Foreign Relations of the United States, 1947, Eastern Europe; The Soviet Union, Volume IV

861.24/6–2547

Outline of Main Points of Settlement Proposed by the United States Side¹

confidential

[Washington,] June 25, 1947.

The U.S. side has during the course of the settlement discussions to date stated to the Soviet representatives the main points which it regards as necessary to be covered by the settlement agreement. The purpose of this outline is to summarize these points in a single paper, and to add to the previous statements where it is possible at this time to do so. As both sides have understood from the outset, the reaching of agreement upon any one issue is tentative and subject to the conclusion of a satisfactory comprehensive settlement. As soon as general agreement upon the essentials of the settlement has been achieved, a draft of a settlement agreement will be presented by the U.S. side. This outline is of a summary nature and it is not intended that it shall be followed verbatim in the settlement agreement.

The following are the main points of the settlement now proposed by the U.S. side:

1. The settlement shall be complete and final as to the obligations of either Government to the other under the Master Lend-Lease Agreement of June 11, 1942.

It has been understood that the negotiations would deal only with matters under the Master Lend-Lease Agreement. It is considered desirable that the settlement agreement be final and complete on that score.

2. No payment will be asked for lend-lease articles lost, destroyed, or consumed in the common war effort.

To the extent that lend-lease articles furnished to the U.S.S.R. by the U.S. were used up, lost or destroyed in the course of the war, the U.S. wishes to consider such articles as a contribution to the common cause. Therefore, the U.S. does not propose to make any charge against the U.S.S.R. for the major part of the more than $11,000,000,000 of aid extended to the U.S.S.R.

The U.S. side assumes that to the extent they were used up, lost or destroyed in the course of the war, the U.S.S.R. does not propose to make any charge against the U.S. for articles transferred to the U.S. by the U.S.S.R. as reciprocal aid.

3. U.S. Navy and War Department vessels transferred to the U.S.S.R. on lend-lease shall be returned to the U.S. at ports to be designated by the U.S., except for certain vessels in certain categories which the U.S. will agree to sell (after their constructive return) if a satisfactory Soviet offer is received.

On May 7, 1947 the U.S. side presented to the U.S.S.R. side lists (designated as Lists Nos. 2 and 3) of Navy Department and War Department vessels which had been transferred to the U.S.S.R. under lend-lease. So that orderly arrangements could be made for the return of these vessels, the U.S. side requested the U.S.S.R. to provide information as to the number and general location of vessels in each category listed which remained in the possession or control of the Government of the U.S.S.R. on September 2, 1945. The U.S.S.R. side has not as yet provided such information. The U.S. side requests that all of these vessels be returned to the United States in accordance with the terms of the Agreement of June 11, 1942. However, if the Soviet Government desires to purchase some of these vessels, the United States will consider offers for the purchase of a certain number of the vessels other than ice-breakers and frigates. The return of such of these vessels as may be agreed upon for sale need only be of a constructive nature so that they will not have to be returned physically to United States ports.

4. The two hundred and sixty (260) 40 mm anti-aircraft gun assemblies (single) transferred by the U.S. Navy Department under the Agreement of June 11, 1942 shall be returned by the U.S.S.R. to delivery points to be designated by the U.S. Government.

The return of these guns is requested in accordance with the terms of the Agreement of June 11, 1942.

5. The lend-lease articles of combat types set forth on List 4 and now held by the U.S.S.R. may be retained by the U.S.S.R. without payment therefor to the U.S., but the U.S. shall continue to have the right to call upon the U.S.S.R. to return all or part of such articles and the U.S.S.R. shall agree to return such of said articles held by it as and when it shall be requested to do so; the U.S.S.R. shall make no retransfers of such articles held by it without the prior consent of the U.S. Government.

On May 7, 1947 the U.S. side requested the U.S.S.R. representatives to provide information concerning a list of lend-lease articles (designated as List 4). The U.S.S.R. side was requested to state the quantities of such lend-lease articles held on September 2, 1945, and the quantities now held. The United States does not intend to exercise generally its right under the Agreement of June 11, 1942 to require the return to the United States of such of the items in List 4 as are now held by the U.S.S.R., nor does the United States propose to charge the U.S.S.R. for the List 4 items retained by the U.S.S.R. However, the United States will expect the Soviet Government to agree in the settlement agreement to return any articles of these types whenever requested by the United States. The United States will also expect the Soviet Government to agree not to retransfer to other governments or their nationals any List 4 items without the prior consent of the United States.

6. With the exceptions indicated below, the merchant vessels held by the U.S.S.R. on September 2, 1945 shall either be returned to the U.S. or the U.S.S.R. shall make payment therefor on terms to be agreed.

With the exception of the steamers White Clover, Charles Gordon Curtis and John Langdon, the Liberty tankers and the T–2 tankers, the U.S. is prepared to transfer to the U.S.S.R. title to the merchant vessels held by it on September 2, 1945. The U.S. requests the return to ports to be designated by it of the Steamer White Clover² and the three Liberty tankers and four T–2 tankers held by the U.S.S.R. The steamers Charles Gordon Curtis and John Lang don are considered to be outside the purview of these lend-lease negotiations.³

The U.S. side will submit separately to the Soviet representatives a list of prices covering the vessels offered for sale. The U.S. will request cash for the pre-war built vessels and the terms of sale of the war-built vessels shall be similar to those provided for in the Ship Sales Act of 1946.

7. With the exceptions indicated below the U.S. will transfer to the U.S.S.R. title to lend-lease articles under U.S.S.R. control on September 2, 1945 or subsequently received by it in consideration for the payment by the U.S.S.R. to the U.S. of the agreed fair depreciated value of such articles.

On May 13, 1947 the U.S. side handed to the Soviet representatives a memorandum concerning estimated inventory of lend-lease articles in possession of the U.S.S.R. at the termination of hostilities against Japan. The memorandum also set forth the principles which governed the determination of the estimates. The exceptions referred to in the heading to point 7 and stated in the memorandum of May 13 are:

(a) Articles which the U.S. considers to have been lost, destroyed or consumed during the war and prior to September 2, 1945 (being the articles referred to under point 2 above);

(b) Vessels in Lists 1, 2 and 3 handed to the Soviet Delegation on May 7 (being vessels referred to under points 3 and 6 above);

(c) Items of a type appearing in List 4 handed to the Soviet Delegation on May 7 (being the articles referred to under points 4 and 5 above);

(d) Articles transferred under the cash payment terms of Mr. Crowley’s letter to General Rudenko of May 30, 1945; and

(e) Articles transferred under the terms of the agreement of October 15, 1945.

Subsequent to May 13, the U.S. side has explained in detail to the Soviet representatives various factors which were taken into consideration in the preparation of the estimates and on June 12 [11], 1947, the U.S. side delivered to the Soviet representatives a supplemental memorandum giving further details.⁴

On June 12 [11], 1947 the Soviet side handed to the U.S. representatives a memorandum setting forth a Soviet, statement concerning lend-lease articles undistributed as of September 2, 1945,⁵ and the Soviet representatives explained that the Soviet statement was not intended to include lend-lease articles in the Soviet Union if they had been transferred to the using agency. Thus, the statement prepared by the Soviet Delegation covers only a small portion of the total lend-lease articles held in the Soviet Union on September 2, 1945 for which the U.S. requests payment.

It is assumed that the U.S.S.R. will transfer to the U.S. for a consideration to be agreed upon title to any articles transferred by the U.S.S.R. to the U.S. as reciprocal aid and remaining under U.S. control on September 2, 1945.

8. The provisions of Article IV of the Agreement of June 11, 1942 will continue in effect and the U.S.S.R. will take necessary action to fulfill such provisions concerning patent rights, including either the making of satisfactory arrangements with the owners of patents on oil refinery processes or the making of a lump-sum payment to the U.S. to cover the patent owners’ interest.

The U.S. will expect the U.S.S.R. to make satisfactory arrangements with all U.S. firms concerning licenses for the continuing use of processes connected with the oil refineries transferred under the agreement of June 11, 1942. To the extent that such arrangements cannot be made prior to the signing of the settlement agreement, the U.S. will expect the U.S.S.R. to make payment to the U.S. at that time in amounts sufficient to discharge any such unsatisfied obligations. Any portion of the amount paid by the U.S.S.R. for this purpose which shall not be required to fully satisfy the obligations to the patent holders as finally determined will be returned to the U.S.S.R. The U.S. will expect the U.S.S.R. to agree to continue in effect after the settlement the provisions of Article IV of the Agreement of June 11, 1942 to provide for such claims of patent holders as may not have been presented at that time.

9. The U.S.S.R. will pay to the U.S. a sum to be agreed upon in settlement of certain specific claims arising from and related to lend-lease presented to the U.S.S.R. representatives during the negotiations.

The U.S. side has presented to the U.S.S.R. two claims for which it will expect payment in the settlement:

(1) Ocean freight charges on materials shipped from the U.S.S.R. to the U.S. on U.S. operated vessels for delivery to the Defense Supplies Corporation under contract dated September 12, 1942 between Defense Supplies Corporation and Amtorg Trading Corporation. This contract called for delivery by the U.S.S.R. f.o.b. U.S. ports. The aggregate amount of the charges is $6,915,465. For convenience at the time, the charges for such shipments were paid by the U.S. from lend-lease funds.

(2) The U.S. side has requested a statement from the U.S.S.R. side of the proceeds received by the U.S.S.R. and the premiums paid by the U.S.S.R. in connection with insurance of lend-lease cargoes in 1941 and 1942. The U.S.S.R. has already made payment to the U.S. of $7,000,000. on this account. The U.S. will expect to receive in the settlement any proceeds over and above premiums paid which are in excess of the $7,000,000. already paid.

The U.S. reserves the right to present to the U.S.S.R. before the conclusion of a final settlement any other claims arising from lend-lease which may appear proper for inclusion specifically in the settlement. It is proposed that all claims arising out of lend-lease transactions or under the agreement of June 11, 1942, not specifically provided for in the settlement will be waived by the two Governments in the settlement agreement.

10. Suitable agreement shall be reached on matters covered by Article VII of the Agreement of June 11, 1942 and such agreement shall be incorporated in the settlement agreement now to be concluded.

11. Provision will be made in the settlement agreement granting to the U.S. the right to obtain from the U.S.S.R.: (a) local currency within stated limits for use by the U.S. Government in meeting its expenditures in the U.S.S.R. and (b) the long-term use of properties to be agreed upon for official and other agreed activities of the U.S. Government in the U.S.S.R., the value of such local currency and properties to be credited against the total dollar obligation of the U.S.S.R. under the settlement agreement.⁶

It is felt that this arrangement provides a valuable means for the U.S.S.R. to discharge its obligation to the U.S. to the extent of such expenditures without the necessity of acquiring dollar exchange, and at the same time provides for the local currency and housing needs of the U.S.

1. This document was handed to the Delegation of the Soviet Union at the 7th meeting of the Combined Working Group on June 25. The 11 main points of settlement as here proposed to the Soviet representatives were sent without comments in telegram 1457 to Moscow on July 14, 8 p. m. (861.24/7–1447).
2. The White Clover (renamed the Lev Tolstoy) was a pre-war built dry cargo vessel which had been requisitioned from the Italian merchant fleet and had been transferred to the Soviet Union on April 30, 1945. It could not be sold because the United States Government was committed to return it to Italy. In subsequent negotiations the Soviet Union agreed to return the ship to the United States at the port of Yokohama, and it was received early in 1948, although not in good condition.
3. The Charles Gordon Curtis (renamed the Sergey Kirov) and the John Lang don (renamed the Tbilisi) were war-built, Liberty dry cargo ships which were transferred to the Soviet Union on April 25 and April 5, 1944, respectively. These two vessels were not lend-leased, but had been transferred in connection with an understanding relating to the distribution and employment of certain categories of the Italian fleet and certain tonnage of the Italian merchant marine.
4. See the Supplementary Memorandum Concerning Estimated Inventory dated June 10, and footnote 1, p. 692.
5. See the Memorandum by the Soviet Delegation Concerning Inventory dated June 10, and footnote 1, p. 692.
6. In a memorandum dated June 2, requesting the views of the Legal Division, Mr. Labouisse had written: “It has been the intention of the Department to embody in the contemplated Lend-Lease settlement with the USSR a provision whereby the Soviet Government would construct a new embassy, and a student hostel in Moscow for the housing of United States citizen students. The cost of the construction of these buildings would be credited to the Soviet Union at a rate of exchange to be provided for in the settlement.” (861.24/6–247)