861.24/5–748

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

secret

Excellency: I have the honor to refer to the negotiations between our two Governments concerning the settlement of lend-lease obligations under the Agreement of June 11, 1942 and to our recent correspondence and conversations concerning the main outstanding issues which must be agreed upon before a complete and final settlement can be accomplished.

As stated in its note of January 23, 1948 the Government of the [Page 985] United States is unable to accept the wholly inadequate proposal of your Government contained in the Embassy’s note of December 16, 19471 and stated repeatedly by you in our recent conversations, namely, that payment be made by your Government only for those lend-lease supplies which were en route on September 2, 1945, were shipped from the United States from September 2 to September 20, 1945, or were “not distributed to ultimate consumers” on September 2, 1945.

The Agreement of June 11, 1942 contains no provision for the transfer of title to any lend-lease articles, except as title may be conveyed in conjunction with settlement for such articles. On the other hand, that Agreement includes a specific provision, Article V, wherein the Government of the Union of Soviet Socialist Republics unequivocally agrees to “return to the United States of America at the end of the present emergency, as determined by the President of the United States of America, such defense 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 of America.” Article V of its English text, which is the only official text of the Agreement of June 11, 1942, clearly defines the articles returnable to the United States as those not “destroyed, lost or consumed”. The language of this article is clear and does not permit of the construction, which you have placed upon it, that only those articles “unused” or “undistributed to ultimate consumers” are subject to return to the United States upon its request.

Any complete and final settlement of lend-lease matters must take into account the disposition of all those lend-lease articles title to which remains with the United States. Title to all lend-lease articles transferred to your Government, except those purchased under the cash payment arrangements set forth in Mr. Crowley’s letter of May 30, 19452 and those transferred under the agreement of October 15, 1945,3 remains with the United States.

The Government of the United States, as United States representatives have stated from time to time, asks no payment for lend-lease articles which were “destroyed, lost or consumed” during the period of hostilities up to September 2, 1945, i.e., for articles no longer in existence on that date.

With respect to military articles of types included in the categories on list No. 4 handed to Soviet representatives on May 7, 1947 and [Page 986] remaining in existence on September 2, 1945, or transferred to your Government up to September 20, 1945, the Government of the United States is not willing to transfer title to those articles and accordingly asks no payment therefor. All such articles retained by the Government of the Union of Soviet Socialist Republics after conclusion of the general settlement will be subject, however, to the continuing right of the Government of the United States to require their return to the United States and subject to certain restrictions upon their retransfer to other governments, under arrangements similar to those now in force under the provisions of Articles III and V of the Agreement of June 11, 1942. Similar provision has been made in settlement agreements already concluded with other lend-lease recipients.

With respect to lend-lease civilian-type articles remaining in existence at the end of hostilities on September 2, 1945, or transferred to your Government up to September 20, 1945 (i.e., articles other than the ships and military items included in the four lists handed to representatives of your Government on May 7, 1947), the Government of the United States asks financial settlement for all such articles not returned to the United States. Accordingly, the Government of the United States proposes, in a lend-lease settlement, to convey full title to such articles in consideration for the payment by the Government of the Union of Soviet Socialist Republics to the Government of the United States, on terms to be agreed, of an amount representing the agreed fair value of these articles. It is recognized that the value of many of these articles for peacetime use is considerably less than it was for war use and that the value to the Soviet Government of such articles for use after September 2, 1945 may be considerably less than their original cost to the Government of the United States.

In order that the current negotiations may proceed to an early conclusion, your Government is requested to present for consideration in the negotiations a reasonable proposal for payment which your Government considers will reasonably reflect the fair value of all civilian-type articles which remained in existence on September 2, 1945, or were transferred to your Government between September 2 and September 20, 1945, except articles paid for under the cash payment arrangements referred to above.

The Government of the United States desires to reiterate that the proposals for settlement which it has set forth in the current negotiations, with respect to the disposition of lend-lease military and civilian-type articles and the settlement of lend-lease obligations, are based on general principles accepted by other lend-lease recipients in settlement agreements already concluded.

With respect to the vessels of the United States Navy transferred to your Government under the Lend-Lease Act, the Government of [Page 987] the United States has in its possession a receipt for each vessel signed by a representative of your Government. Each of these receipts states that the vessel accepted is being “leased” pursuant to the Act of Congress of March 11, 1941, and the other applicable laws and regulations of the United States of America and the applicable agreements between the two Governments. In view of the fact that the Agreement of June 11, 1942 makes no provisions for the transfer of title to these vessels but in fact provides for their return under Article V, and in view of the specific statement in each transfer receipt that the vessels are being “leased”, there can be no doubt of the obligation of the Government of the Union of Soviet Socialist Republics to return them to the United States.

The Government of the United States declines the proposal stated in the Embassy’s note of December 16, 1947 and repeated by you in our recent conversations that title to three of these vessels, the icebreakers, be conveyed to your Government in consideration of payment on a long-term credit basis. As long ago as July 26, 1946,4 the Government of the United States requested the return of these icebreakers and since that date has repeated this request both by note and in conversations with representatives of your Government. In its note of January 23, 1948, the Government of the United States requested the return of the three icebreakers as a matter of urgency. Having received no advice from your Government regarding the return of these vessels, the Government of the United States now requests that it be informed immediately of early dates upon which the Government of the Union of Soviet Socialist Republics will return them to the United States.

With respect to the twenty-eight PF Frigates of the United States Navy transferred to your Government, the Government of the United States has indicated in the settlement discussions that it cannot discuss any disposition of these vessels other than their return to the United States. Moreover, in the United States’ note of January 23, 1948 their prompt return was requested. Since no advice has been received from your Government regarding the return of these vessels, the Government of the United States now requests that it be informed promptly of early dates upon which the Government of the Union of Soviet Socialist Republics will return them to the United States.

With respect to other vessels of the United States Navy included in list No. 2 handed to Soviet representatives on May 7, 1947, United States representatives have stated in the settlement discussions and specifically in the United States’ note of January 23, 1948 that the Government of the United States will consider the possibility of transferring title to a portion of these vessels to your Government as surplus property after their constructive return to the United States. In [Page 988] the note of January 23 it was stated that the Government of the Union of Soviet Socialist Republics should deliver to the Government of the United States forthwith for its consideration a list of the vessels which the Soviet Government wished to purchase, and that all vessels which the Soviet Government does not wish to purchase, and any vessels which the United States Government declines to sell in this manner must be returned to the United States. The Government of the United States, not having received such a list of the vessels which the Soviet Government desires to purchase in this manner, desires to point out that further delay in the submission of such list of vessels will be regarded by the Government of the United States as indicating that the Soviet Government does not desire to purchase any of these vessels. In such event, the United States Government will expect them all to be returned forthwith to the United States.

In the Embassy’s note of December 16, 1947 it was stated that the Government of the Union of Soviet Socialist Republics would take the necessary measures for the conclusion of satisfactory agreements with interested American firms concerning licenses and royalty payments for the use of patented processes provided to your Government under the agreement of June 11, 1942. In our recent conversations you have assured me that the necessary agreements would be concluded with the individual firms before an over-all settlement agreement is executed. Since our last conversation on March 12, 1948, I have been advised by one of the individual patent holders that a preliminary meeting was held with representatives of your Government to negotiate a license agreement but that subsequent inquiries by this patent holder as to when further negotiations would take place have met with no reply. It is, therefore, requested that you advise me promptly as to when your Government proposes to carry forward discussions with the individual patent holders to conclude the necessary license agreements and to make such payments in connection with them as may be necessary under Article IV of the Agreement of June 11, 1942.

With reference to your note of February 24, 1948 in which you informed me of the desire of your Government to acquire the thirty-six war-built dry cargo vessels at the prices and terms set forth by the United States on June 25, 1947, it will be recalled that in the United States’ note of February 27, 1948, it was stated that the decision of your Government concerning these vessels resolved satisfactorily one of the several points of a comprehensive settlement of lend-lease obligations but that agreement upon this single point was necessarily tentative and subject to the reaching of final agreement on all issues which is necessary to the conclusion of a general settlement. Therefore, the position of the Government of the United States is that, if a comprehensive lend-lease settlement is not concluded promptly, [Page 989] the Government of the United States, under Article V of the Agreement of June 11, 1942, will require the return to the United States of the lend-lease merchant vessels now remaining in the possession of your Government.

The Government of the United States earnestly requests the Government of the Union of Soviet Socialist Republics to regard with due seriousness the need for an early resolution of the issues outstanding in respect of the settlement of lend-lease and the importance which the Government of the United States attaches to the requests contained in this note. The Government of the United States cannot long defer final decisions, for its part, upon the disposition of such lend-lease articles as the merchant vessels, which can be retained by the Union of Soviet Socialist Republics only if an early general settlement is concluded; and cannot long remain patient in the face of the silence of the Soviet Government regarding the necessary return of the icebreakers and other naval vessels which the United States Government has indicated must be returned. The United States Government is disturbed by the unsatisfactory progress of the lend-lease settlement discussions, which it had hoped could be long since concluded, and requests the cooperation of the Government of the Union of Soviet Socialist Republics in achieving prompt settlement of the latters lend-lease obligations.5

Accept [etc.]

For the Secretary of State:
Willard L. Thorp
  1. Foreign Relations, 1947, vol. iv, p. 715.
  2. Ibid., 1945, vol. v, p. 1009. Leo T. Crowley was Foreign Economic Administrator.
  3. For text of the agreement relating to the disposition of Lend Lease supplies in inventory or procurement in the United States (the “Pipeline” agreement), signed in Washington, see Treaties and Other International Agreements Series No. 3662, or United States Treaties 2819.
  4. Foreign Relations, 1946, vol. vi, p. 852.
  5. A summary of the contents of this note was sent to the Embassy in the Soviet Union in telegram 539 of May 13, 1948, 6 p. m. (861.24/5–1348). The Embassy was also informed in telegram 604 of May 27, 1948, 6 p. m., that Ambassador Panyushkin had that day told Under Secretary of State Robert A. Lovett that he was going to the Soviet Union to obtain new instructions for the Lend Lease settlement negotiations (861.24/5–2748). The Ambassador returned from this journey on June 22.