800.51W89 U.S.S.R./27: Telegram
The Secretary of State to the Ambassador in the Soviet Union (Bullitt)
31. Your 33, April 2, 8 p.m. will be brought to the President’s attention on his return here next week. Meanwhile I regard the proposal as wholly unacceptable. It substitutes for a loan which the [Page 77] President heretofore declined to consider, a credit which is the equivalent of a loan. It may be assumed that the Export-Import Bank cannot extend such a credit and that Congress would not do so. Were the credit extended and the other details of the proposal approved, the indebtedness to our Government at the end of the 20-year period would apparently be about twice what it was at the beginning of the period. The proposal is so unreasonable not to say fantastic as to make unnecessary comment on the inadequacy of the total amount of indebtedness it contemplates and the inadequacy of the interest rates. Mr. Litvinoff probably knew when he was in Washington how the proceeds of the Kerensky loan were expended, but even if what he states were true the rights of our Government as a creditor would not be weakened, since it incurred no obligation to control the expenditure.
In talking with the Soviet Ambassador on March 261 told him that the President and others who participated in the conversations with Mr. Litvinoff were greatly surprised and keenly disappointed to learn that Mr. Litvinoff now seems to have a version of the debt understanding entered into on his visit here completely different from anything the American officials thought they were discussing and certainly different from anything they had in mind. I informed him that our Government could not for a moment justify to claimants in this country a settlement for a specific amount payable in 20 years, without interest. I finally suggested that in view of Mr. Litvinoff’s new and unexpected contentions it would perhaps be best to keep all commercial and financial relations in suspense until the situation is clarified.
Yesterday the House of Representatives passed the Johnson Bill in precisely the form it had previously passed the Senate. There was no vote against the Bill in the Senate and there was no roll call in the House, where there was little or no opposition. There was read to the House the resolution adopted by the Export-Import Bank as follows, and the House relied on this assurance in passing the Bill [:] “It is the sense of the board of trustees of this Corporation that no actual credit transactions with the Soviet Government shall be undertaken unless and until that government shall submit to the President of the United States an acceptable agreement respecting the payment of the Russian indebtedness to the Government of the United States and its nationals.”
Of course you understand that the Bill will not prevent cash purchases in the United States by the Amtorg, but will prevent the purchase or sale of obligations given for purchases.