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

861.24/7–148

Memorandum of Conversation, by the Under Secretary of State (Lovett)

[Washington,] July 1, 1948.

Participants:	The Under Secretary, Mr. Lovett
	The Soviet Ambassador, Mr. Panyushkin
	Mr. Krotov, First Secretary, Soviet Embassy
	S/P—Mr. Kennan1
	EE—Mr. Stevens2

The Soviet Ambassador came in this morning at his own request and informed me that he had been instructed by his government to discuss two economic questions.

He pointed out that under the “pipeline” credit agreement of October 15, 1945 the annual interest payment was due shortly. The Soviet Government was prepared to make payment but would withhold the amount of $490,000 representing the interest on that portion of the credit representing goods which remained undelivered. (This would parallel the procedure followed by the Soviet Government in making the interest payment on the “pipeline” credit last year.³)

The second point the Ambassador desired to discuss was the question of claims against the Soviet Government by American firms who, because of the export licensing procedure, were unable to export to the Soviet Union goods which had been manufactured on Soviet order. The amount of these claims was about $1,300,000 at the present time, but this figure is incomplete since not all claims have been presented. The Ambassador stated that in the opinion of the Soviet Government the Soviet organizations which had placed these orders were in no way at fault and that the responsibility for the losses incurred by the American firms rested with the American Government, which had imposed export controls. Pie pointed out that some of these orders had been placed as long ago as 1945 and requested that the export control procedure be reviewed to determine whether licenses could be issued for the export of the items which were the subject of these claims. He said that if this Government refused to issue the necessary export licenses the Soviet Government would not settle the claims.⁴

I explained to the Ambassador that the export controls were based on an Act of Congress and an Executive Order and that their administration was vested in the Department of Commerce.⁵ Before a reply could be made to the Ambassador’s request it would be necessary to consult the various interested agencies of this Government. The Ambassador asked for an early reply, pointing out that the interest payment would be due within a few days. I told him that we would take the question under advisement and give him as prompt a reply as possible.⁶

The Ambassador stated that he had sent the Department a note recently with reference to the lend-lease negotiations and asked whether it had been received. I told him that I had a translation on my desk and that his note was being studied.

Robert A. Lovett

1. George F. Kennan, Director of the Policy Planning Staff.
2. Francis B. Stevens, Chief of the Division, of Eastern European Affairs.
3. This payment was made in a note no. 118 from Ambassador Novikov dated July 4, 1947; Foreign Relations, 1947, vol. iv, p. 702.
4. In a memorandum of July 2, 1948, Mr. George E. Truesdell, country specialist in the Division of Eastern European Affairs, noted in part: “As a result of Congressional action, the U.S. was obliged to withhold shipment to the U.S.S.R. of goods valued at approximately $20,000,000 which were included in the lists of items to be delivered to the Soviet Government under the so-called lend-lease ‘pipeline’ agreement of October 15, 1945.…In its note of November 17, 1947 ( ibid., p. 710) the Department stated it was prepared to discuss the matter but to date no discussions have taken place.” (861.24/6–2548)
5. For a résumé of the difficulties associated with the deliveries of the pipeline materials and their cessation, see the memorandum of December 12, 1947, by Mr. Michael H. Cardozo of the Office of the Legal Adviser, Foreign Relations, 1947, vol. iv, p. 713.
6. For the reply, see the note of July 26, 1948, p. 1000.