143. Telegram From the Embassy in the Soviet Union to the Department of State 0

1924. Reference: Deptel 1563.1 On rereading memo Khrushchev-Dillon conversation2 it is evident ground for misunderstanding did exist. For example at Gromyko’s prompting Khrushchev did raise connection between lend lease and credits. He stated lend lease should [Page 503] be approached in same manner as with other countries such as England (British settlement makes ref to trade and to financial agreement) and although I was not present I assume Gromyko has a point re drafting of communique. There is of course also Art 7 of Lend Lease Agreement.3 Nevertheless I agree Sovs were aware their position would lead to breakdown negotiations. I am inclined attribute this to Sov desire avoid being put in position of having refused negotiate on settlement of an obligation. As you know they have constantly hammered theme that they always scrupulously settle their debts. Possibly an added reason is that as result their visits to US Khrushchev and Mikoyan exaggerate desire of American businessmen for trade with Sov Union. I suspect they may have thought lend lease negotiations could be used to publicize obstacles to trade and thus bring pressure for their removal. Sov propaganda following breakdown of lend lease negotiations will throw light on this. Their line is likely to be that elements in US, particularly State Dept, opposed to relaxation of tension and that negotiations showed we did not desire settlement. In this connection I am troubled by our propaganda position particularly with respect to demand of 100 million for use of ships. I agree we should not in present circumstances put forward our minimum offer, since if negotiations were ever resumed we would have to start bargaining from that point. I suggest however that at final session indication might be made that we would be prepared withdraw this demand if satisfactory over-all figure agreed upon and that you could rpt that we are prepared to negotiate further on what over-all figure should be. Nevertheless we cannot seriously negotiate if Sovs insist upon connecting lend lease with agreements on trade and credits.

With respect to method of breaking off negotiations, while I do not feel strongly there would seem to be advantage to us in simply suspending negotiations after which Dept could issue statement our position. It seems to me this might make it slightly easier to resume negotiations at some time in future than if we get locked in present positions by formal exchange of notes. (I am not however sanguine that negotiations will ever be resumed.) If nevertheless note is desired suggest Dept furnish text in order save time and agree that it should be along lines outlined in reftel.

  1. Source: Department of State, Central Files, 711.56/1–2060. Secret; Priority; Limit Distribution.
  2. Telegram 1563 to Moscow, January 19, reviewed the impasse on lend-lease with the Soviets, speculated on Soviet motives in linking these negotiations with trade and credit, and asked for Thompson’s comments on Soviet motives and the best way to terminate these negotiations, if necessary. (Ibid., 711.56/1–1960)
  3. Document 132.
  4. Article VII of the Lend-Lease Agreement between the United States and the Soviet Union of June 11, 1942, provided, among other things, that the terms and conditions in negotiating the final determination of benefits from the Soviet Union to the United States should not burden commerce between the two countries but “promote mutually advantageous economic relations between them and the betterment of world-wide economic relations” and to that end should include provision for the expansion of the exchange and consumption of goods, the elimination of trade discrimination, and the reduction of trade barriers. (11 Bevans 1283)