370. Memorandum of Conversation0

SUBJECT

  • U.S. Sale of Wheat to U.S.S.R.

PARTICIPANTS

  • (See attached list)

Under Secretary Ball said that he and Ambassador Thompson were scheduled to go abroad late Friday and therefore would like to find out before their departure whether a reply to the proposal made at the last meeting1 had been received by Mr. Borisov from his government.

Mr. Borisov replied that he had reported the proposal to his government but had not as yet received an answer. The only additional information he had came from American newspapers.

Mr. Ball said that since their last conversation the other day, a number of possibilities had been explored. There was no U.S. Government agency which would be in a position to handle the wheat transaction in the manner proposed by Mr. Borisov. As Mr. Borisov undoubtedly knew, the grain export trade of the U.S. was handled by four large companies primarily, and in this case, too, it would be these four companies which would handle the bulk of the transaction, since it was difficult for smaller companies to handle a deal of this size. At the moment, the best way to proceed appeared to be for private American grain trading companies to make their proposals to the Soviet wheat delegation on a C & F basis. The government had already taken a number of steps, and intended to take some additional steps, in order to make it easier for the companies involved to make acceptable proposals to the Soviets on a C & F basis. A part of the movement of the wheat would still involve American vessels, but, since the offers to be made would be on a C & F basis, the freight would be a matter of concern to the American company only. Furthermore, since freight constituted only one element of their costs, competition among them for the volume the Soviets were interested in would tend to bring the C & F price down to a basis acceptable to the Soviets. Thus, instead of our saying to them that we proposed to sell them 2-1/2 million tons of wheat at a given price, for delivery during a specified period of time, the matter would be handled by private companies making individual C & F offers for delivery to Black Sea and Baltic ports.

[Page 807]

Mr. Borisov asked a number of questions to clarify the proposal. They were answered by Mr. Ball by a restatement of the above provisions. Mr. Ball added that there was enough flexibility in this type of transaction for private grain dealers to be prepared to absorb some of the elements of costs involved.

Mr. Borisov asked whether his understanding that the price would be uniform, regardless of which ships would be used, was correct.

Mr. Ball answered that individual grain dealers would approach the delegation with specific orders. Company A might be higher than Company B. Mr. Borisov did not have to accept any offer which did not suit him. To Mr. Borisovʼs question as to whether the type of ships used would make any difference in price, Mr. Ball stated that he wanted to be clear about the fact that American vessels would be used along with vessels of other countries, that if a company were to negotiate the sale of, say, 1/2 million tons, the price for that quantity would be uniform since shipping costs would have been averaged out.

Mr. Manjulo asked whether the requirement that no company handled more than 25% of the total quantity involved, would still apply. This was answered by Mr. Ball in the affirmative.

Mr. Borisov said that it would have been better for him to deal with one firm only, but that he understood the situation. He went on to say that he thought the American market was somewhat different from that of other countries. In no other country did he have to settle commercial matters with a State Department or Ministry of Foreign Affairs. He thought that the State Department would have enough to do with problems of its own without getting involved in commercial matters. He wanted to clarify another question which pertained to Soviet ships. Supposing that agreement had been reached on the transaction under discussion, there would be other matters to be taken up as well, in which the question of discrimination would inevitably be brought up. What did the State Department intend to do about this problem?

Mr. Ball said that he had had at least four telephone conversations with the Secretary of Labor since last talking to Mr. Borisov, and had expressed to the Secretary the concern which the State Department felt in this matter.2 Any suggestion about Soviet ships not being handled in American ports was certainly not U.S. Government policy and this matter would also be taken up with the heads of the unions involved. As he had told Mr. Borisov the other day, in this country unions were independent, and while he felt that some progress would be achieved, the government could not give them instructions in this matter.

[Page 808]

Ambassador Thompson remarked that some of these unions had also discriminated against American owners of ships sailing under flags of convenience. While the government would use its influence to alleviate this situation, it was not in a position to guarantee any specific results. At the present time there were four Canadian ships which had been struck in Chicago.

Mr. Borisov said that Soviet unions also were not subject to direct control by the Soviet Government. However, when necessary, their government did influence the unions to do that which was considered desirable by the government. Whenever the government sincerely desired to improve relations with a given country it took whatever measures were necessary to smooth out any difficulties, and vice versa, if they desired to worsen their relations with any given country, they took the appropriate measures for that purpose. Since their unions were independent, they, too, could create a problem by a policy of not handling ships of American registry. He thought that in such an event Mr. Ball would lose no time in summoning the Soviet Ambassador in order to register a resolute protest against such a policy. Todayʼs press again contained an article about Soviet ships with a statement that they would be picketed if they attempted to load wheat in this country. (Mr. Borisov handed Mr. Ball a clipping from an American newspaper.) In this connection the second question, then, was what would happen if he and Mr. Ball should come to terms, yet nothing could be accomplished because of such union policy.

Mr. Ball said that Mr. Borisov undoubtedly was aware of the fact that in recent years there were a number of instances when unions had struck rocket factories, nuclear plants, etc. yet the government found itself helpless to remedy this situation completely. The government was unhappy about the actions of some labor leaders but could not do much to improve the situation.

Mr. Borisov said that rocket factories and nuclear plants were, of course, internal matters, but, when unions began to interfere with the conduct of international relations, then it seemed to him that the State Department should be in a position to take action. Continuing, he said that he would report the present proposal to his government, and asked whether his understanding that the American firms were ready to do business was correct. When answered that this was so, he said that he would in that case detain the “Exportkhleb” negotiators whom he had just instructed to return home. He asked whether anything should be put in writing between the governments, perhaps something in the nature of an exchange of letters.

Ambassador Thompson thought it would be best for the present not to put anything in writing since the U.S. Government would be dealing with the trade and so would Mr. Borisov or his representative. He [Page 809]thought it would be best not to involve the government, as that might lead to a number of complications.

Mr. Borisov said that in the Canadian transaction, the Soviet Government had exchanged letters with the Canadian Minister, Mr. Sharp. Mr. Sharp had stated in the letter that Canada was prepared to sell a given quantity of wheat on specific terms. The Soviet Ministry of Foreign Trade acknowledged the receipt of that letter and signified its acceptance of the terms.

Mr. Ball thought we could give a letter to the Soviets to the effect that the U.S. Government was agreeable to the sale of wheat by private grain traders to the Soviet Union in large amounts, 2# million tons or more, and that the government would endeavor to see to it that the grain would be made available.

Mr. Borisov thought that in principle this was satisfactory, but would like to have one point added, a statement to the effect that the U.S. Government would, within the limits of its power and authority, facilitate the consummation of the transaction. He did not necessarily have the Department of State in mind for such a statement.

Mr. Ball said that Secretary Freeman could give the necessary assurances about grain being made available. The government would advise the trade of the broad condition of offers to be submitted and would take the necessary steps in order to facilitate the sale. As to delivery the government was not really competent. This would have to be handled by the private grain trading companies themselves.

(Mr. Manjulo brought up the matter of Soviet vessels again but was stopped by Mr. Borisov who told him that this should await further directives from Moscow.)

Ambassador Thompson said it was his frank view and opinion that the U.S. Government could influence the trade unions better if it were not known that an agreement existed. If the unions knew that agreement had been reached, they would undoubtedly create some additional difficulties.

Mr. Borisov said that he would of course keep any such letter confidential.

Mr. Ball added that he would have to consult with his associates as to exactly what kind of wording such a letter should contain, particularly in view of the fact that other Departments were involved.

Mr. Borisov wanted to reiterate the gist of the understanding. As he understood it then, first, private firms would make offers to the Soviet wheat delegation on a C & F basis; second, the government would see to it that the grain would be available on the market; third, that all possible assistance would be given to the private firms in the execution of this transaction.

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When this was confirmed, Mr. Borisov said he would so report to his government.

Mr. Ball added that he hoped quick agreement could be reached because he and Ambassador Thompson would otherwise be forced to change some rather detailed plans they had made for their departure on Friday afternoon.

Pending Mr. Borisovʼs getting further instructions from Moscow, it was agreed that another meeting be held at 10:00 a.m. Friday in order to discuss commodities other than wheat which had been brought up at the first meeting.3

LIST OF PARTICIPANTS

  • United States
    • Under Secretary of State George W. Ball
    • Ambassador Llewellyn Thompson
    • William Krimer, L/S, Interpreter
  • U.S.S.R.
    • Sergey A. Borisov, First Deputy Minister of Foreign Trade
    • Viktor M. Manjulo, Chief, Administration for Trade with Western Countries, Ministry of Foreign Trade
    • Nikolay I. Kuzminski, Chief, Interpretersʼ Section, Ministry of Foreign Trade
    • Eugeni S. Shershnev, Commercial Counselor, Embassy of U.S.S.R.
  1. Source: Department of State, Central Files, INCO-WHEAT USSR. Confidential; Limit Distribution. Drafted by Krimer and approved in U on November 15. The meeting was held in Ballʼs office.
  2. See footnote 1, Document 366.
  3. Memoranda of Ballʼs telephone conversations with Secretary of Labor Willard W. Wirtz are in the Kennedy Library, Ball Papers, Telephone Conversations, USSR.
  4. At 5:20 p.m. Ball called the President and told him that the Soviet delegation seemed to like the U.S. proposal. He made a similar call to Secretary Freeman. (Memorandum of telephone conversations; ibid.) At 11 a.m. November 7, the President convened an advisory meeting, attended by Ball and Freeman, to discuss the sale of wheat to the USSR. The discussion focused on rates, availablitity of U.S. tankers, and other issues involved in shipping the wheat. A tape recording of the discussion at the meeting is ibid., Presidentʼs Office Files, Presidential Recordings, Tapes 118/A55 and 118/A56.