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RUSSIA

ECONOMIC RELATIONS

CHAPTER I

LOANS TO THE PROVISIONAL GOVERNMENT-SOVIET FINANCIAL

DECREES

Offer of a Credit to the Russian Provisional Government, April 3, 1917— Credit of One Hundred Million Dollars Established for the Purchase of Supplies, May 16, 1917-Special Credit of Seventy-Five Million Dollars Established for the Payment of Forces in Finland, July 17, 1917Additional Credits of One Hundred Million, August 23, 1917, and Fifty Million, October 12, 1917 -Negotiations for Further Credits

File No. 861.51/131

The Secretary of State to the Ambassador in Russia (Francis)

[Telegram]

WASHINGTON, April 3, 1917, 6 p. m. 1295. Secretary of Treasury requests that you confer immediately with Minister of Finance and ascertain if financial aid or credit is desired by the Russian Government, and if so, probable amount and over what period of time it should be available, and as to what is the most effective way in which such aid or credit can be extended. You may discuss tentatively the idea that the United States Government might extend such credit by purchasing for the United States Treasury obligations of the Russian Government bearing the same rate of interest that the Government of the United States would have to pay for the money with which to purchase the obligations of the Russian Government. Ascertain, also, whether or not any credit extended by the United States in the circumstances would be used for the purchase of supplies in the United States, and what amount of credit would likely be required over a period of six months. The fullest expression of views of the Russian Government on the whole question of financial aid or credit by the United States Government is desired. Secretary of Treasury requests reply as soon as possible. LANSING

'The dates of credits are those of the Treasury accounts.

1

File No. 861.51/133

The Ambassador in Russia (Francis) to the Secretary of State

[Telegram]

PETROGRAD, April 6, 1917, 12 p. m.

[Received April 8, 7.45 p. m.]

1161. Your 1295. For Secretary of Treasury:

Had two conferences with Minister of Finance who says loan would be highly appreciated by Council of Ministers and all Russia. Russia would expend entire proceeds in the United States by direct purchases and not through British intervention as heretofore. Estimates requirements at $500,000,000 provided tonnage therefor can be secured. Is understood, he states, loan of $500,000,000 each being made by us to England and France or $1,000,000,000 jointly, and says would be injurious to new government and humiliating to Russia if she were not granted the same terms. After deliberation and conferences with colleagues he suggests that Russia issue 5 per cent bond in dollars to the extent of $500,000,000 and that our Government advance 95 to 97 per cent thereon as required to pay for purchases, such advances, bearing 97 [5] per cent, to be repaid by Russia one year after peace treaty is signed if not sooner liquidated by sale of bonds.

Russia will announce new 5 per cent loan, called liberty loan, in a few days amount of which is unlimited and underwritten to the extent of $3,000,000,000 by Russian bankers who will offer to public at 85 charging no commissions. Such bonds mature in 49 years but reductions of loan will begin by drawings in 1922 and it is expected entire loan will be liquidated in 21 years. Russia's total debt is Rs. 28,788,000,000. Annual interest Rs. 1,474,000,000. Circulation Rs. 10,777,000,000 outstanding against which has gold reserve of Rs. 3,602,000,000 of which Rs. 2,141,000,000 is on special deposit in England, the remainder in Petrograd. Some outstanding bond issues of 1905, 1906, and 1909 specify gold value of rubles in which principal and interest are payable and such bonds are selling much higher than other loans not containing such specifications. Witte in 1897 reduced the gold in the ruble which depreciated its value in our money from almost 75 cents to 512 cents consequently there is some fear that similar action may be taken by this Government or its successor. The Minister of Finance however says there is no possibility thereof. This arrangement would not be affected by any decline in value of ruble from any cause whatever as the bonds and interest thereon would be payable in American dollars in America.

Russia owns boundless forests, immeasurable deposits of ores and oils, and immense areas of tillable lands. This loan in my judgment

would be absolutely safe. Furthermore it is advisable from every viewpoint of policy.

FRANCIS

File No. 861.51/133

The Secretary of State to the Ambassador in Russia (Francis)

[Telegram]

WASHINGTON, April 13, 1917, 5 p. m.

1313. From Secretary of Treasury:

Replying to your cable April 6 please advise Minister Finance that Congress will probably pass a bill shortly authorizing the Secretary Treasury, with approval of President, to extend direct loans to those foreign governments which can make use of financial aid most effectively in fighting the common enemy. There is the friendliest disposition towards Russia whose Government we are most anxious to support and assist in every practicable and effective way. We shall have to consider the situation of each government and the use it can make of financial aid in order to determine where such aid can be most wisely and powerfully employed. Please secure as much information as possible about the determination and ability of the Russian Government to carry on the war, if financial aid is forthcoming, and cable the fullest possible information. Inform Minister Finance that whatever financial aid is extended will be extended by Treasury of the United States direct to the borrowing government. Loans will be made at the same interest rate the Government of the United States has to pay on its own bonds. The rate of interest will probably not exceed 31⁄2 or 4 per cent. Russian obligations would be taken if the loan is made at par, without any discount whatever, and at the rate of interest indicated. The general terms and conditions of the loans will be determined by the Secretary of Treasury with approval of the President. The obligations of the foreign government, to which the loan is made, will be purchased for the Treasury of the United States, and the maturities of such obligations will be jointly agreed upon.

File No. 861.51/134

LANSING

The Ambassador in Russia (Francis) to the Secretary of State

[Telegram]

PETROGRAD, April 20, 1917, 2 p. m.
[Received April 21, 11.35 a. m.]

1204. Answering your 1313, April 13, 5 p. m., received 17th. For Secretary of the Treasury:

Minister of Foreign Affairs is much pleased prospect of securing American loan. Learned following from him: Russia's indebtedness

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to England for supplies furnished previous to 1917 Rs. 5,000,000,000. Estimated requirements by previous Government of His Majesty made to conference of Allies,' held here in February, was 8,000,000 tons but reduced by Lords Milner and Revelstoke and associates to 4,200,000 tons, estimated cost thereof Rs. 2,200,000,000. In addition thereto England agreed to furnish Russia $360,000,000 to pay for purchases in America during 1917, such purchases to be made by Russian commission in America but approved by England. France soon after war began extended credit to Russia of Fr. 125,000,000 monthly but that limit never consumed so that Russia's present indebtedness to France on open account for war supplies is less than Fr. 1,000,000,000. English indebtedness bears 6 per cent, French 5 per cent, and both are due two years after war ends. England and France have both promised to aid Russia in placing bonds to meet this indebtedness.

Plan proposed in my No. 1161 of the 6th was that advances made by us should be repaid one year after treaty of peace signed, which Minister of Finance thinks would probably be two years after war ends.

Minister of Finance appreciates low interest you suggest but desires as long time as we can grant saying would pay advanced rate therefor. Repeats that proceeds of loan be expended in our country. Estimates railroad requirements $220,000,000 for locomotives, cars, rails, and appurtenances, which Russia needs badly.

Says remainder of loan be used for agricultural products and implements and for promoting industrial enterprises in Russia and strengthening country's gold reserve in event of early termination of war.

Told him no aid whatever would be extended if separate peace concluded of which he said that "there is no possibility." Minister desires to hold England to furnishing $360,000,000 mentioned above in addition to what we advance Russia. When details of loan arranged we should suggest safeguards concerning expenditure. More to-morrow.

File No. 861.51/135

FRANCIS

The Ambassador in Russia (Francis) to the Secretary of State

[Telegram]

PETROGRAD, April 21, 1917, 10 p. m.

1212. For the Secretary of the Treasury:

[Received 11 p. m.]

Minister of Finance states total annual interest Rs. 1,400,000,000; total funded debt Rs. 37,000,000,000, of which Rs. 1,000,000,000 ma

1 Cf. vol. I, p. 135.

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