Foreign Relations of the United States, 1949, Eastern Europe; The Soviet Union, Volume V

861.24/6–1649

Memorandum by the Assistant Secretary of State for Economic Affairs (Thorp) to the Acting Secretary of State

secret

[Washington, June 16, 1949.]

In preparation for your next meeting with the Soviet Ambassador concerning the return of Lend-Lease Naval craft and the relation of this subject to the over-all lend-lease settlement negotiations,¹ there are set forth below certain recommendations together with background and supporting discussion.

Recommendations

It is recommended that you advise the Ambassador that since his call of June 13 you have carefully gone over the record and can find no possible justification for the failure of the Soviet Government to return the 3 icebreakers, 28 frigates and other Naval craft demanded by the United States Government in accordance with Article V of the Lend-Lease Agreement of June 11, 1942. In support of this it can be stated to the Ambassador:

(1) That the language of Article V is clear and unequivocal. (The text of Article V. found in section 1 of discussion below, could be quoted in this connection.)

(2) That the prerequisites conditioning the Soviet commitment to return the icebreakers, frigates and other Naval craft no longer exist since the President of the United States, who alone has the prerogatives in accordance with the specific language of the Agreement, has determined the end of the emergency and has determined that these craft are of use to the United States. (See section 2 of discussion below.)

(3) That, having not complied with its commitment, the Soviet Government is clearly in default of its obligations under Article V. The government of the United States not only considers the Soviet Government in default in not complying with the formal demand contained in the U.S. note of October 7, 1948 but also is of the opinion that that Government has acted in bad faith in not complying with the previous requests for the return of these vessels. The Ambassador could be reminded that nearly three years have elapsed since the return of the icebreakers was first requested on July 26, 1946² and nearly a year and a half has elapsed since the return of the frigates was requested in the U.S. note of January 23, 1948.³ In this latter connection, it could be pointed out that it has been almost exactly two years since the Soviet Government received the U.S. memorandum of June 25, 1947⁴ which stated the necessity of return of the frigates as well as the icebreakers. He could be told also that the Soviet Government alone, of all lend-lease recipients, has failed to return lend-lease articles when requested to do so. (See section 3 of discussion below.)

(4) If the Ambassador again raises the question of a reply to the Soviet note of December 9, 1948 on over-all settlement issues as a counter-move to our note of January 11, 1949 which covered only the return of Naval craft, he may be told:

(a) That upon receiving the Soviet note of December 9, 1948, this government in view of the expression contained therein of Soviet intentions to honor its commitments under the Master Agreement by return of the Naval craft, was prepared to reply to the Soviet note and to continue over-all discussions for the purpose of resolving the issues still standing in the way of an over-all settlement.

(b) That, on the other hand, after a reasonable period of time had elapsed without a reply to our note of January 11, this government began to entertain doubts as to the seriousness of Soviet intentions with respect to their obligations under Article V and the return of the Naval craft. Continued Soviet failure to implement its proposal to return these craft has had the further result of casting doubt upon the intentions of the Soviet Government with respect to other aspects of its obligations and upon its sincerity in the over-all settlement discussions.

(c) That in view of this situation this government expects the Soviet government to give evidence, prior to further discussion of general settlement matters, of Soviet good faith in the negotiations by returning the icebreakers, frigates and other Naval craft as required under the Master Lend-Lease Agreement. (See section 4 of the discussion below.)

(5) If the Ambassador persists in the position that Article V cannot be interpreted as a separate obligation but must be considered in relation to other aspects of the Agreement, he can be told:

(a) That Article V is of course a part of the over-all Master Agreement and that any over-all settlement, to be complete, must of course supersede the Soviet obligations under this Article;

(b) That the U.S., on the other hand, will not enter into any over-all settlement agreement modifying Article V in any respect until the Soviet obligations under this article have been met in full;

(c) That Article V contains definite language governing the time of return of lend-lease articles, namely “at the end of the emergency as determined by the President of the United States” and further stipulates that these articles shall be those “as shall be determined by the President … to be of use to the United States of America”. It is perfectly clear, therefore, that the Soviet Government has agreed to return to the United States, since the emergency has been terminated, any articles when determined by the President to be of use to the U.S.;

(d) That the article contains no reference to other conditions for the return of articles or to other portions of the Agreement, also that nowhere in other portions of the Agreement can there be found any provisions modifying Article V.

(6) If the Ambassador again raises the question of prejudice or discrimination in connection with the disposition of returned articles he may be told:

(a) that Article V contains no provision limiting the United States with respect to disposition of returned articles which are the property of the Government of the United States;

(b) that the Government of the U.S. is of the opinion that its expressed willingness to sell to the Soviet Government, as surplus property in conjunction with the over-all lend-lease settlement, a total of 242 naval craft, considerably more than half of the 428 craft which the Soviet Government desires to purchase, cannot be considered as prejudice or discrimination but rather should be considered by the Soviet Government as an indication of the desire of this Government to give the Soviet Government most favored treatment;

(c) that, while the U.S. Government has no intention of disposing of any of the naval craft returned to it in a discriminatory or prejudicial manner since all of these vessels are of use to the United States, it cannot as a matter of principle agree to bind itself not to dispose of its property in any manner in accordance with the laws of the United States.

Background and Discussion

(1) Text of Article V

Article V of the Soviet Master Lend-Lease Agreement of June 11, 1942 (Tab l)⁵ states: “The Government of the Union of Soviet Socialist Republics will 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 transferred under this Agreement as shall not have been destroyed, lost or consumed and as shall be determined by the President to be useful in the defense of the United States of America or of the Western Hemisphere or to be otherwise of use to the United States of America.”

(2) U.S. Fulfillment of conditions contained in Article V

The Soviet obligation set forth in Article V of the Master Lend-Lease Agreement is firm and unequivocal under certain stated conditions. The condition as to time has been formally fulfilled by the Presidential “Determination of the End of the Emergency Referred to in the Master Lend-Lease Agreements.” This determination was made by the President in a memorandum to the Secretary of State dated July 7, 1948 (Tab 2). Although not published, the Soviet Government was notified of its existence in our note of October 7, 1948 (Tab 3). The condition as to the determination of the usefulness of articles to the United States is, as in the case of determination of the end of the emergency, the sole prerogative of the President of the United States as specifically stated in the Agreement. This condition also has been formally fulfilled, in this instance, by the Secretary of State action under the authority delegated to him by the President. The determination is evidence by our notice to the Soviet Government also in our note of October 7, 1948. The Soviet Government has acknowledged on various occasions the existence of the 3 icebreakers, 28 frigates and 186 other craft and there appears to be no disagreement as to this aspect of the matter.

(3) Soviet Delinquence

Our first formal, legally and technically correct, demand for the return of the naval craft was made in our note of October 7, 1948. In March 1948⁶ the Soviet Government met our request for the return of seven war-built tankers and one old dry-cargo vessel without a formal demand being made. No other lend-lease recipient other than the USSR has evaded its obligation under similar agreements to return articles to the United States. It was Soviet intransigence only which motivated the Department to perfect its position as to the determination of the end of the emergency.

Our first request for the return of the icebreakers was made by note dated July 26, 1946. This note stated our pressing need for the vessels and requested that they be made immediately available for return. A further request for their return was made in a note of September 14, 1946,⁷ which primarily was a request to commence negotiations of an over-all settlement. The matter was also mentioned in an aide-mémoire of October 31, 1946⁸ requesting a reply to our September note. The matter was included by Ambassador Smith⁹ in conversation with Mr. Molotov¹⁰ in Moscow in December 1946¹¹ and in January¹² and February 1947¹³ in connection with our further attempts to initiate over-all lend-lease settlement negotiations. During the negotiations which finally opened on April 30, 1947, the Soviets were told in an “Outline of Main Points of Settlement Proposed by the U.S. Side” dated June 25, 1947¹⁴ that Naval craft “shall be returned to the U.S. at ports to be designated by the U.S., except for certain vessels in certain categories which the U.S. will agree to sell (after their constructive return) if a satisfactory Soviet offer is received.” It was stated in the outline that the U.S. could not entertain offers for the icebreakers or frigates which must be returned. After an interlude of five months, the Soviets, in replying on December 16, 1947¹⁵ to the U.S. proposals of June 25, offered to purchase the icebreakers on long-term credit. In our reply of January 23, 1948, we rejected the Soviet offer and requested the return of the icebreakers as a matter of urgency and also the frigates. After further general lend-lease settlement discussions with the Soviet Ambassador which terminated on March 12, 1948, another note¹⁶ was forwarded in which we again declined the Soviet offer to purchase the icebreakers and requested that we be informed immediately of early dates upon which both the icebreakers and frigates would be returned to the U.S. With respect to the other Naval craft, this note stated that, not having received a list of these vessels remaining in Soviet custody as requested, the U.S. assumed that the Soviet Government did not desire their purchase and that their return to the U.S. was expected. This note stated also that the U.S. could not “long remain patient in the face of the silence of the Soviet Government regarding the necessary return of the icebreakers and other Naval vessels.” In a note of June 25, 1948,¹⁷ the Soviet Government agreed to include in an over-all settlement provisions for the return of the 28 frigates on the assumption that the vessels are needed by the U.S. itself and that the U.S. does not propose to sell or transfer them and thus no discrimination against the Soviet Union would occur. This note proposed that the icebreakers be leased to the USSR since the U.S. would not agree to a long-term credit sale. Our note in reply, dated September 3, 1948,¹⁸ stated that the Soviet proposals to lease the icebreakers and to include provisions for the return of the frigates in a settlement agreement were not responsive to our request for their immediate return. We again demanded their immediate return under Article V of the Master Agreement and requested that we be advised urgently that these vessels were available for immediate transfer to the U.S. in Continental U.S. ports. The note also stated that the return of lend-lease articles under Article V of the Master Agreement is not dependent upon the use of such articles to be made by the U.S. Not receiving a reply to our note of September 3, 1948 a formal demand was made in our note of October 7, 1948 for the immediate return of naval craft as follows: 3 icebreakers, 28 frigates, 15 landing craft, Infantry, 101 Torpedo Boats, 39 Large Submarine Chasers and 31 Small Submarine Chasers.

(4) Policy of Refusing to Continue Negotiations until Naval Craft are Returned

Upon receiving the Soviet note of December 9, 1948 (Tab 5) agreeing to the return of the icebreakers and frigates, the Soviet Ambassador was called in to be notified of our agreement to designate a group of experts to agree with Soviet experts as to the details of the return and to arrange for a date upon which the experts would begin discussions. Since the Ambassador replied only that he would report the matter to Moscow, a note was forwarded for the record on January 11, 1949 (Tab 6) setting forth our agreement to the proposed procedure and asking to be informed of the names of the Soviet experts and the date upon which they would be available to begin discussions. It was planned at that time to initiate general lend-lease settlement discussions simultaneously with the discussions of the experts, or at least at the time when the experts had reached agreement on the icebreakers and frigates. Soviet delay in responding to our note of January 11 supported our doubts as to Soviet intentions with respect to the Naval craft and also with respect to Soviet intentions in the over-all settlement negotiations. It would now appear that Soviet tactics are directed to making the return of the Naval craft dependent upon agreement as to an over-all settlement. This same tactic has been used, so far successfully, by the Soviets in the negotiations with respect to their obligations under Article IV of the Master Lend-Lease Agreement to compensate U.S. nationals for the use of their patented processes supplied under lend-lease (See U.S. Note of October 12, 1948,¹⁹ Tab 7.) The Soviet position is based obviously upon the fact that they are desirous of deferring return of the Naval craft indefinitely and that they have no intention of negotiating in good faith for an over-all lend-lease settlement. It is clear that the Soviet position offering a ridiculously low lump-sum over-all settlement is much more easily defended than would be a default in its clear obligation to return lend-lease articles under the Master Agreement. Thus to continue negotiations without the return of the Naval craft would encourage the Soviet position and invite continued stalling not only the return of the Naval craft but on an over-all settlement as well. Our insistence on the return of the vessels immediately and carrying through in every possible way would improve the U.S. bargaining position in the over-all settlement negotiations. Our negotiating position is based primarily on the fact that residual lend-lease articles either must be returned to the U.S. or must be paid for in the over-all settlement. Failure to insist upon our clear rights with respect to recapture of lend-lease articles would jeopardize our position and would further prolong the already tedious discussions.

It is felt that no reply should be given to the Soviet note of December 9 until we have firm assurances that the Naval craft will be returned immediately. If these assurances are not forthcoming it is felt that the procedure set forth in the policy problem statement of May 6, 1949 (Tab 8) should be followed: that we should publicize Soviet failure to live up to its obligations under the Master Agreement and demand the return of the 87 merchant vessels remaining in Soviet possession preparatory to attempting to regain their custody by legal action in friendly foreign ports and to impeding to the greatest extent possible their use in foreign commerce. The possibilities of offering to present the matter to the World Court or to another action should be explored.

1. The next meeting with Ambassador Panyushkin was held on June 20; for the memorandum of conversation covering it, see infra. Another memorandum was written on that day containing suggested comments as a basis for Acting Secretary of State Webb to use in that meeting; but its contents were not significantly different from the viewpoints contained herein, and it is not printed.
2. Foreign Relations, 1946, vol. vi, p. 852.
3. Ibid., 1948, vol. iv, p. 956.
4. Foreign Relations, 1947, vol. iv, p. 696.
5. All of the tabs herein referred to were not attached to the Department’s file copy of this memorandum.
6. See the note of March 12, 1948, from the Secretary of State to the Ambassador of the Soviet Union, Foreign Relations, 1948, vol. iv, p. 988, and footnote 3.
7. Ibid., 1946, vol. vi, p. 854.
8. Ibid., p. 855.
9. Walter Bedell Smith.
10. Vyacheslav Mikhailovich Molotov was Minister for Foreign Affairs of the Soviet Union.
11. See Ambassador Smith’s note of December 31, 1946, Foreign Relations, 1946, vol. vi, p. 865.
12. See telegram 6, from Moscow on January 2, 1947, ibid., p. 865.
13. See telegram 434, from Moscow on February 18, 1947, ibid., 1947, vol. iv, p. 657.
14. Ibid., p. 696.
15. Foreign Relations, 1947, vol. iv, p. 715.
16. See the note of May 7, 1948, from the Secretary of State to the Ambassador of the Soviet Union, 1948, vol. iv, p. 984.
17. Ibid., p. 989.
18. Ibid., p. 1004.
19. Foreign Relations, 1948, vol. iv, p. 1016.