218 Moore to Keane

Cablegram V5737 WASHINGTON, 25 August 1945, 6.21 p.m.

IMMEDIATE MOST SECRET

1. Further to my 5682 [1], the termination of lend lease. I discussed this matter with a high official of Foreign Economic Administration and advised him of Australian hostility to the out of hand manner of terminating lend lease. I also indicated that as the result, there was now a strong possibility of our terminating reciprocal aid on V-J Day [2] despite the fact that, prior to F.E.A.'s peremptory action, the Australian Government appeared to be favourably disposed towards the continuation of reciprocal lend lease.

2. The F.E.A. official stated that he also disagreed with the arbitrary manner in which the lend lease decision had been taken and conveyed to the beneficiary countries. He felt, however, that we should not lose sight of the following extenuating circumstances:-

(a) As manifested in recent congressional and legislative action:

Congress and the public were opposed to the continuation of lend lease and desired the earliest possible termination. Roosevelt might have forced more favourable arrangements but the new President is unwilling and probably unable to oppose Congress on this point. We must remember that when Truman was Vice-President, he cast the deciding vote in the Senate on the extension of lend lease and at that time pledged that he would lend all his support to the earliest possible termination of lend lease following the end of the war.

(b) Despite repeated requests by F.E.A. since VE Day to consider the lend lease problems which would arise on VJ Day the British had avoided discussions aimed at mutual agreement on the proposed procedures. In view of this unrealistic attitude, Crowley felt very little good would result at this stage from detailed discussions in which the British would undoubtedly adopt similar stalling tactics.

(c) The Secretary of State and Crowley felt that the present arrangements giving the appearance of prompt lend lease termination in accordance with congressional desires should establish goodwill in Congress for the consideration of the solution to the difficulties confronting long term trading and financial relationships between the United States and the British Empire. While the solution of these problems is longer term consideration, Byrnes felt that the continuation of lend lease in the face of acute opposition might sour Congress and imperil future discussions on matters of much greater importance to the British Empire.

(d) The rapid termination of lend lease will also establish background favourable to sympathetic administrative action by F.E.A. in dealing with such matters as inventories and lend lease discounts. By adopting generous approach to such administrative action F.E.A. may be able to render benefit to recipient countries which will be worth far more than the mere continuation of lend lease for a month or two. As [evidence] of this beneficent attitude of F.E.A., official cited Crowley's decision to restrict the definition of inventory to goods in Government stores. He also indicated that inventory stockpiles may be assessed on especially favourable basis as regards special discounts, etc.

(e) The F.E.A. official furthermore claimed that extremely favourable consideration has been given to lend lease countries in extending opportunity for purchase of lend lease procured materials under 3C section on the basis of thirty year repayment at the low interest rate of 2 3/8%. This offer would apply only to Government purchase of lend lease material in inventory or now on contract and subsequent to VJ Day procurement through governmental or commercial channels could probably be financed by export-import bank only at considerably higher interest rates and on the basis of much shorter repayment time.

(f) Further special consideration was being given to shipping freights under lend lease. The official anticipated that F.E.A.

would continue payment of dollar freights under lend lease for a period of thirty days after VJ Day even though the materials carried will not be eligible for lend lease.

3. In reply to a query from me, the F.E.A. official advised that they had not yet determined the position of non-lend lease cost components included in the value of lend lease inventories repossessed by the United States Government. I also raised the question whether subsidiary operational stockpiles should be included in the inventory or whether only material in base stores should be taken into account. The official stated this question had not previously been raised and therefore, no policy had been established.

4. I again protested on the outofhand treatment that had been adopted and suggested that the wisest course for F.E.A. in the future would be the maintenance of the closest possible consultation on difficult matters of this kind. The F.E.A.

official signified agreement and stated as his opinion that this course would be followed in the future.

5. You are, no doubt, aware that the United Kingdom Government is sending Keynes over within the next few days for full discussion of the financial problems arising from lend lease termination. We will of course, keep in close touch and advise you of all important developments. [3]

1 Dispatched 22 August. On file AA : A1066, ER45/1/6. It conveyed the text of a letter from the U.S. Foreign Economic Administrator, Leo T. Crowley, suggesting principles for discussions in negotiations concerning the termination of Lend Lease.

2 2 September. Following advice reported in Document 209 Sir Henry Self, Deputy Chairman, British Supply Council in Washington, persuaded Crowley that Lend-Lease should continue until official VJ Day. See Moore's cablegram V5682, pt. II, dispatched 22 August, on the file cited in note 1.

3 The Commonwealth Govt terminated the provision under reciprocal aid of supplies and services to U.S. forces after 30 September.

Supplies delivered between 2 September (the date on which the U.K.

Govt terminated reciprocal aid) and 30 September were added to the reciprocal Lend-Lease inventory. See cablegram 1390, dispatched 30 September, from the External Affairs Dept to Eggleston. On the file cited in note 1.

[AA : A1066, ER45/1/6]