144. Telegram From the Department of State to the Embassy in the Soviet Union0

1591. For Ambassador from Bohlen. Embtel 1924. Deptel 1580.1 As indicated in refDeptel it is obvious that Menshikov was not prepared for US willingness to suspend talks, and his request to inform his government would indicate he had no instructions covering such contingency. Next Wednesday’s meeting will afford test of real Soviet intention in lend-lease negotiations, since there was no doubt left in Menshikov’s mind that maintenance of Soviet position will result in suspension of talks. Since apparently Soviets had not anticipated this possibility, they may now have to review their position in this light. Any information that you could obtain without making a special point of it would of course be very useful in preparing for possible change in Soviet position next Wednesday.

With reference to some of the points made in your 1924, it is difficult for me to see, assuming that our records are reasonably similar, that a genuine misunderstanding could have existed if only for fact that on Sept 30 immediately after Khrushchev’s departure Dillon gave following written statement to press on economic conversations at Camp David: “The discussions were general in nature and the only specific agreement reached was an agreement to resume negotiations on a lend-lease settlement. We pointed out that an agreement on this issue would provide a better atmosphere and would facilitate efforts to remove the remaining barriers to a full and free flow of peaceful trade.”2 This statement was allowed to stand without public or private refutation by Soviets. Also, Khrushchev’s reference at Camp David to credits in our record is followed by unchallenged statement by Dillon putting matter in complete perspective. Language Article VII in our view does not lend itself to Soviet interpretation, namely that it presupposes bilateral removal of any trade discriminations and can be stretched to include question of credits. No other nation, as I pointed out to Menshikov, has ever [Page 505] attempted this interpretation Article VII the whole history of which showed it related primarily to US program for trade liberalization on multi-national basis. British loan, although signed by Executive Branch on same date as lend-lease settlement, was separate agreement and as President’s report to Congress pointed out, settlement was in no way connected or conditional upon loan.3 Loan, as I pointed out to Menshikov, was based on variety of factors other than lend lease, including fact that British had spent some $4–1/2 billion of their foreign exchange in purchases prior to entry into force of lend lease.

As I endeavored to stress to Menshikov, if we wish to make any progress toward eventual aim of trade normalization, only possible first step at this juncture is lend-lease settlement which as Dillon repeatedly pointed out at Camp David to Khrushchev would improve atmosphere so that Executive Branch could discuss with Congress the question of removal of some of the restrictions which Soviets have in mind. My impression is that Menshikov is extremely conscious of weakness of their position in regard to subject of negotiations, as well as emptiness of attempt to interpret Article VII as some form of obligation to conclude trade agreement and extend credits. As already indicated, Menshikov’s attitude confirms my belief that at present stage at least Soviets are not interested in actual terms of lend-lease settlement, since at no time has he made any serious reference to our offer made at first meeting.

Foregoing is for use in event lend-lease discussions raised with you on own initiative by any Soviet official.

  1. Source: Department of State, Central Files, 711.56/1–2060. Secret; Limit Distribution; Verbatim Text. Drafted by Bohlen and cleared by Kohler.
  2. Telegram 1924 is printed as Document 143. Telegram 1580 to Moscow, January 21, reported that when Menshikov held to the previous Soviet position on lend-lease settlement at the third meeting on January 21, Bohlen, with prior White House approval, proposed the suspension of negotiations. Menshikov expressed regret at this development and asked for time to inform his government. The next meeting was scheduled for Wednesday, January 27. (Department of State, Central Files, 711.56/1–2160)
  3. For the transcript of Dillon’s news conference on September 30, 1959, see Department of State Bulletin, October 19, 1959, pp. 547–554.
  4. The lend-lease settlement and financial agreement with the United Kingdom were both signed in Washington on December 6, 1945. (12 Bevans 700) President Truman did not link the lend-lease settlement with the proposed loan to the United Kingdom in his message to Congress on the State of the Union, January 21, 1946, or in his special message to Congress transmitting the financial agreement with the United Kingdom, January 30, 1946. (Public Papers of the Presidents of the United States: Harry S. Truman, 1946, pp. 45–46 and 97–100)