761.56/6–1550
The Secretary of State to the Chargé of the Soviet Union (Bazykin)
Sir: I refer to your note of September 30, 1949 concerning the settlement of the obligations of your Government under the Lend-Lease Agreement of June 11, 1942.
The Government of the United States has noted with satisfaction the return to United States custody of twenty-seven frigates and one icebreaker in accordance with Article V of the Master Lend-Lease Agreement and in keeping with the “Agreement on Dates and Procedures for Return of Three Icebreakers and Twenty-seven Frigates of the United States Navy received by the Union of Soviet Socialist Republics Under the Lend-Lease Act” of September 27, 1949.
Regarding the two icebreakers which were not returned to United States custody by December 1, 1949 in accordance with the agreement of September 27, 1949, and which the Soviet Government notified this Government on November 12, 19491 would be returned in Germany or Japan by June 30, 1950, this Government wishes to express its regret that the Soviet Government now finds it impossible to deliver these vessels before November or December, 1950. It is expected that the Soviet Government will take all necessary measures to effect the return of these vessels at the earliest possible opportunity.
With repect to the other 186 Naval craft, return of which was formally requested by this Government on October 7, 1948 under Article V of the Master Lend-Lease Agreement, it was the understanding of the Government of the United States from your Government’s note of December 9, 1948, that the Soviet Naval experts were appointed not only to arrange for the return of the icebreakers and frigates, but also to discuss the return of the other Naval craft requested by the United States as well as the disposition of the balance of the United States Naval craft remaining in Soviet custody. The Soviet Naval experts, however, returned to the Soviet Union without considering arrangements for the return of the other 186 Naval craft, despite Mr. Thorp’s personal request to Ambassador Panyushkin that discussion continue as to the arrangements for the remaining vessels.
In view of the fact that the Soviet Government has not yet complied with the request of this Government for the return of these 186 vessels, the Government of the United States must, therefore, regard your Government in continued default of its obligation under Article V of the Master Lend-Lease Agreement. In order that this matter may be brought to an early conclusion, however, the Government of the [Page 1302] United States proposes the resumption of discussions by Naval experts of both Governments in Washington on or before July 15, 1950.
The question of patent matters is the subject of a separate note forwarded simultaneously herewith.2
With respect to the question of the return of the 186 Naval craft and the compensation of United States patent holders, this Government wishes to again point out that the obligation of the Government of the Union of Soviet Socialist Republics to return lend-lease articles is specifically set forth in Article V of the Agreement of June 11, 1942 and the obligation of the Government of the Union of Soviet Socialist Republics to compensate United States patent holders is similarly stated in Article IV of that agreement. It is expected, therefore, that the Government of the Union of Soviet Socialist Republics will take immediate action in order to remedy its defaults with respect to these matters.
As has been stated by the representatives of the Government of the United States repeatedly since the inception of negotiations in April 1947, the proposals of this Government regarding the over-all settlement follow the principles of settlements already concluded with other governments. No payment is asked for any lend-lease assistance expended in the war effort, nor is payment asked for “military type” articles which may remain in Soviet custody under the settlement. This Government asks payment only for the fair value of “civilian type” articles remaining in the Union of Soviet Socialist Republics at the war’s end which have a peacetime value to the Soviet economy. The inventory of “civilian type” articles estimated by the Government of the United States as remaining in the Soviet Union for post-war use was valued at $2,600 million, and it must be emphasized that this represents not the original cost to this Government of all “civilian type” articles delivered to Soviet custody but the cost less depreciation of those articles estimated to remain after deduction of liberally estimated losses. It is thus of great significance that the Government of the United States does not ask full compensation for the peacetime value of these articles to the Soviet economy, but in the interest of a mutually satisfactory agreement offered to accept $1,300 million, and in an effort to reach a prompt agreement this Government further reduced its proposal to $1,000 million.
In contrast to these actions of the Government of the United States the Soviet Government has increased its offer only from $170 million to $200 million and has failed to make any further increase in its offer despite the action of the United States in materially reducing its proposal. The failure of the Soviet Government to date to increase its [Page 1303] offer toward a reasonable amount has led this Government to question the seriousness of the expressed intention of the Soviet Government to reach a prompt and mutually satisfactory over-all settlement through negotiation. The Government of the United States wishes, however, to express its continued willingness to negotiate on the matter of an over-all settlement, and wishes to further express its readiness to give serious consideration to any constructive proposal which the Soviet Government may make toward reaching a prompt and reasonable settlement.
With respect to the comment in your note of September 30, 1949 which held that the credit terms of payment are discriminatory, this Government wishes to reiterate that the terms offered in its note of September 3, 1948, namely interest at 2% per annum accruing from July 1, 1946 and principal payable from July 1, 1946 in thirty annual installments beginning five years after July 1, 1946, are as favorable as those granted to any country in a settlement limited to lend-lease and war accounts. The question of credit terms, however, must be considered in relation to the over-all amount of settlement. It is suggested, therefore, that this matter might appropriately be held for discussion simultaneously with the question of the over-all amount.
The Government of the United States is of the opinion that, provided a fair and reasonable offer is made by the Soviet Government, there exists the basis for a prompt and mutually satisfactory settlement of the Soviet lead-lease account. On the assumption that it is the intention of the Soviet Government to make such an offer, the Government of the United States proposes that representatives of the Government of the Union of Soviet Socialist Republics and the Government of the United States meet in Washington on or before July 15, 1950, so that the question of a lend-lease settlement may be brought to a speedy and mutually satisfactory conclusion.
Accept [etc.]
- See the memorandum of conversation, by Under Secretary of State Webb, Foreign Relations, 1949, vol. v, p. 751.↩
- Supra.↩