375. Memorandum of Conversation0

Thursday a.m., November 14, Secretary Hodges received telephone request from Soviet Embassy that he see Borisov on that day concerning wheat transaction. Secretary Hodges agreed to appointment for that afternoon at 3:30 p.m.

Prior to meeting, Secretary Hodges notified State and Agriculture Departments of meeting and invited them to have representative present. Notice of meeting was also given to Mr. Bundy of White House staff.

Meeting with Borisov convened in Secretary Hodgesʼ office at 3:30 p.m. Acting Maritime Administrator Giles and Assistant Secretary of State Johnson were present. Under Secretary Murphy (Agriculture) could not attend due to conflicting appointment. Under Secretaries Ball and Roosevelt were out of the city.

Borisov was accompanied by his interpreter who had been with him on previous meetings at State Department and by three others of his regular group (names not obtained).

Borisov opened conversation by saying he wanted to buy wheat but American traders apparently did not want to sell wheat; that he had received offers on only small quantities and that transportation charges were much above world prices. He wondered if the United States Government could not do something.

Secretary Hodges responded that he did not know why American traders may be offering to sell only small quantities of the proposed 2-1/2 million tons; that it may be due to fact they were waiting for official release of information on shipping guidelines and export licenses which were being made public that day.

Borisov then referred to high American shipping rates; that he understood from his last conversation with Under Secretary Ball that American shipping would be available at reasonable rates in relation to world prices; that this meant shipping at world rates; that Mr. Ball had indicated the U.S. Government would be able to make arrangements about shipping, etc. Borisov referred to copy of Under Secretary Ballʼs letter of November 8th.1

Secretary Hodges responded that he was not present at his conversations with the State Department, and Assistant Secretary Kennedy would have to speak to that.

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Mr. Kennedy replied to Borisov that Mr. Ball had not said American shipping rates would be the same as foreign rates but that on a C and F basis, with no more than 50% American vessels used, the difference between American and foreign rates would narrow, that foreign rates could be expected to go up and any difference in the delivered prices on the total transaction would not be significant. Mr. Kennedy said the “arrangements” by the U.S. Government Mr. Ball referred to meant the publication of the export control bulletin and the shipping rate guidelines. Mr. Kennedy also reminded Borisov that present U.S. wheat price is some 6 cents per bushel below the Canadian price and this meant the U.S. Government was really helping to hold down the “world price” on wheat.

Secretary Hodges said to Borisov he wanted to emphasize that U.S. shipping rates are higher than foreign rates because of higher American wages and costs. Secretary Hodges said, you will have to pay higher rates on shipping in American vessels. There is no way to get around that, and will be no way. The Secretary reminded Borisov that he had told him on the occasion of their first meeting upon arrival in this country that rates on American vessels are higher.

Acting Maritime Administrator Giles pointed out that the U.S. Government had taken important steps to resolve the shipping problem on a fair basis. That initially it was understood and agreed 100% of the wheat would go on American vessels. This had been reduced to 50%. That in addition rate guidelines for the larger vessels had been reduced 20% over the strong objection of shipping industry people. That a spokesman had strongly criticized the Administration earlier this week. (This was Max Harrison, president of the American Maritime Association in speech to the AFL-CIO Convention.) Thus, the U.S. Government had met the Soviet Government more than half way in an effort to resolve the shipping rate matter.

Secretary Hodges again mentioned the current difference between the Canadian and U.S. prices on wheat, with current U.S. price more than $2.00 per ton below the Canadian price on comparable grade.

At various points Borisov commented to effect that the matter of U.S. costs and arrangements on shipping was an internal matter for the U.S., that the Soviet Government could not subsidize U.S. shipping but that the U.S. could do so if it wished.

The conversations ended with Borisov asking the Secretary to do what he could in finding out about the market situation and bringing about the best situation. The Secretary stated he could not set prices, that was done by the buyer and seller but he would do the best he could in finding out why American traders are not offering to sell in large quantities and do what he could generally to be helpful. Borisov responded by saying he did not ask for anymore than the Secretaryʼs best.

The conference ended at approximately 4:50 p.m.

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Further notes by writer of this memorandum

Prior to the conference with Borisov it was learned through Maritime Administration sources that the Soviets had received an offer from Continental of 200,000 tons of wheat at $81.50 per ton, ($15.50 for shipping) and had received an offer from a small trader (Kerr) of 30,000 tons at $79.50 ($13.50 for shipping). Both of these offers were turned down by the Soviets. Borisov did not mention having an offer of $79.50 per ton delivered to Odessa.

On Friday morning Giles exchanged information and views with Under Secretary Murphy, and also reported developments by phone to Under Secretary Roosevelt who was then in Richmond.

There was further exchange of information and views between Secretary Hodges and Under Secretary Murphy Friday about 2:30 p.m. Mr. Murphy had learned from grain sources the Soviets had a contract form prepared and would ask next week for best offers on 650,000 tons of wheat for delivery each month during January, February, March and April. Through Maritime Administration, received information that this week the grain people had stopped asking for shipping quotations, that no one was looking for tonnage for the Soviets because the Soviets had turned down what seemed to be reasonable offers. The shipping broker (by the name of Najor) said he had been in direct contact with the Soviets Thursday evening and they told him they could pay no more than $12.00 for shipping. They also told him they were awaiting further instructions from Moscow. Najor reported he had also heard the Soviets had “put pressure” on the Hungarians for buying American wheat at too high prices.

Secretary Hodges decided Friday afternoon in conversation with Under Secretary Roosevelt (who had just returned) and Giles that he (Secretary Hodges) should not initiate any follow-up contact with Borisov at this time.

Robert E. Giles2
  1. Source: Kennedy Library, National Security Files, Countries Series,USSR, USSR & Satellites Grain Sales. Confidential. Drafted by Giles on November 15.
  2. See footnote 1, Document 371.
  3. Printed from a copy that bears this typed signature.