861.24/12–948
The Ambassador of the Soviet Union (Panyushkin) to the Acting Secretary of State
No. 208
Translation
Sir: With reference to the notes of the Department of State of September 3 and of October 7 and 12, 1948 on the question of the settlement of lend-lease accounts I have the honor upon instructions of the Government of the Union of Soviet Socialist Republics to communicate the following:
The Embassy’s note of June 25, 1948 indicated that the Soviet Government, desirous of facilitating the reaching of an understanding, does not propose to enter into further discussion of the principles which should serve as a basis for settlement of lend-lease accounts in view of the necessity for proceeding with discussion of concrete proposals. With this aim the Soviet Government introduced in the Embassy’s reference note a series of such proposals which, in the event of their adoption, would have assured the successful conclusion of lend-lease negotiations on conditions mutually advantageous to both parties. It was supposed that the proposals introduced would serve as a basis for concrete negotiations begun in due course on the initiative of the Government of the United States of America. However, rather than continue negotiations the Government of the USA preferred to reply with a note which was not indicative of a desire on its part to achieve an agreement acceptable to both parties.
The Soviet Government deems that the proposals set forth in the note of the Department of State of September 3, 1948, in particular, the proposals concerning the global sum and the conditions for its payment by the Soviet Government for articles of a civilian nature, delivered under lend-lease, that remained unconsumed at the war’s end, cannot serve as a basis for agreement, since they contradict the principles of the Agreement of June 11, 1942, including the conditions of Article VI of this Agreement, which provide that final lend-lease settlement must take into account the benefits derived by the Soviet Union from the USA, as well as the benefits which the USA derived from the Soviet Union, whose contribution to the conduct of the war and the achievement of victory over the common enemy was exceptionally great. The Soviet Government deems exorbitant the global sum of $1,300. million designated in the note of the Department of State of December [September] 3 of this year, which the Government of the USA proposes to recognize as subject for payment by the Soviet Government for articles of a civilian nature delivered under lend-lease [Page 1021] which remained unconsumed at the war’s end. The demand for payment of the above-mentioned sum is unjustified not only from the standpoint of the contribution of the Soviet Union to the conduct of the war and of the benefits which the United States derived therefrom, but also in view of the agreements concerning the settlement of lend-lease accounts concluded by the Government of the USA with other countries, including Great Britain.
The deliveries effected by the USA to the Soviet Union under lend-lease were no more than half as large as the deliveries to Great Britain under lend-lease; moreover the sum of $1,300. million designated by the Government of the USA for the remaining unconsumed lend-lease articles delivered to the Soviet Union is almost three times as great as the sum paid by Great Britain to the United States in this connection. Particular evidence of this are the data of the Supplementary Report of the Special Committee of the Senate of the USA of March 22, 1946 (No. 110, Part 5) from which it is evident that American deliveries under lend-lease to Great Britain, excluding reverse lend-lease, totalled the sum of $21,500. million, whereas the sum which Great Britain is paying under agreement with the USA as compensation for all remaining lend-lease deliveries comprises a total of $472. million.1
Inasmuch as the benefits derived by the United States as a result of the war effort of the Soviet Union immeasurably exceed the benefits derived by the Soviet Union in the form of lend-lease articles, and also inasmuch as the sacrifices and losses of the Soviet Union in the struggle against the common enemy were exceptionally great, the Soviet Government has reason to consider that the sum of $170. million proposed in the Embassy’s note of June 25 of this year for lend-lease articles delivered to the Soviet Union and which remained unconsumed at the war’s end constitutes just compensation. Nevertheless the Soviet Government expresses its readiness to increase the global sum to $200. million in conformity with existing precedents in the settlement of lend-lease accounts.
The Soviet Government deems that the considerations set forth above also relate to the terms of settlement for lend-lease deliveries. In introducing the proposal for the payment of the above-mentioned sum in 50 equal annual installments, beginning 5 years after the conclusion of [Page 1022] the agreement for the settlement of the lend-lease account with an annual interest rate of 2% and with commencement of the accrual of the interest on the amount of the debt also 5 years after the conclusion of the agreement, the Soviet Government has hereby taken into consideration the terms of the above-mentioned agreement between the United States and Great Britain.
In view of the circumstances set forth above, the Government of the USSR has the right to expect that the conditions of the terms of settlement proposed to it will not in any case be worse than the terms of settlement with any other country which has received lend-lease aid from the USA.
As regards the proposal of the Government of the USA for the inclusion in the agreement on the settlement of lend-lease accounts of a condition providing for the right of the Government of the USA to demand of the Soviet Union the return of remaining military articles delivered under lend-lease which may remain on hand in the Soviet Union after the conclusion of the agreement, the Soviet Government adheres to the position set forth in the Embassy’s note of June 25 of this year, considering that the inclusion of such a provision in the agreement would only impede final settlement of lend-lease accounts and would contradict the very purpose of the negotiations being conducted at this time.
It also seems necessary to call attention to the lack of basis of the broad interpretation of the rights of the USA under Article V of the Agreement of June 11, 1942 with regard to the return of lend-lease articles, which is contained in the note of the Government of the USA of September 3 of this year. This note indicates in connection with the question of naval vessels that allegedly: “the return of articles under the terms of Article V of the Master Agreement of June 11, 1942 is not dependent upon the use of such articles to be made by the Government of the United States.”
The Soviet Government cannot concur in such an assertion as it does not accord with the conditions of the Agreement of June 11, 1942 providing for the safeguarding of the interests of both parties.
As regards the question of the 28 frigates, the Soviet Government expresses its agreement to return them to the Government of the USA, on the understanding that the procedure and dates for the return of these vessels shall be agreed upon by experts of both parties. In this connection the Soviet Government has in mind that no discrimination toward the Soviet Union will be permitted in connection with the subsequent disposition of these vessels on the part of the United States.
In connection with the unwillingness of the Government of the USA to lease to the Soviet Government the three icebreakers transferred [Page 1023] under lend-lease, the Soviet Government is agreed that experts of both parties should also discuss the question of dates and procedure for the return of these vessels to the United States.
In view of the proposals contained in the notes of the Department of State of September 3 and October 7, 1948, as regards the remaining naval vessels transferred under lend-lease to the Soviet Union, the Soviet Government would deem it expedient that Soviet and American experts discuss both the terms of sale to the Soviet Union of a certain number of these vessels, as well as the procedure and dates for the return to the United States of the balance of these vessels. In this connection the Soviet Government in compliance with the request of the Government of the USA, expressed in its note of September 3, 1948, will provide to the Government of the USA information mentioned, as well as information concerning the vessels destroyed. At the same time the Soviet side expresses its agreement with the proposal of the Government of the USA for the destruction of naval vessels technically unfit for use, and complete up-to-date information will be made available concerning them.
The Soviet Government in the note of June 25 of this year already stated its desire to acquire for $7 million merchant vessels of pre-war construction and tug boats, including in this sum compensation for vessels of pre-war construction lost after March 18, 1946. As the Government of the USA is doubtless aware, the vessels in question are from 28 to 46 years old and most of them are in unsatisfactory technical condition. However, for the purpose of most rapidly concluding the negotiations, the Soviet Government is ready to increase this sum to $13 million, having in mind that experts of both parties should come to an understanding regarding the conclusion of a special agreement on the sale of merchant vessels to the Soviet Union.
As regards the question of payment of compensation to American firms for the utilization of their patents for oil refining processes transferred to the Soviet Union during the war, in accordance with an understanding reached earlier on the settlement of this question by means of direct negotiations with the firms holding the patents, the Soviet Government Purchasing Commission in the USA has been carrying on for some time appropriate negotiations with three of the seven interested firms. The Soviet Government Purchasing Commission is also ready to carry on negotiations with the other interested firms. The Government of the USSR therefore sees no reason to change the agreed procedure for the settlement of this question.
Accept [etc.]
- U.S. Congress, Senate, Investigation of the National Defense Program. Additional Report of the Special Committee Investigating the National Defense Program. Report No. 110 (79th Cong., 2d sess.), Part 5 (March 22, 1946): Investigations Overseas—Surplus Property Abroad (Washington, Government Printing Office, 1946). See particularly the section entitled: “The Bulk Sale of Surpluses to the United Kingdom and the Lend-Lease Settlement,” pp. 23–33. Here the total of consumed American lend lease deliveries to the United Kingdom, excluding reverse lend lease, is given as $20½ billion on pp. 23, 31, and 33.↩