893.24 FLC/9–448: Telegram

The Ambassador in China ( Stuart ) to the Secretary of State

1628. In compliance Deptel 1226, August 24, we discussed surplus bulk sale agreement at Foreign Office September 2. After long discussion, it was agreed as follows: [Page 717]

Although Chinese had given notice of termination Vinnell and Marsman contracts on August 24, they would proceed immediately toward renegotiation at lower costs and in addition promised every effort accelerate removal surplus from island[s].
We would address note Foreign Office suggesting amendment agreement so as to permit transfer from transportation to engineering allotment of US $3 million. This sum is not to be used for time being for rehabilitation purposes in Shanghai. Chinese made strong plea for interpretation of spirit of agreement which they claimed should permit diversion of up to US $1 million for rehabilitation in Shanghai. They pointed out that under our interpretation they could still follow uneconomic procedure of concentrating surplus on any [say] Guam rather than Shanghai and accomplishing rehabilitation there effecting payment from engineering funds. They fail to understand our reasoning which they feel would prevent them from following the more economical procedure of concentrating the surplus in Shanghai and rehabilitating it there. Luboshez maintained firm position that we could not permit such diversion but on strong representation from Chinese we agreed to submit matter to Department for further instructions. Even at risk of affording Chinese opening wedge for future similar requests, we would be inclined to go along with them.

Notwithstanding our arguments re disposition of property on certain isolated islands, Chinese took firm position that where removal is completely uneconomic island should be withdrawn from agreement. They plan to present us with requests to that effect and mentioned specifically that if we could withdraw Eniwetok from the agreement31 for our own reasons leaving only two smaller and less important islands in the Marshalls from which it would be uneconomical for the Chinese to remove the surplus, then they are justified in requesting the withdrawal of the other Marshall Islands in the agreement as well.

At the very close of the discussions Chinese raised the question of disparity which we brushed aside by saying matter could be considered when operations under agreement had been completed; that our best information indicated that it would be impossible to reach an accurate determination of dollar and cents benefits to each country under the agreement, particularly as there were other elements involved; and that furthermore if discussions of disparity were to take place, they should be in the first instance at high policy level.

Question of terminal date for declarations was mentioned and although neither side was in position give definite commitment thinking [of] Chinese seems to be October 31.

Luboshez concurs.

We should appreciate Department’s early instructions.

Sent Department 1628; repeated Shanghai 776 for Luboshez.

  1. Accomplished by letter of November 20, 1947, from Captain Luboshez to General Kiang (893.24 FLCV12–1147).