740.0011EW/7–1946: Telegram
The Minister in Finland (Hamilton) to the Secretary of State
[Received July 19—6:48 p.m.]
501. For Dunn. When Paris Peace Conference convenes question of Finnish peace treaty may come up in such a way that US delegation will have opportunity or will wish to express, by whatever method may be considered suitable, its views. Although Finnish Govt had not when I saw FonMin Enckell on July 16 received any information on Peace Conference or on draft of Finnish peace treaty except that derived from press and radio, President Paasikivi has returned to Helsinki from summer residence to consider with Cabinet [Page 7] composition Finnish delegation to Peace Conference and Finnish Govt will probably present its comments on draft treaty to Conference if given opportunity. In an open forum for discussion, US delegation may desire to express views. With this in mind, I offer following comment.
It is of course to interest of USA that Finland continue as an independent sovereign country and retain and develop the progressive democratic political economic and social system which has characterized it for number of decades.
At present Finland is bearing burdens consequent on losing the war.15 That is inescapable. It has lost substantial portion of its territory. Problem of finding farms and homes for 400,000 Karelians, over 10 percent Finland’s population, is tremendous. It has heavy reparations load. To this is added burden of turning over to Soviet Govt German assets in Finland valued at about 6½ billion marks. This figure includes 3,700,000,000 marks representing value war supplies furnished Finland by Germany. At some time Soviet Govt is likely to insist that Finland pay this sum, perhaps in goods and possibly at 1938 valuations. If payment were demanded today, I question whether Finnish economy could stand it. I therefore do not expect early demand. It is more likely to be held in reserve for presentation when Finns could net [meet] it though only at continued sacrifices.
There is not conclusive evidence that Finns cannot pay reparations. They have paid to date. But payment places a really heavy burden on country. Soviet extension of payments period to 8 years was in my judgment recognition that burden is heaviest that traffic will bear. I seriously doubt whether they can make payments without additional foreign credits needed principally to purchase essential materials abroad and to bring industry from its present 50–60 percent capacity to full capacity. Food and supply situation in Finland is not good but people are not starving. They want to regain high standard of living which they had in decade before war. If they can see sound prospect of achieving that goal within reasonable period their political economic and social institutions can probably remain healthy. Without such prospect or if additional economic burdens are imposed situation will become fruitful for operation of sinister forces and impairing of democratic ways of life in which US believes.
When Finnish Prime Minister visited Moscow in April he put before Stalin question of possible changes in Finland’s borders and reduction of reparations by 100 million dollars. Stalin said frontiers as fixed in armistice were final but question of reducing reparations [Page 8] while difficult could be considered. Soviet Govt also said it would consider giving Finland transit rights through Saima Canal, historic water outlet for important eastern industrial region, and through Porkala section of Finland’s principal railway to Abo, outlet to Sweden and west.
I believe it would be to USA interest to take sympathetic attitude toward any Finnish request presented to peace conference for reducing its economic burden. This might take form of reducing reparations amount or changing basis of valuation from 1938 to later year when prices were higher. The inclusion by Soviet Govts in German assets payable by Finland of any item such as 3,700,000,000 marks for German war materials constitutes in fact addition to reparations amount. As country which has extended substantial credits to Finland (35 million from Eximbank16 plus refunding of old debt, 15 million for purchase US army surplus stocks and 5 million for purchase cotton) US has legitimate interest in Finnish capacity to repay and in increasing of Finnish obligations since US credits were extended by adding item such as book value of German war materials received by Finland. Finnish transit rights through Saima Canal and Porkala District would probably be helpful, especially during next few years.
I believe it would be to our interest to evidence at Paris Conference for interest in Finnish affairs. We naturally wish to have preserved in Finland equality of commercial opportunity including air rights.
I realize that Finland is only one aspect of vast and complicated picture of treaty making and I offer foregoing for whatever it may be worth to those studying our relations with Finland in their connection with Paris Conference.
Repeated to Paris for Dunn as my 14.
- The Finnish Armistice was signed at Moscow September 19, 1944; for text, see British and Foreign State Papers, vol. cxlv, p. 513.↩
- For documentation on the Export-Import Bank loan to Finland, see vol. vi, pp. 242 ff.↩