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Enclosed I am sending a memorandum of Counselor of Legation Hilger on his conversation with Commissar for Foreign Trade Mikoyan on Jure 17,1939. The fact that Mikoyan received Herr Hilger immediately after his arrival, after an appointment had been made on the day before, shows that Mikoyan is anxious not to lose contact. That Mikoyan would immediately accept the German proposal could hardly be expected considering the mentality of the Soviet Government, which at present is riding a high horse, and its known methods of negotiation. The continually repeated statement of Mikoyan that he suspects a political game behind our offer of negotiation may not be due only to tactical motives but may partly reflect his true opinion. Mikoyan seems to believe that we had deliberately chosen the present time for economic negotiations. This becomes clear from his remark that we expected an advantage from a resumption of the economic negotiations just now.
It is a remarkable nuance that Mikoyan in his answer uses the same formula as the communiqu published on June 16 on the first conversation of Molotov with the British and French Ambassadors and Strang. In this as well as in the other case the result is called "not entirely favorable."
After the Embassy had made an appointment the People's Commissar Mikoyan received me today immediately after my return from Berlin.
I explained to Mikoyan the purpose of my trip and pointed out the unfavorable impression which his last communication of June 8 had left with us. At the same time I asked him to consider the fact of my trip to Berlin and the answer of the German Government which I had brought along as an additional proof of the seriousness of our intentions with respect to the expansion and strengthening of German Soviet economic relations. Thereupon I read to Herr Mikoyan the text of the German answer that had been given to me in Berlin (cf. enclosure). The People's Commissar listened with rapt attention, while Babarin, newly appointed Deputy Commercial Representative in Berlin, who was present at the conversation, busily wrote down every word. The People's Commissar appeared to be visibly impressed with the German answer. Nevertheless, he declared after a short pause that the German answer had disappointed him, since it did not meet his conditions.
On the basis of the instructions received in Berlin on this subject, I then commented on the contents of the German answer in great detail. I stressed particularly the great German concession which was expressed in sending Counselor of Legation Schnurre and in accepting the last Soviet proposal as a basis for negotiations. I reminded the People's Commissar that during the negotiations in February he did not describe the last Soviet proposal as his last word, but as the basis of further negotiations. I further reminded him of his statement in the conversation of June 8, in which he had declared that the Soviet Government would see in the despatch of Herr Schnurre proof of the fact that the German Government was also serious in the matter of "policy" [der "Politik"].
Mikoyan replied that my two last statements corresponded entirely with the facts and that I had repeated his statements correctly. Nevertheless, he still did not believe he had assurance that it was for us not a question of continuing a political game in which the Germans had an interest just at the present moment and from which they expected advantages to them.
To this I replied sharply that I had often enough rejected his statements regarding a political game allegedly played by us and that they would not become more convincing by continuous repetition. I could not understand at all what risk for the Soviet Union the People's Commissar saw in the whole matter, since the Soviet Government was not delegating a special emissary to Berlin, but the German Government was sending Herr Schnurre to Moscow, and, in fact, in agreement with the request expressed by the Soviet Government in January of this year.
Herr Mikoyan replied that this statement by me was also correct, since the Soviet Government at that time had expressed the specific desire to conduct the negotiations in Moscow.
Thereupon I stated to the People's Commissar that I was completely in the dark about what he really wanted from us, after all, and what answer he had expected from the German Government.
Mikoyan replied that he had expected concrete statements as to which points of his last proposal we would and which we would not accept.
I told the People's Commissar that this was clearly apparent in the German answer and my oral comments of today. Therefore I would like to repeat for the third time that, after the existing obstacles had been removed on our part, we definitely expected agreement from the Soviet Government to our wishes and an increase in the Soviet offer of raw materials. All other less important points would have to be left to the negotiations suggested by us. This offer from us represented the maximum concession. If on this basis we did not soon arrive at concrete negotiations, the responsibility would fall alone upon the Soviet Government.
Thereupon, the People's Commissar declared that he unfortunately could not change his opinion that the German answer was "not entirely favorable." Nevertheless, he would present it to his Government and inform me of the result.
The German Government is willing to send Counselor of Legation Schnurre to Moscow with authority to negotiate expansion and strengthening of economic relations between the Reich and Soviet Russia and, if a common basis is found, to come to an agreement. From the fact of sending a German plenipotentiary as negotiator we request the Soviet Government to conclude that the German Government expects and desires a positive conclusion on a widened basis. We would have to refuse acceptance in advance of the Soviet counterproposal of February 1939, however, since this counterproposal itself is to be the basis of the negotiations. The Soviet Government, however, should note that in the meanwhile we have endeavored to remove obstacles which in February still appeared to us as insurmountable. However, we expect that the Soviet Government, too, will reexamine Soviet raw material deliveries in the light of German desires in order to establish a balance of give-and-take under the future treaty.