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

861.24/7–249

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

Washington, July 2, 1949.

[Translation]

No. 80

Sir: Upon instructions from the Government of the Union of S.S.R. I have the honor to communicate that the Soviet Government has given an order for a third payment of interest to be made to the Government of the U.S.A. according to the Agreement between the U.S.S.R. and the U.S.A. dated October 15, 1945, in the amount of 1,481,715 dollars.

The calculation of this sum is based on the following:

1. From the amount of the regular payment of interest 490,000 dollars are excluded, in accordance with the Soviet note of July 4, 1947,¹ which apply to the value of equipment delivered under the Agreement in incomplete form.

2. As was indicated in my note of January 11, 1949, inasmuch as the damages to the Soviet economic organizations in connection with the discrimination on the part of the Government of the U.S.A. in regard to the exporting of equipment to the Soviet Union have been growing, 2,500,000 dollars are reserved from the sum of the payment as partial compensation for the said damages. The Purchasing Commission of the U.S.S.R. in the U.S.A. can, if necessary, communicate the details relating to these damages.

3. On December 27, 1946² the Government of the U.S.S.R., upon the request of the Government of the U.S.A., paid in 725,000 dollars for administrative and supplementary expenses connected with the delivery of goods under the Agreement of October 15, 1945. However, this sum has not been utilized as designated, in view of the discontinuance of shipments; the sum of 725,000 dollars with interest for the period from December 30, 1946 to July 1, 1949, amounting to 43,000 dollars (computing two and three-eighths percent annually), is also excluded from the regular payment.³

As far as your note of June 14, 1949 is concerned, the statements contained in it cannot be regarded as well founded. As is well known, the Government of the U.S.A. has violated its obligations under the Agreement of October 15, 1945, unilaterally discontinuing deliveries under the Agreement in January 1947, and, discriminating against the U.S.S.R., is not fulfilling its obligations under the Soviet-American Trade Agreement of 1937.⁴ Under such circumstances the Soviet Government, because of the necessity of protecting the interests of the Soviet economic organizations, does not consider it possible to change the position stated in my note of January 11, 1949.

Please, accept [etc.]

A. Panyushkin

1. Note No. 118, Foreign Relations, 1947, vol. iv, p. 702.
2. See the letter of December 28, 1946, from the Chairman of the Government Purchasing Commission of the Soviet Union in the U.S.A., Ivan Andreyevich Yeremin (Eremin), to the Lend-Lease Administrator, Chester T. Lane, ibid., 1946, vol. vi, p. 864.

3. In regard to this deduction of $725,000 and interest upon it of $43,000, the Director of the Office of Financial and Development Policy, J. Burke Knapp, wrote on July 20, 1949, to R. W. Maxwell, Commissioner of Accounts in the Department of the Treasury, and stated in part: “It is considered that the Soviet advice of this reduction in the interest payment is in fact a redesignation of the special deposit for the payment of interest due July 1. It would be appreciated, therefore, if you would arrange for the necessary adjustments to the Soviet Lend-Lease accounts.” Mr. Knapp inquired further for “information as to the policies of the Treasury Department” concerning the deduction of $43,000 as interest on the special deposit. (861.24/7–2049)

   In a reply of August 16, Mr. Maxwell wrote that his office “will make the necessary adjustments in the Soviet Lend-Lease accounts for the amount of $725,000,” but that the deduction of $43,000 “should not be allowed as a credit against the amounts due under the Agreement of October 15, 1945.” There was “no agreement or understanding which would support the conclusion of the Soviet Government” and allowance of this deduction “would not be consistent with similar transactions with other Foreign Governments when no credit was allowed as interest on the special deposits.” (861.24/8–1649) Mr. Francis T. Murphy, Chief of the Lend-Lease and Surplus Property Staff, expressed concurrence with this position of the Treasury Department in a letter to Mr. Maxwell on December 2, and since it was not “an eligible deduction” he accordingly requested that “you include the sum of $43,000 in your next billing to the Soviet Government.” (861.24/8–1649)

   Mr. Maxwell had sent a letter on November 30 to Gennady Nikolayevich Ogloblin, the treasurer of the Government Purchasing Commission of the Soviet Union in the United States in New York City, in which he wrote that “we have applied your payment of June 30, 1949, in the amount of $1,481,715.00, and the deposit of $725,000.00, which was made in December 1946 for administrative and incidental expenses” as credits on the total amount of interest which had been due from the Government of the Soviet Union as of July 1, 1949. In the payment of the interest on account of the 1945 agreement made by the Government of the Soviet Union in 1950, this special deposit with interest upon it, was not excluded from the payment made.

4. For documentation on the conclusion of a commercial agreement between the United States and the Soviet Union on An gust 4, 1937, see Foreign Relations, The Soviet Union 1933–1939, pp. 405 ff.