pp. 364–365; or 59 Stat. (pt. 2) 1733.
  2. Frigates (PF), as Secretary of the Navy Forrestal pointed out to Secretary Marshall in his letter of June 11, 1947, were substantially the same as destroyer escorts, and being combatant ships, their sale or transfer was not permitted by current statute; Foreign Relations, 1947, vol. iv, p. 694.