Foreign Relations of the United States Diplomatic Papers, 1940, The British Commonwealth, The Soviet Union, The Near East and Africa, Volume III

740.00116 European War 1939/171

Memorandum of Conversation, by the Chief of the Division of European Affairs (Moffat)

[ Washington ,] January 10, 1940.

The Soviet Ambassador⁴¹ called this morning at his own request. He said that he had many observations to make about the course of American-Russian trade relations.⁴² For years he had been working in the direction of building these up, and now for a series of reasons, partly political and partly economic, the direction had been reversed and his work was rapidly disintegrating. For the moment he wished to talk to me about one case which he said he regarded as somewhat in the nature of a test case. This was the Wright Aeronautical Company case.

In the last few days of August, 1939, the Soviet Government had signed with the Wright Aeronautical Company a five-year contract for technical assistance, involving the construction of three types of airplane engines. The contract was signed after six years of relationship between the company and the Soviet authorities, and after the contract had been shown by the company to the authorities in Washington. Under this contract, which provided that several models of the engines should be shipped to Russia and manufactured there, fifteen Soviet engineers were to participate in receiving plans, drafts, and other facilities in the company’s factory. All was going well when about December 27 or 28 Mr. Vaughn, the President of the company, informed Amtorg⁴³ that “by order from Washington” no Soviet engineers would any longer be admitted to the factory, and all passes were revoked. As a result, the execution of the contract has become impossible, and neither the company nor the Soviet authorities see any way in which work can be continued. Substantial sums are involved. The whole thing amounts to a unilateral breaching of contract, with the company referring to orders from Washington as justification for this unilateral breaching of contract. The Ambassador said that he did not know what officials had given this order.

In other factories the situation was not yet quite as bad, but little by little Soviet engineers were being refused permission to visit parts of the factories on the ground that orders were being filled therein for the United States Army and Navy. The Ambassador feared that there was widespread discrimination against Soviet engineers.

I told the Ambassador that I did not know anything specific about the Wright Aeronautical Company case and would try and find out for him. On the other hand, I showed him the two press releases that we had issued on December 15 and December 20 regarding the moral embargo.⁴⁴

The Ambassador said that he had read these releases not once but many times. He pointed out that Soviet Russia was not mentioned therein. I replied that that was true but that it would be difficult to maintain that Russia had not been guilty of unprovoked bombing of civilians in Finland.⁴⁵ Furthermore, the Soviet Government had not answered the President’s request for an assurance against the bombing or machine-gunning of civilians by Soviet Russia during the Finnish hostilities.⁴⁶ The Ambassador said that in the first place Mr. Molotoff⁴⁷ had in effect answered the President, though he seemed somewhat hazy as to the form in which it was done.⁴⁸ However, he claimed that the facts spoke for themselves and that President Kallio of Finland had yesterday only claimed that 200 Finnish civilians had been killed by bombardment from the air despite what he alleged to be constant Soviet bombing of open cities. Actually, the Ambassador said, Russia had limited herself entirely to military objectives and Finland’s own figures were the best proof of the foregoing.

However, quite apart from the foregoing, he thought that paragraph 3 of the press release of December 15⁴⁹ almost amounted to an invitation to the various companies to divest themselves of their contractual obligations with Soviet companies. He felt that this was contrary to announced American policy, which had always upheld the sanctity of contracts and emphasized the necessity of equal treatment to all, without discrimination.

In conclusion, the Ambassador asked three things: first, that I endeavor to find out the facts in the Wright Aeronautical Company case; second, that we explore the possibilities of working out some effective means of continuing work under the contract,—some sort of modus vivendi; third, that we be prepared to discuss with him at a somewhat later date the whole subject of the general trade relations between the two countries, with particular reference to discriminations which he feels in fact are being practiced.

P[ierrepont] M[offat]

41. Konstantin Alexandrovich Umansky.
42. For correspondence regarding trade relations and renewal of the commercial agreement signed on August 6, 1940, see pp. 441 ff.
43. Amtorg Trading Corporation, official purchasing and sales agency of the Soviet Union in the United States.
44. See footnote 5, p. 179.
45. For reports by the American Minister in Finland of Soviet air raids on Helsinki during the first days of Soviet aggression, see Department of State Bulletin, December 2, 1939, p. 610.
46. See telegram No. 255, November 30, 1939, 6 p.m., Foreign Relations, The Soviet Union, 1933–1939, p. 798.
47. Vyacheslav Mikhailovich Molotov, People’s Commissar for Foreign Affairs of the Soviet Union.
48. See Foreign Relations, The Soviet Union, 1933–1939, p. 799, footnote 2b.
49. Department of State Bulletin, December 16, 1939, p. 685.