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

861.24/3–1248

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

secret

[ Washington ,] March 12, 1948.

Present

u.s.	u.s.s.r.
Mr. W. L. Thorp, U.S. Chairman	The Soviet Ambassador, Mr. Alexander S. Panyushkin
Mr. Robert G. Hooker	Mr. N. I. Cheklin
Mr. G. E. Truesdell, U.S. Assistant Secretary	Mr. Krotov, Interpreter

Mr. Thorp advised the Soviet Ambassador that he had completed his work at Lake Success and was ready to proceed more rapidly toward a conclusion of the lend-lease discussions. The Ambassador asked, possibly with intended jest, what success had resulted from the meetings at Lake Success. Mr. Thorp replied that it had been the most fruitful session he had yet experienced. He said the discussions were good, there was less waste of time, and he had learned more about the economic and social conditions of the world than he had at any previous session. He gave as an example Mr. Arutiunian’s two and one-half hour speech on the U.S.S.R. which provided more knowledge on the Soviet economy than had heretofore been presented. Also he said that a number of problems had been more fully discussed than ever before. The Ambassador responded that the facts presented by Mr. Arutiunian were well known and must have been known previously to Mr. Thorp. Mr. Thorp confirmed this but remarked that the presentation of so much data in one package was most helpful.

Mr. Thorp then asked the Ambassador what method he would prefer in proceeding with the lend-lease discussions, separate meetings on individual subjects or continuance of the past practice of general discussions on all subjects. The Ambassador stated that he had no preference but was willing to continue according to the wishes of the U.S. side.

Mr. Thorp then stated that he desired to discuss several subjects at the present meeting. He pointed out that at the previous meeting Naval vessels had been mentioned and that the Ambassador had deferred discussion of the matter until the next meeting. Mr. Thorp summarized the negotiations on this subject pointing out that last year (Second Meeting–Combined Working Groups, May 7, 1947) the U.S. had provided lists² of all the Naval vessels transferred to the U.S.S.R. under lend-lease (File No. 3, D–10). He said that, of the vessels so listed, the U.S.S.R. had been requested to return the three icebreakers and twenty-eight frigates and had been asked to provide a list of these vessels which it desired to purchase. He observed that no information as to Naval ships had been contained in the Soviet note of December 16 and no information had subsequently been presented by the Soviet side. The Ambassador said he did not remember agreeing to discuss this point but that he would look into the matter. He mentioned the three icebreakers and twenty-eight frigates and asked what was meant by the statement that they had not been included in the Soviet note of December 16, 1947³ (File No. 20–1, D–61). Mr. Thorp stated that the translation he had of the Soviet note of December 16, 1947 stated that the U.S.S.R. desired to purchase the three icebreakers only but did not mention the other naval vessels.

The Ambassador replied that since most of these vessels had been distributed and thus had been lost, destroyed or consumed, they were not specifically mentioned. Mr. Thorp emphasized that these vessels could not be considered in the category of “lost, destroyed or consumed” since they remain in the hands of the Soviet Government. The Ambassador replied that Article V of the Agreement of June 11, 1942 provided that only those articles not used were returnable to the United States and these vessels had been distributed to users. Mr. Thorp replied that these ships were still in existence in the hands of the Soviet Government and could not be considered as lost. The Ambassador retorted that they had been “used”. Mr. Thorp replied that the vessels had not been “used up” and he clarified this phrase by reference to the English text of Article V “destroyed, lost or consumed”. The Ambassador replied that the Russian text of the agreement read “used”. Mr. Thorp pointed out that there was only one official text of the June 11 agreement and that was the English text.

The Ambassador said that the point of the U.S.S.R. side was that the articles supplied by the U.S. to the U.S.S.R. were for the prosecution of the war and had been used to that end. He referred to the example given at a previous meeting (Third Combined Meeting, January 29, 1948, File No. 25, CM–3) that auto accidents in peacetime were rare but in wartime it took only one shell to destroy an article. He said that on the basis of the U.S. proposal, the U.S.S.R. would be obliged to pay for articles damaged or used up in the war. He said the settlement for lend-lease was not like paying for things in peacetime, thus the U.S.S.R. counts all articles received during the war as coming under the agreement of June 11, 1942. He referred to the meeting wherein, he stated, the U.S. had acknowledged this agreement was not economic (CM–3, January 29, 1948). He said the results achieved by the U.S. due to the Soviet war effort were immeasurably greater than the lend-lease aid which the U.S.S.R. had received from the U.S. and this, he said, was recognized by everyone and the U.S. must take it into account. He emphasized that, in spite of this, the U.S.S.R. was willing to settle on the basis set forth on December 16.

Mr. Thorp expressed his great surprise at the Soviet attitude regarding the naval vessels. He said that total lend-lease aid to the Soviet Union amounted to $11 billion and that the U.S. was discussing only a small part of this total. He then pointed out that each vessel had been turned over to the Soviet Government on the basis of a formal lease or agreement to execute a lease and stated that the U.S. asks no payment for the war use of these vessels but asks only that they be returned or that an offer for their purchase be made. In closing the discussion on this point, Mr. Thorp emphasized that these vessels were no longer needed for military purposes and that the U.S. had a clear choice either to ask for their return or to offer them to the U.S.S.R. for purchase and then suggested that this point be studied and clarified.

Turning to merchant vessels, Mr. Thorp stated it to be his assumption that, on the basis of the note of December 16, 1947, the Soviet Government desired to purchase all the merchant vessels. The Ambassador confirmed this but added that the three icebreakers were included in the Soviet offer. He remarked that the question of the thirty-six war-built vessels had already been agreed upon.

Mr. Thorp again referred to the Soviet note of December 16, specifically item 3 on the subject of patents, and asked if the Ambassador proposed to work out agreements directly with the U.S. firms or if he had some other arrangements in mind. The Ambassador replied that the Soviet Government would take the necessary steps to conclude agreements with the U.S. patent holders. He said that this was only one small portion of the problem but that he agreed with the U.S. position that the agreement should be complete and final. Mr. Thorp then asked if the U.S.S.R. would conclude these agreements before the over-all settlement was reached and if any progress had as yet been made with the individual firms. The Ambassador replied that the agreements with the individual firms must be concluded before the over-all agreement is signed. Mr. Thorp then asked whether this meant that the U.S.S.R. would begin these discussions immediately. The Ambassador said that the U.S.S.R. could not negotiate immediately with the U.S. firms but this was not such a large task that it would hinder an over-all settlement. Mr. Thorp asked what would happen if a firm should ask too much even though the U.S.S.R. was willing to settle. This, he said, might present a difficult situation and arrangements should be made so that it would not become a continuing problem. The Ambassador again stated that the U.S.S.R. would take the necessary measures to conclude satisfactory agreements with the firms. Mr. Thorp then queried as to who would determine what a satisfactory agreement would be and expressed his feeling that this element could be most disturbing. The Ambassador gave a short answer by observing that a lot could happen to most anything. Mr. Thorp stated that he wanted to make certain that there would be agreements with the firms and asked that a summary of the progress made with the individual firms be presented at a future meeting. He recalled that the Soviet side had conducted some negotiations of this sort last fall but he said he did not know what problems had been involved. He said that the Laws of Congress required that the firms receive full payment and that any settlement must be such as would have the approval of Congress. The Ambassador retorted that he would discuss the matter at some future meeting. Mr. Thorp concluded discussion of this point by emphasizing that this problem could not be disregarded.

Mr. Thorp then continued by stating that the U.S. had two further points to bring before the meeting. He referred to lend-lease cargoes insured by the Soviet Government on which the Soviet Government had paid the premiums and had collected the proceeds. He said the Soviet Government had made a payment of $7,000,000 in 1943 in partial satisfaction of this claim but the U.S. did not know whether this payment had settled the account and does not have the necessary information. He asked the Ambassador if he could provide the information so that a final settlement of this account could be made. The Ambassador said he was not yet prepared but would make inquiries and then reply.

Mr. Thorp then mentioned another claim, that concerning ocean freight charges for goods delivered by the U.S.S.R. to the U.S. on a contract concluded in 1942. He said the amount due was slightly less than $7 million and that, since the contract was one made independently of lend-lease, the Ambassador might wish to consider whether or not he wished to discuss the claim in the lend-lease settlement. The Ambassador said he did not know how he desired to discuss this problem. Mr. Thorp said that bills had been set to Amtorg⁴ without results and asked if another bill should be sent to Amtorg. The Ambassador agreed to discuss the matter with Amtorg.

Mr. Thorp said it was not his intention to cover all matters at the present meeting; however, the major point, the amount to be paid for civilian inventory items, i.e. the items for which the Ambassador had offered to settle for $261 million, was still to be discussed. The Ambassador stated that there was one further point he had to mention, which was point numbered four in his note of December 16, i.e. the limit of the amount of local currency which the U.S.S.R. would provide for use of U.S. diplomatic missions in the U.S.S.R. He said the Soviet note of December 16 met U.S. wishes in this respect. He then asked for clarification as to what was meant by Mr. Thorp’s reference to $261 million as the amount to be paid for items remaining in the Soviet Union. He said that the $261 million represented merely the stated value of the articles undistributed as of September 2, 1945 payment for which the U.S.S.R. would negotiate.

Mr. Thorp pointed out that the Soviet offer of $261 million to cover undistributed items was already considered by the U.S. as too small. He called attention to the agreements made in 1941 and 1942 through Mr. Stalin wherein the Soviet Government agreed to pay $2 billion for items being shipped at that time and said that although these commitments had been incorporated in the Master Agreement of June 11, 1942, the U.S. continued shipping. He stated that the U.S. was willing to consider a reasonable proposal by the U.S.S.R. for articles left at the end of the war, including articles moved out of warehouses which nonetheless had value but that the latest Soviet proposal to pay less than $261 million was most surprising in view of the history of the program and the fact that the concept of lending and leasing did not in any manner imply transfer of owership. He said the U.S. was not asking for return of the articles but desires a reasonable offer for their peacetime value. He pointed out that the U.S. had made lend-lease agreements and settlements with many other governments but that this was the first time any government had questioned the meaning of the original agreements. Other countries, he said, presented no such problems as the question of return of naval vessels or the definition of the words “destroyed, lost or consumed”. Mr. Thorp referred the Ambassador to his statement made at the first meeting that the U.S. desired to make a settlement consistent with those with others, not easier or harsher. He pointed out that the terms offered by the U.S. were exceedingly generous, made no charge for war costs and sought payment only for value of articles of peacetime utility at the end of the war. This principle had been accepted by the U.K., France, Norway and the other countries and it would be most difficult to justify a settlement at $261 million when compared with these other settlements. The Ambassador interposed that the figure of $261 million for articles remaining at the end of the war was too high and that the prices of these articles should be discussed. He said he failed to see why U.S. public opinion would not accept these figures. Mr. Thorp replied that his chief worry was the reaction of the other countries. The Ambassador said he had no fear of these aspects of the problem, giving as his reasons the facts that the cause of the defense of the U.S.S.R. was the cause of the defense of the U.S., the Soviet Union had fought alone before the second front had been opened, the U.S.S.R. had had more expenditures in the war, having defended its own territory, and the lend-lease agreement itself gave evidence that the defense of the U.S.S.R. was vital to the defense of the U.S. He said the British also had been aided by the Soviet effort and would have been overwhelmed had it not been for the Soviet Union. He said that the U.S. side had forgotten these aspects but if the role of the U.S.S.R. in the war were described properly to the other governments, they would be satisfied.

At this point Mr. Thorp suggested adjournment and proposed that another meeting be scheduled for the following week. The Ambassador agreed without comment. In closing Mr. Thorp stated that the meeting had disturbed him greatly since he previously had misunderstood the Soviet position concerning the $261 million. He said that if the U.S.S.R. was thinking of an amount smaller than this it would be exceedingly difficult. He pointed out that $261 million represented only 10% of the amount estimated by the U.S. as the value of articles remaining at the end of the war and emphasized that the Soviet position was most disturbing to the U.S. The Ambassador said this should not cause worries to which Mr. Thorp responded that he hoped it would not. In closing, the Ambassador said that during the war U.S. industry had been safeguarded and enlarged, whereas hundreds of thousands of Soviet people and Soviet industrial centers had been destroyed by the Germans. He said the U.S. should be glad—not worried.

As the Ambassador departed he was handed a note⁵ replying to his note No. 51 of March 8⁶ concerning the actions of U.S. representatives in accepting delivery of lend-lease vessels in Yokohama.

1. These are not agreed combined minutes. This meeting was held in the Department of State, beginning at 4:45 p. m.
2. Four detailed lists had been handed over at this meeting, none printed, but see Foreign Relations, 1947, vol. iv, footnotes 2 and 3, p. 688.
3. Ibid., p. 715.
4. Amtorg Trading Corporation, the official purchasing and sales agency in the United States of the Soviet Union.
5. Infra.
6. Not printed.