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

861.24/7–847: Telegram

The Secretary of State to the Embassy in the Soviet Union

secret

Washington, July 14, 1947—8 p. m.

1456. Reurtel 2389 July 8.¹

I. Negotiations to date have been primarily of exploratory nature but real bargaining should begin shortly as result of submission by US side of statement main points of proposed settlement, which are set forth immediately following telegram.² It is understood that reaching of agreement on any one issue will be tentative and subject to conclusion of satisfactory comprehensive settlement.

II. Particular interest evidenced by Sovreps is desire purchase merchant vessels provided suitable terms can be arranged. US side has submitted statement of prices for which prewar and war-built vessels, exclusive of three Liberty and four T–2 tankers, held by Sovs, will be sold. Prices on prewar vessels range from minimum $117,000 to maximum $385,000 and on Liberties from minimum floor price, which is $544,000, to $595,000. All valuations on basis V–J Day. Sovreps have accepted Liberty valuations “as basis for negotiation” but have requested reconsideration valuations prewar vessels. USreps have stated all valuations minimum and not subject negotiation.³ Sovreps pressing for inclusion tankers in sale, but US has so far stated wanted these returned. Tanker situation complicated by legal and policy considerations. Question still under consideration by US side. Even if it ultimately proves possible to offer the tankers for sale, US will not do so until Sovs have indicated some willingness to make substantial settlement on other points involved.

III. US side requested information on May 7 as to numbers now held and general locations of some 600-odd craft transferred through Navy and War Depts. These included icebreakers, frigates, subchasers, PTs, LCILs, barges, minesweepers, etc. Sovreps have indicated this information will not be forthcoming. US on June 25 requested return of all these craft but stated would consider sale on basis constructive return of certain of vessels other than icebreakers and frigates. It was emphasized to Sovs that we made no commitment to sell any of these Navy or War Dept vessels and we definitely would not sell certain of them.

IV. Failing submission inventory by Sovreps, US side submitted on May 13 statement estimated inventory articles referred to in para (7) immediately following telegram⁴ showing valuation $2,600,000,000. Only Sov response has been to submit statement showing valuation of $261,000,000 on basis original cost of articles both military and civil received by USSR under lend-lease and “undistributed among consumers” on V–J Day. “Consumers” includes any transferee after original recipient and therefore excludes such items as refineries, machine tools, etc. US side has indicated to Sovs that this not considered as a counter-proposal to our $2,600,000,000 estimate and has told Sovreps we would be glad to consider counter-proposal. Expect this soon.

V. Minutes of meetings and copies documents handed Sovreps being sent you.

Marshall

1. Not printed. Ambassador Smith asked to be informed about the status of the lend-lease settlement negotiations. (861.24/7–847)
2. Not printed; but see the Outline of Main Points of Settlement Proposed by the United States Side, June 25, and footnote 1, p. 696.
3. Secretary of State Marshall further informed the Ambassador in telegram 1477 on July 16, 7 p. m., that at a brief meeting with the Soviet representatives on July 14, they had been told that no reduction in prices was felt to be justifiable. “It was pointed out that only principle upon which reduced prices could be based would be valuation as of present instead of V–J Day, but that this would entail charges for charter hire running to thirty percent and more of V–J Day valuations.” (861.24/7–1647)
4. This is the same as paint number 7 of the Outline of Main Points of Settlement Proposed by the U.S. Side, June 25, p. 699.