861.13/3–150: Telegram

The Chargé in the Soviet Union (Barbour) to the Secretary of State 1


714. Embtel 704 February 28 and 708, March l.2 In preliminary Embassy opinion, decree Council Minister[s] changing official exchange rates ruble to dollar and other currencies and establishment purported gold basis will have only negligible economic significance outside Soviet orbit except for propaganda. Obviously Soviets will not be able force acceptance ruble rate of exchange in trade with free world.

Principal motive behind move seems to be exploitation weakness western currencies as implied in devaluation and effort compromise dollar to Communist advantage in eyes those who have misgivings western economic stability.

Further considerations, however, probably also involved: Kremlin desire for Soviet currency established on some sort financial parity with currencies freely convertible and having real value has been reflected in post-war speeches and articles Soviet economists who [Page 1115] hopefully referred to “strengthening of ruble in relation foreign currencies” and reiterated ruble has “gold basis”, describing it as “international currency”. Undoubtedly obvious to Kremlin that this phase would not change status ruble from one unacceptable in free international trade to one of desirability and free convertibility. Best Soviets realistically may expect re world trade is to take first step as prelude to creation “ruble area” which they would control. Rumors to this effect have appeared throughout orbit and in Moscow in past months. (Embtel 3022, December 6, ’493)

Additionally, Soviets may hope by describing ruble as based on gold to obviate past embarrassing necessity for publicly stating trade agreements in dollars and defining ruble in terms US dollars.

By basing ruble on gold Soviets imply continued support for gold as international valuta, which understandable since Soviets one of biggest gold producers.

Likewise, by revaluing ruble upward in terms foreign currencies Soviets may have in mind improving trade with satellites although questionable if such device needed with general Soviet control over European satellites now adequate (worth noting that Sino-Soviet trade pact recently signed had special safeguard currency provisions). However, non-satellite countries undoubtedly will ignore claims re ruble value and insist on basing prices on world market prices.

By its action in reducing number of rubles obtainable for hard and soft currencies, Soviets may have considered additional pleasant acquisitions of foreign currency which will accrue to USSR from diplomatic missions on Soviet soil, at same time relieving embarrassment stemming from mere existence diplomatic rate of exchange which confession low purchasing value of ruble. At same time Kremlin may have in mind further curtailment diplomatic missions Moscow and hope additional expenses will force reduction staffs with concomitant improvement Soviet internal security.

In summary Embassy sees principal Soviet advantages decree in internal and external propaganda presuming more gullible sectors world public opinion will be impressed and Soviet populace will take pride in postwar Soviet accomplishments ostensibly reflected therein.

In countering such effect, emphasis on obvious falsity maneuver should go far toward clarifying situation and making evident that with this development Soviet ruble is in fact further from avowed goal becoming internationally accepted valuta than heretofore.

  1. This telegram was relayed to London and Paris and to the Departments of the Army, Navy, and Air Force on March 1.
  2. Latter telegram not printed, but see footnote 3, p. 1113.
  3. Not printed. The First Secretary of the Embassy in Belgrade, William A. Fowler, reported in despatch 450 on April 20, 1950, that an article in Republika two days before had found the official announcement by the Soviet Union to be unconvincing. The writer of the article was of the opinion that “it is unquestionable that (the formation of an Eastern political and economic bloc) is the main purpose … of the revaluation of the ruble.” (861.131/4–2050)