Memorandum of Conversation, by the Associate Chief of the Division of Eastern European Affairs (Hooker)

Participants: Mr. Krotov, First Secretary, Soviet Embassy
Mr. Bruslov, Second Secretary, Soviet Embassy
Mr. Hooker, EE
Mr. Freers,1 EE

After discussing another matter, Mr. Krotov said that the second purpose of their visit was to inquire when they would have an answer to the questions raised by Ambassador Panyushkin in his conversation of July 1 with Mr. Lovett. I said that, as I had told him over the telephone on Saturday,2 I hoped that it might be possible to give him an answer at an early date, but I could give no assurances as to the time. I added that before coming to a decision on the request that certain export licenses be granted it would be necessary to receive full information as to the nature of the goods involved. Mr. Krotov replied that while he had participated in the interview only as an interpreter, it was his distinct understanding that the goods involved were those specified in the Soviet note which accompanied the first interest payment (July 1, 1947) under the “pipeline” credit, namely the goods purchased under the “pipeline” agreement which had not been shipped, and which amounted to some $20,000,000 total value.

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I pointed out that the failure to ship this material had nothing to do with the export licensing procedure to which the Ambassador had referred in his conversation with Mr. Lovett. Mr. Krotov said that it was a matter of indifference to the Soviet Government whether the shipment of the goods had been prevented by failure to issue export licenses or for some other reason, and what they were concerned with was that the goods should be shipped. I inquired if the claims of $1,300,000 referred to in the conversation of July 1 had reference to the same goods, i.e., the goods purchased but not shipped under the “pipeline” agreement, and he replied that this was correct.

Mr. Krotov then stated that with respect to the subject of the annual interest payment due July 1 on the “pipeline” credit, Ambassador Panyushkin had informed the Under Secretary that whereas last year the amount of $490,000 had been withheld (representing interest on that portion of the credit covering goods which had been delivered but were unusable because of failure to deliver necessary component parts) this year the position of the Soviet Government was that payment would be made in the same manner but only on condition that delivery was made on the $20,000,000 worth of goods remaining undelivered. When I indicated that I had some doubt if Mr. Stevens had understood the Ambassador in this sense, he added that he believed that both the Under Secretary and Mr. Stevens had fully understood the Ambassador when this statement was made. I replied that, not having been present at the meeting myself and not having discussed it with either the Under Secretary or Mr. Stevens, I could not comment on what either of them had understood or not understood, and that if any further clarification of the Soviet position appeared necessary in order to enable us to reply, I would let him know.

Robert G. Hooker, Jr.
  1. Edward Louis Freers, in the Division of Eastern European Affairs.
  2. July 3, 1948. Memorandum of conversation not printed.