861.13/3–250: Telegram

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


729. At instance Italy, Ambassadors Italy, France, Netherlands and Belgium and Chargés US and UK this afternoon informally discussed ruble appreciation with particular reference effect on operation diplomatic missions here and possible countermeasures. Italian Ambassador suggested two lines on which action might be taken, first relating to measures which could fee taken abroad and second possibilities in Moscow. In first category he mentioned retortion by restricting Soviet financial operations in Italy to a single bank and the imposition of a retaliatory exchange rate. He also raised question whether it would be desirable to consider removal of diplomatic rate as direct effort on part of Soviets to reduce size of diplomatic staffs in Moscow and on basis such reasoning to require reduction in Soviet diplomatic staffs abroad. As regards situation in Moscow he enquired whether it would be advisable to ask Soviets for corresponding reductions in rents and other major items of expenditure not covered by concurrent consumer price reductions.

General consensus was that effect of exchange rate change on diplomatic corps was only an incidental factor in Soviet thinking, the controlling consideration being the psychological impact both domestic and foreign of ostensible strengthening of ruble and Soviet economy therein implied, and that, it being inconsistent with that line to maintain a diplomatic rate, chances of obtaining a return to such preferential treatment are virtually nonexistent. Netherlands Ambassador felt it would be unwise to make any representations on basis of amount of extra expenditure to diplomatic missions involved pointing out that in sum of national budget expenditures amount is relatively insignificant and Soviets could represent such action as evidence of capitalistic petty financial consciousness. He proposed that issue should be taken with statements in Foreign Office note referring to conditions in US and Europe and rejecting those Soviet contentions as interference in matters of internal concern to other countries. British Chargé said he had been considering recommending that UK solve problem by insisting upon inclusion in future UK–USSR payments agreements of provision for a balance of rubles to cover exchange rate increment. I pointed out probable US difficulty in establishing counterexchange measures such as Italian Ambassador had in mind and remarked that US situation with regard to size of respective diplomatic staffs in Washington and Moscow differed from that in some of other countries which would complicate US imposition [Page 1117] of measures of reprisal on that basis. British Chargé noted UK–USSR staff situation comparable US.

It was agreed that those present would recommend to their governments (1) consideration of possibilities retaliatory measures and (2) advisability in meantime of transmitting parallel replies to the Soviet Foreign Office note designed to make clear unrealistic nature of Soviet action in light existing price conditions in Moscow and consequently protesting new rate as wholly out of line with situation it purports to reflect. It was the general view that such protests will, if published, at least have effect of counteracting to some extent psychological impact among western peoples of this calculated Soviet maneuver. British Chargé is drafting preliminary suggestion as to substance which might be included in such protest and text will be sent Department soon as available.2

  1. This telegram was relayed to London, Paris, Rome, The Hague, and Brussels at 4:35 p. m. on March 2.
  2. A lengthy summary of the British proposed note was sent to the Department of State in telegram 748 from Moscow on March 4, not printed. (861.131/3–450)