611.6131/613
Memorandum of Conversation, by the Assistant Chief of the Division of European Affairs (Henderson)
| Participants: | Mr. Constantine A. Oumansky, Ambassador of the Soviet Union; |
| Mr. Pierrepont Moffat, Chief, Division of European Affairs; | |
| Mr. Loy W. Henderson, Assistant Chief, Division of European Affairs. |
It will be recalled that a number of weeks ago during conversations with members of the Department in the office of Mr. Feis, Mr. Oumansky expressed dissatisfaction with the reasons given for the refusal of the Maritime Commission to approve charters of American vessels for trips to Vladivostok, and he also stated that he was not satisfied with the reasons advanced for the refusal of the Navy Department to permit Soviet engineers stationed in the Wright Aeronautical plant to enter certain sections of the plant. He stressed the seriousness of the effect which the attitude of the Maritime Commission and the Navy Department would be sure to have on Soviet-American relations, especially commercial relations, and requested that the Department again approach these two agencies of the American Government on the subject and inform him regarding the outcome of the conversations.
Yesterday afternoon Mr. Oumansky called Mr. Henderson by telephone, and with considerable agitation said that he had just been informed that a large machine tool ordered from an American firm a number of months ago by a Soviet purchasing agency and now ready for delivery had been requisitioned by the Navy Department. He asked for an immediate explanation of the action of the Navy Department and for assurances that the requisitioning of the tool was not the beginning of a new series of discriminations against the Soviet Union. He also informed Mr. Henderson that he would appreciate receiving as soon as possible a report of the conversations of the Department with the Maritime Commission and the Navy Department.
In pursuance of Mr. Oumansky’s request it was arranged for him to see Mr. Moffat today at noon. Mr. Henderson was present during the conversation.
Mr. Moffat opened the conversation by referring to Mr. Oumansky’s request that the Department take up again with the Navy Department the refusal to permit Soviet engineers freely to visit various parts of the Wright Aeronautical plant. Mr. Moffat said that this matter had again been discussed with the Navy Department and that he [Page 300] desired to read a memorandum, a copy of which is attached hereto,14 setting forth the views of that Department. Mr. Moffat thereupon read the memorandum, which had been prepared by the Division of Controls, while Mr. Oumansky made notes.
Following the reading of the memorandum, Mr. Oumansky stated that he found that the detailed reply did not correspond fully to facts. For instance, the Navy Department maintained that temporary visits to the plant were still being approved for representatives of the Soviet Union for the purpose of inspecting engines and other machinery. It was true that since his last conversation with the Department on the subject as an exception and for only a short time several Soviet inspectors had been admitted into the Wright plant, but the general practice was still to exclude them. He wished to point out that the Navy has rendered it impossible for the technical assistance contract in existence between the Wright Aeronautical Corporation and the Soviet Union to be carried out. On the other hand, the engineers of other countries were being allowed the freedom of the plant. China, for instance, has a technical assistance contract with the Wright Aeronautical Corporation, and Chinese engineers stationed at the plant, in accordance with that contract, were being accorded privileges to visit sections of the plant to which the Soviet engineers were being denied access.
Mr. Moffat stated that he could not discuss individual cases. He desired again to point out that the Navy Department had stated that there has been no discrimination. The Ambassador said that he regretted that the situation had shown no improvement since his last conversation on the subject with the Department. There was no change and no improvement. Mr. Moffat added, “and also no discrimination”.
Mr. Moffat then referred to Mr. Oumansky’s request that this Department again take up with the Maritime Commission the matter of the refusal of the Commission on several occasions to approve the charter of American vessels for Vladivostok. Mr. Moffat read to Mr. Oumansky the attached memorandum of the Division of International Communications, dated May 13,15 setting forth the factors which the Maritime Commission considers in passing upon applications for charters. Mr. Oumansky made copious notes while Mr. Moffat was reading.
When Mr. Moffat had finished reading the memorandum Mr. Oumansky stated that he appreciated the detailed answer, that he had no criticism to make of the form of the reply, but he regretted [Page 301] to learn that in spite of his representations in the matter there was no change and no improvement. He was sure that Mr. Moffat would again add “and no discrimination”. He could not, however, agree with Mr. Moffat in this connection. Japan and Vladivostok were in approximately the same geographical area. There were only about 36 hours’ difference in sailing time between them. At least six or seven times since January Japanese importers had been able to obtain charters of American vessels, whereas no charters had been obtainable for Soviet vessels. He had failed to find among the factors listed by the Maritime Commission as those which guided it in its decision, any factor which might account for a failure to approve charters for Vladivostok, at a time when charters for Japanese ports were being approved. He had noticed that in addition to the factors specifically listed the Maritime Commission had referred to “any other matters, which, in the judgment of the Commission, appeared to be pertinent and bear on the sound development of our merchant marine policy”. Perhaps some of these unspecified matters might have influenced the decision of the Commission.
Mr. Oumansky then produced an article clipped from the New York Herald-Tribune of April 24 regarding the refusal of the Maritime Commission to approve charters for Vladivostok. He said that in his opinion this article which frankly admitted discrimination against the Soviet Union stated the truth. He referred in particular to a statement contained in the article to the effect that in addition to refusing to approve charters the Maritime Commission was “cracking down” on other tonnage for the Soviet Union. He charged that the Maritime Commission was making it impossible for Amtorg not only to charter vessels but even to obtain space for cargo destined for Vladivostok in vessels bound for the Far East. As a result of the pressure brought upon American ship owners, Soviet purchasing and shipping agencies had been unable of late to find space for a single ton of merchandise destined for the Soviet Union. Millions of dollars worth of machinery and other merchandise purchased by the Soviet Government in the United States were occupying warehouses in this country at enormous expense to the Soviet Government. He added:
“I wish to thank you again for your detailed answer, but find in it no explanation. I can’t be emphatic enough in stressing the damage to American-Soviet trade which is being caused by the attitude of the Maritime Commission. The situation is worse than it was when I talked with you in Mr. Feis’ office, because we are now unable to obtain not only charters but also cargo space. I must, therefore, reserve my position on this point.”
Mr. Moffat then referred to Mr. Oumansky’s complaint of the previous day that the Navy Department had requisitioned a machine [Page 302] tool ordered by a Soviet purchasing agency from the Consolidated Machine Tool Company of Rochester. To assist the Ambassador in understanding the situation, Mr. Moffat read excerpts from the attached memorandum of May 22 prepared by the Division of Controls.16 Mr. Moffat said that in order to carry out certain extensive defense measures of this Government the Navy Department had found itself obliged to requisition from a number of machine tool manufacturers tools which had been ordered by several foreign governments or foreign concerns. He emphasized the fact that the sole reason for the requisitioning of these tools was that they were indispensable to the production of armaments which were essential to the expanding needs of the national defense of the United States. He assured Mr. Oumansky that the policy of requisitioning would not involve discrimination against any of the foreign purchasers.
When Mr. Moffat had finished his explanation of the situation, Mr. Oumansky remarked sarcastically that this must be terrible news for the British and French. No reply was made to this statement. He therefore repeated it, adding that he assumed that the measures which were being applied to machinery ordered by the Soviet Union in this country would also be applied in an equal measure to the British and French. Mr. Moffat said that the only criterion was our own need for the individual machine tools.
Mr. Oumansky said that he wondered if the American Government understood the full implication of the steps which it was taking. The most important activity of Soviet purchasing agents in this country was the buying of machine tools. A threat to cut off the supplying by the United States to the Soviet Union of American machine tools would be a serious step in the direction of disruption of Soviet-American trade. It should become apparent in the near future whether requisitioning of machinery ordered in this country by the Soviet Union would be on a large scale. It would also become clear in a short time whether similar measures were being applied to machinery and equipment under order by certain belligerent countries. Scores of millions of dollars were involved. The inauguration of such a policy of requisitioning produced an absolute uncertainty about orders placed. Soviet planning organizations had devoted much time and spent large sums of money in preparing to make purchases in this country; commissions had been sent to the United States at considerable expense to make purchases; inspectors had been maintained here in order to examine the machinery which had been ordered; Soviet plans had been built around the contemplated arrival of the machinery in the Soviet Union. The financial losses to the Soviet Union would therefore be much greater than the mere [Page 303] value of the machinery. His remarks were, of course, of a merely preliminary nature since the official answer to the measures which had just been taken by the American Government must come from the Soviet Government. He would like to point out, however, that Lozovsky, the Assistant Commissar for Foreign Affairs, was apparently right when recently he stressed the fact in a conversation with Mr. Steinhardt17 that the measures (discriminating against Soviet-American trade) which were being taken by the American Government must affect that trade in the future as well as in the present.
Mr. Moffat stated that it was his understanding that the Soviet Government would be reimbursed for certain losses resulting from the requisitioning of equipment ordered by it.
Mr. Oumansky said that before telegraphing to his Government he would appreciate learning the extent to which the policy of requisitioning would be carried out—would this policy be carried so far as to render it impossible for the Soviet Government to purchase machinery in this country?
Mr. Moffat replied that so far as he knew the policy was being applied only to those machine tools which were most urgently needed. He was not in a position to state whether or not the policy would be extended to other fields. Mr. Oumansky said that in his own personal opinion it was tragic that in view of the lengthening chain of measures of a discriminatory character against Soviet trade in the United States the relationship between the two greatest neutrals was progressing in the direction of deterioration and ruin. The subject which had been under discussion was no mere routine matter. It merited the most careful consideration of the American Government. He would probably receive instructions in the near future to discuss it personally with the Secretary of State.