LAURENCE A. STEMHARDT:
NEW DEAL DEPLG‘MAT,

{931-45

Times-ls for “to Dog?“ of DE. D.
MECHIGAN STATE UNWEESITY

Ralph Robert Stackman
1967

1am

This is to certify that the

thesis entitled

lAUREHCE A. STEINHARDT:
New DEAL DIPLOMAT,
1933-h5

presented by

LALF’H P. BERT STACKDIAN

has been accepted towards fulfillment
of the requirements for

Ph.D. degree in HISTORY

Major professor

JUly ID, 1967
Date

 

0-169

 

 

LAURENCE A. STEINHARDT: NEW DEAL DIPLOMAT.

1933-45

By Ralph Robert Stackman

Laurence Adolph Steinhardt (1892-1950) was one of
the early supporters of Franklin D. Roosevelt's presidential
bid in 1932. His support (mainly financial) was rewarded
with various diplomatic appointments. The only political
appointee to serve in the foreign service throughout Roose-
velt's more than twelve years in office. the New York City
attorney received diplomatic assignments to Sweden. Peru.
the Soviet Union. and Turkey.

Although it contains a brief biographical sketch of
Steinhardt. the study is intended as an investigation of New
Deal diplomacy. The Steinhardt Papers in the Library of Con-
gress. Washington. D. C.. was the writer's major source. Both
published and unpublished documents from the Department of
State were used extensively.

As Minister to Sweden. Steinhardt negotiated one of
the first reciprocal trade agreements of the New Deal's

l

Ralph Robert Stackman

trade program. Negotiations emphasized the Administration's
determination to include the most-favored-nation principle
in the treaty. Although not actively involved in the liti-
gation surrounding the Kreuger-Toll proceedings. Steinhardt
was interested in seeing that American stock and bondholders
were treated equitably. Brought to successful conclusion
was the legally entangled lawsuit between the American firm.
Dexter & Carpenter against the Swedish Railways.

When in 1938 Steinhardt was transferred to the Amer-
ican Embassy in Peru. the Good Neighbor Policy was already
in transition. Originally conceived with economic overtones.
the policy in the late 1930's emphasized hemispheric solidar-
ity. Peru. under the dictatorship of Oscar Benavides. was a
hotbed of fascist activity. Nevertheless. Steinhardt success-
fully negotiated the assignment of an American Naval Mission
to Peru and outbid the Italians in the sale of airplanes to
the Peruvian Government. The most significant event during
Steinhardt's tour of duty in Peru was the Eighth Pan—American
Conference held in Lima. December 9-24. 1938. Although a
delegate. Steinhardt's role was completely overshadowed by
that played by Secretary of State Cordell Hull.

2

Ralph Robert Stackman

Appointed Ambassador to the Soviet Union. Steinhardt
arrived in Moscow in August. 1939. immediately preceding the
signing of the Nazi-Soviet Pact. Convinced that the Soviets
signed the Pact as more than an expediency. Steinhardt fa-
vored treating the Russians as belligerents in the European
war. Unlike some Kremlinologists. the New Deal diplomat
argued that Soviet territorial expansion into Finland. East-
ern Europe. and the Balkans was imperialistic rather than
defensive vis-a-vis Germany.

As the European war progressed. the Allied position
became increasingly desperate. In view of the situation.
some British policymakers advocated appeasing the Russians
in an effort to drive a wedge between the Soviets and Germans.
Steinhardt violently disapproved this policy and advocated
that the United States adhere to reciprocal relations with
the Soviet Union. Referred to as the tit—for-tat policy.
Steinhardt suggested that no favor be accorded the Soviets
unless returned in kind. that every discourtesy be returned
with similar treatment. Still in Moscow when the Germans
attacked Russia. the Ambassador expected neither Moscow nor
Leningrad to long withstand Nazi assault. Even so. he main-

tained that the Soviets would retreat and fight from the
3

Ralph Robert Stackman

Urals if necessary. He suggested that Kremlin leaders would
capitulate under no circumstances.
Steinhardt served as wartime ambassador to Turkey.
He was charged in Ankara with the tasks of keeping that na—
tion neutral. ameliorating Russo-Turkish relations. and keep-
ing vital Turkish economic material (chiefly chromium) from
reaching the Axis. Through preclusive and preemptive pur-
chasing programs. the war in Turkey was largely fought on
the economic battleground. Steinhardt resisted Russo—British
efforts to force Turkey into the war as an active belliger—
ent. He contended that the ill—equipped Turks could not
enter the war without serious domestic economic dislocation.
As a political appointee. Steinhardt served credit-

ably the nation and the New Deal.

LAURENCE A. STEINHARDT:
NEW DEAL DIPLOMAT.

1933-45

BY

Ralph Robert Stackman

A THESIS

Submitted to
Michigan State University
in partial fulfillment of the requirements
for the degree of

DOCTOR OF PHILOSOPHY

Department of History

1967

PREFACE

New Deal diplomacy falls neatly into three contrast-
ing periods. Dominating the first was the Great Depression.
The Roosevelt Administration. geared to solving domestic
problems, relied chiefly on lower tariffs and trade recipro-
city. While foreign affairs in the early New Deal took a
place subordinate to economic and social reform, a few Amer-
icans. among whom.was President Franklin D. Roosevelt, alerted
themselves to the holocaust that was preparing in Europe.

The task of awakening the country to the dangers of the
Eur0pean dictators and, thus, into a different aspect of

New Deal diplomacy, rested largely with those in the White
House. After the EurOpean war broke out in September, 1939,
and in response thereafter to the desperate position of the
Allies, an unneutral policy took America to the brink of war.
Yet war, when it came, did not arise from our EurOpean policy,
but came suddenly despite what the Administration considered

a careful and correct policy in Asia. Following the Japanese

ii

attack at Pearl Harbor on December 7, 1941, New Deal mili—
tary and civilian strategists were charged with the responsi-
bility of leading the nation to victory. Wartime relations
marked the third period of New Deal diplomacy.

Among the multitude of ministers and ambassadors
associated with New Deal diplomacy, only a few names come
readily to mind. One instantly recalls the names of William
Bullitt, Joseph Kennedy, William E. Dodd, Joseph Davies,
Claude Bowers, Joseph Grew, and, perhaps, J. Carlton Hayes.
While not depreciating those mentioned, none of these
statesmen typify New Deal diplomacy to the extent that does
the relatively little known Laurence A. Steinhardt. A mem—
ber of the "Before Chicago" club, Steinhardt like most of
those already named, was a political appointee. But unlike
the others, the New Yorker remained an official member of
the New Deal administration throughout Roosevelt's more
than twelve years in office. Not only was Steinhardt's
length of service longer, he was the only American ambassador
to serve in as many as three theaters-~European, Latin Amer—
ican, and Mid Eastern. As head of the United States mission
in.Sweden, Steinhardt was instrumental in the signing of a

iii

reciprocal trade agreement with that country. In Peru,
Steinhardt while serving yet another facet of New Deal
diplomacy--the Good Neighbor policy--was there when the
spectre of Fascism began overriding economic relations in
importance in Administrative thinking. Steinhardt served
in Moscow in the period from the signing of the ill—fated
Nazi-Soviet pact to the bombing at Pearl Harbor. During
this period Allied leaders sought to sway the Soviet Union
from their sworn neutrality. During World War II, the
Administration assigned the New Deal diplomat to Turkey.
It was his responsibility to keep the Turks neutral and
prevent vital raw materials from reaching the Axis warlords.
Although this study makes no pretension of being a
biography, it is apparent that the study of an individual
can accord different views and perspectives of time and
events. As a study in diplomacy, the writer has attempted
to evaluate the service of an individual who received his
diplomatic appointment as a "political plum." It does not
appear that the lack of specific State Department training
necessarily impairs the efficiency of our representatives

iv

abroad. Although sounding trite, it seems that the defici-
ency can be remedied by hard work, willingness to learn,
and an open mind.

This study is the result of many people's efforts.
Dean Paul A. Varg, under whose direction this work has been
written, gave unselfishly of his time and criticism. The
author records his appreciation to Professor Charles C. Cum-
berland, who read the chapter concerning Steinhardt's mis—
sion to Peru, and to Professor Arthur E. Adams who not only
read the two chapters concerning the New Deal diplomat's
service in Moscow but kindled the original interest in the
study. The writer wishes to thank Eugene Jacobson and the
International Programs at Michigan State University for its
grant.

Individuals in various libraries have been courteous
and helpful. The author expresses his appreciation to staff
members of Michigan State University Library, the State of
Michigan Library, the Library of Congress, and the National
Archives. Special gratitude is extended to Eleanor J. Boyles
of the Michigan State University's Document Division and
Elizabeth B. Drewry of the Franklin D. Roosevelt Library.

V

In a special manner I wish to express appreciation for
the tireless assistance of my wife, Joan M. Stackman. Her
enduring cooperation made it possible for me to complete my

work.

vi

TABLE OF CONTENTS

Page
PREFACE. . . . . . . . . . . . . . . . . . . . . . . ii
Chapter
1. PATRONAGE AND POLITICS . . . . . . . . . . . l
2. STEINHARDT AND RECIPROCAL TRADE WITH SWEDEN 32
3. GOOD NEIGHBOR AMBASSADOR TO PERU . . . . . . 95
4. IN MOSCOW FROM THE SIGNING OF THE NAZI-
SOVIET PACT THROUGH THE RUSSO-FINNISH
WINTER WAR . . . . . . . . . . . . . . . . 157
5. DIPLOMACY ON THE HIGHWAY TO WAR. . . . . . . 229
6. WARTIME AMBASSADOR TO TURKEY . . . . . . . . 306
BIBLIOGRAPHY . . . . . . . . . . . . . . . . . . . . 390

vii

Chapter 1
PATRONAGE AND POLITICS

Organizers of the Franklin D. Roosevelt-for-Presi—
dent movement formulated their strategy well in advance of
the 1932 Democratic Convention. By the spring of 1931 sup-
porters Opened small but busy headquarters at 331 Madison
Avenue, New York City. The beginnings of the campaign fund
came from contributions of individuals whose names are scat-
tered throughout the history of the New Deal. Collectively
they formed what became known in Democratic political circles
as the "Before Chicago Club." Included in this early group
of contributors were Frank C. Walker, Henry Morgenthau, Sr.,
William Woodin, William Julian, Edward J. Flynn, Jesse I.
Straus, Herbert Lehman, Joseph P. Kennedy, Robert W. Bingham,
Basil O'Connor, and Laurence A. Steinhardt.1

In American politics the spoils belong to the
victors. The members of the "Before Chicago Club" received

their rewards--high government positions, Cabinet posts,

 

, 1James Farley, Jim Farley's Story: The Roosevelt
Years (New York: McGraw-Hill Book Company, 1948), pp. 9-10.
1

and appointments in the diplomatic service. All played
vital and important roles in the New Deal. All their names
are indelibly linked with the era of Franklin D. Roosevelt.

The least familiar name in this exclusive but in-
formal club is that of Laurence A. Steinhardt. This in spite
of the fact that he was a frequent caller at the White House
and that he held office at the President's pleasure through-
out FDR's tenure.

The Steinhardts were an old New York City family.
The paternal grandparents, German Jews. had emigrated from
Hamburg in 1848. Laurence's father, Adolph M., was an in-
dustrialist and co-founder of the National Enameling and
Stamping Company. For many years he served the firm as sec-
retary-treasurer. Adolph's untimely death in 1914 (he suf-
fered a heart attack while shoveling snow) left Laurence
fatherless while still in college.

The maternal side, however, wielded greater in-
fluence on the develoPment and shaping of young Laurence's
life. His mother, Adelaide (affectionately called "Addie"),
was of the prominent Untermyer family of Lynchburg, Virginia.
Samuel Untermyer, Addie's brother, was one of the nation's

most outstanding attorneys and international financiers.

His law firm, Guggenheimer, Untermyer and Marshall, was
long established and one of New York City's better known
forms specializing in corporate matters.

As counsel to the Pujo "Money Trust" Committee,
Untermyer became a well-known figure in national as well as
international circles. During WoodroW‘Wilson's Administration.
the Jewish barrister criticized the original Clayton Bill,
helped shape the Federal Reserve Act, and called for strin-
gent regulation of the stock exchange. Untermyer's name
carried considerable weight in the higher echelon of the
Democratic party. A strong advocate of fiscal responsi—
bility, both in the public and private sector, Untermyer
remained a strong Wilsonian Democrat. As an elder states-
man his advice and counsel was sought until his death in
1940. Both his political affiliation and economic philoso-
phy were accepted and deeply ingrained in his young nephew.

Laurence Adolph Steinhardt, born October 6, 1892,
was the only son of Adolph and Adelaide's three children.

A close relationship existed between mother and son; it was
not until after her death in 1920 that he freed himself to
marry. As the only surviving male after the father's death,

young Laurence became the family's patriarch, its leader and

advisor. After their respective marriages, the Steinhardt
daughters relied on their brother for advice in both private
and financial matters. Generally sympathetic, his recom-
mendations were unemotional, detached, and frank.

Privately tutored in his early years, Steinhardt
attended the exclusive Franklin School in New York City.
His earliest ambition was to become a surgeon. Realizing
that this profession required many years of training and
preparation, be quite naturally decided on a career in law.
Even so, he retained an abiding interest in the medical pro-
fession throughout his life. In the 1920's he wrote a series
of unpublished articles on "Medical Jurisprudence" and men-
tion of these articles are made in all of his biographical
sketches. As an amateur student of medicine, he was jokingly
referred to by his friends as "Doctor" Steinhardt.2

Steinhardt in 1913 received his bachelor's degree
from Columbia University. He was awarded the A.M. and LL.B.
two years later by the same school. J3 Carlton Hayes,
one of Steinhardt's Columbia instructors, crossed diplomatic

paths with his pupil during the 1930's. One of his instructors

 

2Personal interview with Mrs. Dulcie Ann Steinhardt
Sherlock, Washington, D. C., February 22, 1967.

in law school was the later Supreme Court Justice Harlan
Stone. Among his classmates was his life long friend Cyrus
Hay Sulzberger, later publisher of the New York Times. As
an alumnus Steinhardt remained actively interested in the
affairs of Columbia University.

In the same year, 1915, in which he took his last
degree from Columbia, Steinhardt authored an unpublished
booklet, A Survey of the Legal Status of the Trade Union,

Its Origins and Developments.3 Labor unions at this moment
were a popular item of discussion. Just the previous year

the Clayton Act provided that "the labor of human beings is
not a commodity or article of commerce." Although the phrase
was nothing more than a pious expression of senatorial Opinion
and did not change labor's standing before the law, it ap-
parently pleased everyone. Labor hailed it as their "Magna
Carta"; on the other extreme, the general counsel of the
American Anti—Boycott Association was entirely satisfied with

the legislation.4

 

3Copy of booklet in hands of Mrs. Dulcie Ann Stein-
hardt Sherlock, Washington, D. C.

4Arthur S. Link, Woodrow Wilson and the Progressive
Era, 1910-1917 (New York: Harper and Row, 1954), pp. 73-74.

So it was with Steinhardt's treatise. Characteris-
tically he refrained from expounding his own personal views.
He limited it to a study of the courts' and judges' views of
the problem. Notwithstanding that,he earnestly recognized
"the irksome yoke which labor still bears in some of the
industries of our nation,. . .." In reviewing the doctrine
of the "right to combine," boycotts, strikes, and picketing,
he came down on the side of neither labor nor management.
Legally, as he saw it, there were no absolute rights and
wrongs involved. For in essence, he concluded by quoting
the bench in Curran vs. Galen (152 NY 33): "If organization
of working men is in line with good government it is because
it is intended as a legitimate instrumentality to promote
the common good of its members. If it militates against
the general public interest, if its powers are directed to-
wards the repression of individual freedom, upon what princi-
ple shall it be justified? .. .." Thus, as it was with the
Clayton Act, both employer and employee could find gratifi—
cation in Steinhardt's efforts.

After graduation, Steinhardt took employment as an
accountant with Deloitte, Pender, and Griffiths, British

chartered accountants in New York City. His ability to c0pe

with details should have made himavaluable asset to the account-
ing firm. Although he did not remain long on this first job,
the ability to deal in minutiae became second-nature to the
young attorney. In a sense it became a way of life, for
Steinhardt found it difficult to operate without looking at
things in their most minimal form.

Steinhardt in 1916 served as counsel to Waslaw Ni-
jinsky, the Russian dancer, in the Metropolitan Opera affair.
Russian authorities demanded the extradition of Nijinsky for
having evaded the Czar's army. Steinhardt was successful in
having the deportation proceedings set aside.

Two years later with the United States at war with
the Central Powers, Steinhardt entered the Army as a private.
Rising to the rank of sergeant, he was honorably discharged
in the same year. His service was limited to duty in the
United States. In 1919 he served as counsel for the Housing
and Health Division of the War Department. The few brief
months spent with this agency was the only governmental exper-
ience Steinhardt possessed before accepting employment under
the New Deal.

Shortly after his return to civilian life, Steinhardt

joined his Uncle San Untermyer's law firm located on Pine

Street in the heart of Manhattan. With improved finances
and a modest legacy from his mother's estate, Steinhardt
exchanged wedding vows on January 15, 1923, with Dulcie
Yates Hoffmann. The young, attractive Mrs. Steinhardt was
the only daughter of Henry and Ida M. Hoffmann. The bride's
father, a retired New York banker, however, had previously
been killed in an avalanche while skiing in the Swiss Alps.
The mixed marriage uniting a Jew with an Episco-
palian was not a new thing in the Steinhardt family. An
unbroken Jewish strain was lacking on each his paternal and
maternal side. Although he never renounced his Jewish faith
neither did he remain a strond adherent. A non-joiner of
Jewish and Zionist organizations, he on occasion worshipped
alongside his wife in the latter's church. This religious
toleration widened the gulf between himself and the radical
Zionists in New York City. Furthermore, having been born
of German ancestry, Steinhardt found little in common with
the masses of Eastern European Jews congregated in New Ybrk.
As will be shown later, his matter of fact approach to "Jew-
ish problems" caused him considerable annoyance. He was
shrewd enough to recognize the strength of the Jewish vote

in the Empire State and the expediency to do their calling.

At the same time he seldom allowed his religious affiliation
to determine decisions. In a crucial time when history dealt
harshly with Jews all over the world, Steinhardt had a spir-
itual tightrope to walk. In his mind Jewish and Zionist
demands were not always consistent with what he believed to
be in the best interest of the United States.

Marriage changed Steinhardt in yet another way.
Although the international aspect of his law practice forced
him to look beyond the seas, his marriage into the Hoffmann
family required frequent visits to Europe. Likewise the
personal finances of the two families took on an international
character; both Mrs. Hoffmann and the Steinhardts held con—
siderable stocks and bonds in European and South American
concerns which required periodic personal attention. Both
Laurence and Dulcie Steinhardt readily accepted Eur0pean
culture. Unable to reach the linguistic accomplishments
of his mate, Laurence did, however, master French and German.

Life in the late twenties was rather serene for
the newlyweds. There were few financial problems. Sound
investments afforded a bountiful life for them in their

Park Avenue apartment. Distraction in their home, however,

 

10

came from the wails and screams of baby Dulcie Ann born in
1925. She was the only child to be born to the couple.
Storm clouds were gathering in other parts of
the country. The heaviest was about to unload on Wall Street.
Steinhardt had felt the first few drops. In the spring of
1929 following a slight dip in the prices of stocks, he
thought them still "inordinately high." Accordingly, in
his View, "the true values must be measured over a period
of years not weeks."5 A disbeliever in speculative profits,
Steinhardt withdrew from the market and fortified himself
against the inevitable storm that raged in the fall of
1929. The only thing that amazed the New York attorney
about the storm was its tardiness.6 To him, the economic
barometer had called for a severe downfall that summer.
Coming through the Great Crash virtually un-
scathed, Steinhardt had little sympathy for those less for-
tunate. For those who had used Wall Street as a gambling

establishment and a "get rich" scheme, he held contempt.

 

5Laurence A. Steinhardt to Mrs. Ella H. Sullivan,
March 26, 1929, Library of Congress, Laurence A. Steinhardt
Papers. Hereafter cited as Steinhardt MSS.

6Steinhardt to Mary B. Hinckley, December 2, 1929,
Steinhardt MSS.

11

Why should they have sympathy when they had violated "the
fundamental laws of economics and finance, and were engaging
in a highly technical field about which they knew nothing?"7
Personally there was a sense of satisfaction for having

been correct in his predictions. He hoped that the people
had learned their lesson.

The depression that followed the storm was no
surprise to Steinhardt. In the last month of 1929 the only
question concerning the depression unanswered in Steinhardt's
mind was its depth and duration.8 Only time and patience
would lend him that answer. Meanwhile the business spiral
sped downward until it became an international calamity.

In the spring of 1931 he thought he saw signs of an economic
renaissance in Europe, "the beginning of which cannot be much
longer deferred—-not more than another year."9 By summer

of the same year, he revised his thinking. The situation

in Germany appeared to him as "extremely ominous. Things

 

7Steinhardt to Ina M. Hoffmann, October 29, 1929,
Steinhardt MSS.

8Steinhardt to Ina M. Hoffmann, December 2, 1929,
Steinhardt MSS.

9Steinhardt to Madeline Partridge, March 15, 1931,
Steinhardt MSS.

12

were allowed to drift to a point where I am doubtful as to
their ability to pull out .. .."10 Always a great admirer
of Germany and things Germanic, he thought they could sur-
vive; "there is always a chance for Germany, with its extra-
ordinary sense of order and discipline, to pull through a
crisis which no other country could survive."

At this moment the survival of the United States
rested squarely on the shoulders of the Hoover Administration.
The machinery of the Federal Government was set in motion
in order to pull the American pe0ple out of economic chaos
and ruin. President Herbert Hoover for his part disliked
direct involvement in federal relief programs and direct
dole. He encouraged the States and private organizations
to initiate programs to relieve the discomfort and distress
among the unemployed. Such an organization was the Emergency
-Unemployment Relief Committee functioning in the State of
New York. This Committee operated through the use of private
donations.

Such was the situation when in the winter of 1931-

1932 the Committee solicited a donation from Laurence Steinhardt.

 

10Steinhardt to Mrs. Dulcie Steinhardt, July 15, 1931,

Steinhardt MSS.

13

He turned them down flatly but, so he thought, justifi-
ably. New York had already passed a law increasing the
income tax fifty percent for emergency unemployment relief.
This additional tax, he averred, was levied on but 60 to
70,000 families of the States's ten-million p0pu1ation.
Furthermore, so he claimed, he owned stock in corporations
already making large contributions. To make matters worse,
unnecessary spending by the federal government for new roads
and canals served only "to destroy the value of our railroad
stocks."ll

Steinhardt disliked government interference in
the nation's economy. He reminded his correspondent that
"experiments with huge unemployment funds in England, Aus-
tralia, Germany, and Russia have pauperized the people and
bankrupted the governments."12 He was also disdainful of
those caught in the nation's economic catastrOphe. They deserved

to suffer because they had lived high without saving for the

rainy day. "These people by their votes are coercing an

 

11Steinhardt to Mrs. J. Ernest Stern, November 2,

1931, Steinhardt MSS.
12Steinhardt to Mrs. J. Ernest Stern, November 11,
1931, Steinhardt MSS.

14

increase in socialism and paternalism. The unemployed re-
fuse to give up the movies and the flivver and the lights of
Broadway for the farm."13 Needless to say, he did not sug-
gest where or how these peOple were to obtain these farms.

There was in Laurence Steinhardt a broad, strong
streak of rugged individualism. No doubt he felt that he was
a self-made man. A true believer in the American capitalis-
tic system, he looked back at the Golden Twenties with shock
and disbelief and, yet, a feeling of satisfaction. He had
played the game and won. By his own strength he had stood
against the reckless wave of frivolity, nonsense, and waste
that swept the nation against the rocks of ruin. While the
rest of the nation had played, Steinhardt had worked: while
the rest of the nation had spent, Steinhardt had saved.

To him, his nearly one-hundred thousand dollar an-
nual income in the early 1930's was reward for hard work,
frugality, and wisdom. It was not uncommon for the rugged
six-footer to work ten to fourteen hours a day. He seemed to
thrive on a work schedule few men could physically or mentally

endure. However, he seemed to pay the price in his inability

13Ibid.

15

to relax. Small, trivial things upset him. He became un-
reasonably irritated and annoyed by rattling radiators in his
Park Avenue apartment. Where another person might have dis—
missed it as a minor disturbance, Steinhardt felt compelled
to make it a major issue. He threatened to terminate his lease.
suggested that the building superintendent be fired, and in

a small peevish way kept a daily time table of the "rattles."
Annoyed and bothered by a busload of chattering school chil-
dren, he lodged his complaint in a letter to the school's
headmaster. To Steinhardt individual freedom ended when it
impinged on the rights of others. Furthermore he was always
the best guardian of his own individual rights.

He was likewise the sole guardian of his economic
rights. It was Laurence Steinhardt pitted against the entire
economic structure of the United States. By wit and cunning
one could survive in the economic jungle. The amount of money
involved in a transaction meant little. Steinhardt could argue
just as strenuously over what he considered to be an unfair
price of a gallon of gasoline as he did over the price of
stocks and bonds. Perhaps he sharpened his wit on those things
that others considered trifling. Such was a five dollar bill

found in Gimbel's Department Store by Mrs. Steinhardt. Since

16

the bill was unclaimed and the statutory period had passed,
Steinhardt wrote a letter to the store setting out all of his
legal claims to the lost object. This was one of New York's
highest paid attorneys in action. The value of the bill meant
little, it was the principle involved.

And Steinhardt was highly principled. He was impec-
cably honest, straightforward, and scrupulous. So much was
this true that seemingly minor things were magnified beyond
their relative importance. Where these characteristics
should have gained Steinhardt esteem and creditability they
frequently did not. Instead the results often appeared as
picayune and petty.

Nonetheless the creators of the Puritan ethic would
have been proud of this American Jew. He was an ardent
disciple of diligence, hard work, and thrift. Not only did
he hold these to be good for the individual but held them
to be just as valid for use by the federal government. The
depth and length of the depression, he thought, "could have
been very definitely curtailed, and the country put back on
the track towards reasonably prosperous times, if the Ameri-

can people had not consigned thrift to the winds and gone

17

on an insane orgy of over—valuation, speculation, mortgaging
their expected future income for present luxuries."

The real culprit and profligate in Steinhardt's mind
was the Hoover Administration. To his way of thinking they
had thrown all laws of economics to the winds. It was indeed
happy for him to see conservatives elected to Congress.

As the depression deepened and the Republicans
continued to flounder, Steinhardt's mind turned increasingly
to politics. Already in 1931 he had become one of Franklin
Roosevelt's financial contributors. Early in 1932 he wrote
a stinging rebuke of the HooverAdministration.16 Put in
pamphlet form and mailed to over five hundred people, Steinr
hardt challenged the Republicans for violation of elementary
economic laws. In November, 1929, Hoover called leaders of
business and labor to a series of conferences. He urged
them to maintain production and to avoid wage cuts or in-

creases, and he obtained promises that they would do so.

 

14Steinhardt to Mrs. Irving McGeahy, January 16, 1932,

Steinhardt MSS.

15Steinhardt to Percy H. Stewart, December 4, 1931,
Steinhardt M88.

16The Truth, The Whole Truth! and Nothing But The
Truth, January 5, 1932, Steinhardt MSS.

18

Said Steinhardt, "During a period of declining business and
diminishing gross receipts, expenditures should be curtailed.

. . . it seems elementary in business that expenditures should
not exceed income, and promises of good business in the future,
when improvidently made, fail to eliminate operating deficits."
He called administratave efforts to prevent wage reduction as
"a mere vote-catching device." According to Steinhardt it

was plain that America was suffering from excess plant and
excess productive capacity. The law of supply and demand,

he thought, would eliminate many factories that had no right
to existence.

Through the reconstruction Finance Corporation,
President Hoover as part of the total program hoped to en-
courage home building. Steinhardt scoffed at the idea as
"but another manifestation of the failure to recognize the
present dabacle." His rejoinder was that the country was
already overbuilt.

Along with other leading Democrats, Steinhardt
called for less rather than greater government spending.
.Accordingly he deplored the growth in the number of federal
employees and the increase of public works. Public funds

were being allocated for "thousands of miles of utterly

19

unnecessary roads." Instead of spending money, he thought
the government should economize, reduce its expenditures,

pay its debts, and save. So too should the government
change its taxing program. "The taxing of only four mil—
lion taxpayers out of a pOpulation of 123,000,000 is unsound,
unjust, and dangerous. . .."

Steinhardt also hit hard Hoover's agricultural
policy. He called the attempt to stabilize American Wheat
prices at a level above the world market, in the face of a
huge crop and world overproduction, as "perhaps unexampled
in world history." The real answer, he stated, could be
found in the workings of the law of supply and demand,
lower prices with greater consumption, and lower production.

There was really nothing unorthodox about Stein-
hardt's economic thinking. It appealed to many. One such
admirer wrote Basil O'Connor (Roosevelt's law partner) and
suggested that the Governor make Steinhardt his legal ad-
visor.l7 Steinhardt, in the writer's mind was a "shrewd,
natural born politician" with a "keen mind and an unusual

understanding of finance, economics, and particularly,

 

17Unknown author to Basil O'Connor, March 12, 1932,

Steinhardt MSS.

20

international affairs." Not only would Steinhardt be a
heavy contributor but as the "potential" international
leader of the Jews could deliver a large bloc of votes.
Steinhardt, the anonymous letter stated, would be "highly
acceptable to Tammany without carrying the Tammany label."
The emerging politician may have been puzzled by the ref-
erence to Tammany for he considered himself a lifelong
member of that New York Democratic organization.

Meanwhile Steinhardt himself set out to improve
his own political fortunes. No doubt his $7500 contribu-
tion brought cheers in the Madison Avenue headquarters.
As a heavy contributor, Steinhardt automatically became an
important member of the "team." The Pine Street attorney
desired, however, a more active role commensurate with his
ability. As a keen observer of the American economy, he
felt confident that he could provide Roosevelt with the
economic tools with which to carve a victory in the November
elections. The party needed the ward-healer and backroom
politician, he surmised, but so too did it need the financial

and economic expert.

 

18Steinhardt to Lawrence Hills, October 5, 1933,
Steinhardt MSS.

21

Steinhardt was convinced that the national campaign
would be fought on the economic battleground. He feared
"the uneducated order of intelligence which comes to the
surface in politics, the lack of original thinking, and
processes of mind which calculate only in the number of
votes,. . . $19 He charged the Republicans with providing
no real leadership instead of "leading the people over the
thorny path of reduced exPenditures, thrift, and time-tried
methods of government, . . .," they resorted to, "time-tried
socialistic failures. Sad though it may be, our so-called
leaders seem to learn nothing from the socialistic experi—
ments which have brought the rest of the world to its pre-
sent sad pass."20 He believed the Democratic Party should
form sort of a cabinet to serve in an advisory capacity to
the nominee. It would debate national and international
issues on various angles of addresses before they were re-

leased to the press.21 More than likely he envisaged him-

self on the cabinet.

 

l
9Steinhardt to Frederick H. Allen, April 28, 1932,
Steinhardt MSS.

20Ibid.

21Steinhardt to W. Forbes Morgan, April 12, 1932,
Steinhardt MSS.

22

Already he had sent a copy of the The Truth,vThe Whole
Truth to the Governor's Mansion in Albany. Roosevelt answered
appreciatively that notwithstanding the fact that he had not
read it thoroughly, he found it "interesting."22 Steinhardt
followed this with a 12—point "National Economic Program."23
Briefly stated, it included:

1. CrOp reduction necessary to acquire loans from
Federal Farm Loan Banks.

2. Unemployment insurance and Old Age Pensions:
a. Tax should enter into the cost of the
finished product and not become a govern-
mental or State burden or dole.
3. Natural resources belong to the people.
4. Federal Budget and Federal taxation:
a. Budget should be immediately balanced and
all appropriations be set by the Bureau

of the Budget.

b. Eliminate direct taxation and substitute
indirect taxation.

c. Reduce expenditures of Veterans Bureau.
5. Federal Administration:

a. Same wages and hours for government

 

2Franklin D. Roosevelt to Steinhardt, January 12,
1932, Roosevelt Memorial Library, Hyde Park, New York.

23Steinhardt to Roosevelt, March 28, 1932, Stein-
hardt MSS.

10.

23

employees as the taxpayers who pay their
wages.

b. Reduce bureaucracy and overlapping.

c. Liquidation of governmental agencies in
competition with private industries.

Federal and State coordination in construction
of roads and public buildings and the financing
of unemployment relief.

Inter-Governmental Debts:

That a corporation organized by the United
States Government accept merchandise of the
categories specified in the schedules and dis-
pose of the same in American markets to the ex-
tent of their absorptive capacity at the price
fixed by the foreign governments, and that the
proceeds of such sales be credited on the ac-
count of its annual indebtedness to the United
States Treasury.

Creation of an independent and non—political
Tariff Commission.

Railroads:

a. Repeal of the recapture clause.

b. Control and regulation of trucks, buses,
pipelines, and other methods of transpor-
tation which unfairly compete with railroads.

c. Relief from economic and burdensome taxation.

Business and industry in general:

a. Business be emancipated as soon and as much
as possible: urged to go forward with the
promise that no wild, socialistic, or eco-

nomically unsound legislation will be recom-
mended.

24
11. Labor must be patient until industry has been
rehabilitated.
12. Prohibition question to be submitted to the

peOple in a national referendum.

Although Roosevelt certainly agreed with portions of the
program, there is no indication that he found it more than
"interesting." Steinhardt received no hurried call hasten-
ing him to Albany.

About this time Roosevelt interested himself in the
political mileage to be gained from an attack on the Repub-
lican's handling of the Reconstruction Finance Corporation.
In an early April radio broadcast the Governor lashed out.
The RFC, he insisted, had aided banks, railroads, and
large corporations but had failed to ameliorate the condi—
tions of the owners of small homes and farms. It added fuel
to the growing public impression that the Hoover Administra-
tion cared only to succor big business and was doing little
or nothing to relieve the suffering of the hungry or to help
the small businessman.

Roosevelt's attack on the Reconstruction Finance
Corporation met with Steinhardt's approval. He thought that

the corporation would be an important campaign issue and

25

wrote Roosevelt accordingly.24 When George B. McLaughlin,
former New York State Bank Commissioner, replied to Roose-
velt's charges, Steinhardt urged his candidate to return the
fire. The young politician pointed out that "though banks
have been getting funds, banks still continue tO press small
farmers and home owners." In short, he accused the banks
of possessing a mania for liquidity. Roosevelt did not
want to be drawn into a worthless debate with McLaughlin but
requested Steinhardt to keep him advised on the activities Of
the Reconstruction Finance Corporation.

Roosevelt sought Steinhardt's advice on other
matters as well. In early June the Governor requested the
"latest information Of the bank and gold situation."25 But
there was still no request to go to Albany. Obviously Roose-
velt treated Steinhardt's economic prOposals with high regard
and respect and, yet, kept the man at arm's length. Was
Roosevelt, the master politician, merely keeping all channels
Of communication and information Open? Quite likely, for al-

ready a group of economic advisors--known early as the "brains

 

24Steinhardt to Roosevelt, April 11, 1932, Steinhardt
MSS.

25Roosevelt to Steinhardt, June 7, 1932. Roosevelt MSS.

26

trust"-—argued through long evenings at the Governor's fire—
side in Albany, held audiences for economists in a hotel
suite in New York City, and wrangled over drafts Of campaign
yspeeches. As the Democratic Convention approached Steinhardt
still failed to occupy a chair he desired near the seat of
power. He found it already Occupied. In this situation
Steinhardt had to content himself with a lesser but still
important role in the making Of the president, 1932.
Unquestionably Roosevelt made Steinhardt feel that
the latter was an important member Of the Roosevelt-for—
President team. Steinhardt remained faithfully committed to
the Governor's nomination. The Democratic Party Convention
met on June 27, 1932, in Chicago. Like all Democratic dele-
gates, Steinhardt arrived cheerful and confident. As a mem—
ber Of the New York delegation he probably joined in the
singing Of "Happy Days Are Here Again." Certainly he approved
Of the platform that blamed the depression on Republican poli-
cies: economic nationalism, business monopoly, and credit
inflation. Likewise, he more than likely found satisfaction
with planks that called for 25 percent reduction in the federal
budget, a competitive tariff for revenue, regulation of holding
companies and stock and commodity exchanges, and control of

farm surpluses.

27

The real drama Of the convention was in nominating
the Democratic candidate for president. For a while it
appeared as if the Democratic Party would engage itself in
an inexpiable deadlock as it did in 1924. The politically
astute Roosevelt campaign manager, James A. Farley, saved
the day. Snatching victory from possible defeat, Farley
engineered Roosevelt's nomination on the fourth ballot.
Steinhardt had backed a winner.

Returning to New York City Steinhardt was still limp
from the excitement. To the Democratic nominee he wrote:

"I would not exchange the experience Of that week in Chicago
for any other experience in life. There was more real fight
and excitement packed into those few days, and particularly
in holding some Of our wavering delegates in line between
midnight and 10:00 A.M. Friday, than I have enjoyed in a
long time."26 Much Of the bitter feeling generated by the
Al Smith forces toward Roosevelt's nomination "was largely
stimulated by a packed hostile gallery."

As the summer waned, so too did Steinhardt's politi—

cal enthusiasm. Apparently accepting his consignment tO a

 

26Steinhardt to Roosevelt, July 5, 1932, Roosevelt

MSS.

28

minor political role, he sailed for Europe where he remained
throughout the month Of September. Even though victory was
almost a certainty in the fall elections, it is doubtful if
those in command Of the Democratic campaign would have per—
mitted this from a member Of the power elite. Had Stein-
hardt%considered himself a member Of that group it is unlikely
that at such a crucial time he would have departed from the
scene Of the battle.

Steinhardt returned to the United States during the
dying days of the campaign. It gave him time to throw at
least one more thrust at the Republican Party. Roosevelt had
intimated in a speech that the Supreme Court during Hoover's
stay in the White House had made decisions favorable to
Republican legislation. Hoover counterattacked and denied
that the Republican Party dominated the Court. Writing to
Louis M. Howe, Steinhardt stated: "It has been unwritten law
in the United States that the Supreme Court . . . shall be as
evenly balanced as between political faiths as possible, which

. 2 .
means five to four." 7 He averred that when Hoover took Office

the division between the two parties stood at six-tO-three.

 

27Steinhardt to Louis M. Howe, October 29, 1932,

Steinhardt MSS.

29

In spite of vacancies caused by death, he continued, Hoover
chose to keep the same six-tO-three ratio. In effect, as
he saw it, it was a Republican Court.

Election Day brought victory to Franklin Roosevelt
and office-hungry Democrats. Losing a one—hundred dollar
bet, a Hoover-stalwart provided Laurence Steinhardt an
extra bonus.28 National campaigns, he mused, "are not won
by luck, but by strategy; not by money, but by brains."29
How much, other than money, Steinhardt provided to the Dem-
ocratic victory is Open to speculation. Presumably it was
less than he would have others believe but large enough to
warrant early consideration in the division Of the political
spoils. He would have to wait until Spring.

Participation in the Roosevelt campaign did more
than take Steinhardt into government service. It whetted

his appetite for more politics. Assuring his uncle, Samuel

Untermyer, that he had no intentions of making politics a

 

28Edwin M. Berolzimmer to Steinhardt, November 9,

1932, Steinhardt MSS.

29Steinhardt to Louis M. Howe, November 9, 1932,
Steinhardt MSS.

30

career,30 he must have been bitten unknowingly by the poli-
tical bug. For throughout his service abroad he assiduously
followed the American political scene and kept his political
fences mended.31

Steinhardt kept a particularly watchful eye on the
political developments in his home State Of New York. Al-
though he held onto his connections with Tammany, he now
considered himself a "Roosevelt Democrat." It was his View
that he owed nothing to the Old leaders Of Tammany who, he
ruefully said, had done nothing for him. His loyalty be—
longed tO the Roosevelt Democrats who had jumped him into
"national politics overnight and without having to gO through
the slow tedious path of city and state politics."32

Roosevelt had sparked a political ambition inside
the young Steinhardt. Though the roads of government service

were to take Steinhardt across oceans and continents, there

came a time when he wanted most to travel the road that led

 

30Steinhardt to Samuel Untermyer, February 23, 1933,
Steinhardt MSS.

1Personal interview with George V. Allen, (Washington,
D. C.), February 21, 1967.

32Steinhardt to Joseph Johnson, October 30, 1933,
Steinhardt MSS.

31

to Albany and the Governor's Mansion. He considered himself
a fitting successor to the man who was now vacating it for

the White House in Washington.

Chapter 2

STEINHARDT AND RECIPROCAL TRADE WITH SWEDEN

The interval between Roosevelt's election in Novem-
ber, 1932, and his inauguration in March, 1933, proved the
most incongruous four months Of the entire depression. As
the nation teetered on the brink Of disaster, the President—
elect was everywhere-—grinning, joking, waving his cigarette
holder, giving the impression that he had not a care in the
world. TO millions he appeared enjoying the cat-and-mouse
game being played with the out-going Hoover Administration.
This outward appearance was deceiving, for Roosevelt, Oper-
ating behind this facade, was quietly going about the busi-
ness Of shaping "NewHDeal" legislation. One Of his primary
considerations was the welding Of a political team to carry
the program to fruition.

A few Democrats received their future assignments
during the interregnum. Party chieftans kept most of their
followers waiting and guessing. Laurence Steinhardt, stating

32

33

that he was "by nature a pessimist,"1 was not certain that any—
thing was coming his way. "There are too many slips between
the cup and the lip," he continued in like vein. An appoint-
ment was possible, he confided, but not probable. If anything
were to come his way, it was certain that his influential uncle,
Samuel Untermyer, would be among the first to know.

In a long letter tO his uncle, Steinhardt surveyed the
entire political range.2 First of all, he wrote, "In none of
my talks with Roosevelt at any time, either before his nomina-
tion or since his election, has he given the slightest intima-
tion to me that he contemplated my appointment tO any post."
The closest approximation, Steinhardt continued, was a remark
Roosevelt made before he was nominated, in which he said that
every dollar contributed towards his personal preconvention
fund would count as $10 with him if he were elected.

Yet Steinhardt knew that he stood in high favor.

While Roosevelt was in Warm Springs resting from the ordeals
of the campaign, Steinhardt related to his uncle, the Presi-
dent—elect summoned Farley, Frank C. Walker, and Edward J.

Flynn. He asked them to bring with them three lists of

 

lSteinhardt to Mrs. Molly McAdOO, January 17, 1933,
Steinhardt MSS.

2Steinhardt tO Samuel Untermyer, February 23, 1933,
Steinhardt MSS.

34

individuals to whom he was under Obligation. List "number
one" was the "Preferred List"-—nineteen to twenty-one names
of those who had supported Roosevelt throughout and who had
contributed substantially to his preconvention fund. List
"number two" included names Of those Roosevelt felt under
Obligation to for assistance, not necessarily financial.
This list was to be entirely subordinate tO the "Preferred
List." List "number three" included names of prominent
people who had not necessarily supported the Governor before
the convention but had supported him during the campaign.
Steinhardt assured Untermyer that names on the "Preferred
List" would not necessarily be considered for the Cabinet,
as Roosevelt proposed "to name his Cabinet without regard
to politics." Steinhardt's name stood high on the "Preferred
List."

Samuel Untermyer had already advised his nephew on
various positions he considered suitable for the young attor-
ney. Heading the list was that Of Commissioner Of Internal
Revenue: second, United States District Attorney: and, third,
Ministerial appointment to either Switzerland or Sweden.
Steinhardt discounted the first two. In one of the few

instances where he showed lack of self-confidence, he pointed

35

out that there were too many candidates for Commissioner

Of Internal Revenue for him to be considered. The posi-

tion as United States District Attorney, he directed, was
a matter Of political bargaining between Tammany, Flynn,

and Farley.

This situation left only Untermyer's third sug—
gestion——Switzer1and or Sweden. "Everyone agreed that
Switzerland was by far more important," Steinhardt wrote,
"butthis was held by a career diplomat, Hugh'Wilson, and
he [Roosevelt] had not yet decided how to handle the career
situation." The retention Of Norman Davis as chief dele-
gate at Geneva, he thought, would probably hurt him, "as
none of his crowd are tOO friendly towards us." Further-
more, he had no doubt "that the clique Which constitutes
the permanent service will fight tooth and nail against the
displacement of [Hugh 5.] Gibson in Belgium, [Hugh R.] Wilson
in Switzerland, [Joseph C.] Grew in Japan, and [Robert W.]
Bliss in Argentina who are their pets and their first line
Of defense."

Nevertheless Steinhardt did not think the situation
hopeless. He thought Raymond Moley might help. In Jack-

sonville the Barnard College professor, so Steinhardt wrote

36

his uncle, had expressed himself as being bitterly Opposed

to the permanent career service. Then too Steinhardt had
been busy "trying to map out an attack with all the necessary
outposts and allies, so that when the time comes to call upon
you [Samuel Untermyer] for help it would not appear that you
were engaged in a purely 'nepotistic' attempt." He cautioned
his uncle that he had received "repeated warnings from those
close to the Governor that he hates or refuses to be pushed
or crowded by influence into making any appointment. I sin—
cerely believe that if he felt that you were trying to choke
me down his throat he would turn against me."

In due time Roosevelt and his political potentates
considered Steinhardt's appointment. As related in another
letter to his uncle, Steinhardt reported that his status had
been discussed in a meeting attended by the newly sworn-in
President, Louis Howe, Farley, Flynn, and Walker.3 "It
appears as if Roosevelt expressed himself as being willing
tO send me to Switzerland, but did not think it fair to send
me--as he put it 'cOld.'" The group agreed to keep Hugh

'Wilson, for the time being, in Switzerland. It was agreed

 

3Steinhardt to Samuel Untermyer, March 21, 1933,
Steinhardt MSS.

37

to Offer Steinhardt the post Of Assistant Secretary Of State
under Cordell Hull. In this position the New York lawyer

was to reorganize the legal department. After a year's appren-
ticeship, so to speak, in the Department of State, Steinhardt
was to be sent to the coveted post in Switzerland.

Confident that something was about to materialize,
Steinhardt remained uncertain as to what he would be Offered.
Anxiously awaiting word from Washington, he was, as he sug-
gested to Moley, "on pins and needles."4 Then word came:

a wonderful relief after weeks and months Of anxiety and an-
ticipation. Not completely unexpected, he was Offered the
position as United States Minister and Envoy Extraordinary
to Sweden.

If he were disappointed, it was never apparent. He
welcomed the Opportunity tO get away from his New York law
practice. The assignment, he wrote his sister, would give
him a chance to relax and regain some of the health he had

lost during "the last hard fifteen years."5 He assured her

 

4
Steinhardt to Raymond Moley, March 28, 1933,
Steinhardt MSS.

5Steinhardt to Mrs. Frederic F. Partridge, April 27,
1933, Steinhardt MSS.

38

that the post should not be difficult since "our relations
with Sweden are excellent."

As presaged by Steinhardt the Swedish appointment
was to be nothing more than a brief interlude. His stay
was to be short, possibly eighteen months or two years.

"I expect to be quite an opportunist about it," he assured
his uncle. "I would stay in the post the shortest period
of time necessary to make the available connections and to
obtain what prestige it may lend."7 He went on to say,

"I have not the faintest intention of making either poli-
tics or diplomacy a career but merely a means to an end,
that end being the practice of law."

Meanwhile the Administration through the American
Legation in Stockholm inquired as to Steinhardt's accepta—
bility to the Swedish Government. The American Chargé
dJAffaires was the first to raise the question of Steinhardt's

fitness for the appointment.8 He reminded the Department

6Steinhardt to Samuel Untermyer, February 23, 1933:
Steinhardt to Douglas L. Elliman, April 28, 1933, Steinhardt MSS.

7Steinhardt to Samuel Untermyer, February 23, 1933,
Steinhardt MSS.

8Charles Crocker to Hull, April 19, Department of
State Archives, 123 Steinhardt/4.

Q'-

[I]

‘e
‘t

39

that Steinhardt was a member of a firm "representing a group
of American holders of bonds secured by some fifty million
dollars worth of collateral at present in Sweden and subject
to Swedish jurisdiction." Hull informed the Legation that
following the usual practice Steinhardt had resigned from
his firm.9 To an acquaintance, Steinhardt lamented, ". . .
I am resigning my partnership with the firm and becoming a
'poor diplomat'. .. ."10

President Roosevelt sent to the Senate on April 26
the nomination of Laurence A. Steinhardt to be Minister to
Sweden. Without a dissenting vote he was confirmed on May 4.

The confirmation, however, did not receive unanimous
approval from the American press. At least one newspaper
questioned Steinhardt's fitness for office. Hitting the
newly designated Minister to Sweden in a sensitive spot,

it called him "a dabbler in stocks." Offended, Steinhardt

could not let the attack go unanswered.

 

9Hull to Charles Crocker, April 19, 1933, Depart-
ment of State Archives, 123 Steinhardt/5.

10Steinhardt to Charles Ritz, April 29, 1933, Stein-
hardt MSS.

4O

Firing off a letter to the editor, Steinhardt set
out his personal history in the stock market.11 He vehe-
mently denied ever buying a share of stock on margin in his
life. The bulk of the securities he sold in the spring of
1929, he asserted, he had owned, outright, for many years.
When they had reached levels which he felt were vastly in
excess of their intrinsic value, be disposed of them and put
the proceeds into more secure holdings.

This letter afforded Steinhardt an Opportunity to
vent other feelings. In it he castigated the practice of
certain American bankers. At this particular moment, his
outpouring was not unusual. His voice was merely added to
popular outcry against Wall Street. In Washington the
Pecora Committee had just completed its dramatic investiga-
tion which, in turn, made possible the adoption of the
Securities Act late in May, 1933.

Not unlike his famous uncle, Steinhardt, too, held
a deep-seated suspicion of the money-lenders. To the editor

he stated that "billions of dollars of foreign securities

 

11Steinhardt to Editor, Springfield Journal [sic.] June
24, 1933, Steinhardt MSS. (N. W; Ayer and Son's Directory of
NeWSpapers and Periodicals [Philadelphia, 1936] lists no éfiéh

newspaper.)

 

41

were sold to the American public by so-called bankers with
not the slightest prospect that the interest or principal
could ever be repaid, the motive being the large underwriting
commissions collected by those bankers." It was his Opinion
that a banker was under a solemn obligation to regard the
welfare of the purchaser of the security offered by him at
least in the amount which the banks received for affecting
the sale. It would appear that in Steinhardt's thinking,

the Securities Act was a step in the right direction.

Even while serving abroad, Steinhardt maintained an
interest in banks and securities. As a part of international
relations, some of the interest was in response to duty.
Aside from that, for self-preservation he had to be inter-
ested. As an underpaid United States diplomat, Steinhardt
had to depend on his own private resources to make up the
difference between outlay and government income. Never did
the two meet. Following the appointment of Sweden and his
resignation from his law firm, Steinhardt's major source of
income was derived from securities he held. Regardless of
where he served, he necessarily had to keep a sharp eye

on the American stock market.

42

Finances, in any case, were a secondary consideration
to Steinhardt as the weeks reached toward summer. More and
more his thoughts turned toward Sweden. Even before his con-
firmation by the Senate, he had addressed the Swedish Chamber
of Commerce advocating the elimination of many of the trade
barriers existing between the United States and Sweden.12
In May he was the guest of honor at a luncheon given by the
American-Scandinavian Club.13 At this gathering the newly
appointed Minister promised to encourage trade relations and
tourist movements between Sweden and the United States.
Praising the foundation's object, "to keep the lamp of inter-
national friendship burning," he said he could conceive of
"no better method of bringing friendship and understanding
from one nation to another than by the interchange of stu-
dents and establishment of fellowships."

His social whirl of SwedisheAmerican societies con-

tinued. He and his wife attended the dinner-dance celebrating

the formal opening of a new c1ub--The American Society of

 

12New York Times, April 21, 1933.

13New York Times, May 13, 1933.

(1')

LL)

(I

’(J

‘1
N

r-‘

3“

.-

5..

I

43

Swedish Engineers.14 Sandwiched between such social

engagements, Steinhardt read The History of Sweden by Carl

 

Hollendorff and Adolf Schflck. As a courtesy, he attended
on June 16 the Swedish Evangelical Lutheran Gustavus Adol—
phus Church's "Te Deum" celebrating the seventy—fifth anni—
versary of the birth of His Highest Majesty the King of
Sweden.15

Steinhardt found it a hectic experience preparing
for his new venture. With irregular meals, he had to close
his apartment, move his effects, purchase clothing, attend
to his cases and clients, and prepare for the long stay
abroad.16 He complained of having at the same time "a
lot of intergovernmental matters dropped in his lap" long
before he was prepared or anyone had a right to expect him
to take them up. With all this to do, he had to make inter-
minable trips to Washington and the Department Of State.

‘

14New York Times, May 20, 1933.

15New York Times, June 17, 1933.

16Steinhardt to Andre Mertzanoff, June 13, 1933,

Steinhardt MSS.

44

At the Department Steinhardt found already in
progress study on a proposed trade agreement between
the United States and Sweden. No one was more committed
to the lowering of tariff barriers than the new Secre-
tary of State Cordell Hull. As a member of Congress he
had Opposed the high tariff rates imposed by the Repub-
licans in 1909. 1922. and 1930. He envisaged "a liberal
system of international trade not only as a remedy of
the world's economic ill. but also as one of the chief
pillars of peace.”17 With huge Democratic majorities
in both chambers of the 72nd Congress. Hull had every
reason to expect the passage of a trade liberalization
program. Of all the instructions given the new Minister
to Sweden none was more important nor dear to the heart
of Hull than the one concerning the trade agreement. No
one was more in agreement with his proposals than Stein-
hardt.

While in Washington Steinhardt also called on

the new President. Roosevelt asked him to go to the

 

17Julius Pratt. Cordell Hull. 1933-1944. 2 vols.
(New YOrk: Cooper Square Publishers. 1964). vol. 1.
p. 107.

45

WOrld Economic Conference in London before proceeding to
Stockholm.18 The new minister advised a friend to watch
the Economic Conference carefully.19 "If the results

are not important." he warned him. "I think you can ex-
pect a very definite and very substantial inflation in
the Fall. which would make it most unwise. in my Opinion.
to part with equities. If on the other hand. the results
are really substantial--which I am beginning to doubt--
then I should not expect any serious inflation. and we
might have substantial corrective reaction."

According to Steinhardt EurOpe would confront a
different type Of American president. "For the first
time in this century they are dealing with a man who has
American interests in his heart first. last. and all the
time.”20 Roosevelt. he thought. would be a poor student

of history had he not learned something from Wilson's

experiences. The Conference. in his opinion. would last

 

18New York Times. May 9. 1933.

19Steinhardt to Milton Steindler. June 12. 1933.

Steinhardt MSS.

20Steinhardt to William Rosenblatt. June 24.
1933. Steinhardt MSS.

46

through the summer. and the President's policy would be
one of constantly shifting and changing his representa-
tives. Steinhardt called it a new type of diplomacy--

“borrowed more or less from the football field."

Time was growing short and there were other
preparations to be made. Small but important things
had to be done. Although insignificant. it more than
likely thrilled Steinhardt to have the United States
coat of arms painted on the sides of his $20.000 Isotta
Fraschini. For a second car he purchased a Packard
Waterhouse Convertible formerly owned by Damon Runyan.
The day of departure approached.

A Bon VOyage dinner honoring the new American
diplomat and his wife was held at the Waldorf-Astoria.
With Frank C. Walker presiding and Eddie Dowling as mas-
ter of ceremony. over two-hundred friends hailed Stein-
hardt as a "human and regular fellow."21 Richard H.
Waldo of Mchure's Magazine described the guest of honor
as ”wise. farsighted. marvelously analytical. endowed

with good taste. and an excellent judge." Steinhardt

 

21New York Times. June 20. 1933.

47

told of his good fortune in going to Sweden. He expressed
the belief that Sweden was at or near the head of all
civilized countries because of her 116 years of peace
through crises that would have thrown almost any other
country into war. Others present to bid the Steinhardt's
"farewell" besides Walker. Dowling. and Waldo were:
W. Forbes Morgan. Gene Tunney. Edward J. Flynn. Basil
O'Connor. Daniel Tobin. Robert Jackson. and Samuel Unter—
myer.

To the press Steinhardt denied he would carry
“last minute" instructions to the American delegation
at the World Economic Conference. (Although Steinhardt
did stop in London on his way to Stockholm. it appears
that Roosevelt intended to use him only as a "decoy."
He was instructed "to mix around for a few days or a
week with the conference crowd.")22 Stockholm being
considered a vantage point for a clear view of Russia.
the Minister was asked if he might not make valuable

scrutinies of the Soviet Union.23 He replied: "I should

 

22J.R.M. to Hengstler. May 12. 1933. Department

of State Archives. 123 Steinhardt/14.

23New York Times. July 7. 1933.

48

say that Stockholm is an advantageous point from which
to observe Russia. I shall certainly report back to
the President from time to time on these observations."
In his original instructions. Steinhardt was ordered to
report on the Soviet Union. When the Department con-
cluded that Riga was a better listening post than Stock-
holm. the order was countermanded.24 The Minister even
when taking a small holiday to the Soviet Union in 1934
did not formally report his findings to the Department.
The new Minister and his family departed New
York for Sweden on the first day of summer. 1933. After
a brief stop in Paris. they spent a few days "mixing
with the Conference crowd in London." They reached their
destination. Stockholm. July 25. The United States at
this time owned no residence for its Minister in Sweden.
It was up to each member of the Legation to shift for
himself. Eventually the Steinhardts found suitable
residence at Nobelgatan 2 where they remained through-

out the Minister's service in Sweden.

 

4Personal interview with Loy Henderson. Washing-
ton. D. C.. February 9. 1967.

49

The Steinhardts desired a dwelling befitting a
representative of the world's greatest power. In time.
Mrs. Steinhardt had it elegantly. but tastefully. furn-
ished. The lawn and shrubbery were carefully manicured;
the house surrounded with flowers planted by the Minis-
ter and his wife. American tourists could point to it
with pride. Life in Stockholm set a pattern for the
Steinhardts; no matter where the diplomatic service
took them. it became necessary for them to live in the
dignity which. in their minds. was the American way.
They were respected and comfortable but not. necessar-
ily. ostentatious.

During this period. the manner in which American
diplomats lived was left to the individual's personal
ability and efforts. The United States Government pro-
vided little or no financial help. The Department re-
fused to grant Steinhardt a $25 allowance to purchase
a flagpole for the Legation: Diplomats had to ship
their own furniture and furnishings. The Government

furnished no automobiles; there was no such thing as

50

a "gasoline allowance.” In a word. the United States be-
haved "niggardly."25

The Government's impecuniosity forced diplomats
with limited finances to be careful with expenses. So
it was with Laurence Steinhardt. But above and beyond
the Minister's need for ordinary prudence was his mania
for details and exactitude; financial transactions. no
matter how small. were wars of nerve. Soon after he
settled in Stockholm he let the local butcher know that
he (Steinhardt) ran his household "on a business basis.
exactly the same as I have run my business."26 He would
not tolerate price-gouging and expected "to pay the pre-
vailing prices as quoted by other butchers." Never one
to be cheated. Steinhardt threatened to check the weights
--"prices will be checked twice a week against prevailing
prices.”

The new American Minister and Envoy Extraordinary

to Sweden presented his credentials to King Gustavus V

 

zsIbid.

6Steinhardt to Carl Larssons. November 4. 1933.
Steinhardt MSS.

51

on August 29. After welcoming the American diplomat to
Sweden. “the King expressed himself as disappointed in
the outcome of the London Conference . . . ." The King
said he regarded the present conditions of the world as
pitiful. that commerce had been strangled. and that com-
munism was a definite menace. He stated that communism
was a real danger to Sweden and that lately. on several
occasions. he had urged the Government to take more
drastic steps to deal with the subject. adding that the
Russians were carrying on a great deal of pro-communis-
tic prOpaganda in Sweden."27

The King's concern about communism no doubt
stemmed in part from the fact that the Social Democratic
Party had recently taken control of the Swedish Govern-
ment. On September 29. 1932. Per Albin Hansson. who
considered himself a good (but practical) Marxist.2

27Steinhardt to Hull. August 29. 1933. Depart-

ment of State Archives. 123 Steinhardt/19.

28Marquis W. Childs. This is Democracy: Collec-

tive Bargaining in Scandinavia (New Haven: Yale Univer-
sity Press. 1938). p. 65.

52

was requested by the King to form a cabinet. Hansson
had risen from the ranks of labor. Cautious and unimpul-
sive. he was built with a round and Open face with large
eyes that sparkled with humor. Slow to anger and sure
of himself. he led Sweden to accept him as its symbol.
Long before he became prime minister. the workers had
called him "our Per Albin." and soon he was Sweden's
"Per Albin." In time the King. too. claimed the Prime
Minister's friendship.29

The election of 1932 was so favorable to the So-
cial Democrats that the public expected much from it. The
Party had won so much support in addition to that of organ-
ized labor that it was almost a people's party. While the
Social Democratic Party of Sweden was nominally socialist.
it had become in reality a party of reform. After 1920

they deserted a program of nationalization of production

to favor nationalization of consumption. through the growth

 

29O. Fritiof Ander. The Buildinq_of Modern Sweden:

The Reign of Gustav V. 1907-1950 (Rock Island. Illinois:
American Book Concern. 1958). p. 168.

53

of c00peratives.3O The chief aim of the party was a higher
living standard for all people. The Social Democratic social
welfare program in time and purpose approximated Roosevelt's
New Deal in America.

After getting settled in Stockholm, it did not take
the new United States Minister long to grab hold of the diplo-
matic reins. Rickard Sandler, Swedish Minister of Foreign
Affairs, who had been absent from Stockholm when Steinhardt
first arrived, remarked that it took him only a few hours
to hear about the new Minister's activities. Asked whether
the reports were favorable or unfavorable, Sandler laugh-
ingly replied that he was referring to the Dexter & Carpenter
negotiations.31

The case involving the American firm, Dexter & Car-
penter, had languished for years in the diplomatic channels
between the United States and Sweden. The claim arose out
of a contract entered into by Dexter & Carpenter with Kunglig
Jarnvagsstyrelsen, also known as the Royal Administration of

the Swedish Railways, for the sale by the former to the

 

3OChilds, This is Democracy, p. 65.

31Steinhardt to Hull, August 22, 1933, Department

of State Archives, 123 Steinhardt/l8.

54

latter of a quantity of coal. In 1922 the State Railways
brought suit in the District Court for the Southern District
of New York, describing itself as a corporation under the
laws of Sweden, and sought to recover $125,000 for an alleged
breach of contract by the Dexter & Carpenter Company, Incor-
porated. The case passed through various stages of trial in
the District Court, the Circuit Court Of Appeals, and was
twice presented to the Supreme Court on petitions for writs
of certiorari, and on each occasion the Court declined to
review the case. The claim by the State Railways was re-
jected by the Courts, and judgment for $411,203.72 was given
in favor of the American corporation on their counter claim.
Action was then brought in the United States District
Court to execute the judgment by attachment of certain pro—
perty in New York belonging to the Kingdom of Sweden. This
was denied since it was contended that the property of the
Swedish Government was immune from court process. The case
was then presented to the Department of State as a diplomatic
claim against Sweden, and correspondence between the two
Governments ensued. Dexter & Carpenter agreed to settle

the claim for $150,000. However, the Swedish Government

55

over a period of eleven years had refused to take any action
in settlement of the claim.

Dexter & Carpenter in the summer of 1933 sent their
counsel, Charles Haight, to Sweden. Up to the time Stein-
hardt arrived there, Haight had made little or no progress.
The two attorneys shortly got together and went over the
details of the litigation. Haight confided that his client's
actual out of pocket loss was "approximately $70,000" and
in addition the disbursements incurred in carrying on the
lawsuit, Steinhardt set at $15,000. The latter amount in-
cluded stenographic charges, depositions, and the printing
of briefs and records. Haight generalized as to the attor-
neys' fees actually paid by his client and without Haight
saying so, Steinhardt deduced that the fees of his (Haight's)
firm were on a contingency basis. From Haight's statements,
Steinhardt judged that the total monetary cost of the case
to Dexter & Carpenter, including the actual financial loss
sustained by them, was approximately not less than $85,000
and not more than $90,000. Haight frankly admitted that
the bulk of the judgment consisted of prospective cu:specu-
lative damages or what might prOperly be referred to as
potential profits under the contract.32

32Steinhardt to Hull, August 18, 1933, Department of
State Archives, 458.11 Dexter & Carpenter/184.

 

56

Accompanied by Haight, the United States Minister
‘hastened to see Swedish officials. Steinhardt thought that
a settlement was still possible: Haight had serious doubts.33
Siteinhardt, in the discussion with Osten Unden, Acting Min-
ister of Foreign Affairs, invited Haight to take the initia-
'tive in the talks, "thus leaving him [Steinhardt] free from
.any'commitments in connection with future negotiations."
EBOon Steinhardt entered the conversation. He explained
‘to Unden that the theory of agency in the United States was
‘totally'different from the theory of agency in Sweden. Con-
‘tinuing, Steinhardt explained to Unden the American theory
<3f undisclosed principal as well as the theory of ratifica—
‘tion of the acts of others. This seemed to occasion con—
:siderable surprise to Unden as it did considerable surprise
‘to Steinhardt "that after eleven years of litigation the
:fundamental differences in the legal principles of the two

«countries should not have been brought to the attention of

34
'the Foreign Office."

 

33Haight to Green H. Hackworth, August 18, 1933,
lDepartment of State Archives, 458.11 Dexter & Carpenter/184.

34Steinhardt to Hull, August 18, 1933, Department
<3f State Archives, 458.11 Dexter & Carpenter/184.

(I)
' 0

«Av

5..

up.
I
.4“

“u:

‘1-
U‘.

m-

i

t.‘

57

Legal weapons were not the only instruments at
titeinhardt's disposal. He told Unden that Haight and Dex-
‘ter & Carpenter had brought a very considerable amount of
;pressure to bear with certain members of Congress forbidding
{governmental or private loans in the United States to any
government or agency of any government against‘which an
tinsatisfied judgment of the United States Supreme Court was
(Nitstanding. The Minister also pointed out to Unden that
jjudgments of the United States Supreme Court were invariably
respected and said that the failure of the Swedish Government
tn: remove the existing judgment by settlement or payment would
taause extensive comment and might reflect upon the Swedish
(Sovernment and Swedish credit. How much pressure Haight and
lDexter & Carpenter brought on Congress is conjectural; there
.is no evidence to support the fact they brought any. There-
:fore, it is uncertain how much of this was an invention of
Eiteinhardt's mind but, according to the American Minister,

"it was unmistakable that they left a marked impression with

him [Unden] . "35

If Steinhardt had resorted to subterfuge, it never-

‘theless brought results. Though Haight in confidential

 

351bid.

 

p? .
ple

n,— v

A:

’h".

'osv

V.

Eat

‘A

0-.

58

discussions with Steinhardt agreed to reduce the amount
of his claim, the Swedish Government on September 30
agreed to pay Dexter & Carpenter $150,000. It afforded
Steinhardt immense satisfaction to confirm the report that
the longstanding controversy and litigation arising out
of the so—called Dexter & Carpenter claims against the
Swedish State Railways had been full and finally disposed
of to the satisfaction of both Swedish and American Govern-
lnents. "Obviously the continued existence of so fertile
.a source of irritation," he concluded, "was not conducive
'to improving the relations between the two Governments.
'The complete and satisfactory settlement of these claims
:removes the only serious issue between Sweden and the
‘United States."36

However, there were some Americans, more inter-
ested in other Swedish litigation. In March,l932, the
Swedish match king, Ivar Kreuger, shot himself in a Paris
apartment. Mourned at the time of his death as a financial
'titan, he was revealed a month later to have been a swindler

*who had forged $100,000,000 in bonds. Many Americans were

 

36Steinhardt to Hull, October 12, 1933, Department.
of State Archives, 458.11 Dexter & Carpenter/206.

59

victims of Kreuger's deception. Already in July, the month
of Steinhardt's arrival, auditors from all over the world
were busy at work in the Swedish capital. Steinhardt wit-
nessed for the next several months the unraveling of one
of the world's most notorious swindles.

To a few felloweAmericans, Steinhardt was more than
a casual witness. From time to time both President Roose—
velt and the Department of State received letters complain—
ing of Steinhardt's, along with others, activities in con—
nection with the Kreuger affair.37

Circumstances, family ties, previous connections,
and ignorance fathered the complaints. The situation of
Norman H. Davis was one such example. The American Protec-
tive Association represented a large majority of the bond-
holders, American citizens for the most part. It created
in July, 1933, an International Committee to study the posi-

tion of the three Kreuger Companies, namely International

Match, Kreuger & Toll, and Swedish Match with a view of

37Hull to John Bradford, December 29, 1934, Depart-
ment of State Archives, 858.659 Matches/227: Bradford to
Franklin Roosevelt, November 17, 1934, Department of State
Archives, 858.659 Matches/219: C. Palmgren to Hull, July 21,
1935, Department of State Archives, 123 Steinhardt/60.

6O

finding some solution of their difficulties for the benefit
of their respective creditors and investors. The Protec-
tive Committee asked Davis, American member of the Disarma-
ment Commission at Geneva, to head the International Com-
mittee. IReceiving Presidential approval, Davis took a
leave of absence (without pay) from his public duties and
went to Stockholm. The fact that Davis in performing his
functions as head of the Committee was acting in a private
capacity. escaped consideration by the uninformed.

Davis, as head of the Committee, would have con-
ferred with.America's diplomatic representative in Sweden
no matter who occupied that position. In like manner the
American minister, no matter who, would have interested
himself in the Kreuger prodeedings. However, Steinhardt,
as a former member Of one of the country's leading firms
dealing in international finances, was in a sensitive posi-
tion. Some critics seemingly were unaware that he had
severed connections with the New York City law firm headed
by his uncle, Samuel Untermyer.

It is true that Untermyer was interested in the
Kreuger litigation. As early as July, 1932, the Jewish

financier had expressed a desire to go to Sweden "in

61

connection with the Kreuger & Toll matter."38 In the fall
of 1934. twenty-four American and foreign businessmen and
economists interested in the reorganization of properties
of the late Ivar Kreuger were guests of Samuel Untermyer
at his country estate.39 Laurence Steinhardt. United
States Minister was among those present.

Steinhardt did not necessarily feel obligated to
his uncle's business. In Steinhardt's mind the greater
interest of America transcended any self-centered interest
held by small. independently minded groups. If Untermyer's
interest was compatible with that of most other Americans.
there was no inconsistency in Steinhardt's thinking.

Admitting no rationalization. Steinhardt thought
that as foreign diplomat his service should be in the
interests of the United States. In his view since Ameri—
can capital represented the largest investment in the var—
ious Kreuger enterprises. American interests ought to play
an important and perhaps determining role in any plan of re-

organization that might be proposed.‘“3 He disliked attempts

 

38Steinhardt to Mrs. Madeline Partridge. July 6.

1932. Steinhardt MSS.
39 .
New York Times. November 10. 1934.
40

Steinhardt to Hull. March 14. 1934. Department
of State Archives.

62

by the Swedish interests, both public and private, to gain

an advantage over the Anglo-American interests.

Neither did he like the selfish interests which he
imagined at work within the United States. In Stockholm

he observed the activity of the American match industry

that hopefully desired the emasculation of Swedish compe-

t: it ion. To Steinhardt it was "reflective of the personal

and selfish point of view which the country [the United
States] has had such ample evidence in recent years, par-
t icularly in so far as it overlooks the greater interests

of the greater number of our fellow Americans."41 In the

Same deSpatch Steinhardt stated that the American public

had invested approximately $350,000,000 in the various

Kreuger 5. Toll enterprises. The total investment within

the United States in the domestic match industry, he con-

tinued, amounted to less than $40,000,000. It was the

idea of those interested in the domestic match industry.
Steinhardt wrote, "that the $350,000,000 investment of
tens and thousands of Americans should be sacrificed in

orCier that the earnings of the industry within the United
\ \

D 4lSteinhardt to William Phillips, November 18, 1934,
ePartment of State Archives, 858.659 Matches/229.

63

states, in which there is invested not much more than ten

percent of the $350,000,000 investment in the same industry

abroad, may not be adversely affected."

The American match industry was also under the im-
pression that both Davis and Steinhardt had recommended to

the Department of State or were seeking a reduction of the

American tariff on matches. Arthur Rosenborough, a member

0 f the Davis International Kreuger Committee, assured Stein-
hardt that "there was no desire for any such reduction" and
that he was inclined to believe that the coincidence of the
trade treaty negotiations taking place at the same time as
the attempts to rehabilitate the Kreuger companies must
haVe led someone to jump at the erroneous conclusion.42
A reduction in the American tariff on matches, he went on,
was not in the slightest degree essential to the Kreuger
reOrganization plans and that there was nothing in common
between the American tariff on matches and the attempts to
salvage for the American public a part of their investment

In the Kreuger Companies.

No doubt Steinhardt thought he served the interest

of the greater number of Americans.
\

42

o Steinhardt to Hull, February 8, 1935, Department
‘5 State Archives, 858.659 Matches/247.

However, the degree of

64

influence he had upon the Committee is open to speculation.
According to Cordell Hull, Steinhardt was in no way con—
Iglasaczted with the reorganization of Kreuger & Toll.43 And
<::¢:>11trary to later statements, Steinhardt stated that he
'ICIEEIJCi not at any time taken part in any of the negotiations
of the Davis Committee.44 Furthermore, he suggested, it
would have been quite absurd for him to do so, as the
Davis Committee had at all times been represented in Stock-
'1:L<:>JLrn by the most eminent counsel, who would have deeply
resented any meddling on his part. It is a fact, notwith-
standing, that these gentlemen discussed from time to time
the ir problems with him privately, and he, in turn, en-
Clfieenvored to assist them-~particu1ar1y in the social field--
Vvllfiazrever he thought he could properly do so within the
Irea(Julations of the Department. As United States Minister
to Sweden, he "endeavored to maintain a spirit of harmony
13$theen all the parties interested" in what he regarded

\

43Hull to John Bradford, December 29, 1934, Depart-
ment of State Archives, 858.659 Matches /227.

44Steinhardt to William Phillips, November 18, 1924,

1Del>a.:lrtment of State Archives, 858.659 Matches/229.

65

to be "a most constructive piece of work looking to the

protection of American interest in Sweden."45

Firsthand viewing of selfish motives evidenced in

the Kreuger affair heightened Steinhardt's regard for Amer-

ican interests abroad. This regard was not only for pri-

vate capital investment but also for the broader spectrum

0 f international relations .

He had already come to the

conclusion that there was "only one way for the United

States to deal with Europe" and that was "by adopting

their own methods. They merely take advantage of our

idealism and have no sense of reciprocity. We have spread

our wealth over the four corners of the world by gifts,
other charities, and loans and in return have nothing but

ill—will, envy, and an ill-concealed desire to hurt us

whenever possible."46

The United States' policy in foreign affairs,

Steinhardt thought, "should be nothing for nothing."47

Ha‘71ng been too generous and charitable in our dealings
\

45
Ibid.

S Steinhardt to Frank C. Walker, September 26, 1933,
teinhardt MSS.

47

S Steinhardt to Richard Waldo, January 4, 1934,
teinhardt MSS.

m
(I)

.
#1,

BL:

66

with the rest of the world, he stated to the same corre-

spondent, "they have taken advantage of us without so much

as a thank you." In his view, we had failed to raise the

rest of the world to the standard of American ideals. Con—

23 equently, the United States should retain its ideals domes-
t ically but in foreign dealings trade with otherson the

basis which they themselves have established, to wit: "we

give. nothing unless we get its equivalent in value to our-

8 elves. "

Such a course, he said, would shock Europe. However,

over a period of years the policy would "result in greater

reapect for the United States and its citizens than the

Pelicies of the past under which we have not only been but

have rightly been laughed at in Europe as suckers."4'8

New Deal diplomacy, according to the Minister, was a

move in the right direction. Every step taken by the Presi—

dent: he asserted, was examined in EurOpe from a selfish

E"~-=I.:I:'<>pean point of view. He was satisfied that at last "the

American Santa Claus had closed shop."49
\

481bid.

S . 49$teinhardt to Frank C. Walker, January 20, 1934,
teinhardt MSS.

u
Q‘s-I

IILII!

67

Moreover, Steinhardt considered the diplomacy of the

nineteenth century unsuitable for that of the twentieth

century. New Deal diplomacy, he alleged, recognized the

problems inherent in modern warfare, the ever increasing

1:). ecessity for international trade, economic unsettlement,

and political unrest. As far as it affected American diplo-

ma cy the New Deal called for "more work and less play:

greater frankness and less formality; more action and less

pomp; and above all honesty of purpose without mental reser-

vation."50 The old school of diplomacy is dead, Steinhardt

announced, and in its place is rising a new school founded
upon a standard of ethics which demands as between govern-

ments at least as high a standard as that required by up-

right business men in dealing with one another. "Only by

a World wide acceptance of these principles can the nations

e3":IE>ect or even hope for international trade relations and

t:}1<3 abolition of war."
Steinhardt doubted, however, Europe's willingness

and ability to adapt itself to this new diplomacy. As he

Saw it, there were fundamental differences between Europeans

\

S 50From Steinhardt address on unknown date in
Weden, 1934, Steinhardt MSS.

68

and Americans in their outlook on life. Whereas he saw
Americans as optimistic, democratic, hospitable, generous,
frank, and cordial, he depicted Europeans as having a
natural bent for hereditary tightness, selfish, suspicious,
formal, worshipful of station in life, and aloof.51 EurOpe
suffered, as a consequence, from inefficiency; labor was
impotent, lazy, and unable to compete with America's super-

ior productiveness. As a result, he concluded, Europe

looked to the United States for not much more than a dole
52 '
and a handout.

These rather parochial and nationalistic views
did not mean that he was anti-lforeign, but his generaliza-
tions could scarcely have been supported by objective
e\ridence. Steinhardt's state of mind led him to express
the view that only the United States, with its intrinsic
virtue, possessed the necessary economic skills. When the
depression halted America's industrial machine, Europeans

resented "the failure of the United States to maintain a

\

51Steinhardt to Richard H. Waldo, June 28, 1934,

S t e inhardt .MSS .

I52Steinhardt to Richard H. Waldo, May 9, 1934,

S t e inhardt MSS .

69

peak of prosperity for the benefit of EurOpe."53 The rest
cjyjf'the world, he continued, was entitled to suffer from
;I;><Ezriods of depression, bad business, speculation, or other
unhealthy outbreaks but the United States was supposed to
21:>¢Ee immune. He added; "Strangely this mental condition
5. s not the result of any charitable or generous instinct
1::<:rvvard.the United States but rather that of the poor rela-
1:::i_<xn who has been supported by a rich relative all his life
0.11 1y to turn on his benefactor in a rage on learning that
he is no longer wealthy and unable to continue his bene-
factions." Quoting an old adage, Steinhardt expressed to
a fellow minister what he (Steinhardt) thought Europe's
Eitzizitude was towards the United States:

The devil was sick, a monk would be--
The devil got well, the devil a monk was he.

54
Europe's ingratitude as reflected in the press dis-

turbed the American emissary. In Sweden, news concerning

the United States was received chiefly from English or Ger-

man sources. "The news so received hereis frequently dis-

torted by these agencies foreign to the United States for
\

fl

53Steinhardt to Hoggman Philip, May 3, 1934, Stein-
hardt MSS.

l 54Steinhardt to Ruth Bryan Owen, September 19,
935, Steinhardt MSS.

70

their selfish national political or trade purposes. A
vein of disbelief, sarcasm, exaggeration, and at times con-
tempt permeates the news . . . This practice which is now
of long standing has materially diminished the prestige of
the United States in the Northern Countries and is seriously
a ffecting our exports."55 The prevalent notion in Europe
that the United States was a lawless country annoyed him.56
Steinhardt responded to what he considered journal—
istic perversion. As a private citizen he would have been
Stimulated to do so--as a representative of the United
States he accepted it as a duty and obligation. Realizing
that a managed press was incompatible with a free democratic
s<>oz.~.iety, he thought that "some means be provided, through
e='<:i.sting agencies if possible, such as the Associated Press
and the United Press, of furnishing news . . . more inde-

Pendent of the foreign agencies which persist in carrying

aI'lti-American news."57 Likewise, he thought American-made
\

5Joint report of American Ministers; Mrs. Ruth Bryan
Owen (Denmark), Edward Albright (Finland), and Laurence A.
S‘tt-einhardt (Sweden) to Franklin D. Roosevelt, March 1, 1934,
I{Oosevelt MSS.

56Steinhardt to Richard H. Waldo, June 28, 1934,
Steinhardt MSS.

57Joint report of American Ministers to Franklin D.

I{Cosevelm March 1, 1934, Roosevelt MSS.

71

motion pictures should be regulated. The unsupervised export
of movies, in his opinion, had "done great harm to the
prestige of our country."58 In a one-man campaign he set
out to uproot the poor image of America in Sweden; the
Swedes, from Malmb to Karuna, heard the story of American
might and virtue. Thus disposed, he was determined to
press his point in Washington. Steinhardt and Mrs. Ruth
Bryan Owen, United States Minister to Denmark, collaborated
on the creation of a scrapbook for the Department of State's
use concerning newspaper accounts of American life as
depicted in the Scandinavian press.

As a New Deal diplomat, Steinhardt also felt obli-
gated to defend Roosevelt's recovery program from foreign
misunderstanding. Using prepared speeches and statements,
the American envoy protected the Administration's position

on gold.60 deficit financing and the national debt,61

 

58
112E.-
59Steinhardt to Mrs. Ruth Bryan Owen, October 27,
1934, Steinhardt MSS.

60Steinhardt to Hull, September 26, 1933, Department
of State Archives, 123 Steinhardt/20; Steinhardt to Laurence
Hills, October 12, 1933, Steinhardt MSS.

61Steinhardt to Hull, October 4, 1934, Department of
State Archives, 123 Steinhardt/43.

72

social legislation,62 agriculture,63 and international
trade.64 Interestingly, Steinhardt found he could dance
to the tune of the New Deal. As the tempo of Roosevelt's
legislative agenda shifted from a conservative to a more
liberal score, Steinhardt was seldom found out of step
with the music. In a real sense, the shift in Steinhardt's
thinking matched that of his Commander-in-Chief's.
Perplexingly, Steinhardt was all but oblivious
to the extensive Social Democratic program designed to
deal with the depression crisis in Sweden. It was during
Steinhardt's stay in Sweden that--thanks partly to the
publicity given to her by writers such as American jour-
nalist Marquis Childs, whose book, Sweden: The Middle Way,65
was first published--she came to be regarded as an ideal

state, which achieved social security, equality, and eco-

nomic prosperity while remaining a liberal democracy. In

 

‘621bid.

63Steinhardt to null, March 1, 1935, Department of
State Archives, 123 Steinhardt/51.

64Steinhardt to Hull, February 5, 1936, Department of
State Archives, 123 Steinhardt/71.

65Marquis W. Childs, Sweden: The-Middle Way (New
Haven: Yale University Press, 1936.)

73

the 1933 Riksdag, Per Albin Hansson presented an extensive
program designed to deal with the crisis: public works were
to be undertaken by workers paid at market rates, agricul-
ture was to receive more assistance, and an attempt was to
be made by a bold financial policy to overcome the depres-
sion and pave the way for new recovery.66 The new govern-
ment came to the aid of the farmers by retaining controls
already imposed by its predecessors and raised the fixed
minimum prices of farm produce. Industry was encouraged
by devaluing the krgg§_to discourage imports.

Conditions improved rapidly in Sweden during 1933.
Production and real wages rose, and unemployment sank: a
period of prosperity greater even than that of the 1920's
got into full swing. The situation was favorable for the
introduction of further social legislation: unemployment
insurance came in 1935 and old age pensions were raised

appreciably in 1936.67 During Hansson's first two years

 

_Y

6

Ingvar Andersson, A History of Sweden, translated
by Carolyn Hanney (New York: Frederick Praeger Co., 1956),
pp. 438-39.

67Oakley Stewart, A Short History70f Sweden (New
York: Frederick A. Praeger, 1966), pp. 243-44. See also
Franklin Scott, The United States and Scandinavia (Cambridge:
Harvard University Press, 1950).

74

the government resorted to deficit financing: the two years
following were sufficiently prosperous to balance the budget
and pay off the previously accumulated debt. President
Roosevelt in 1936 sent a special mission to observe and
report on Swedish recovery programs.68 Roosevelt's actions,
however, were prompted more by Child's book than by the
reports and observations of the American Minister in Sweden.
Even though social legislation was the hallmark of the New
Deal, Steinhardt failed to evince much enthusiasm for such
programs in Sweden. It goes without saying that the Roose-
velt Administration would have benefited from on-the-spot
reports from Sweden.

Like the Social Democrats in Sweden, the early New
Dealers in the United States concerned themselves more with
damestic problems than with foreign affairs. When Roose-
velt refused to submit a new tariff bill to the special
session of Congress in the spring of 1933, it was a setback
to the program espoused by Secretary of State Cordell Hull.
The President mindful of Hull's unrelenting desire for a

trade liberalization program, assured the Secretary that

 

68Hudson Strode, Model for a World (New York:
Harcourt, Brace and Company, 1944), p. xix.

75

the chief executive had the power to negotiate reciprocal
trade agreements. However, Hull knew the Senate's record
in rejecting such treaties. Deeply hurt, he threatened to
quit.69 Roosevelt, in an attempt to soothe the Secretary's
ruffled feathers, authorized the Department of State to
sound out several countries on the possibility of negoti-
ating reciprocal trade agreements.70

One such possibility was a Swedish-American treaty.
The depression had caused a marked decline in the exchange
of goods between the two countries. After the Swedes aban-
doned the gold standard in September, 1931, the cost of
American goods became excessive and diverted the require—
ments of Sweden to other sources of supply which were
available. Violent fluctuations in the dollar exchange
made Swedish importers extremely cautious and prevented them
from buying in the United States. When America went off

the gold standard a certain degree of the same uncertainty

had the same bad effect. Reported refusal of American

 

69Cordell Hull, The Memoirs of Cordell Hull, 2 vols.
(New York: The Macmillan Company, 1948), I, p. 42.

7OJulius Pratt, Cordell Hull, 1933-1944, 2 vols.
(New York: Cooper Square Publishers, 1964), I, pp. 108—10.

 

76

banking concerns to grant ordinary commercial credit facil-
ities to finance export sales had the effect of forcing
Swedish commercial interests to turn to other financial
centers for such accomodations, primarily to London.71
Sweden was the first European country approached
regarding a reciprocal tradeagreement.72 In Stockholm,
Steinhardt confirmed the report that he had received
general instructions to initiate negotiations with the
Swedish Government for a trade agreement.73 The Swedish
Minister in Washington, Wollmar Bostrom, received similar
instructions from his government. The Department assured
him.that it would be glad to negotiate with Sweden
promptly in order that there would be no discrimination
against Swedish trade with the United States. The United
States would accord Sweden, so the Treaty Division informed
Bostrom,.most-favored-nation treatment and later if desir-

able it would be incorporated into a reciprocity treaty.

 

71T. O.-Klath to Hull, January 19, 1934, Department

of State Archives, 611.5831/85.

72William Phillips memorandum of conversation with
Swedish Charge d'Affaires, July 13, 1933, Department of
State Archives, 611.5831/50.

73New York Times, July 27, 1933.

77

In the past the United States had incorporated the
most-favored-nation principle in most of its commercial
treaties. Its inclusion in various New Deal reciprocal
trade agreements was not, therefore, a departure from.Amer-
ican practice. With reduction of duties on a commodity
imported from a country with which the United States made
an agreement,'the most-favored-nation principle Operated to
accord reduction on the same commodity when imported from
other countries. As a low tariff country, its inclusion
had particular significance for Sweden.

The indefiniteness of the development of prices of
American commodities due to the National Recovery Act was
another deterrent to SwedisheAmerican trade. Bostrom feared
that the Act would serve to increase import duties on Swed-
ish products.74 He was assured that his fears had no basis.

The National Recovery Act proved embarrassing in
another way. American negotiators in preliminary discus-
sions had promiSed the Swedes that pulp wood and newsprint
would be exempt from import duties. Concurrently both com-

modities received protection under Section 3e of the

 

7‘q’William Phillips memorandum of talk with Bostrom,
October 18, 1933, Department of State Archives, 611.5831/69.

 

()

78

National Industrial Recovery Act. The Executive Council
meeting at the White House in January, 1934, discussed
this ambiguity together with the general status of recipro-
cal negotiations with Sweden. President Roosevelt thought
it unnecessary to hold up negotiations in spite of Section
3e. Roosevelt opined that there would be no great protest
against continuing the commodities on the free list except
in Maine and the Northwest. Inasmuch as he was willing
"to stand the gaff," other members of the Council were
willing to proceed with the negotiations.75

Steinhardt on several occasions requested the
Department to hasten the agreement.76 In the summer of
1934 he sent a revised list on which tariff concessions
might be asked of the Swedes.77 Included on the list were:

fresh fruit, automobiles, automotive parts and accessories,

motion pictures, and silk manufactures. The Minister

 

75'William Phillips to Francis Sayre, January 16, 1934,

Department of State Archives, 611.5831/91.

76Steinhardt to Herbert Feis, January 22, 1934, Febru-
ary 20, 1934: March 20, 1934 in Steinhardt MSS. See also
Ministers Report, March 1, 1934, Roosevelt MSS.

77Steinhardt to Hull, August 9, 1934, Department of
State Archives, 611.5831/116. For earlier list see Steinhardt
to Hull, August 11, 1933, Department of State Archives, 611.583/54.

 

Flu

Ht

FII‘U

0.:

HVL

79

thought that impediments existed in form of excise tax

on tires and gasoline, stringent pharmaceutical and grain
mixing regulations. Further impediments, he pointed out,
were the possibilities of future Swedish laws requiring
compulsory mixing of alcohol with gasoline, a threatened
Governmental monopoly of motor fuel distribution, and
extensive dumping by the Soviet Union of petroleum pro-
ducts. Steinhardt suggested that Swedish objectives
would be to retain wood pulp, newsprint, and paper on the
free list without reduction of quantity. In turn, the
Swedes would ask for lower rates on iron, high grade steel
and steel products, granite, matches, and industrial art
products, particularly glassware and pewter.

Steinhardt concluded, however, that the most essen-
tial concession upon which the United States should insist
was extraneous to tariff and rate changes. "If the object
of the proposed treaty be the increased sale of American
products," he asserted, "there is a basic obstacle which
must first be removed and which is a more serious deterrent
to the sale of American products than any tariff schedule

could possibly be."78 He had in mind the practice in Sweden

 

781bid.

.4.

\

80

whereby individuals either imitated American products or
pirated American trade-names and trademarks. The Swedish
laws, reported Steinhardt, were antiquated and provided
no relief to the offended. He considered it wise to pro-
tect American business by incorporating suitable prOViSions
in the proposed treaty.

Although he favored government sponsored assistance
to commerce, Steinhardt thought that American business
ignored international trade. In Sweden they refused to

take advantage of the excellent market that awaited them.79

Instead, they contented themselves with inept franchises
and one-time sales. Generally speaking, he thought, Amer-
ican products were over-priced with nothing but short term
profits in mind. American businessmen, in his opinion,
had to set long-range goals if they were to corner success-
fully their share of world trade.

The Department of State concluded its investiga-
tory studies. In accordance with requirements specified

in the Reciprocal Trade Act, the Department on September 10,

1934, gave public notice of its intention to negotiate a

 

79Steinhardt to Hull, December 11, 1934, Department

of State Archives, 611.583/215.

81

trade agreement with Sweden. As anticipated most of the
critics represented American match, wood pulp, paper, iron,
and steel industries. Their effect on the draftings of the
agreement was minimal.

Swedish intractability delayed the signing of the
treaty. Notwithstanding obstructive tactics by Swedish
Minister Bostrom in Washington,80 Steinhardt urged patience.
Confident that the two countries would eventually come to
terms, the New Deal diplomat referred "to the fact that a
disposition to bargain is inherent in the Swedish character.
It is not a Swedish characteristic to strike a bargain
quickly. The Swedes have a penchant for prolonged trading.
They are a slow moving conservative people who . . . seem
to believe that the length of time ofa negotiation consumes
bears some relation to the ultimate result arrived at."81

According to Swedish negotiators, they had good

reason to forestall the agreement. The Swedish Govern—

ment desired a clause written in the treaty which could

 

80Steinhardt to Hull, August 9, 1934, Department

of State Archives,

81Steinhardt to Hull, December 11, 1934, Department
of State Archives, 611.583/215.

82

be construed as a recognition by the United States that
Sweden pursued a low tariff and liberal trade policy. For
that reason, they concluded, there was not available the
same possibilities for bargaining and reduction of rates
as with other higher tariff countries. They were particu-
larly anxious for such a clause, partly for domestic poli-
tical effect and partly because they thought that it would
enable Sweden to better resist the pressure from other
European countries.

This failed to satisfy Secretary Hull. He suggested
that Steinhardt have "a frank talk" with either the Prime
Minister or Minister of Foreign Affairs. Hull requested
his Minister to inform Swedish authorities that United
States policy tended toward lower tariffs and hoped to be
able to grant liberal concessions, "but not without reci-
procity, for it is the only way we can mutually increase

trade."83

 

2Pierrepont Moffat memorandum of telephone address
with Per Wijkman, October 23, 1934, Department of State
Archives, 611.5831/187.

83Hull to Steinhardt, December 6, 1934, Department

of State Archives, 611.5831/193a.

83

Steinhardt found nothing but cooperation in the
Swedish Foreign Office. He assured Hull that Rickard
Sandler, who as Minister of Foreign Affairs served also
as President of the League of Nations, was sympathetic
toward the Secretary's attempt to remove international
trade barriers. Hereafter, he confided, specific items
would be relegated to a place of secondary importance.
According to Steinhardt, the Swedish Minister of Foreign
Affairs was "engaged in the ambitious project of endeavor-
ing to negotiate a treaty with the United States which
he can hold before the eyes of the world as a 'model
treaty' aiming at the destruction of trade barriers."84

It appeared for the next several months that
authorities had shelved the agreement. Suddenly in May,
1935, with no forewarning, Hull announced that negotia-
tions had been completed and the treaty was ready to be
signed. He cabled Steinhardt in Stockholm: "The nego-
tiations have gone so fast that it has not been possible

to telegraph you day to day deve10pments. We do not want

you to think, however, that we did not rely greatly on

84Steinhardt to Hull, December 22, 1934, Department
of State Archives, 611.5831/216.

84

your excellent reports, and want you to know that we feel
that your share in the conclusion of the agreement is a
large one."85 Officials in Washington signed the treaty
on.May 25; it became effective on June 7 when ratified by .
the Swedish Riksdag.

Steinhardt, for the most part, was satisfied.
Undoubtedly he was disappointed that the treaty had no
provision protecting American products, c0pyrights, and
patents in Swedish courts. Taken as a whole, he regarded
the treaty as very satisfactory. In a letter he stated
his convictions: "I have no present intention of sending
any formal despatch with respect to the provisions of
the treaty. The matter is closed and I have never been
given to wasting much time on that which no longer can be
changed. Obviously, in any contract each side strives to
get as much as it can and to give as little in return as
possible."86 Efforts on behalf of the treaty proved to be

Steinhardt's most significant contribution as Minister to

Sweden. It established him as a partner along with

 

A85. ‘ . ' ' ' ‘ '
Hull to Steinhardt, May 23, 1935, Department of
State Archives, 611.5831/245a.

86Steinhardt to T. O. Klath, June 12, 1935, Stein-
hardt MSS. '

1‘

[Jo

85

Secretary Hull in the New Deal's design to remove the
world's tariff barriers. When in 1936 American exports
to Sweden increased by nearly fourfold over what they
had been in 1933, both Steinhardt and the Department
hailed the Reciprocal Trade Treaty signed with Sweden
in 1935 as the impelling factor.

Efforts on behalf of the treaty did not consume
all of Steinhardt's time. He still found time to fulfill
his reasons, in part, for accepting the ministerial posi-
tion: be relaxed by sailing, fishing, skiing, playing tennis
and bridge. In between activities he promptly and method-
ically sent bi-monthly post reports to Washington. Pri-
marily the reports were gleanings from Swedish newspapers
covering a wide range of activities. Seldom, if ever, did
the Minister incorporate his own personal views in these
reports. He left interpretation for those at the European
desk in the Department of State.

On occasion he found time (from his northern outpost)
to write friends his views of Europe. Like other diplomats
of the time, Steinhardt was slow in recognizing the inher-
ent danger in the Nazi regime in Germany. In the fall of

1932 while on his pre-election trip to Europe, Steinhardt

86

doubted Hitler's ability to take over the government.87

In speaking of anti-Semitism, Steinhardt thought it
"primarily a political expedient of the Nazis. The
closer they come to the real accession of power, the
less palatable anti—Semitism will be to them." Once
in power, he said, Hitler would find himself "in the
position of having to suppress anti-Semitism as much
as possible." Even when Hitler acceded to power and
increased rather than lessened his attack on the Jews,
Steinhardt was of the Opinion that Hitler had "done I
a great deal for the German people; if nothing else

he as given them back their self—respect."88 Although
Steinhardt foresaw no trouble between France and Ger-
many "for along time, " he thought Hitler would be

more acceptable "if some of his satellites were of a
different type or if he himself had not been so extreme

in certain of his policies--particularly anti—Semitism--

and did show a greater knowledge of government and

 

87Steinhardt to Jacob Landau, September 13, 1932,
Steinhardt MSS.

J

88Steinhardt to Robert Davis, December 4, 1933,
Steinhardt MSS.

87

economics and respect for world opinion. .. ." Had Hitler
fulfilled these qualifications, Steinhardt could have said
"a great many good things for his movement."

Steinhardt, on the other hand, was cognizant of
Hitler's mishandling of foreign affairs. He thought that
the Germans blundered badly regarding Anschluss between
Austria and Germany.89 "They have antagonized at least
half of the Austrian people, have spoiled their chances of
ever gaining English or French consent, have made the Little
Entente extremely nervous, and have even alienated Italian
sympathy on this point." In his opinion there could be no
Anschluss between Germany and Austria "unless Germany at—
tempts to bring it about by force which could easily pre-
cipitate a war in which even Italy could not be expected
to side with Germany." Because of "the great hostility
to Germany" rising from "commercial and financial mis-
treatment," Steinhardt predicted that the Swedes in the
event of war would turn toward Britain and the British

Colonies.90 A long-time antipathy toward Russia, "the

 

89Steinhardt to John A. Hinckley, February 14, 1934,
Steinhardt MSS.

90Steinhardt to Robert Pell, January 29, 1934, Depart-
ment of State Archives, 123 Steinhardt/B9.

88

traditional enemy," he thought would leave Sweden no
other choice.

However, it was Swedish-American relations that
dominated Steinhardt's thinking during his stay in Stock-
holm. Appreciating the magnetism of Anglo—Swedish rela-
tions, he did not desire English monopoly of Sweden's
trade. Consequently, he urged Roosevelt and others to enter
the psychological battle for Scandinavian markets. He im-
plored the Department of State to display American pres-
tige by sending war ships, air squadrons, famous individuals
and athletic teams to Scandinavia.9

Ordinarily, Steinhardt had good, amicable rela-
tions with the Swedish press. It was events surrounding
a visiting team of American athletes that presented him
with his only real embarrassment during his stay in Sweden.

The newspaper Idrottsbladet, leading Swedish sports jour-

 

nal, rebuked Steinhardt for a speech he was alleged to
have made at a reception for visiting American athletes.92

The newspaper quoted Steinhardt as saying: "Be on your

 

91Steinhardt to Roosevelt, January 24, 1935, Stein—
hardt.MSS.

92New York Times, July 19, 1934.

89

watch: the Swedes are a jealous nation and do not like to
see foreign sportsmen triumph." Steinhardt denied the
story stating that he had only advised American athletes
to "comply strictly with the rules."93 Later T. Tegner,

proprietor and editor of Idrottsbladet, apologized to the

 

New Deal diplomat: "We know you as the friend of Swedish
Sport in the Corps Diplomatique of Stockholm. What pains
me more than the distortion is the violation of your hos-
pitality."94 The sincerity of the apology and the esteem
in which Steinhardt was held by the Swedish press are best
indicated by the correspondence he maintained with various
individuals throughout the American's entire diplomatic
career. Steinhardt, for his part, continued an acute
awareness of the power of the press.

As America's quadrennial elections drew closer,
Steinhardt's thoughts turned increasingly to politics.
During his ministry he kept abreast of political develop-
ments. On home leaves be activated his political image,

never failing to make‘ a personal call at the White House
\

93Ibid., July 20, 1934.

94Ibid., August 29, 1934.

 

90

or Hyde Park. From Stockholm he sent the President an
expensive crystal vase engraved with the seals of the
Navy Department, State of New York, National Recovery
act, and the Presidential seal.

Along with other diplomats, Steinhardt returned
hcune: for the Presidential campaign. A cartoon by T. E.
Powers in a New York newspaper depicted the diplomats
(Steinhardt among them) swimming home to help in Roose-
‘veliz's "Raw Deal" re—election.95 It piqued Steinhardt.
Steinhardt explained that such procedure had been common
practice for years, the government paid only for the
diplomat's first and last trip, and the expenses for
absences beyond sixty days came from the diplomat 's own
Pocket and resulted in an actual savings to the tax—
payer-3.96

Steinhardt was uncertain of the election's out-
conus. In June he thought Roosevelt's chances for re-

election no better than 50-50.?7 He found it difficult

 

 

95New York Evening Journal, July 17, 1936.

S . 96Steinhardt to Charles Michelson, July 14, 1936.
telnhardt mss .

St , 97Steinhardt to Mrs. Ina M. Hoffman, June 17, 1933,
ell'11"1ardt MSS.

 

91

to appraise the violent campaign against the President
that had "emanated from Wall Street and the big investor .
interests."98 The outcome of the election, he thought,
"would depend primarily on which side makes the worst
blunders."99 This was true, he continued, becuase "in
the ~ United States . . . the masses vote against rather
than for individual candidates—-and pay very little
attention to platforms or politics." Even so, he had
no fears that the country would go radical.100 Further—
more, he; assured his correspondent, there are "some
elements at the Republican Convention . . . so liberal
(or even radical)" to make the Roosevelt Administration
appear conservative by comparison.101

One such Republican "radical" Steinhardt had in

mind was the popular Fiorello Laguardia of New York.

e

98Steinhardt to James E. Brown. Jr., June 23+ 1936'
Steinhardt :MSS.

99Steinhardt to James E. Brown, Jr., June 16, 1936,
Steinhardt MSS.

100

Steinhardt to Alfred Oste, July 28, 1936, Stein-
h""rdt: MSS.

101

h Steinhardt to Alfred Oste, May 15, 1936, Stein-
ardt MSS.

92

Steinhardt as a Democrat was innately suspicious of the
"Little Flower." But he imagined himself joined in this
attitude with "conservative Republicans, in fact all
Republicans outside the small". who had no use for LaGuar—;'
dia -102 "They regard him as a demagogue and a wild radi- '
ca1——a politician to the finger tips with no knowledge
of government and still less disposition to learn any—
thing about government or finances."

The political situation in New York forced Stein-
hardt to look at his own future with reluctance. Early
in the year Governor Herbert Lehman announced that he
would not run for re-election. The declaration increased
anxiety among Democrats in the Empire State. Steinhardt
refused to commit himself or be nominated on the New York
State ticket.10:3 To his mother-in-law he wrote: "I have
no intention, if I can avoid it, of running the risk of
dE‘feat at my age. If I were fifteen years older I wouldbe. .

for(Nerd to take a chance, but at my age I feel that I can

affOrd to stand back, and if I run for office do so at a
\

102Steinhardt to Laurence Hills, October 5, 1933,

Steinhardt MSS .

103Steinhardt to Mrs. Ina M. Hoffman, June 17, 1936.

Steinhardt mss .

 

93

time when the election for a Democrat is better than it
. 104 . .

appears thlS fall." The overcautious Steinhardt must
have been astonished with the November results. Ulti-
mately, Lehman decided for re—election and won handily:
Roosevelt carried New York with a million vote plurality.
Steinhardt was to wait for another day and another oppor-
tunity.

Pushing aside the politics of 1936, Steinhardt
contemplated his immediate future. The prime consider-
ation was whether to remain in government service or
return to his private law practice. Having stayed in
Sweden longer than he had originally intended, Stein-
hardt necessarily found an attraction in the diplomatic
service. Was he now ready to trade in the excitement,
Power, and public attention of an American diplomat for
the routine and obscure life of a Pine Street attorney?
which of the two would present the best opportunity to
fu“fill his still unsatisfied political ambitions?

One decision had already been made. Steinhardt
would not return to Stockholm; there would be nothing to

105

be gained by doing so. In April he had informed the
\\

 

105Steinhardt to Mrs. Ina M. Hoffmann. OCtOber 9'

l9
36' Steinhardt MSS.

94

president accordingly. He had made up his mind that he
would not stay in government service unless offered "a
cabinet post or one of the important Embassies in Europe
. 106 .
or South America." These were the only two continents
that interested him and having had a legation, he did
"not care for anything less than one of" our important
. 107 .

Embass1es. . . ." Thus.to a large extent, Steinhardt's

immediate future lay in the hands of the man in the White

House, President Franklin Roosevelt.

b 106Steinhardt to Major Frederic A,.Partridge, Novem-
er 20, 1936, Steinhardt M53.

1
07Ibid.

 

Chapter 3
GOOD NEIGHBOR AMBASSADOR TO PERU

Following his bitterly fought but relatively easy
xritztory in the 1936 election, President Roosevelt left
Washington for well—earned and much needed rest. With the
New Deal at high tide, the President swam lustily, bathed
11innself in the tropical sun, and fished. However, it was
not all play. Aboard the yacht Potomac, Roosevelt and ad—
viasors mapped strategy for the next round of New Deal legis-
la1:ion, discussed international affairs, and dealt with.
domestic political problems.

At some moment aboard the Potomac Roosevelt con-
Sixiered the future of Laurence A.Steinhardt. As he had done
if! 1932, Steinhardt again had made generous campaign contri-
blJltions. In addition to donating money, Steinhardt had in—
fllmenced his friend, Arthur H. Sulzberger of the New York
T

..issss into a more conciliatory attitude toward Roosevelt's

canugaign.1 Shortly before the election, the Democratic
\

‘7 lSteinhardt to Marvin McIntyre, June 15, 1936, and
1113’ 20, 1936, Roosevelt MSS.

95

 

96

candidate and Steinhardt had discussed future possibilities.
Knowing that Steinhardt desired not to return to Sweden,
Roosevelt intimated that a post might be found for the New
Deal diplomat in South America.2 Having found time to delib—
erate on the matter, Roosevelt became convinced that the
American Embassy in Peru ideally suited the talents of the
ambitious diplomat. Peru had already been chosen to host
the next Pan-American Conference: its success, in part,
depended upon having a reliable American representative there
during the preparatory stages. Pleased to be elevated to
ambassadorial rank, Steinhardt agreed to serve in Peru
through the Conference. 3

Shortly after Roosevelt's second inauguration, Stein—
hardt returned to Sweden. Aware of his impending appointment
to Peru, he knew his stay in Stockholm would be brief. Be-
tWeen caring for routine diplomatic affairs, he arranged
Personal matters, tended to the shipment of furniture and
Personal effects, and made preparations for his successor.

The Administration had already determined his replacement.

\

2Steinhardt to Mrs. Ina M. Hoffmann, November 28,
1936. Steinhardt MSS.

l 3Steinhardt to Charles S. Guggenheimer, April 1,
93 6 . Steinhardt MSS .

 

97

rphe present ambassador to Peru, Fred H. Dearing, and Stein-
hardt would trade assignments.

Steinhardt spent his last several weeks in Sweden
exchanging farewells with acquaintances and friends. Aristo-
cratic—minded, Steinhardt had limited his acquaintances to
members of Sweden's upper class: industrialists, business
leaders, and professional people. He was assured, however,
that his friendship with these people did not stem from his
diplomatic position.4 "It is almost as difficult for a
diplomat to get into the circles of these business people
as it is for a camel to get through a needle's eye, . . . ."
The writer informed the American Minister that the ability
"to get into touch with people" depended "exclusively" on
the diplomat's personality rather than position. "I go so
far as to say that you became popular notwithstanding you
were a diplomat." The correspondent neglected the fact that
Steinhardt, through Samuel Untermyer's international financing
(as already witnessed in the Kreuger affair), had a "ready-
made " audience. It is significant that he failed to reach

beyond the class of people involved in the litigation.
\

S 4Carl Trygger to Steinhardt, January 11, 1937,
tell’lhardt .MSS .

98

The Swedish press was exPansive and complimentary.

The Svenska Dagbladet, the leading conservative newspaper,

 

after applauding Steinhardt's contribution in connection
with the Dexter & Carpenter Case, the Kreuger affair, and
the Swedish-American Trade Agreement, concluded:

Minister Steinhardt has devoted much interest and
great effort toward increasing in Sweden knowledge
of American conditions. In so doing he has led
diplomatic activities into paths not heretofore
followed in this country. For example, he has de-
livered lectures in different parts of Sweden, and
he is believed to be the first foreign envoy who
has delivered a lecture before the Swedish Society
of Economists.5

The Nya Dagliegt Allehanda was just as effusive. In respect
to the development of Swedish-American cultural relations,

it said, one finds traces of Steinhardt's work everywhere.
"Mr. Laurence Steinhardt will leave a void and will be missed
here in Sweden. But such is life in the diplomatic world.
JFaced with the unavoidable parting, Sweden can only express
:Lts appreciation and say 'Good Luck' to this friend of
Sweden . . . ."6 No compliment could have been more meaning-

fill to the departing Minister than that from his own

x

5The Svenska Dagbladet, June 25, 1937, as trans—
lated in Steinhardt MSS.

6The Nya Dagliegt Allehanda, June 25, 1937, as
'translated in Steinhardt MSS.

99

Commercial Attache: ". . . your work here will never, I am

certain, be forgotten and the more I think of it the more

I am convinced no pettiness can possibly injure the position
you built up here for the United States and for yourself
personally."

The cordiality of the Swedish press toward the Ameri-
can Minister and the country he represented resulted from
Steinhardt's personal efforts. Since arriving in 1933 he
had turned an unfavorable press into one that upon his
leaving showed "a strong American attitude." It had taken
cultivation. According to Steinhardt a diplomat generally
had no control over the time or place of an interview; caught
off-guard, he might have other things on his mind. If the
diplomat avoided or refused an interview, the press immedi-
ately presumed that he concealed something. Such being the
<2ase, Steinhardt made it a practice to grant the interview,
ill this way, obtaining some inkling what the particular publi-
Cxation was likely to print. Even by using such precaution,

Sizeinhardt was aware that a single word in translation might

 

 

7Charles E. Dickerson, Jr. to Steinhardt, June 26,
19 37 , Steinhardt MSS .

‘ 8Avra M. Warren to Rudolf E. Schonfeld, unknown
date, 1937, Steinhardt MSS.

 

I'd

100

change the whole meaning; or a reporter, with his ideas on a
subject, might alter the interview to correspond with his own
views.

The time arrived, however, to set aside the problems
of Sweden for those of Peru. Confirmed by the Senate on
April 19, 1937, Steinhardt busied himself gathering infor-
mation concerning the country to which he had been assigned.
Peru, like other Latin American countries, had undergone a
series of difficulties following the world depression. Much
of the Peruvian problem stemmed from the dictatorial regime
of Augusto Leguiva who had governed the country from 1919
to 1930. He initiated in the early twenties a reform program
‘Which included modern public works, pavements, immense recla-
mation projects in the interior of the country, enlargement
<3f the public school system, and protection of the Indians.
then it became evident that his program of improvements in-
VNDlved immense graft and mortgaging, the best citizens began
‘tc> criticize. Forthwith, the critics were ruthlessly im—
Purisoned or sent into exile. Meanwhile, the president con—

tlinued to float more loans by giving liens on petroleum,

\

9Steinhardt to Carl Trygger, February 3, 1937,
S”Ceinhardt MSS .

101

guano, and customs, even granting to a foreign-controlled
board the right of collecting taxes.10

American investment in Peru increased substantially
during the Leguiva period. About one-third of this investment
was in the nature of loans; the money was to be spent for
public improvements, but actually much of it went for graft,
for buying immunity from crime, and for preparation for war.
Loans to Leguiva were given with severe mortgage conditions,
and caused deep resentment among the helpless Peruvians who
saw the future of their country thus pawned by the dictator.11
A military coup in 1930 overthrew the regime.

The men Leguiva had hounded out of the country came
'back. Victor Raul Haya de la Torre, the leader of APRA,
(alianza popular revolucionaria americana), stood for the
jpresidency and lost the vote to Sanchez Cerro, a second-rate
tsoldier who was not equipped to meet the problems which came
Viith.the'worldwide financial collapse. While disorder spread

tluroughout Peru, with violent anti-foreign feeling, a mora-

trarium was declared on all foreign debts. Bonds sold to

\

10Samuel Guy Inman, Latin America: Its Place in World
Lfiife (New York: Harcourt. Brace and Co., 1937), pp. 149-168.

llIbid.

102

American investors fell from $97 to $7. The American public

lost almost $100,000,000.12

Sanchez Cerro was assassinated in 1933 and General

Oscar Benavides took over. The plump Benavides--called

"Waterbelly" by his political opponents--was educated at

St. Cyr, the West Point of France, and served as ambassador

to Rome where he became the friend of Mussolini. Soon after

becoming president, Benavides released Haya de la Torre from

‘prison. Two years later when the country was clearly behind

Iiaya de la Torre, Benavides ordered his arrest and proscribed

2XPRA. The President-Dictator of Peru ruled by force and not

Ixy'law. When in 1936, Haya de la Torre's candidate was

cfilearly'elected after only eighty percent of the ballots had
been counted, Benavides stopped the counting and declared the

election illegal. Thereafter he ruled without a congress.

Benavides liked to think of himself as a benevolent

dictator who used force only when it was necessary. In

Peru, he considered himself taking the middle course between

t:}1€3 extremes of Aprism and the outright fascist reactionaries

\
12John T. Whitaker, Americas to the South (New York:
The Macmillan Company, 1939), pp. 19-20.

13Ibid., p. 18

103

who owned El Comercio, the country's leading newspaper.14
Not unlike the New Deal, he initiated a vast public works
program: the building of highways, workers' homes, and
schools. A social program included paid vacations and
compulsory social insurance. To finance these programs
Benavides borrowed money from the International Petroleum
Company (which belonged to Standard Oil of New Jersey)
in return for a promise not to increase duties levied
against the Company.15
Benavides benefited from boom times. Roosevelt's
crurtailment program opened up markets for Peru's high
gfirade long-staple cotton. Simultaneously, c0pper and other
ntines benefited from world rearmament. The Fascist coun-
‘tzries with their expansion of war industries put forth
.sizzrenuous efforts in Peru to sell munitions, war vessels,
£3r1<i airplanes. The selling of such products necessitated
1:}1ee sending of experts, which increased economic and politi—

<=Ei£1. influence and insured further orders.16 In four years,

‘__

14Ibid., p. 22.

151bid., p. 23.

A. 16Carleton Deals, The Coming Struggle for Latin
-£E!§EEE;13§_(New York: J. B. Lippincott Company, 1938): P- 99-

104

1934 through 1937, Hitler moved German exports up from

nine to approximately twenty percent. Even so, the United

States retained roughly thirty-six percent of Peruvian ex-

ports. German gains were largely at the expense of the

British.17

The fact that Peru was economically a colonial

country added to its problems and served to complicate

the picture. Sixty percent of the Peruvian railroads were

owned in perpetuity by the British. A German family owned

(Sasa Grande, which produced forty—five percent of Peru's

:sugar crOp. Italians owned a bank and electric power, light,

and trolley monOpolies in Lima. United States capital was

rwepresented by the Cerro de Pasco COpper Corporation which

nniJued ninety-five percent of the c0pper and more than half

CEE’ the country's large supply of silver and gold. Other

-innI>ortant United States firms with investments in Peru were

Irrltzernational Petroleum Company and‘W. P. Grace and Company

which had a virtual monOpoly on shipping between the United

18
St ates and Peru.

\

l7Whitaker, Americas to the South, pp. 36-38.
8Inman, Latin America: Its Place in World Life,
PP - 166-167.

I

105

Steinhardt should not have been surprised when
Under Secretary of State Sumner Welles, at the latter's
Oxon Hill Manor, informed the new Ambassador that Peru was
"the particular sore spot for us in Central and South
America at the present time."19 Although torn by both
domestic and foreign dissension in the 1930's, Peru had
not known political unity since the time of the Incas. The
Andes divide Peru into three distinct areas; the coast, the
intermontane plateaus, and the jungle east of the mountains.
Each of these three parts had its own problems and its own
\nay of living.20 The struggles between Benavides and anti-

(Eovernment forces, the fascists and anti—fascists increased

tzhis "natural" disunity. Undaunted by Peruvian problems,
Steinhardt admitted that he was not Optimistic about his
czliances to improve matters but "as the situation could not
1362 much worse there was little room for failure and a possi-

IDleity of at least some degree of success" if he received any

E

19Steinhardt to Rudolf E. Schonfeld, August 4,
1-59l37, Steinhardt MSS.

2
0Harry Kantor, The Ideology and Program of the
plai§5529vian Aprista Movement (Berkeley, California: University
of California Press, 1953), p. 4.

106

kind of a break. 21 In similar manner, he was warned by his
predecessor at Lima that the post in South America would be
"quite different from the one in Stockholm."22 The Peruvian post
involved, he was told, "of being a 'good neighbor' to people
who aren't always as sincere about being good neighbors as
we ourselves.’I
The "Good Neighbor" policy of the early New Deal
had been motivated by the desire to promote hemispheric
economic recovery, which in turn would help the United States
fulfill its domestic recovery program. The Roosevelt Admin-
.istration later showed an interest in maintaining a policy of
rion-intervention and in concluding dollar diplomacy. At
Bhontevideo, Uruguay, in 1933, Secretary Hull gained tacit
support for reciprocity and he prevailed upon the other
rwalaublics to endorse several commitments to outlaw war.
CPIlee most important action of the meeting was to approve
IAzrtzicle VIII: "No State has a right to intervene in the in-

ternal or external affairs of another." The pronouncement

‘

21Steinhardt to Rudolf E. Schonfeld, August 4,
l 9 3 7 . Steinhardt MSS .

22Fred M. Dearing to Steinhardt, May 1, 1937,
S t e inhardt MSS .

107

marked an end "to that interpretation of the Monroe Doctrine
which justified and gave sanction to the intervention of
the United States in the affairs of the states of the New
World."23

It became evident by the time Steinhardt associated
himself with the policy in 1937 that there was more to world
unrest than simply monetary and commercial dislocation.
Alarming developments in Europe--the increasing aggressive-
ness of Nazi Germany and Fascist Italy, the penetration of
German and Italian influence into Latin America—-seemed to
menace the peace of the New World as well as the Old. As
American Ambassador to Peru, Steinhardt had two diplomatic
courses to steer: the first, a continuation of efforts to
increase American recovery; the second, a diplomatic policy
designed to promote hemispheric solidarity.

However, Steinhardt's first concern after arriving in
Lima was related neither to economic recovery nor hemis-

pheric solidarity. As was the case in Sweden, his first

concern dealt with housing and American physical properties.

To a person sensitive to America's image abroad, the physical

 

3Dexter Perkins, A History of the Monroe Doctrine
(Boston: Little, Brown and Company, 1963), p. 347.

108

condition of the United States Embassy was deplorable. In
a long letter to Sumner Welles, the Ambassador described not
only the physical status of the Embassy but set forth his
views regarding the morale of the employees. In making the
disclosures it became necessary to reveal the names of those
luathought responsible for the sad plight of the Unites States
Embassy in Peru.24 Realizing this could not be done without
some embarrassment, Steinhardt was firm but discreet. Above
all else, he felt it an obligation owed to the United States.

The physical condition of the Embassy was enough to
cause poor worker morale. It was shocking: Steinhardt found
the equipment and furniture disgraceful, typewriters in need
of repair, and index cards filed in shoe boxes. There were
no lamps, hat racks, nor tables: the floor coverings were an
"eye sore." Inasmuch as there was no heating system in the
Chancery, employees used an old kerosene stove to take off
the dampness. At his own expense, Steinhardt purchased
electric heaters.

The staff was demoralized. Women employees in the

chill of the Chancery worked in their coats. Employees

 

24Steinhardt to Sumner Welles, September 29, 1937,
Steinhardt MSS.

109

had no respect for their former chief and were indifferent
to the Government's business. The staff, short two employees,
was inadequate. Of the three stenographers, Steinhardt noted
that two were married and "much more interested in domestic
affairs and social engagements" than in their jobs. The
other he described as "a jittery neurotic spinster of nearly
sixty."

The United States owned neither the Embassy nor
Chancery. It so happened that the owner of the property
was Mme. Benavides, wife of the Peruvian dictator. Both
husband and wife were displeased with their tenants: so
much so that they tacitly refused "to accomodate the embassy
in the most trivial respects." Steinhardt found them so
wrathful that he thought it "a waste of time to endeavor to
accomplish anything . . . until the President and Mrs. Bena-
vides are first put in a more conciliatory frame of mind.”

Much of the Benavides's unhappiness resulted from
financial dealings with Steinhardt's predecessor, Fred M.
Dearing. Out of an annual rental of $7200 paid by the
United States Government, Dearing, a career diplomat nearing
retirement age, had demanded and received from Mrs. Benavides

a monthly refund of $100, or $1200 a year. According to

110

Steinhardt, "Mrs. Benavides's fury knew no bounds when Dearing,
who sailed June 3, demanded and received advance payments for
June and July." Further investigation by the new Ambassador
revealed that Dearing had consistently Opposed the erection
of a residency by the United States Government claiming that
the location was unhealthy. This, in spite of the fact,as
reported by Steinhardt, that the British Government had built
within three-hundred yards of the proposed site. Carrying
his investigation further, Steinhardt disclosed that his
predecessor entertained to a negligible extent; this in
turn being supported by the fact that no part of Dearing's
salary of $17,500 was used in Peru, being deposited in
New York and retained there virtually in its entirety. Also,
Steinhardt continued, Dearing had an overdraft of approxi-
mately $3000 at the Lima Branch of the National City Bank
which had been running for a period of over three years.
Steinhardt carried his investigation of Dearing into
yet another area. There was a "compulsory payment for a
brief period to a Mr. de Silva of $71.50 monthly out of
$96.50 salary of a clerk in the Embassy." The records of the
Embassy indicated that de Silva came to Lima from Portugal

after Dearing was transferred from Lisbon. After working

111

for the Embassy (and living with the Dearings), de Silva
resigned and went into the liquor importing business. Stein-
hardt was "satisfied without a reasonable doubt" that his
predecessor had "imported liquor duty free under his diplo-
matic privilege, Mr. de Silva paying for the shipment and
receiving one—half thereof--the Ambassador receiving the
other half free of charge."

The Department of State investigated the charges.
In essence it confirmed the allegations made by the New
Deal diplomat. Suffice it to say that after the gossip
died down, Dearing, on the grounds of his wife's health
and that of her parents',25 after more than thirty years of
service, was allowed to resign. Steinhardt was relieved
that the investigatory report confirmed his letter to Welles:
". . . itis renewed evidence of the confidence and respect
which the State Department appears to have for my judgment,"
he wrote his wife.26

With alacrity Steinhardt set out on the task of re-

storing confidence in and creating correct image of the

 

25Charles E. Dickerson, Jr. to Steinhardt, June 14,
1938, Steinhardt MSS.

26Steinhardt to Mrs. Dulcie Steinhardt, June 21,
1938, Steinhardt MSS.

[.4
i

-
o
t

:I‘

‘ F
an

1“
M

.4

‘v.

"f

'1

I—h

1"

0‘":

112

American Embassy in Peru. It necessarily required a shifting
of some personnel. Rue. Benavides, with renewed faith in the
Americans, consented to minor repairs on the Embassy. Located
in the suburb of Miraflores, the Embassy was old but rich in
legend.27 The Steinhardts surrounded it with gardens teem-
ing with flowers. In View of the forthcoming Pan-American
Conference it was necessary to modestly refurnish the inter-
ior. As was the case when the Steinhardts occupied the
United States Legation in Stockholm, so too could Americans
now point to their Embassy in Lima with pride.

It amazed the new Ambassador that the world knew so
little about Peru. Overstating reality, he declared that the
country was "probably the richest in the world" in natural
resources. True, Peru was rich in gold, silver, copper,
vanadium, and oil but it lacked the coal and iron necessary
for industrial development in the Twentieth Century. Sadly,
too, the riches of the country had fallen into the hands of
foreigners. Appalled by his own ignorance, he speculated
on increasing American visits to this Latin American neighbor.

Peru was, in his thinking, "indescribable for its archeological

 

7Unknown author, "A Day at the United States Embassy
in Lima," 1938, Steinhardt MSS.

113

wonders that make Egypt a joke." Peruvian natives were more
picturesque than in any country of the world: anyone who had
"not seen the Andes had not lived."28 This was a superficial
view. Seventy percent of Peru's 6,000,000 population were
Indians living under the conqueror's heel. In this country
inhabited by Indians and owned by foreigners, the native did
his work and fought his wars; he endured his dire poverty
by crunching the cocaine out of the cocoa leaf.29 "The
picturesque native" as perceived by Steinhardt actually
existed in infinitesimal small numbers. Workers on govern-
ment projects received two sols (forty cents) a day, barely
enough to keep body and soul together.

Tourism, according to the American Ambassador, was
a business that needed cultivating. He voiced his views on
the subject in a radio broadcast to the Peruvian people.3O
Tourism, Steinhardt stated, was "an industry guided by the

laws of supply and demand which obey the well-known rules

 

28Steinhardt to Axel Wennergren, March 27, 1938,

Steinhardt MSS.

29Whitaker, Americas to the South, pp. l4-15.

 

30Steinhardt to Hull, November 18, 1937, Department
of State Archives, 823.111/99.

114

of a return on invested capital like any other general busi-
ness activities." He thought it necessary to offer the
tourist sufficient attraction to induce him to come; and
once he had come, to surround him with conditions which would
make the tourist-—once he returned home--a steady propagandist
for the visited country. He explained the irritations affect—
ing a tourist; with particular reference to Peru, he empha—
sized the unnecessary friction arising out of the passport
system.

The advice did not go unheeded. In fact, Benavides
had built several new hotels facing the ocean along the
newly constructed Pan-American highway. Within a matter of
weeks the Peruvian authorities took steps to ameliorate incon-
veniences to foreigners entering Peru. Steinhardt assured
the Department in Washington that visitors "would be treated
in the future with more consideration, particularly in resPect
of the immediate return of their passports and a less rigor-
ous examination of their baggage."31 He was confident that
members of the Peruvian Government who had "the vision to

appreciate what an increased tourist movement could mean to

 

31Steinhardt to Hull, December 7, 1937, Department
of State Archives, 823.111/100.

115

Peru," would correct the situation. An American newspaper
correspondent soon noted a changed Peruvian attitude:

Lunch and siesta hours of the custom inspectors

are being staggered nowadays so that no one is

kept waiting; examination of baggage is much

more casual than it used to be: interpreters

have been assigned to all posts where they might

be needed, and everything is being done to make

the visitor feel at home.32

A trade agreement between Peru and the United States

as contemplated by Steinhardt would stimulate the Peruvian
economy even more than increased tourism. In Steinhardt's
mind a third party'stood,however, as an insuperable impedi-
ment to the success of the treaty unless corrective steps be
taken. W. R. Grace and Company, as previously mentioned,
had a virtual monopoly on both freight and passenger movement
between the United States and Peru. As a consequence, the
envoy pointed out, Grace and Company was in a "position to
absorb for itself practically all of the benefits the Depart-
ment desires to accord American agriculture and industry as

the result of a trade agreement."33 Any agreement effecting

the reduction in tariffs or eliminating other impediments to

 

Chicago Tribune, "Detour" by Frederic Babcock,
March 27, 1938.

33Steinhardt to Hull, November 30, 1937, Department
of State Archives, 611.2331/80.

116

trade, he thought, would assist the steamship lines in the
maintenance of present excessive rates or be seized upon as
the basis for further increases. Grace and Company were not
unaware of Steinhardt's thinking; he had personally complained
of what he considered to be excessive charges in transporting
his personal effects, household goods, and automobiles to

Peru. Hull, in accordance with established practice, sub-

fj‘ _R-H:-.

mitted Steinhardt's report "confidentially" to the Maritime
Commission.34

Steinhardt did not long delay preliminary talks
concerning the treaty. Immediately after Dr. Carlos Concha
took up his duties as Foreign Minister, the American Ambassa-
dor called at his office. Concha expressed himself as
desirous of negotiating such an agreement but informed the
American that President Benavides "had the last word in such
matters."35 Under the circumstances, Steinhardt suggested
immediate action on the proposed treaty because, as he put
it, the rapidity with which expediency caused changes in

Peru's government policy. "If the contemplated trade

 

34Foreign Relations of the United States Diplomatic
Papers: 1938 (5 vols., Washington, 1956), V, p. 835. This and
other volumes of the series hereafter cited as Foreign Relations.

351bid., p. 831.

 

117

agreement has not been concluded before a business recession

36

becomes apparent to the general public, the chances of negoti-
ating any such agreement will be materially diminished."

Government revenues, he asserted, which were derived from

both import and export duties, would probably soon commence

to decline .

The Department, nevertheless, desired fundamental

assurances from the Peruvian Government. They would have to

negotiate upon the basis of the unconditional most—favored—

nation principle as applied to all forms of trade and pay—
ment. The Department requested the American statesman to
make it "clear that the acceptance of this basis for negoti—

ation would involve the removal of any discrimination against

the trade of this country that might exist." It was sug-

gested that Steinhardt might state that the prompt removal

by Peru of any discrimination that then existed would greatly

facilitate the progress of exploratory conversations.

Peru had in the past neither accepted nor practiced

the unconditional most-favored-nation principle. Steinhardt

\\

of Steinhardt to Hull, December 3, 1937, Department
State Archives, 611.2331/83.
37Foreign Relations: 1938, V, pp. 832-33.

 

118

thought the required informal assurance of the acceptance
Of the principle might constitute an insurmountable barrier.

Dr. Concha, although not Opposed to the acceptance of this

basis of negotiation, indicated to Steinhardt that he (Concha)

"might find himself confronted with practical difficulties
38

arising out of the existing commercial agreement with Chile."
Concha made particular reference to the free entry of Chilean

wheat. Similarly, Steinhardt thought it inexpedient to urge

Concha to take immediate steps toward the removal by Peru
of the discrimination that existed against United States

trade. If the Ambassador succeeded in persuading Concha to

take such steps, Steinhardt conjectured that the Foreign

Minister would meet great resistance which might seriously

imperil the successful outcome of the negotiations. "Peru-

Vian mentality, coupled with the psychology Of the individuals
Whose OOOperation he (Concha) would require, and those most
affected by such action," the New Deal diplomat suggested,
"Would demand immediate disclosure of the concessions to be

made by the United States in return for the removal of exist-

ng discriminations. In the absence of Dr. Concha's ability

\

381bid., pp 835—38.

119

to state just what concessions are to be received from the
United States, his position would be materially weakened .. .."

The existing trade agreement between Peru and Chile

was an impediment in Peruvian-American negotiations. Concha

informed Steinhardt that although Peru might be prepared to
give the informal assurance required by the Department, Peru

desired to make a reservation in respect of its trade agree-

ment with Chile.39 Secretary of State Hull informed Stein—

hardt that the Department opposed exceptions to the most-
favored-nation principle which were not founded upon such

Special conditions as to permit them to be generally recog-

nized as long standing and legitimate.
The Peruvians delayed negotiations. Concha reported

the Peruvian President "jittery" about governmental income

for 1938; that between the financial conservatism Of Bena-

vides and Benjamin Roca, Minister of Finance, it had become

necessary for him to satisfy them that the budget would not
be Seriously affected by the acceptance of the unconditional

mostefavored-nation clause as a basis for a trade agreement

\
39Steinhardt to Hull, January 15, 1938, Department

0
f State Archives, 611.2331/87.

40Foreign Relations: 1938, V, pp. 840-42.

120

with the United States. He observed that there had been

a substantial loss of revenue to Peru following that country's

treaty with Great Britain in 1936. Steinhardt attempted to
allay the Foreign Minister's fears. He pointed out to Concha

that the desirability of the proposed trade treaty did not

rest solely with import and export duties or other tax

revenues, but that if the general level of the economy of

the country was raised by such agreement, the resultant
greater assurance of political stability, general contentment,
increase in all values, and economic improvement must eventu-
ally be reflected in expanded government revenues. "It is

important to bear in mind," Steinhardt exhorted, "that with

Very few exceptions, most Peruvian Government officials have
only most rudimentary knowledge of economics or finance. The

lack of understanding of the most elementary principles of

taxat ion, trade, and economics of several high officials who
43

are at present gathering data for Dr. Concha is pathetic."

\

4lIbid.. pp. 842-43.
42Ibid.

43Steinhardt to Hull, March 11, 1938, Department

0
f State Archives, 611.2331/92.

121

The Department suggested that Steinhardt assure Concha with
respect to possible revenue loss through tariff reductions,
that the United States Government would not expect concessions
from Peru which would seriously affect customs revenues.
According to Hull, preliminary analyses indicated that United
States requests of Peru would in a majority of cases probably

be for bindings rather than reductions in import charges.
During the summer 1938, Steinhardt returned to the

United States on annual leave. At the Division of Trade

Agreements, he reiterated his belief that Peru would negoti-
ate upon the basis of the unconditional most-favored-nation

Clause but with exceptions in the case of trade between that

Country and Chile.45 At the same time he reported that Presi-

dent Benavides had indicated a strong personal interest in
"having something done" for Peruvian silver and cotton.

Silver, he was told, was a question for the Treasury Depart—
ment; the possibility of providing a separate classification

fOr Peruvian cotton involved our trade relations and a pos-

Sible trade agreement with Egypt. All parties agreed that

the need to provide relief for Peruvian sugar was more
\
44 . .
Foreign Relations: 1938, V, p. 844.

451bid.. pp. 844-845.

122

important than "doing something" for either silver or cotton.

They reaffirmed the desire to negotiate a trade agreement

with Peru .
In Steinhardt's absence the Peruvians became increas-

ingly circuitous. Concha informed the American Charge Louis

G. Dreyfus, Jr. "that Chile was putting a great deal of pres—

sure On Peru: that she bought 120,000 tons Of Peruvian sugar
earih year (against 50,000 by the United States) and that she

had suggested some kind of clearing or compensating arrange-

" Peru had rejected any such plan, Concha declared,

ment 0 o o
it would mean a com-

but "if Chile stopped buying from them,

mercial and possibly a social crisis in Peru." If only the

United States could purchase 200,000, or even 100,000 tons
of sugar each year, he lamented, Peru ''would be relieved of
't}Ne ciependence on the Chilean market, and hence the necessity
c>f Sglranting special concessions to the most-favored-nation

ClauSe. "46

Without prior notice, the Peruvians suddenly increased

t119ir exceptions to the most—favored-nation principle. After

consulting with his advisory committee, Concha asked that
\

4611616.. pp. 852-53.

123

all countries contiguous to Peru be excepted from the Opera-
tion of the most—favored-nation clause.47 Challenged on the
demand, the Minister naively explained "that it was his
policy to ask for the maximum concessions even if it should
develop later that they could not be obtained." Steinhardt
upon his return to Peru questioned the Minister about the
turn-about; the Peruvian had only a smile to Offer.48 There-
upon Concha assured the American Ambassador that Peru would
insist on only the Chilean exception to the clause.

The Peruvians were puzzled about American insistance
on limiting exceptions to be granted Chile. The Peruvian
Foreign Minister noted that Chilean industrial products were,
to use his expression, "mostly junk" and in that sense not
competitive with American products on either a basis of
quality or price. He insisted that a general exception in
the case Of Chile would not have the slightest effect on
American exports to Peru. Steinhardt was inclined to agree.

In answer to Concha's question, Steinhardt told him that the

 

47Ibid.. pp. 855—56.

48Steinhardt to Hull, November 9, 1938, Department
Of State Archives, 611.2331/119.

124

Department's position was based "on principle rather than on
fear of Chilean competition"; as the result of the large
number of trade agreements already negotiated by the United
States, certain set principles and policies had been estab-
lished from which the Department could not deviate, excepting
to a limited extent in the face of the most urgent consider-
ations. The Ambassador asserted that "the Department's
position regarding most—favored-nation treatment had not
and was not being advanced as a bargaining position, but
had for its foundation the principles and policies on which
the entire trade agreement program of the United States
rested.49

Chilean reaction continued to plague American-Peru-
vian negotiations. Concha reasserted his claim that the
entire Peruvian sugar industry would be thrown into a state
of chaos were Chilean purchases of Peruvian sugar to be dis-
continued or materially reduced, with disastrous consequences
to the extensive employment in the sugar growing districts.
Steinhardt thereupon asked the Minister for a memorandum of

the exceptions, including sugar, which Peru would desire in

the case Of Chile. Concha stated that this could not be done

 

49Foreign Relations: 1938, V, pp. 864-67.

125

for he did not know what Chilean demands would be from time

to time; that Chile as part of its threat had been keeping
the Peruvian-Chilean demands on a year-tO-year basis but

had now reduced this basis to six months. Therefore, the
Foreign Minister concluded, it was impossible for him to
anticipate the demands which would be made by Chileans from
time to time for concessions by Peru in consideration of the
continued acceptance of Peruvian sugar.50 Steinhardt thought
Concha "rather convincing" and was satisfied by the Minister's
sincerity.

Preparations for the Eighth Pan—American Conference
disrupted Peruvian-American trade agreement negotiations.
Once put aside, negotiations drifted into oblivion. Ambas-
sador Steinhardt, soon to leave Peru, never again seriously
took up the problems connected with the agreement. He left
the task of bringing them to fruition to another day and
another diplomat.51

Steinhardt did resolve, however, a couple of minor

economic problems existing between the two countries. The

 

50Ibid.

51A trade agreement was eventually effected between

the United States and Peru on May 7, 1942.

126

United Aircraft and the Electric Boat Company, United States
corporations, had sold in the 1920's military equipment to the
Leguiva regime. As previously mentioned, the Peruvian Govern—
ment in 193l,in response to the financial depression suspended
payment, the American companies accepting the moratorium.
After the period of the moratorium had expired and the Peru-
vian economy had improved, the American companies requested

a resumption of payment. The Peruvian Congress in 1933 in-
cluded in its budget a sum to pay off the debt; even so, the
companies received nothing. It was not until 1938, through
the efforts of Ambassador Steinhardt that the Peruvian Govern-
ment decided to satisfy the claims.

The American Ambassador in Peru concerned himself
with problems other than those involved in economic relations.
The Benavides Government was a dictatorial regime leaning
toward fascism and unconcerned about being a Good Neighbor.

As Minister to Spain in the Cerro Government, Benavides de-

clared that "the pe0ple can be saved only by men identified

 

2 . .
5 Whitaker, America to the South, p. 39; see also

Henry R. Sutphen to Steinhardt, Mayll, 1938, Steinhardt MSS;
Sutphen to Laurence Duggan, June 16, 1938, Department of State
Archives 123 Steinhardt 178.

 

127

with Fascist doctrines."53 For a time, especially during the
Leticia trouble,54 Benavides courted the United States "but
angered by our apparent partiality toward Colombia, he later
let out several loud blasts against American tariffs and loan
retirement terms."55 Even though his displeasure with the
United States diminished in time, he remained very much under
the thumbs of the fascists. Steinhardt as Ambassador was
charged with the responsibility of preventing further fascist
expansion, and if possible, bringing Peru into a hemispheric
alliance. He was to obtain for the United States, in a sense,
the good will of that Latin American country.

Through no fault of his own, he received at the be—

ginning what in his mind was a setback. In January, 1938,

 

53Beals, The Coming Struggle for Latin America, p. 101.

54The Leticia controversy was a territorial dispute
between Peru and Colombia concerning the "Leticia trapezium,"
a 4,000-square-mile enclave Of almost impenetrable and unde—
veloped jungle land. On May 24, 1934, the Protocol Of Peace,
Friendship, and COOperation was signed by the plenipotentiaries
of Colombia and Peru, ending the Leticia incident. See J.
Lloyd Mecham, The United States and Inter-American Security,
1889-1960 (Austin, Texas: University of Texas Press, 1961),
pp. 159-166.

 

55Beals, The Coming Struggle for Latin America, p. 44.

128

Fortune Magazine published an article unfriendly to the

 

Benavides regime.56 It came at a time when the contract for
the Naval Mission was to be submitted to President Benavides,
United Aircraft was to receive a settlement to its seven

year old claim, negotiations for the proposed trade agreement
were to be discussed, Peruvian cooperation was being sought
to help solve the problem arising under the International
Sugar Agreement, and lastly, the Peruvian Government had

just recently announced their intent to nominate Secretary
Cordell Hull for the Nobel Peace Prize.57 The article set
Off a furor in Peru; few were more infuriated than Ambassador
Steinhardt. In his Opinion "the article did great disservice

to the United States."58

The magazine, he thought, had "little
consideration for the position of the United States abroad,

its vast investments and commercial interests, and the efforts
of its representatives to obtain for the United States the

good will of the country to which they are accredited . . . ."

He did not argue against the content of the article which

 

56"South America II: Peru," Fortune Magazine,
XVII (January, 1938).

57Steinhardt to Hull, January 6, 1938, Department of
State Archives, 811.91223/42.

58Ibid.

 

129

was a fairly accurate description of the country; in fact,

he may have agreed with it. However, with various negotiations

at a precipitous stage, he was well aware that Benavides might

grasp at any straw to break them off. The Peruvian dictator,

if of the mind, would not differentiate between official

government and private opinion. As a pragmatist, Steinhardt

had to deal with the government as it existed; the Benavides

Government was such that it had to be "treated with kid gloves."
Steinhardt alerted himself to the printed word.

However, in Peru the envoy confronted a press different from

any he had previously encountered. The problems involved

in converting an anti-American press to one with a pro—Ameri—

can bias were far different from the Swedish situation. In

' Peru the newspapers, Operated by political rivals, were

dictatorially operated and rigidly censored. Coupled with

the internal political intrigue was the international battle

of the press being played in Peru: fascist against anti—

fascist, communist against anti-communist, Italian—German

against Anglo-French—American forces. The largest daily

newspaper in Lima, E1 Comercio, was decidedly pro—fascist.

 

Of the foreign presses none were more influential than

"Agencia Italia." Competition between two American news

130

gathering rivals, United Press and Associated Press, accord-
ing to Steinhardt, diminished rather than enhanced American
prestige in Peru.

Fascist influence pervaded other sectors of Peruvian
affairs. While the Italians supposedly enjoyed sufficient
influence with President Benavides to select cabinet Officials,6O
it was rumored that a German Economic Mission advised the
Peruvian Government on taxes, budget affairs, and foreign
debts.61 Italians Operated and controlled tha country's
largest and most important banking entity. Italian Officers
directed Peru's civil guard and police force. The Peruvian
Air corps received instructions from an Italian Air Mission;
in turn, Peruvian pilots flew Italian—made planes. Italian
money built a Peruvian airdrome and airplane factory. When
the gold—braided Benavides stepped out on official business,

he was usually accompanied "on the one hand by the Italian

 

59Steinhardt to Hull, February 19, 1938, 811.91223/46;
Steinhardt tO Hull, March 11, 1938, 811.91/48 both in the
Department of State Archives: see also Steinhardt to Laurence
-Duggan, May 6, 1938, Steinhardt MSS.

6OSteinhardt to Hull, June 12, 1937, Department of
State Archives, 723.65/4.

61Open letter to Steinhardt, no date, 1938, Stein—
hardt MSS.

131

minister; on the other hand, by the Japanese minister."62

It pleased Steinhardt to announce that a contract
to provide a naval mission to Peru had been awarded to the
United States. He requested that the Department of State
in Washington promptly inform the Embassy on the conclusion
of the contract "so it could arrange for adequate publicity."63
He thought it would permit him to offset, to some extent,
Italian propaganda. This would, he thought, "stand out in
sharp contrast with the extensive publicity which was care-
fully arranged by the Italian Legation with the Lima news—
papers on the occasion when the Italian police mission and
subsequently the Italian aviation mission were announced."
That same year Italian prestige suffered another
setback. In a Peruvian contract for the purchase Of air-
planes, the United States won the bulk of the order. As
part of the agreement, the Navy Department agreed to cooper-
ate in the inspection of the planes. The War Department,

however, declared that it was contrary to its policy to use

government personnel for this purpose. Later, the Department

‘

62Beals, The Coming Struggle for Latin America, p. 44.

63Steinhardt to Hull, January 17, 1938, Department
Of State Archives, 823.30/224.

132

changed its position to allow inspection, and then shifted
again disallowing it. President Benavides complained to
Steinhardt; Steinhardt complained to the Department of State:

There is a sharp contrast between what the Italian
Government is prepared to do, and is doing, for
Peruvian aviation, and the attitude of our War
Department. If we are to hold our own in Peru and
throughout Latin America against the totalitarian
states, we would be well advised to talk less on
the air and in the newspapers about fascist progress
in this hemisphere to the detriment of our trade
interests and political philosophy and show more
signs of prompt OOOperation by the War and Navy
Departments with the State Department than has
thus far been exhibited in the present case.64

The oscillation of the War Department came at a time when
Benavides, according to Steinhardt, "might now be described
as anti-Japanese, anti-German, prOmItalian, and leaning more
and more towards the United States."65 The view, as will be
shown later, did not square with the facts. Nevertheless,
the situation increased the Ambassador's anxiety. In the end
the War Department saw fit to allow government personnel to
proceed with the inspection.

64Steinhardt to Hull, November 21, 1938, Department

Of State Archives, 823.248/164.
65Steinhardt to Hull, Novermber 16, 1938, Department
Of State Archives, 823.248/170.

133

Of all the contending political forces in Peru,
none was more disconcerting than the Aprista. Steinhardt
thought the line separating Aprista and Communist ideals

, 66 . .
as very finely drawn. "The general objectives seem to
be the same," he stated, "but Aprism tends to confine its
objectives to Latin America, and to the most part to Peru,
whereas Communism directs its energies towards the whole
world." This was a puerile view. The Aprista movement,
or Aprismo, found its early origins in Latin American pro-
test literature of the nineteenth and early twentieth

67 . . .
century. It came formally into eXistence follOWing World
War I as the outgrowth of student unrest in Lima. Workers
supported the strike; the alliance between worker and stu-

. . . 68
dent became the baSis of the PeruVian Aprista movement.
Led by Haya de la Torre, the Apristas viewed Peru as a class

state employed by exploiters to dominate and oppress the

masses. Peru, with little industrialization, had no

 

66Steinhardt to Hull, March 26, 1938, Department
of State Archives, 823.00B/107.

67William S. Stokes, Latin American Politics
(New York: Thomas Y. Crowell Co., 1959), pp. 282-285.

 

68Kantor, The Ideology_and Program of the Peru—
vian Aprista Movement, pp. 7—8.

134

proletariat in the Communist sense. An indigenous Peruvian
political party, Aprismo opposed Yankee imperialism, appealed
for Latin American political unity, advocated the nationali—
zation of land and industry, favored the internationalization
of the Panama Canal, and pleaded for solidarity with all

69 .
peoples and all oppressed classes. Even though Aprismo
was influenced strongly by Marxism, more than "a finely
drawn line" separated Aprism and Communism. Harry Kantor,
who has written the standard work on Aprismo says that
".. . Aprismo or Marxian-Aprismo is a combination of Marxian

. . . . 70 . .
soc1alism and the reality of America." In addition, there
is evidence that Haya de la Torre was impressed with what he
saw in Nazi Germany and took from Nazism such ideas as hier-
archy, the power to command, the authority of the leader,
. 71

marching ranks, and the salute.

It was true, as Steinhardt observed, that the Peruvian

oligarchy, whether in the government or oppositional, saw

 

69Stokes, Latin American Politics, pp. 282-85.

OKantor, The Ideologygand Program of the Peruvian
Aprista Movement, p. 29.

71Stokes, Latin American Politics, pp. 282-285.

135

Aprism as Communist inspired. Peruvian leaders generally
made no distinctions between the terms: communist, bolshe-
vist, red, socialist, and Aprista. To further discredit
Haya de la Torre the Benavides regime fostered the untrue
belief that the Third International, Russia, and right—wing
political Opponents gave both orders and money to the
Apristas.72 The American Ambassador found no evidence to
support the charge. He observed that the Peruvian Govern-
ment intentionally tried to substitute the word "communism"
for "aprism." The Government in October, 1936, held in
accordance with the constitutional provision prohibiting
members of international political organizations from
holding office in Peru, that APRA was barred from any parti-
cipation in the elections. In the same year, when a Haya
de la Torre-backed candidate was clearly elected with but
eighty precent of the ballots counted, Benavides stopped
the counting and declared the election illegal. The spirit

. . . . . 7
of Aprismo, notWithstanding, remained very much alive. 3

 

72Steinhardt to Hull, March 26, 1938, Department of

State Archives, 823.00B/107: Steinhardt to Hull, December 31,
1938, Department of State Archives, 823.00/1328.

73Steinhardt to Hull, March 8, 1938, Department of
State Archives, 823.00/1301.

136

Its existence in the midst of the Peruvian political tur-
moil added confusion to the democracies' struggle with the
fascists. Had the American Ambassador more affinity to
the lower classes and their social problems, it is probable
that he would not have been so confused by Aprismo. The
United States could scarcely have intervened on behalf of
Aprism: even Haya de la Torre would not have welcomed such
intervention.74 Even so, as American Ambassador to Peru,
Steinhardt should have better understood such an important
movement.

Japanese in Peru were also troublesome. The most
serious charge against the Japanese immigrants in Peru
was that they constituted a state within a state, a self-
continuing group of unassimilable and permanent aliens.
Japenese men rarely consorted or married Peruvian women;
instead they had brides brought from Japan. Their children
were purely Japanese in blood, went to Japanese school
where they were inculcated with Japanese culture, racial
pride, and reverence for the Emperor. A chief concern of

the Peruvians was the Japanese control exercised over the

 

74Whitaker, Americas to the South, p. 31.

137

small businesses of Lima: cafes, bakeries, restaurants,
barber shOps. grocery stores, and jewelry stores. Ninety
percent of the Huaral Valley was in Japanese hands and
they were also getting possession of the Chancay Valley,
one of the principal cotton regions of Peru. Peruvian
leaders were disturbed by Japanese military and naval
actions in China; they wondered what would happen if the
Japanese Admiralty decided Peru Offered a good field for
Japanese expansion.75 Although the Rome-Berlin Axis re—
ceived the most attention for its subversive activity in
South America, Japan was the chief prOpagandist in Peru.76
Japanese settlement in Peru had historical antece-
dents. Peru had a long tradition of close relationships
with the Orient. The country was at the American end of
the China trade through much of the Spanish colonial period.
All during the independence period Peru traded heavily with
Japan. The long dangerous trip around the Straits of

Magellan made Peru's access to Europe difficult. Not

 

75Steinhardt to Hull, January 31, 1938, Department

of State Archives, 894.20223/35.

76Steinhardt to Hull, December 2, 1938, Department of
State Archives, 800.20210/203.

138

until the Panama Canal was Opened in 1914 did she come close
to European markets and influence. Nevertheless, friendly
relations with Japan continued. The low cost of products
permitted the Japanese to tap markets never before reached
by European or American goods. Much of the animosity toward
the Japanese, both within and outside Peru, stemmed from
their ability to undersell competitors. Arriving as poor
immigrants, the Japanese did not remain underprivileged.
Competent, industrious, frugal, loyal to each other, as a
rule they rose rapidly.77

The rise of fascism in South America aroused much hys-
teria. Many Americans considered every Japanese merchant,
barber, and fisherman a spy for the Imperial Government.
Such was not the case. No doubt Japan employed, along with
other nations, spies in Latin America. Nevertheless, the
bulk of the Japanese in Peru were honest, hardworking indi-
viduals. They were, like Japanese—Americans in World War II,
the victims of international machinations over which they

exercised little or no control. In the 1930's they were the

victims of the international trade war: increasing trade

 

77Beals, The Coming Struggle for Latin America, pp. 14-44.

 

139

meant increasing emigration, financial penetration, and
political influence. Trade could not be disassociated from
political pressure and dogmas. Not only did the world powers
actively promote trade at all costs, but they tried to create
friendly governments inbued with similar economic and politi-
cal philosophy. Fascists employed economic penetration and
trade manipulation in the hope of eventual political domina-
tion. Even so, there is no evidence to support the charge
that Japanese residents in Peru actively supported the grandi-
ose achemes of the Tokyo Warlords.

By the time winter 1938 arrived, Austria, Czechoslovakia,
Spain, and China had fallen victims to the irresponsible
might of the fascist aggressors. It was apparent at least
by then that the fascists had no intentions to confine their
activities to EurOpe and Asia. The struggle had already been
extended to South America; there, by use of typical totalitar-
ian practices, the Axis hoped to "soften up" and "condition"
American States for eventual political domination.

President Roosevelt was one of the first to recognize
the impending danger. On October 5, 1937, in Chicago, Roose—
velt warned that if aggression triumphed elsewhere in the

world, America could expect no mercy and, in a striking phrase

140

which immediately caught the attention of the world, proposed

a "quarantine" of the war contagion. Later, on the occasion

of Pan-American Day (April 14, 1938), he urged upon the nations
Of the Western Hemisphere the necessity of strengthening their
collective will if their "good fortune was to continue."78
Steinhardt in Lima echoed the President's sentiments. In a
radio broadcast, the New Deal diplomat urged the American na-
tions to present a united front against Old World "predatory
forces" seeking "new or lost fields to conquer."

Amidst political turmoil and fascist propaganda,
Peruvian authorities prepared for the Eighth Pan—American
Conference to commence in Lima on December 9, 1938. The
Peruvian Government spared no effort to crown the Conference
with success; they beautified public buildings and parks,
rushed to completion many new buildings, and urged the citi-
zens of Lima to cooperate by repairing and painting their
homes. Officials had the city festooned with flags

and bunting during the period of the Conference.80 What

 

78New York Times, April 15, 1938.

79Ibid.

80Steinhardt to Hull, November 5, 1938, Department
Of State Archives, 710.H/17l.

141
Steinhardt failed to report was the fact that along the flag
bedecked streets of Lima, those most in evidence, next to
the flag of Peru, were the banners of Germany, Italy, and
Japan.81 The secretary on arriving in Peru must have been
shocked to have been greeted by the swastika and rising sun.
It is also evident that Benavides had not become "anti—Ger—
man and anti-Japanese" as had been previously claimed by the
American Ambassador.

It was rumored in Lima that the Apristas contemplated
disturbances at the time of the Opening of the Conference.
Such Aprista disturbances, Steinhardt surmised, would be
for the purpose of attracting attention to their cause and
impressing visiting delegates with the repressive measures
that would be necessary for theGovernment to take in order
u)preserve public order.82 Such disturbances, he continued,
would "do the ApristaS' cause a great deal more harm than
good." He thought that Peruvian authorities would deal sum-

marily with the disturbances and, in such a way, that visiting

 

81Mecham, The United States and Inter—American

Security, 1889—1960, p. 139.

82Steinhardt to Hull, November 30, 1938, Department
of State Archives, 823.00/1322.

 

 

 

142

delegates would not even know that such disturbances took
place. The authorities, he determined, would unquestionably
exercise press censorship to see that no reference to any
bomb explosion would appear in Peruvian newspapers. Though
the Lima Conference passed off without great demonstrations
threatened by the Apristas, they were not completely ignored.
A telegram of protest (dated December 24) was addressed to
Benavides by five ex—Presidents of South American Republics
making a plea for amnesty toward political prisoners.
The protest accomplished nothing. Notwithstanding, the
Aprista movement, according to Steinhardt, continued "to
seethe and to be a real, though apparently remote, threat
against public order."

As host to the American delegation, Steinhardt
moved quietly but unobtrusively in his preparations. Dis—
appointed that President Roosevelt would not attend the Con-

ference,84 the American Ambassador ordered pictures of the

 

83Steinhardt to Hull, December 31, 1938, Department

of State Archives, 823.00/1328.

84Roosevelt attended the Seventh Pan-American Con-

ference held in Buenos Aires in 1936; he did not want to
start a precedent of having the President of the United
States open every Pan-American Conference, thus, he declined
the Offer to attend the Lima Conference. See Steinhardt to
Major Robert E. Cummings, July 1, 1938, Steinhardt MSS.

143

President and Secretary Hull; the latter as head of the
American delegation was also to be the ranking United States
official. On the eve of the convention, in an international
broadcast, Steinhardt assured his listeners "that in spite
of prOpaganda to the contrary, Latin—American countries are
friendly to the United States."85

The fascists moved to subvert the Conference. Fas—
cist agents arrived on nearly every plane and ship. They
circulated among groups of delegates, handshaking and say-
ing a few words in favor of totalitarianism as against demo-
cracy wherever opportunity afforded. They arged that Latin—
American countries needed a stonger system of government
to control or prevent frequent political uprisings and a
strong man with a strong hand was the only solution.86 Fas-
cists spread reports that the United States sought a mili-
tary alliance in the hope that when such an alliance did
not materialize that it be construed as a defeat for the
United States.

Fascist charges that the United States desired a

military alliance was not without basis. Mecham states that

 

5New York Times, December 7, 1938.

86Washington Post, December 7, 1938.

144

"the American delegation had originally favored an outright
mutual defense pact, but when Hull realized that there was
too much opposition to put this through, he hastened to
sponsor a strong resolution proclaiming the common disposi-
tion of the American republics to defend their liberties
and independence on all fronts against non-American aggres-
sors."87 Hull, the author writes, later denied that he ever
favored a political or military alliance at Lima, although
a military alliance was desired, the Secretary said, by
some of the Latin-American delegations.

It was not easy for the assembled American dele-
gations to demonstrate enough solidarity to give pause to
potential foreign aggressors when a group of South American
nations, headed by Argentina, did not share the alarm of the
United States concerning the immediacy of the Nazi—Fascist
menace. Argentina remained unalterably opposed to a formal
pact because of her attachment to a traditional policy of
no entangling engagements. Jose Cantilo, Argentine Foreign

Minister, stated his belief in "continental solidarity, but

 

87Mecham, The United States and Inter-American
Solidarity, 1889-1960, p. 141.

 

145

individual policy."88 In spite of overwhelming Opinion among
the delegates for unification of ideals and efforts, Cantilo
reminded them that European markets were important to River
Plate countries, and that those interests had to be considered
in their international policies; that European immigration
and capital had developed their resources: that Spanish blood
and religion, French culture, and even Italy and Germany con-
tributed to important aspects of America's evolution.89 Other
delegates considered United States alarm over the fascists'
penetration as a "smoke screen" to increase Yankee imperial-
ism by driving the Europeans out.

The Eighth International Conference of American
States met in Lima from December 9-27. It was unique in
several respects: it was the shortest in the history of the
Pan-American movement; it negotiated not a single treaty nor
convention, although it approved 112 declarations, resolu-
tions, recommendations, and agreements; the assemblage met
in the Peruvian Legislative Chamber from which the national

deputies had been ejected by the Peruvian dictator.

 

88Ibid., p. 140.

89Ibid.

146

Steinhardt, as United States Ambassador to Peru and
delegate to the Conference, played only a minor role in the
actual proceedings. The pressing problem at Peru was that
presented by the activities of the Axis nations. There was,
according to Mecham, "neither time nor disposition to take
up the subject of the improvement and coordination of the
inter—American peace instruments."90 With the possibility
of acrimonious debate arising from discussions on lesser
problems, Secretary Hull frowned on anything that in his
Opinion would "rock the boat." Steinhardt served on two
committees: the committee on Civil and Political Rights
for Women: and as reporter for the subcommittee, Inter—Amer-
ican Communications. The Ambassador's presence on the latter
Committee is readily apparent in its report to the Confer-
ence.91 Among other recommendations, the Committee pro-
posed "that the governments consider the reduction or elimi-
nation of barriers to increase tourist travel" and urged the
Pan-American states to adOpt measures designed to encourage
such travel.

90Ibid., p. 147.

91Report of the Delggation of the United States of
America to the Eighth International Conference of American
States (Washington: Government Printing Office, 1941). P. 24.

147

No individual American, South or North, received the
publicity and limelight that followed Cordell Hull. As the
ranking Official and head delegate from the hemisphere's
leading power, it was as it should have been. Not even Alf
Landon, Republican presidential candidate in 1936 and a "good
will" delegate to the Conference, aroused much attention in
comparison. In truth, it was the Judge's show.

Hull was neither complacent nor blind to the objec-
tions surrounding the proposed mutual defense pact. Foreign
Minister Cantilo of Argentina declared that such a pact
pointed too directly at the totalitarian states; he was fear-
ful it would give them offense. Cantilo proposed instead an
affirmation of common allegiance to American ideals and a
determination to consult at the threat of menace from any
source (which would include the United States). Since Argen-
tina stood adamant, and since the conference could not afford
to Split over the issue and thus exhibit a lack of solidarity
before the Axis, "twenty nations bowed to the demands of
one."92 Argentina's devitalized proposal, called the "Declar-

ation of Lima," was adopted.

 

2Mecham, The United States and Inter-American Soli-
darity, 1889-1960, p. 142.

 

148

The Declaration was the most significant achievement
of the Lima Conference. It can be divided into two parts:
an affirmation of solidarity, and a declaration of purpose
for supporting it. In somewhat extravagant terms the princi—
ples upon which American solidarity was established were
enumerated: Spiritual unity through republican institutions,
unshakable will for peace, sentiments of humanity and toler-
ance, absolute adherence to international law, equal sover—
eignty of states, and individual liberty without religious
or racial prejudices. In enumerating and affirming these
principles, it might be construed as a challenge to the
totalitarian regimes. The Conference announced to the world
that henceforth the American republics agreed to defend their
independence "against all foreign intervention" whenever
"acts of any nature" might menace their peace, security, and
territorial integrity.93 Fresh from his "victory" at Munich,
Hitler was flatly informed that he could expect no such
appeasement in the Americas.

The fact that the Declaration of Lima was not a for-
mal convention.as was the Consultation Pact of Buenos Aires

in 1936, was so noteworthy that it elicited comment from Hull.

 

93Washington Post, December 25, 1938.

149

He emphasized the wisdom of incorporating agreements in
declarations rather than treaties "when the matters dealt
with are of general character and of political nature."94
The real reason, as pointed out by Mecham and not mentioned
by Hull, "was the dilatoriness on the part of Latin—American
governments in ratifying treaties."95 For example, when the
Lima Conference convened the Buenos Aires Consultation Pact
had not yet been ratified by four countries. Because of the
rapidly gathering war clouds over Europe, it was thought ex—
pedient to resort to a declaration, less binding than a
treaty, in order to anticipate the expected crisis.

Hull appraised the Declaration of Lima as a great
advance over previous Pan-American agreements, for according
to the Secretary it provided for joint action not only against
a military assault but also against the underground infiltra-
tion methods pursued by the Axis. Henceforward, the defense

of the Western Hemisphere became the joint responsibility of

all American republics.96 Despite tflua fact that the

 

4Department of State, Press Releasgprecember 27, 1938.
5Mecham, The United States and Inter-American Secur—
ity, 1889-1960, p. 145.

96Hull, The Memoirs of Cordell Hull, p. 608.

 

150

Declaration of Lima made much Of common action, it was
weakened by the announcement that the governments of the
American republics would act in their individual capacity,
recognizing fully their juridical equality as sovereign
states. They were, therefore, bound to nothing more

than to consult, a rather far cry from defensive alliances
and mutual security pacts.97 Nor did the Declaration
"Pan-Americanize" the Monroe Doctrine, as has been held
by some authorities. Dr. Leo S. Rowe, director-general

of the Pan—American Union, declared that "the Conference
transformed the Monroe Doctrine into a continental doc-
trine." Charles G. Fenwick held that we took the Mon-

roe Doctrine, a unilateral declaration by the United
States and a cornerstone of our foreign policy for 115
years, and converted it "from a unilateral into a multi-
lateral policy."98 Dexter Perkins, the American authority
on the Monroe Doctrine is willing to concede only that

the Lima Declaration marked a step "toward international

 

7Mecham, The United States and Inter-American
Security, 1889-1960, p. 145.

 

8Charles G. Fenwick, "Lima Conference in Relation
to World Peace," The Annals Of the American Academy of
Political Science, Vol. 204, (July, 1939), pp. 119-121.

 

151

action in the defense of the principles of 1823."99 Although

the Declaration and the provision for the consultative meet-
ings of the foreign ministers evidently proved their worth
during World War II, it is doubtful whether it deserved all
the praise bestowed upon it by some writers.

The Conference was the pinnacle of Ambassador Stein-
hardt's tour of duty in Peru. In spite of the apparent in—
significant role he played in the parley, his efforts as
host to the American delegation were not unappreciated nor
completely unnoticed.100 That he went out of his way to
provide the delegation with assistance, hospitality, and
physical comfort is not doubted. One such example of his
thoughtfulness was the "old—fashioned Christmas dinner"
provided by the American Embassy in which the guest list
included "everyone from the Secretary of State to the

101

humblest night working code clerk." Furthermore, the

Conference afforded Hull a first—hand Opportunity to size

 

99Dexter Perkins, A History of the Monroe Doctrine
(Little, Brown and Company, 1963), p. 353.

100Alexander V. Dye to Steinhardt, December 30, 1938.

Steinhardt MSS.

101New York Times, December 26, 1938.

152

up the New Deal diplomat. That Steinhardt made a favor-
able impression is without question.

Aside from the Conference, Steinhardt had reason
to believe his Ambassadorial stay in Peru a success. True,
the same dictatorial regime headed by Oscar Benavides still
exercised absolute control over the country. Though Stein-
hardt desired to impress others by playing down fascist in-
fluence, there is no doubt that the Axis were still very
active in Peru. Yet, no matter how distasteful the Ameri-
can Ambassador found the Peruvian Government, it was not
his responsibility to alter or change it: least of all, to
overthrow it. On the contrary, at least in the latter
stages of Roosevelt's Good Neighbor Policy, it was consid-
ered ill—advised to meddle in the internal affairs of a
Latin American country. (The Mexican decision in March,
1938, to nationalize the oil industry and exprOpriate the
property of the large foreign companies, is an example of
such restraint.) Aside from Steinhardt's depreciation of
fascist influence in Peru, the fact remains that the United
States had made inroads. The United States continued to
dominate Peruvian trade; German gains were largely at the

expense of the British and not America. In the first half

153

of 1938, the United States' share of Peruvian exports was
thirty—six percent as compared to Germany's twenty percent.
This, in spite of the fact that Peru found natural markets
in EurOpe; it remained a truism that to sell one must buy.
The Ambassador used his influence to facilitate the selec-
tion of an American Naval Mission and persuaded the Peru-
vian Government to renew payments to the United Aircraft
and the Electric Boat Company; other American missions
sought the same thing but had failed. The better rela-
tions he had established with the Benavides regime were
also responsible, no doubt, for the fact that Peru pur-
chased a number of American planes after Benavides had
already drafted a contract with the Italian Government.
American prestige in Peru had been elevated in
other respects. The Peruvian Government selected Ameri-
can scientists for its Department of Public Health, awarded
contracts for important governmental buildings to American
architects, and hired American instructors to stimulate
athletics in Peru. In addition, Steinhardt was instru-
mental in the formation of a cultural society known as the

"Institute Cultural Peruano—Norteamericano" (Peruvian-

154

American Cultural Society).102 Though its chief objects
were educational and cultural, it Offset, in part, influ-
ence of the Peruvian-German, Peruvian—Italian, Peruvian-
Japanese, and Peruvian-British Societies. One bit of un—
finished business was the prOposed Peruvian—American
trade agreement which continued to linger.

The emergency confronting Roosevelt's Good Neigh—
bor Policy in the years 1937 and 1938 was the fascist in-
vasion of the Western Hemisphere. In a sense, everything
else was of secondary importance. If battling fascism
was the primary function of the Steinhardt mission to
Peru, the Ambassador's presence there was meaningful. Even
though Nazis and Black Shirts were still very much in
evidence, America, through Steinhardt, noticeably cut into
fascist influence. This, in spite of the fact that Bena-
vides, as Peruvian dictator, favored authoritarian govern-
ment of the fascist type. Fascist ideas were much more
welcomed by the Peruvian Government than any unpleasant
prattle about democracy. Under these circumstances, the

mission must be judged.

 

102Whitaker, Americas to the South, p. 43.

155

Although fascism was the immediate problem in Peru.
America in the long range faced other Peruvian difficulties.
Certainly the Peruvians would not forever be satisfied with
their "colonial" status; the seething poverty-stricken masses
would not always be content with foreign expropriation of the
country's riches. The popularity of the Aprista movement was
built on such discontent. As a man of wealth and high posi-
tion. Steinhardt made no effort to understand the social
problems confronting the country to which he was assigned.
In reporting on Aprista activity he never bothered to diag-
nose its source Of strength. He was not a person of large
social consciousness and was. consequently. unable to see
the inherent problems besetting the country. It is correct.
however. that for the next several years following the Stein-
hardt mission. the United States was in no position to aid
in the solution of Peru's internal problems. Even so. when
the United States found itself in the situation of rendering
help. the Department of State should have found reports on
Peru's internal problems in the late thirties invaluable.

Having stayed on through the Lima Conference. Stein-
hardt had fulfilled his pledge made to President Roosevelt.

The Ambassadorial post in Lima had afforded Steinhardt the

156

Opportunity of serving the President's Good Neighbor policy
and another phase of New Deal foreign policy. The fascists
were in 1939 moving the world closer to disaster. The Ad-
ministration would be able to use Steinhardt's experience
in battling fascism in the larger arena of international
affairs.

In early 1939 Steinhardt's mind turned to politics.
Soon to enter the final two years of his second term. Roose—
velt had not yet indicated that he would seek a third term.
As a Roosevelt political appointee. and a Roosevelt-democrat
by his own admission. Steinhardt must have recognized that
his future rode heavily on the whims of politics. It was
also clear to him that either a Republican or anti-Roosevelt
Democratic victory in the 1940 presidential sweepstakes
would cut him adrift and force him to fall back on his New
York law practice as a base for future political activity.
He must have concluded that what he needed most at this
juncture was an appointment to an important diplomatic po—
sition. As holder of such a post it was possible that he
would be catapulted into the limelight along with New Deal
diplomats Joseph Kennedy. William Bullitt. and Joseph Davies.

It was worth a try.

Chapter 4

IN MOSCOW FROM THE SIGNING OF THE NAZI-
SOVIET PACT THROUGH THE RUSSO-FINNISH

WINTER WAR

The world depression of the 1930's grievously
affected every capitalistic country of the world. Among
the few beneficiaries of the economic wreckage were sundry
fascist leaders. Fascism had already, in 1922 under the
leadership of Benito Mussolini, conquered Italy. In Ger-
many on January 30, 1933, Adolf Hitler became Reichs Chan-
cellor and proceeded in six months to do what Mussolini had
taken three years to accomplish: the suppression of all
parties, the creation of a totalitarian dictatorship, and
the restoration of prosperity through public spending on
armaments in preparation for wars of conquests to come.
Frightened industrialists and aristocrats supported by
insecure and neurotic masses of the lower middle class
hypnotically followed the Pied Pipers of despotism to the

157

158

brink of disaster and beyond. The warlords of Japan effected,
more slowly, a like transfer of power in Tokyo. Similar
groups flourished in Austria, Hungary, the Balkans, Spain,
France, and elsewhere.

In America the collapse of the stock market ended
inflationary prosperity through stock speculation and install-
ment buying. Franklin D. Roosevelt in 1933 assumed the presi-
dency of an ill-fed, ill-clad country with thirteen million
unemployed. The richest country of the world was reduced to
beggary. From the beginning the New Deal was confronted with
the spectre of fascism abroad while attempting to solve a
desperate economic situation at home.

As a partial solution to the domestic economic situ-
ation, many American businessmen, hopeful of recovering lost
foreign markets, advocated the recognition of Soviet Russia.
Since 1917 the Washington government had consistently refused
to accord diplomatic recognition to the Moscow regime, chiefly
because the Communist government refused to honor the debt
of the earlier regime to the United States, confiscated Amer-
ican-owned prOperty, denied religious freedom to Americans
in the USSR, and waged covert warfare against American insti—

tutions through the Comintern and its branch in the United

159

States. Heartened by the shift of depression sentiment,
Roosevelt began to investigate the possibilities of renewed
relations with Russia.

.

International circumstances in 1933 made both Russia
and the United States more amenable to a diplomatic agree-
ment. In that year the Soviet Union feared a Japanese attack
against the Maritime Province, and the Soviet authorities
now wanted.American friendship and the right to purchase
supplies on credit in the United States. Sharing the Krem—
lin's fear of Japan's aggressive intentions, Roosevelt, per-
haps with no illusions about the nature Of the Communist
system nor the lure of a trade boom, desired that the Soviet
Union serve as a buffer to Japanese and Nazi expansion.

The rise of fascism and the advent of the New Deal,
coupled with mutual Soviet-American anxiety over Japan, con-
tributed to Washington's belated recognition of the USSR.
After long discussions, unhappily lacking in precision,
texts of accord were issued on November 16, 1933. In return
for American recognition, the Soviet Union agreed to abstain
from carrying on prOpaganda activity in the United States,
to guarantee religious freedom and fair trials to Americans

in the USSR, and to negotiate a settlement of the Czarist

160

debts to the United States. President Roosevelt and Com-
missar Josef Stalin agreed to exchange ambassadors and
expressed the h0pe that the diplomatic exchange would lead
to OOOperation for mutual benefit and for preservation of
the peace of the world.

The President's action won wide support. However,
subsequent events disappointed advocates of recognition.
By 1936 it was apparent that benefits anticipated from
the Soviet—American agreement would not materialize. There
was no substantial increase in trade, the Russians did not
noticeably curb their propaganda, nor was their cooPeration
against the rising tide of fascism, equally menacing to the
Soviet Union and America. Under the circumstances the Admin-
istration abandoned efforts to collect the old Czarist debts.
Likewise it discontinued all outward attempts to drag the
Russian bear into the family of nations governed by interna-
tional law.

Shift in Administration attitude toward the Soviet

Union followed on the heels of William Bullitt's mission to

 

1Personal interview with Loy Henderson, Washington,
D. C., February 9, 1967.

161

Moscow. Bullitt had been a pOpular choice as America's
first ambassador to the Soviet Union; considered pro-Rus-
sian, he had unstintingly advocated American recognition.
Protracted dealings with Kremlin leaders cooled his ardor.
Vain and self—confident, Bullitt proved unable to compro-
mise the debt claims and reduce Comintern activities. Sen-
sitive to his own inability to bring the Soviet to terms,
Bullitt on leaving Russia was hurt, disillusioned and
bitter. Transferred in 1936 to Paris as American Ambas-
sador, Bullitt became a leading spokesman for the Anti-
Communists.

American relations with Russia as determined by
President Roosevelt, henceforth, would be "correct but
cool." The only specific instructions given Joseph E.
Davies, Bullitt's replacement in Moscow, was to negotiate
the annual renewal of the trade treaty and to size up the

position of the Soviet Union as a military power. He was

 

2William‘W. Kaufmann, "Two American Ambassadors:
Bullitt and Kennedy," in The Diplomats, ed. by Gordon A.
Craig and Felix Gilbert (Princeton, New Jersey: Princeton
University Press, 1953), pp. 666-71. See also Gordon Wright,
"Ambassador Bullitt and the Fall of France," World Politics,
vol. X (October, 1957); William E. Dodd, Jr. and Martha
Dodd (eds.), Ambassador Dodd's Diary (New York: Harcourt,
Brace, and Co., 1941), p. 242.

 

162

to report his impressions of Russia's military, economic,
and political strength: in a sense he was to be the Admin—
istration's eyes and ears in the Soviet Union.3 However,
his mistake was to use rose-colored glasses. Unlike Bul-
litt, America's second ambassador to the Soviet Union saw
little but virtue in the Communist regime. Contrariwise,
when Davies left Moscow for the Brussels post, he continued
championing the Soviet cause. Critics have suggested that
Davies was naive, gullible, and unperceiving.4 In the end
he was right on some things but for "the wrong reasons.“
American—Soviet relations reached their nadir in
years 1938-1939. Simultaneously nervous war—jitters per-
vaded European capitals. As Hitler put the finishing touches
on his war machine, British, French, and German diplomats
fought each other for a Russian alliance. In spite of the
situation's urgency, the Roosevelt Administration had no

ready successor for the Moscow post when Davies vacated it

 

3Joseph E. Davies, Mission to Moscow (New York:
Simon and Schuster, 1941), pp. 5-6.

4Richard H. Ullman, "The Davies Mission and the
United States-Soviet relations, 1937-1941," World Politics,
'Russia Blasted Hitler's Spy Machine," American Magazine,
CXXXIII, no. 6 (December, 1941).

163

in June, 1938. Davies suggested that the appointment "be
tendered to a man of the successful business or banking
type who would be characterized not only by a familiarity
with industrial and business problems but who was also
known to be liberal in his political ideology, although
not swayed by a communistic or extreme leftist attitude
.. .."5 Mentioned as a possible successor of Davies at
Moscow was Floyd B. Odlum, president of the Atlas Corpor-
ation, a contributor to President Roosevelt's 1936 cam-
paign and an avowed New Dealer.6 Apparently Odlum found
it inconsistent with his personal business interests to
accept. Thus unable to come up with a fresh, rich, free-
to-travel Democrat, circumstances forced Secretary Hull
to dip into his own bag of tried and trusted diplomats.
The Eighth Pan-American Conference at Lima had
enabled Hull to better size-up the diplomat Steinhardt.
He liked what he saw. Speaking of Steinhardt, Hull stated
in his Memoirs: "His record was so creditable that I later
suggested to the President that he be transferred to the

higher and more responsible post at Moscow, to which Mr.

 

5FR: Soviet UnionL71933-1939, p. 598.

6Washington Star, December 12, 1937.

164

Roosevelt agreed. 1 always found Steinhardt to be alert
and very efficient as a diplomatic reporter, especially
during perilous times."7 No doubt Steinhardt was pleased
when his name was sent on March 5, 1939, to the Senate for
confirmation. After nearly six years service in the De-
partment he was finally assigned to a really important
post.

The fact that President Roosevelt permitted the
Moscow post to remain vacant for ten months caused fre-
quent conjectures as to whether there was a coolness in
relations between the two countries. The Department of
State denied any frigid attitude on its part. It never-
theless appeared that the leisurely posture that was
adopted reflected a feeling that little could be accom-
plished diplomatically. The New York Timgg thought the
Administration had selected the right diplomat to¢dnmin-
ish any coolness that existed.8 In speaking of Stein-
hardt, the newspaper stated: "His liberal views commend
him to the Soviet Foreign Office. He is a skillful and

friendly conciliator."

 

7Hull, The Memoirs of Cordell Hull, pp. 603—04.

 

8New York Times, March 6, 1939.

165

Across the ocean, however, the Voelkischer Beobachter
thundered its disapproval of the nomination. The German
newspaper reported that the selection of Steinhardt threw
"a revealing light on American diplomacy," indicating that
anyone giving financial support to the presidential candi-
dates in the United States could expect an ambassadorship.9
The paper characterized Steinhardt and his two predecessors
in the Soviet Union, Bullitt and Davies, as rich Jews re-
warded for their support of President Roosevelt while pro—
fessional diplomats received lesser posts. It is true
that in sending Steinhardt to the Soviet Union, Roosevelt
continued his practice of sending political appointees to
Moscow. However, neither Bullitt nor Davies were Jews,
nor is there any indication that Steinhardt's religion was
a factor in his selection. Curiously, Stalin on May 3, 1939,
removed Maxim Litvinov, a Jew, as Soviet Foreign Commissar.
It is generally accepted that Stalin's action presaged
Soviet determination to align itself with the German Reich.
The two affairs appear distinctly isolated from one another.

Leaving his Peruvian post, Steinhardt enjoyed a

dawdling trip back home. Remarking that he had seen little

 

9New York Times, April 24, 1939.

166

of South America during his stay in Lima, he requested and
received permission to return the long way around Cape
Horn and up the eastern seaboard. Inasmuch as the trip

and time were at Steinhardt's personal expense, the Depart-
ment considered it a saving. It would keep him Off the
payroll that much longer. There was no urgency in getting
him to the Soviet Union.

In Washington Steinhardt spent considerable time
preparing himself for his tour of duty in Moscow. Briefed
by the Department on various Russian individuals and their
characteristics, Steinhardt remarked that he would "have
some mighty interesting but extremely difficult nuts to
crack."10 The assignment, he was told, would require con-
siderable energy but results would be more than likely
negligible. He would face the challenge. In his mind,
Moscow was "becoming more and more the pivotal post“; the
role the Russians were destined to play during the next
few years, both in EurOpe and the Orient, could hardly be
over-estimated. Looking forward to his new assignment,
Steinhardt thought the eXperience unique and something he

would remember the rest of his life.

 

17f

10Steinhardt to William Cochran, June 23, 1939,

Steinhardt MSS.

167

Among those with whom Steinhardt conferred at the
Department was Loy Henderson, Assistant Chief of EurOpean
Affairs. Henderson had been Charge d'Affaires at Moscow
under both Bullitt and Davies. He arranged that Stein—
hardt meet his Russian counterpart, Soviet Ambassador to
the United States Constantine Oumansky, at the Soviet
pavillion at the New York World's Fair. The two Ambas-
sadors exchanged pleasantries and expressed views. Later,
scratching his head, Oumansky informed Henderson that he
(Oumansky) was puzzled by Steinhardt, he did not know
what to make of him. Relaying the report of Oumansky's
perplexity on to Steinhardt, Henderson, noting the new
Ambassador's apparent pleasure, was informed that it was
his (Steinhardt's) desire to keep the Russians guessing
and off-balance.11

Steinhardt was already formulating an over-all
policy in dealing with Soviet authorities. More than
likely it originated with Henderson. Having been involved
in American-Soviet affairs during the 1920's when rela-

tions between the two countries were virtually non—existent,

 

1Personal interview with Loy Henderson, Washington,
D. C., February 9, 1967.

168

Henderson was an old Russian hand. From his experiences

he had concluded that the Russians, unlike other civil-
ized people, were not influenced by social amenities;

they looked upon foreign concessions as signs of weakness.
The Russians were, in his thinking, pragmatic Oriental
horse-traders--something for something, nothing for
nothing. Steinhardt convinced himself that the Russians
would receive no concession without their paying an equiva-
lent price, that every Russian abuse would be met with
similar treatment. It was a "tit-for—tat" policy.

Even before embarking for the Soviet Union,
Steinhardt inquired about living conditions in Moscow.
Having just shipped his household goods and personal effects
from Peru, it would require some time before they arrived
in Moscow. In spite of the sparseness of furnishings in
Spaso House, the Ambassador's residence in Moscow, he was
informed that even if he had to "camp out there a bit at
first;I it would be preferable to any of the Moscow hotels.12

His correspondent also recommended that he fill his "key

household positions" with non—Russians. Steinhardt, in

¥

1ZStuart E. Grummon to Steinhardt, June 15, 1939,
Steinhardt MSS.

169

turn requested the Department to assign a Naval radio Oper-
ator to the Moscow Embassy.13 It was his view that the
Embassy in Moscow in the event of a EurOpean war "would
unquestionably be more or less cut Off from the Department
.. .." If war broke out, he continued, Poland was likely
to be the seat of the conflict, at least during the early
stages. He thought that the whole Baltic area would be
more than likely involved, at least during the early
stages, and that the Ukraine and Romania would almost
certainly be implicated, "for obvious reasons--princi-
pally the necessity for the Germans to Obtain oil."
Meantime, the world in the summer of 1939 edged
closer to global disaster. In Asia, Japan, having vio-
lated Chinese neutrality in 1937, not only drove deeper
the forces of Chiang Kai-shek but moved southward toward
Indochina, the Philippines, and Dutch West Indies threat—
ening French, Dutch, British, and American territory. In
Europe, Hitler destroyed what remained of Czechoslovakia;
Mussolini added Albania to the Italian empire. At the same
time, the Fuehrer directed a "war of nerves" against Poland

demanding that she surrender the city of Danzig to Germany.

 

13Steinhardt to Loy Henderson, July 5, 1939, Stein-
hardt MSS.

170

These last acts of violence forced Britain and
France to reverse their policy of appeasing Hitler. In
the spring they had guaranteed aid to Poland if Hitler
attacked; two weeks later they made a similar pledge to
Greece and Albania. The two Allies tried to bolster
their guarantee to Poland with an alliance with the
Soviet Union. The Soviets,notwithstanding the fact that
they had been ignored at Munich, had offered the Euro-
pean democracies a defensive treaty against Hitler.
British and French negotiations with the Russians proved
indecisive because Poland, Romania, and the Baltic States
feared Russia as much as they did Germany. Distrust-
ing the EurOpean democracies, the Russians opened parallel
negotiations with the Germans.

The world situation alarmed President Roosevelt.
He requested Hitler and Mussolini to demonstrate their
oft-repeated desire for peace by giving thirty-one nations
in EurOpe and the Middle East guarantees against attack
for at least ten years; Mussolini did not reply, and Hitler
denied any aggressive intentions. In view of the situation
Roosevelt continued asking for repeal of the neutrality

law of 1937 so that we could make American arms available

171

to friendly nations. (A new law repealing the arms embargo
did not become law until November 4, 1939.)

Reports reaching President Roosevelt from EurOpean
capitals in late July, 1939, indicated that the crisis
between Poland and Germany would probably come to a head
within a month or six weeks.14 Steinhardt had already left
for Moscow. Enroute he stopped in Paris where he undoubt-
edly received further encouragement from Ambassador Bullitt
to take a "hard line" with the Soviets. Meantime the Pres-
ident decided to throw his personal influence on the scales.
He hoped to forestall a Nazi-Soviet agreement. He began
by reviewing the situation with Ambassador Oumansky who
was preparing to leave for Moscow. Roosevelt requested
the Ambassador to tell Stalin that if the Russians joined
up with Hitler it would be to no avai1--that once the Ger-
mans conquered France, they would then turn on the Soviet
Union. The substance of these remarks was at once sent
by Sumner Welles to Steinhardt who had just arrived in

Moscow. The message was cabled to Paris and from there

 

14William L. Langer and S. Everett Gleason, The

Challenge to Isolation (New York: Harper and Brothers
Publishers, 1952), pp. 161-62.

172

taken by special courier, Second Secretary in the United
States Embassy Douglas MacArthur II, to Moscow in order
to obviate any chance of interception.

Before receiving these instructions, Ambassador
Steinhardt had already paid a visit to Vyacheslav Molotov,
Soviet Foreign Commissar (August 10) and had presented
his credentials to President Mikhail Kalinin (August 11).
These high officials of the Kremlin had by this time
received a telegraph from Oumansky and therefore, were
prepared. Some importance may thus be attached to the
lengthy remarks of Kalinin, unusual on such occasion.

The Soviet President spoke frankly and cordially, but
about the Far Eastern situation rather than the EurOpean
circumstances.15 Steinhardt obtained the impression that
the Kremlin felt secure in Europe: "they thoroughly
appreciate the fact that Germany cannot attack Russia
without inevitably involving Poland or Romania, or pro—
bably both. They seem to feel that they are assured of
Anglo-French military assistance in the event of a world

war and appear to be disposed on this front and await

 

15Foreign Relations: The Soviet UniogL_l933-l939,
pp. 775-79.

173

further deve10pments." Steinhardt thought that any influ-
ence the American Government desired to bring to bear

could be best accomplished by expressing a greater interest
in the issues of the Far East than Europe.

Steinhardt on August 16 presented Roosevelt's
letter to Molotov. The letter stated that the American
President was looking at the world situation in an objec-
tive manner, that "if war were now to break out in EurOpe
and the Far East and were the Axis powers to gain a victory,
the position of both the United States and the Soviet Union
would inevitably be immediately and materially affected
thereby."16 The president suggested that if a satisfactory
agreement among the EurOpeans could be reached, it would
prove to have an effect in the interest Of world peace,
in the maintenance of which, of course, the United States
as well as the Soviet Union had a fundamental interest.

Steinhardt was far too shrewd to think he had the

key to Soviet policy.17 In his report he made careful

 

16Sumner Welles to Steinhardt, August 4, 1939,
Steinhardt MSS.

7Langer and Gleason, The Challenge to Isolation,
pp. 162-164.

174

reservations on this score, but ventured the opinion that
the Soviet authorities were genuinely desirous that
peace should be preserved and particularly anxious to
avoid being drawn into any European conflict, at least
in the beginning, if only because of internal problems
and difficulties. Under the circumstances, Steinhardt
averred, their guiding principle was to assure nonviolation
of their frontiers. The Soviets were deliberately carry—
ing on negotiations with the French and British on the
one hand and the Germans on the other, he asserted, in
the hope of thereby avoiding the outbreak Of war before
the beginning of October; that with this Object in view
they intentionally dragged out the negotiations with the
hope of finding Japan in a weaker position by spring, 1940,
and the British and French rearmament progressed to the
point where they no longer had need to fear Germany.
Steinhardt thought the Soviet point of view not

only readily understandable but also thoroughly sound. He
wrote the Department:

While circumstances may force the Soviets into

a military alliance with Britain and France at

any moment, it seems to me that unless there

is a material change in the present situation
between now and the first of October, the Soviets

175

while keeping the negotiations alive and hold-
ing them over Hitler's head as a threat, will
not enter into any more far-reaching agreement
during the next six weeks than circumstances
necessitate. They will probably be disposed
to keep the negotiations alive as a threat
against Hitler and thus avert war this fall,
for there is nothing that the Soviets desire
more than to avoid being in a EurOpean war at
this time.18

In Steinhardt's Opinion the Soviet authorities were playing
"a very shrewd game in international politics, that from
the point of view of their interests they are playing the
game intelligently and successfully, . . ." SO shrewd was
the Russian game played that even Steinhardt was taken off-
balance when on August 23, 1939, Kremlin leaders signed
the Nazi-Soviet Pact.

Why was Steinhardt fooled? According to Hull, the
prospect of a German-Russian pact had long been in the
minds Of those at the Department.19 They gave due signifi-
cance to the replacement of Litvinov by Molotov: "the former
was known as an apostle of cooperation with the Western Demo—

cracies and as anti-Hitler, the latter was believed much less

.,—

18Foreign Relations: The Soviet Union, 1933-1939,
pp. 778-790

19Hull, Memoirs of Cordell Hull, pp. 655-56.

176

favorably disposed toward the democracies." The Depart-
ment knew, the Secretary claimed, of the many difficulties
the British and the French experienced in their negotia-
tions for an alliance with the Soviet Union. It can be
assumed that Steinhardt was instructed concerning these
developments. SO too can it be assumed that he was instruc—
ted in regard to Soviet preoccupation with Far Eastern
affairs. Mutual Russo-American uneasiness over Japan's
aggressive intentions had been a major consideration in
the United States' belated recognition of the Soviet
Union. Ambassador Bullitt while serving in Russia under-
scored this anxiety vis-a-vis Japan.20 There were also
those in the Department who were convinced that Soviet
diplomacy committed itself to the duo—policy of involv-
ing the United States in war with Japan in Asia while
entangling France and Britain in a EurOpean war with
Germany.21 Remaining neutral, the Soviet Union, so

those Kremlinologists believed, was to be free to "grab

territory" in both the East and West. Supposing that

 

 

20Foreign Relations: The Soviet Union, 1933-1939,
p. 227.

1Personal interview with Loy Henderson, Washington,
D. C., February 9, 1967.

177

Steinhardt was instructed concerning Soviet—Japanese rela-
tions, his talks with Kalinin did not lessen his belief
that Soviet fears lay in the East rather than in the West.
Apparently he knew that Franco—British negotiations
were floundering. Steinhardt sent a series of cables to
the Department concerning negotiations between Berlin and
Moscow. He reported that steady progress could be noted;
that he had every reason to believe that the Soviet Union
had not informed the French and British of these conversa-
tions.22 In view of this, why did the Ambassador believe,
as stated earlier, that "circumstances may force the Sov—
iets into a military alliance with Britain and France at
any moment?" In reality, circumstances suggested that the
Soviet Union would make every effort to remain neutral. A
pragmatist himself, Steinhardt should have recognized that
the political realists in the Kremlin held the Winning
hand. The only explanation appears to be his faith in
Roosevelt's power to convince the Kremlin leaders that he
(Roosevelt) knew the best policy for Russia to follow.

Roosevelt's letter pointed out to the Soviets his belief

 

22Hull, Memoirs of Cordell Hull, p. 656.

178

that Germany was the potential enemy for all. Its logic
seeminguzconvinced Steinhardt; it failed to do likewise
with the Russians. However, while the ink dried on the
Nazi—Soviet pact, Russian policymakers could content them-
selves with the idea that their country could remain neu-
tral while Germany, France, and Britain bled each other
white in a repeat performance of World War I. The one
thing that Kremlin leaders failed to perceive in the
summer of 1939 was the speed and destruction of the Ger—
man Wehrmacht. The Nazi-Soviet pact was a calculated
risk.

Of lesser importance than the diplomatic problems
greeting Steinhardt in Russia were the tasks of settling
himself and family at Spaso House and adjusting to life
in the Soviet Union. He discovered life in the Russian
capital both difficult and trying. This, in spite of
the fact that he found "a great improvement in Moscow"
since his abbreviated visit in 1934 while Minister to
Sweden.23 The people, he thought, were better clothed

and food better distributed. There had been, he suggested,

 

23Steinhardt to Loy Henderson, August 11, 1939,
Steinhardt MSS.

179

a substantial improvement in building and construction.
Nevertheless, he found food prices exhorbitant.24 Due
to the large numbers of servants necessary to maintain
the Embassy and in order to reduce expenses, he set two
meals: one for the Russian servants, the other for the
Ambassador's table. Even so, Steinhardt thought he fed
the Russians better than they were accustomed; American
food at the cheapest price and worst quality was better,
he said, than that sold locally "at any price."

More importantly, Steinhardt thought diplomats
confronted incredible difficulties in Moscow. Soviet
authorities throughout the diplomatic colony, he com-
plained, opened mail, tapped phones, and hugged Embassies.25
With a sense of humor, he reported that OGPU agents fol-
lowed each Ambassador "at such propinquity that I had
to suggest to one Of them a few days ago in having my
photograph taken for a carnet that only my photograph

was desired." Living conditions, he thought, were

"frightfully hard," contact with the Russians virtually

 

24Steinhardt to Loy Henderson, August 11, 1939,
Steinhardt MSS.

25Steinhardt to John W. Browning, August 22, 1939,
Steinhardt MSS.

180

forbidden, and the authorities anything but obliging
towards foreigners including diplomats.26 At the Em-
bassy, he worked fifteen hour days, seven days a week.
But he was encouraged with his staff; taken as a whole,
he said, it was "by far the most intelligent, able,
cooperative, and personally agreeable staff" that he
had known in the Service.27

It was the affairs of a staff member that af—
forded Steinhardt his first Opportunity to put the
"tit-for-tat" policy to a test. Dr. Walter G. Nelson,
Public Health Surgeon attached to the Moscow Embassy,
prepared to leave the Soviet Union. Soviet authorities,
however, refused to inspect his household goods, medi-
cal supplies, and instruments at the Doctor's apart-
ment but insisted that the examination take place in

a Moscow custom house.28 The procedure would have

inconvenienced Dr. Nelson: it piqued Steinhardt.

 

26Steinhardt to Charles S. Guggenheimer, September
15, 1939, Steinhardt MSS.

2
7Steinhardt to Loy Henderson, August 11, 1939,
Steinhardt MSS.

28Foreign Relations: Soviet Union, 1933—1939,
pp. 845—46.

181

Circumstances afforded the New Deal diplomat an
Opportunity to retaliate. First, the Red Army Choir and
Ensemble had recently left the Soviet Union for the
United States in order to appear at the New York World's
Fair.29 Hull suggested that steps could be taken by
American customs to inconvenience their entry.30 Secondly,
the Soviet steamer Kim, without a prOper bill as recently
required (August 15) by Canal authorities, approached the
Panama Canal. The Soviet Foreign Office had requested
that the gig, in spite of its deficiency, be allowed to
pass:31 Steinhardt informed the Russians that no action
regarding the gig would be taken until proper treatment
was accorded Dr. Nelson. Steinhardt had no special
interest in Dr. Nelson; his interest stemmed from his
desire to improve the treatment of his entire staff.

The Department in Washington backed the American
Ambassador. Hull was agreeable to either alternative.

Henderson at the EurOpean desk thought the Department

 

29Ibid., p. 844.

30Ibid., p. 846.

311bid., p. 846—54.

182

had to back Steinhardt "to the full."32 Otherwise, he stated,
the Embassy was almost certain to be more harrassed by Soviet
customs and other authorities in the future than it had been
in the past. Steinhardt agreed. Notwithstanding, the repeated
courtesies extended by the: Embassy and the Department to the
Soviet authorities during past years, he said, "the deliberate
refusal of the Soviet authorities to reciprocate or to extend
even common courtesies to the Embassy and the members Of its
staff persists. .. ."33 He suggested that Dr. Nelson be per-
mitted to remain in Moscow until the matter was settled.
Otherwise, he thought the Embassy would be deprived of the
argument that the delay in furnishing a customs official con-
stituted a hindrance to the performance of the duties of the
Embassy.34 The 'tit-for-tat" policy received its first divi—
dends. The Soviet Foreign Office informed Steinhardt that as
an exception not to be taken as precedent, a customs in-

spector was being sent to Dr. Nelson's apartment.

 

321bid.. pp. 847-50.

33Ibid.. pp. 850-52.

34Ibid., p. 852.

3SIbid., p. 854.

183

Steinhardt thereupon requested that the gig be permitted
to proceed and the usual custom facilities be accorded
the Red Army troupe.

However, Steinhardt was in no mood to allow
things to rest. The Soviet Foreign Office requested the

issuance of a diplomatic visa and laissezgpasser to

 

Dmitri Zaikine, Soviet Vice Counsul at New York, and his
wife, Klavdia, bearers of diplomatic passports. Stein-
hardt informed the Soviet authorities that the laissez-
passer would be issued the zaikines provided Soviet

laissez:passer were henceforth issued American Consular

 

officers and their families.36 The Department of State
fully supported his view. Reasoning that American
customs treatment was granted on the basis Of reciproc—
ity,37 the Collector of Customs at New York was advised
to search the baggage of the Vice Counsul and his wife.
Ambassador Oumansky in Washington complained. He argued
that the Soviet treatment of Americans had nothing to do

with treatment of Russians in the United States: that in

 

36Ibidol Pp. 857-58.

37Ibid., p. 858.

184

the Soviet Union, Americans were treated in accordance
with the most—favored-nation principle and the United
States should apply the same doctrine.38 Neither the
Department nor Steinhardt, however, would budge. Presi-
dent Roosevelt supported both; he stated, ". . . I
think we should match every Soviet annoyance by a sim-
ilar annoyance here against them. When it comes to

the larger questions of downright rudeness on the part
of Stalin, Kalinin, or Molotov we cannot afford to

repay such rudeness with equivalent rudeness over here.
But I am inclined to think that the day may come soon when
it will be advisable to bring the situation Of the
direct attention of Oumansky."39 However, authorities
in the Soviet Union were unwilling to loosen their
control over foreigners in their country: an exception
could not be made for America. A draw was the best
Steinhardt was able to gain from this round of the
"tit-for-tat" policy. Nonetheless he had gained sup-
port for the policy from both the Department and the

President.

 

381bid.. pp. 862-64.

39Ibid.. pp. 868-69.

185

Meantime, Hitler's Wehrmacht in September had

 

rolled eastward across the Polish plains and cannon thun-
dered across EurOpe. With the contents of the Nazi-Soviet
pact unknown to the world, few people knew what to expect
from the Russians. Even Soviet militarists were caught
off—guard; not expecting a German advance of the rapid-
ity which actually occurred, the Russians were neither
eager nor ready to move. On its march into Poland, the
Red Army was ignorant of its final destination; many of
its ranks were under the impression that they were on
their way to fight the Germans.40 Possessing no more
information on the contents of the pact than any other
American, Steinhardt doubted that the Soviet Union had
committed itself to military Operations against Poland.41
The pact recognized, he speculated, certain areas in
Eastern EurOpe as vital to the interests of the Soviet

Union which Germany would refrain from entering. "It is

my opinion," the Ambassador stated, "that the Soviet

 

0David J. Dallin, Soviet Russia's Foreign Polipy,
(New Haven: Yale University Press, 1942), p. 73.

41Steinhardt to Hull, September 1, 1939, Depart-
ment of State Archives, 761.6211/158.

186

Union will pursue an opportunistic policy based entirely
upon the deve10pments arising out of any conflict in
Eastern Europe."

The Department of State closely watched the devel—
opments. Hull suspected that the Soviet Union "would
invade Poland so as to obtain her share of that country,
and to keep Hitler's legions from approaching too close
to Russia."42 On September 17 Steinhardt cabled from
Moscow the text of a note from Foreign Commissar Molo-
tov announcing that Soviet troops had entered East
Poland to protect the lives and property of the popula-
tion of the western Ukraine and western White Russia
in the absence of any Polish government, and that both
Poland and the Polish Government ceased to exist. It
added that the Soviet Union would pursue a policy of
neutrality in its relations with the United States.43
Late in September, Joachim von Ribbentrop, German Foreign

Minister, went to Moscow for the purpose of ironing-out

difficulties that had arisen between Germany and the

 

42Hull, Memoirs of Cordell Hull, p. 685.

43Ibid.

187

Soviet Union. The two countries agreed to a treaty of
friendship supplemented by a separate boundary protocol
providing for the exchange of German and Russian nation-
alists: a provision not to tolerate any Polish agitation
concerning territory occupied by the other; and, a secret
protocol which provided for the exchange of territory.
RibbentrOp and Molotov announced the demarcation of
their new frontier in Poland, and in a joint statement
on behalf of their governments declared that their defin-
itive settlement of the Polish question had created a
basis for an end to the war between Germany and the
Western Powers.44 Britain and France, by this time,
were too far committed to turn back.

The United States could have construed the Rus-
sian invasion of Poland as an act of war. Roosevelt
and Hull chose not to include the Soviet Union in the
application of the Neutrality Act. To do so, they
reasoned, would place her on the same belligerent

footing as Germany and "might thrust her further into

 

44Dallin, Soviet Russia's Forgign Polipy, p. 130.

188

Hitler's arms.45 They felt, the Secretary asserted,
that Russia and Germany would not become full allies,
and that the Fuehrer had not abandoned his ambitions
with Russia. When the Soviet Union moved troops into
the Baltic States, Hull looked upon it as a movement
to outline new strategic borders. Russia, according
to Hull, was evidently seeking to increase her pro-
tection against foreign nations; but an estimate of
the military situation disproved that it could be

the Allies.46 Hull remained unconvinced of a lasting
Nazi—Soviet friendship.

Both France and Britain were reluctant to
declare war against the Soviet Union. They thought
that the more effective measures against the Soviet
Union which would be made possible by a state of war
would be more than offset by the danger of precipi-
tating complete military and economic COOperation

. 47 .
between Germany and Russ1a. Steinhardt reported a

 

45Hull, Memoirs Of Cordell Hull, p. 685.

46Ibid., p. 701.

47Steinhardt to Hull, September 17, 1939, Depart-

ment of State Archives, 740.0011 European War 1939/353.

189

view already expressed in British and French circles
that "friction has or will shortly arise" between Ger—
many and the Soviet Union.48 Steinhardt not only dis-
agreed with the French and British, but he also dis-
agreed with Hull. He did not believe the Nazi-Soviet
alliance a mere marriage of convenience. Although he
did not believe the Soviets would take an active part

in the war, he thought the USSR would "divide the spoils
and do everything within her power to assist the Nazis."
The Soviet Union's demands from Estonia to increase
transit and storage facilities, he suggested, was "an
effort to aid the Nazis."50 Thus, from the beginning
of the EurOpean war, Steinhardt's view of the Nazi-
Soviet agreement was at variance with those held by

the American Secretary of State and certain policy-
makers in Britain and France. However, Steinhardt was

not without supporters in the Department of State who

49

 

48Steinhardt to Hull, September 27, 1939, Depart-

ment of State Archives, 740.0011 European War 1939/587.
49Steinhardt to Hull, September 17, 1939, Depart-
ment of State Archives, 740.0011 EurOpean War 1939/352.

50Steinhardt to Hull, September 27, 1939, Depart-
ment of State Archives, 740.0011 European War/587.

190

looked upon the Soviets as opportunistic imperial-
ists.51

Steinhardt thought the war could not last long.
The internal structure in Germany, he thought, was weaker
than many people thought it was, which was Offset by the
lack of preparedness on the part of the British and the
unpopularity of the war in England and France. Russian
participation, he continued, was "likely to be more
economic than military, and not too much of the former."52
All reliable information, he asserted, pointed to the
fact that Hitler and the entire Nazi regime had not only
lost their popularity with the German masses but were
suspected of having led Germany into an unnecessary war
of which the outcome could only be disaster for Germany.53
The best Opinion, Steinhardt said, was that the outcome

would be a negotiated peace, not in the immediate future

but before the war had run the lengths of the last war--

 

51Personal interview with Loy Henderson, Washington,
D. C., February 9, 1967.

52Steinhardt to Alvin Untermyer, October 19, 1939,
Steinhardt MSS.

53Steinhardt to John W. Browning, September 26, 1939,
Steinhardt MSS.

191

that is, complete exhaustion. At the end of two years,
or perhaps somewhat longer, he thought the Germans would
be about ready to accept such a negotiated peace, one
that would not be regarded as a German victory. The
situation, he opined, might boil down to the efficacy
of the British blockade, which in turn would rest in
large part on the extent to which the British were pre-
pared to aggravate the neutral powers--as against the
willingness of the German masses to support Hitler for
an indefinite period of time.

As it turned out, American neutrality was first
tested by the Axis rather than by the British. The
Cipy of Flint, an American freighter carrying a mixed
cargo to Britain, was captured on October 9 by the Ger-
man pocket battleship Deutschland. The Germans put
aboard a prize crew and took the ship to Tromso, Norway
on October 21. After two hours in port to take on water,

the Citygof Flint instead of proceeding to a German port

 

as expected, departed for Murmansk and entered the Rus-
sian harbor three days later. Under the rules of war
governing maritime warfare, a prize ship could be brought

into a neutral port only on account of unseaworthiness,

192

stress of weather, or want of fuel or provisions. Failure
to leave obliged the neutral country (the Soviet Union in
this instance) to release the ship with its original crew
and to intern the prize crew.54 The Department of State
instructed Steinhardt to notify the Soviet authorities that
the United States Government assumed that such action would
be taken at once, since failure to act would compromise

the neutrality of the Soviet Government as previously
announced. Although giving conflicting reasons, both the
Germans and the Soviets indicated that the vessel was
brought into Murmansk by reasons making it impossible for

the City of Flint to remain at sea: German authorities

 

alleged that the ship was non-navigible because no suit—
able charts were aboard, whereas the Soviets claimed
that the ship had damaged machinery. Both reasons fell
within the scope of Articles 21 and 22 of the Hague Con-
vention of 1907.55

Inability to contact members of the interned Ameri-

can crew irritated both Steinhardt and the Department.

 

54Hull, Memoirs of Cordell Hull, pp. 704-05.

55Foreign RelaEions: Soviet Union, 1933-1939, p. 992.

193

On two different occasions the Captain of the City of
glipp failed to appear at the phone in Murmansk at the
appointed hour. Steinhardt was likewise unable to get
Soviet permission to charter a plane to send a member
of the Embassy to Murmansk. Successfully preventing
American contact with the crew, the Soviet Government

on October 26 issued a statement that the City of Flint

 

was being released on condition she leave Murmansk
immediately.
Steinhardt drew his own conclusions surrounding

the City of Flint episode. It was his opinion that when

 

the City of Flint was brought into Murmansk and claimed

 

the right of entry, the Russian port authorities there
were ignorant of international law and proceeded to
intern the German prize crew. Thereupon the German Em-
bassy stepped in to the matter and "counseled the Soviet
Government not to challenge the grounds of entry, even
though they might not be sound or sufficient, but to
release the German prize crew and permit them to take

the vessel to sea."56 In pursuance of the plan, he said,

 

56Ibid.. pp. 1003-05.

194

it was necessary to keep the American crew on board and
prevent its communication with the American Embassy:
such communication, he thought, might have exposed the
entire scheme. Falling back on the "tit-for-tat" policy.
Steinhardt suggested that the only factor which tended
to influence the action of the Soviet Government in
such cases as that of the City of Flint was the "fear
of retaliation directly affecting some Soviet interest."
In view of the close collaboration of the Soviet Union
with Germany which was based on self-preservation and
fear Of German armed might, the Soviet Union, in Stein-
hardt's view, had demonstrated by its actions surround-
ing the City of Flint affair that it clearly preferred
to remain in the good grace of Germany even at the
expense of the impairment of its relations with the
United States; Kremlin leaders chose the lesser of the
two evils. The American public, already dubious of
Soviet motives after the signing of the Hitler-Stalin
pact, increased its apprehension of the USSR. Meantime

the City of Flint had put into the Norwegian port of

57

 

57Ibid., p. 999.

195

Haugesund on a false pretext. This time the Norwegian
authorities, on December 3, interned the German crew
and freed the vessel in charge of the American crew.58
Already in the making was an affair that would
serve only to increase the flow of anti—Russian adren-
alin in the United States. The secret protocol of the
Nazi-Soviet pact defined both Russia's and Germany's
"sphere of influence." No surprise was occasioned
when the Kremlin summoned the Finns to Moscow to dis-
cuss certain "concrete" questions. As early as October
5, Finnish Minister Hjalmer PrOOOpe sought a promise
from Secretary Hull that the United States would say
something to the Soviet Government in the event that
Russia made demands on Finland.59 Hull informed the
Minister that the United States would not project itself
into political controversies of two other countries:
that because of unfavorable action in the Soviet Union,

it "might do more harm than good."

 

58Hull, Memoirs of Cordell Hull, pp. 704-05.

59Ibid., p. 702.

196

The Finns had a foretaste of the Soviet claims
likely to be advanced. Soviet leaders desired two
things: first, to push the frontier on the Karelian
Isthmus back a substantial distance from its closest
approach to Leningrad; and second, to establish a naval
base on the Finnish coast at Hango. The Soviet negotia—
tors did not bully. Restrained in manner, the Russians
nevertheless were determined to get what they wanted.
The fact that Josef Stalin himself participated in all
stages of the negotiations indicates the importance that
the Russians attached to them. Although the Russians
presented their original points as "minimum demands,"
they were prepared to compromise on details.60 There
was no such elasticity on the Finnish side. Finnish
politicians believed that since "they entertained no
aggressive ambitions and were simply insisting on retain-
ing what belonged to them by right, they could somehow
withstand Soviet pressure."61 Finnish negotiators sent

to Moscow enjoyed almost no freedom to maneuver. Strict

 

6OC. Leonard Lundin, Finland in the Second World

War (Bloomington, Indiana: Indiana University Press, 1957),
p. 52.

 

61Ibid.

197

orders from Helsinki shackled them. The sense of urgency
which the delegates received in the course of the conver—
sations failed to impress politicians back in Finland.
Nor was Steinhardt able to foresee Soviet deter-
mination. Throughout October and most of November, he
thought the Finns and Russians would settle their dif-
ferences without war. Both the French and German Embas—
sies in Moscow informed Steinhardt that they thought the
Soviet Union would modify their demands vis-a-vis Finland
in order to achieve "an amicable and peaceful solution."62
From Paris, Ambassador Bullitt informed him and the
Department of State that "the Soviet Union was bluffing
and would not attack."63 A talk with the Finnish Min-
ister in Moscow, who set forth the terms of Soviet de-

mands and Molotov's review of foreign affairs before the

Supreme Soviet, did not alter the Ambassador's Opinion.64

 

62Steinhardt to Hull, October 28, 1939, Department
of State Archives, 760D61/361: Steinhardt to Hull, Novem—
ber 4, 1939, Department of State Archives, 760D61/402.

63Bullitt to Hull, November 27, 1939, Department
of State Archives, 760D/486.

64
Steinhardt to Hull, November 1, 1939, Department
of State Archives, 760D/486.

198

He deduced from Molotov's speech that the Soviets had
given up their demands for the naval base at Hango. Fur-
thermore, Steinhardt thought that the internal economic
situation in the Soviet Union "still so fundamentally
(weak as to cause the Kremlin to proceed with extreme cau-
tion in the execution of its present foreign policy."6
He thought the disposition of troops so few and in such
position that an attack on Finland was "highly improbable";
sleeping car accomodations were still available from Mos-
cow to Leningrad.66 Certain that peace would prevail.
and in need of dental care, Steinhardt left Moscow for
Stockholm in mid-November.

However, Soviet leaders had made up their minds
to the contrary. Molotov informed the Finnish Minister
in Moscow on November 28 that the Soviet Union considered
itself released from its obligations under the 1932 pact
on non—aggression; on November 29 the Soviets severed diplo-

matic relations. Friends and neighbors of Finland found

 

65Steinhardt to Hull, November 9, 1939, Department

of State Archives, 861.50/298.

66Steinhardt to Hull, November 14, 1939, Department
of State Archives, 760D61/44l.

199

it impossible to credit what was happening in the final
days before the Red Army marched. The Swedes and French
refused to believe that the Kremlin would actually resort
to war against its small neighbor. The United States
Government shared this incredulity.67

Fired on November 26 was "the shot at Mainila"
which Moscow used as an excuse for precipitating the
crisis that followed. On November 30 without the for-
mality of a declaration of war, Russian troops crossed
the Finnish frontier. Steinhardt and other foreign
diplomats were caught completely unaware. According to
Steinhardt the Soviet decision to wage war "was made
abruptly and carried out almost instantly, constituting
a complete reversal of the Government's intentions."68
Two or three days before the attack, according to Stein-
hardt, the Soviet Government had no intention of invading
Finland.

Why the sudden reversal? One possibility as

determined by Steinhardt was a Soviet effort to recoup

 

67Langer and Gleason, The Challenge to Isolation, p. 327.

68Steinhardt to Loy Henderson, December 4, 1939,
Steinhardt MSS.

200

world prestige. He pointed out that reports from dif-
ferent parts of the world believed the Soviets were
bluffing, with a resulting loss of prestige. "As they
had taken one rebuff from the Turks and unquestionably
have ambitions in the Black Sea area and the Balkans,"
he wrote, "I am inclined to regard this as the con-
trolling motive." However, he did not disregard the
rumor that Stalin had been misled by the Governor of
the Leningrad District, Andrei Zhdanov. Supposedly
Zhdanov informed Stalin that a Soviet revolution was
brewing in Finland and that the troops of the Leningrad
Command--poorly trained and equipped as they were--wou1d
be able to take over the whole country in fourteen days.
"Every army officer of the slightest rank," Steinhardt
said, "was here in Moscow. Some of them did not get

to the Finnish frontier until several days after the
invasion began." If this situation prevailed, Stein-
hardt's latter explanation has merit. How else would
Russia's lack of preparedness be explained? If Soviet
prestige depended on a quick victory, Stalin must have
been convinced that the Leningrad Command was capable

of producing it. If Stalin was misled, as we may presume

201

that he was, either Zhdanov or someone else had to do it.
With prestige at stake, Stalin would not have otherwise
sent his troops to battle. NO matter what determined the
decision, we can be sure that it was Stalin acting alone
who gave the green light.

Upon the Opening of hostilities the United States
Offered to mediate the dispute. It was welcomed by Fin-
land but rejected by the Soviet Union.69 After receiving
word from the American Legation in Finland that Helsinki
had been bombed, President Roosevelt stated publicly that
all "peace-loving peoples" condemned this new resort to
force.70 He followed this with an appeal, tactfully
issued to both powers, not to bomb civilian populations
or unfortified cities, and requested an immediate reply.
Steinhardt cabled that when he presented the appeal to
Molotov, the latter categorically denied that Soviet air
forces had bombed civilian pOpulations or unfortified

cities or had any intentions of doing 80.71 Steinhardt

 

69Hull, Memoirs of Cordell Hull, pp. 706-07.

7OLanger and Gleason, Challenge to Isolation, p. 330.

71Hu11, Memoirs of Cordell Hull, pp. 706-07.

202

received the impression that the Foreign Commissar wanted
no third party mediation, and that Russia began the war

to liquidate the Finnish question at the earliest possible
moment and be free for develOpments in the Balkans and
Black Sea area.

Most Americans from the beginning sympathized
wholeheartedly with the Finns. It was a natural expres-
sion to root for the underdog, but many Americans fondly
thought of the tiny Northern country as "the one honorable
nation that paid its debts when others did not." There
was considerable hue and cry against our continuing diplo—
matic relations with the Soviet Union. Former President
Herbert Hoover, in protest against the war on Finnish
civilians, urged the recall of our envoy.72 Under Secre-
tary Sumner Welles heartily favored an immediate break, if
only as a demonstration to Nazi-Soviet partnership.73 In,a
tense session of the House of Representatives, Representa-

tive John W. McCormack of Massachusetts proposed an amend-

ment to the State Department Supply Bill cutting out the

 

72New York Times, December 3, 1939.

73Langer and Gleason, Challenge to Isolation, p. 332.

203

annual salary of $17,500 for the American Ambassador
to Moscow.74 The amendment was defeated by three votes
--108 to 105--but only after the Administration had
brought pressure to bear upon its supporters in Congress.
The fact that the legislators considered it provides an
emphatic illustration of the depths to which American
relations with the Soviet Union had sunk.

However, Steinhardt thought little good could
be accomplished by severing relations. Just two weeks
before the outbreak of hostilities, Gordon Vereker,
Counselor of the British Embassy, had informed Stein—
hardt that insofar as his (Vereker's) Government was
concerned, its experience in 192775 had beenvery un-
satisfactory--that his Government suffered all the dis-
advantages without any compensating advantages.76 Vereker

added that since the Soviet Government did not recognize

what he described as the customary social amenities of

 

74Dallin, Russia's Foreign PolicY. p. 179.

75Relations between Great Britain and the Soviet Union
were broken off on May 26, 1927, after evidence had been un-

covered suggesting Soviet espionage and revolutionary activi-
ties. Diplomatic relations were restored on October 1, 1929.

76Foreign Relations: Soviet Union, 1933-1939. PP. 793-4.

 

204

diplomatic intercourse, including rebuke, his Government
had come to the conclusion that mere rupture of diplo-
matic relations was pointless. He suggested that it
was impossible to Obtain any information on any Soviet
subject without a diplomatic establishment and that the
Soviet Foreign Office was unwilling to receive diplo-
mats Of lower rank than chief of mission. Steinhardt
thought his "recall without complete breach of diplo-
matic relations would be about the most idle gesture
our Government could make."77 Kremlin authorities, he
pointed out, would be vastly amused at such a move;
they were not interested in gestures, morality, ethics,
or anything else. Recalling the "tit-for-tat" policy,
Steinhardt added: "The only language that they undery
stand is that of action, retaliation, and force. One
might just as well strike an elephant with a feather as
to believe that the Kremlin is responsive to gestures."
Refusing to recall Steinhardt, the Administration
moved in other directions. On December 2 it placed a

moral embargo on the export of airplanes to the Soviet

 

77Steinhardt to Loy Henderson, December 13, 1939,
Steinhardt MSS.

205

Union; on the 15th the embargo was extended to include
alundxmmi and molybdenum. Ambassador Bullitt from Paris
urged the Administration to support a movement working
for the ouster of the Soviet Union from the League of
Nations.78 Roosevelt wisely declined. Not only did
Roosevelt and Hull refuse to go along with the Bullitt
proposal, they abstained from applying the Neutrality
Act to the Russo-Finnish conflict. As a Government,

the United States could not send arms to Finland but

the Administration did not wish to prevent the sale of
arms by private exporters. Furthermore, the combat
zone, as proclaimed in the European war, prevented
American shipping from entering the Baltic area. Fin-
ally, the United States did not desire to make Russia

a legal belligerent. According to Hull, he still felt
that the basic antagonisms between Communist Russia and
Nazi Germany were so deep, and Hitler's ambitions so
boundless, that eventually Russia would come over to the
side of the Allies. He concluded, "We had to be careful

7
not to push her in the other direction."

 

*7.

78Gordon Wright, "Ambassador Bullitt and the Fall of
France," World Politics, vol. X (October, 1957), pp. 76-77.

79Hull, Memoirs of Cordell Hull, pp. 706-07.

206

Steinhardt, like most Americans, sympathized with
the Finns. The outcome, he thought, depended on the abil-
ity of the Finns to make a real resistance for sixty or
ninety days. If they accomplish that, he said, "the Soviets
may lose a good deal of their Hitler complex for they seem
to think they can 'clean up' as the Germans did in Poland
in about three weeks."80 A determined effort by the Finns,
he thought, might cause the Russians to reflect. He be—
lieved, however, that the Russians were relying more for
the accomplishment of their objective on internal dissen-
sion in Finland and the establishment of a puppet govern-
ment which would be subservient to SOviet wishes than on
a mass attack. Nevertheless, he did not discount the use
of Soviet armed forces to aid bringing about this subserv—
ient government.

In the early days of the war Finland attempted to
renew negotiations and restore peace. When Finland took
the problem to the League, the Russians refused to appear
and on December 14 the world organization expelled the

Soviets from membership. In turn, the Finns sought German

 

80Steinhardt to Authur Schoenfield, December 2, 1939,
Steinhardt MSS.

207

mediation. But the Russians by an extraordinarily stupid
move rendered negotiations impossible. Hardly had war
begun when Moscow recognized a "Democratic Government of
Finland," known as the "Terjioki Government," headed by
Otto W. Kuusinen, a Communist exile resident in the Soviet
Union since 1918. With this shadow government set up in
the hamlet of Terjioki on the Karelian Isthmus just across
the boundary from Russia, Moscow concluded a mutual-aid
treaty on December 2. Consequently, so long as the Soviet
Union clung to the fiction that the puppet regime was
sovereign in Finland it could not recognize or deal with
the Helsinki regime. After a talk with a member of the
German Embassy, Steinhardt reported that the Germans con-
sidered the Soviet recognition of the Kuusinen Government
as a "bad blunder on the part of Stalin."81 The prospect
of such a government, the Germans thought, would only stif-
fen Finnish resistance and, in consequence, the Soviet
Union committed itself to a complete military conquest of
Finland. Taking it one step further, Steinhardt considered

the initial attack on Finland a major blunder on the part

81Steinhardt to Hull, December 7, 1939, Department
of State Archives, 760D6l/664.

208

of Stalin; "it is apparent that he was thoroughly misled
as to the efficiency of the Finnish army and to the extent
of Finnish resistance ... ."82 The formation of the
Kuusinen Government, in his Opinion, "was the greatest
of all blunders .. . 3'

Unable to effect a peaceful settlement, Finland
plunged earnestly into the Winter War. The attackers
had vast reserves of manpower and equipment; the Finns
deficient of both. Favored by terrain and possessing
skillful officers and astounding courage, the Finns were
able to make the utmost of their advantages. They appealed
for aid through various diplomatic channels: Sweden, Great
Britain, France,and the United States Offered guns and
credit. When the promised war material failed to arrive,
Finland's chances for victory became hopeless and futile.
Distressed Finnish leaders faced a perplexing situation.
On the one hand, Finnish leaders envisaged an expedition
‘with the aid of the Western Allies to Murmansk; on the
other hand, Finnish leaders confronted the reality of the

situation and requested Stockholm to seek peace negotiations

with the enemy .

 

82Steinhardt to Loy Henderson, December 9, 1939,
Steinhardt MSS.

209

Finland's position was in a precarious if not be-
wildering balance. Whichever way the scale might tip, the
decision would not only affect the Finnish position but the
course of the European war. In determining the amount and
kind of aid to be sent to Finland, the Allies had to weigh
strategic considerations. SO long as Finland kept Russia
occupied in the north, Romania and Turkey, allies of France
and Britain, were free from Soviet threat. Also the Allies
hOped to draw Sweden and Norway over to the anti-German
coalition. If either country permitted the transit of
troops across its territory, the act would commit that
country to the Allied side. With Sweden committed to the
Allies, Germany in turn would lose a valuable source Of
iron ore. Finally, the strategists recognized that a
Scandinavian front would relieve German pressure on the
French front.83

Just as importantly, the Allies had to determine
'whether involvement in the Winter War was worth the risk

of war with the Soviet Union. The Allies vacillated through-

out the war on this serious question. Emm.so Steinhardt.

 

83Andrew J. Schwartz, America and the Russo-Finnish
War (Washington, D. C.: Public Affairs Press, 1960), p. 23.

210

Inasmuch as the Russians were "in full alliance with Ger-
many," he thought France and Britain ought to treat the
Soviet Union as a belligerent.84 The weak link in the
Russo-German partnership, he suggested, was Russian eco-
nomic aid; if France and Britain aided Finland, they

might cripple Russian aid to Germany. He disagreed with
those who thought that an attack on Russia would cement
the Nazi-Soviet alliance. Anybody who presumed that there
would be a conflict between Russia and Germany, in his
Opinion, were indulging themselves with "wishful thinking."
Russia, he thought, would next turn to the acquisition of
Bessarabia. If the Germans also harbored an interest in
the Balkans, Steinhardt thought the two partners would
reach a peaceful solution.

As the Winter War progressed, Finland found her-
self in an increasingly perilous position. Allied promises
remained vague and casual. One unexpected problem con-
fronted by the Allies was the refusal by Sweden and Norway
to allow the transit of trOOps across their territories.

Sweden, perhaps under Nazi threat and reluctant to see

 

84Steinhardt to Rudolf E. Schoenfeld, December 9,
1939, Steinhardt MSS.

211

Scandinavia serve as a battleground, notified Helsinki that
she would not respect the Allied demarché. With the pros-
pect of Allied troops landing in Scandinavia thus removed by
Sweden, Finland intensified its efforts to bring about a
peace. Prime Minister Risto Ryti of Finland on December 28
requested the American Minister at Helsinki to inquire of
Washington its willingness to initiate peace overtures with
a view tx>stopping hostilities. In turn, the Department
of State asked Steinhardt for his views. He responded that
he found no evidence that the time was propitious to approach
the Soviet Government for the purpose of bringing about
negotiations with the Finnish Government.85 There was no
sign, he said, of any desire on the part of the Soviet
Union to extricate itself from the difficulties which it
had encountered in the prosecution of the war with Finland.
The Soviets he suggested, were too far involved to change
their course.

In spite of no outward manifestation discernible by
Steinhardt, Kremlin leaders were concerned about the situ-

ation. Prolongation of the war had stirred up all sorts of

 

85Steinhardt to Hull, December 31, 1939, Department
of State Archives, 769D61/890.

212

dangers. Unable to effect a swift victory in Finland,
the Soviet Union confronted the real danger of an Allied
invasion of Scandinavia and a threat to the Caucusus.
They also ran the chance of losing the United States

as a source for certain economic products they were un-
able to get elsewhere. Recognizing the Soviet desire

to keep the American economic door Open, Roosevelt in
late January suggested that serious consideration be
given to the curtailment of gasoline and scrap iron ship-
ments to the Soviet Union.86 The time might be right,
the President said, "where one or two comparatively
minor matters may tip the scale toward unofficial con-
siderations in the direction of peace." It is doubtful
that an embargo on Oil or scrap iron would have had any
effect: the President was later informed that oil ship-
ments in 1939 to the USSR were about one-half what they

had been in 1938 and that no scrap iron was shipped either

year.

f

86Roosevelt to Adolf Berle, January 27, 1940, Depart-
ment of State Archives, 700.00116 Moral Embargo/14.

'5

87Joseph C. Green to Adolf Berle, January 30, 1940,
Department of State Archives, 700.00116 Moral Embargo/l4.

213

Roosevelt's proposed embargo was not the only
attempt made by the Administration to end the Finnish-
Soviet conflict. On the same day that the President in-
quired about embargoing oil and scrap iron, Secretary
Hull authorized Steinhardt to seek an interview with
Molotov.88 The Secretary instructed Steinhardt to in-
form the Foreign Commissar that various neutral non-Baltic
governments had suggested that the United States approach
the Finnish and Soviet Governments in the hOpe that some
means might be found for a cessation of the conflict with-
out further bloodshed. Throughout the lengthy interview,
Steinhardt reported, Molotov avoided giving any indication
as to whether the Soviet Government was prepared to treat
with an independent Finnish Government.89 Steinhardt
thought it significant that Molotov did notatcnce reaffirm
the previous Soviet position that the Kuusineanovernment
was the only one with which the Soviets would deal. The
American Ambassador thought that Molotov's cordial atti-

tude was due less to the purpose of Steinhardt's visit

 

88Foreign Relations: 1940, I, p. 281.

891bid.

214

than a desire not to impose by an abrupt rejection any
further strain on Soviet-American relations. He sug-
gested that it was not unlikely "that the Kremlin may
see certain advantages in keeping the door Open for the
good offices of the United States at some future time."

For the next several weeks the Soviets appeased
the American Embassy. The climax was the "cordial but
informal" luncheon Molotov gave in honor of the Ameri-
can Ambassador.90 Molotov informed Steinhardt that the
Kremlin was "acutely aware of the present anti-Soviet
sentiment in the United States" and was both annoyed and
disturbed thereby.91 Molotov indicated that the Soviet
Government was interested in relaxing relations between
the two countries.

Meantime, when well-founded rumors leaked out
that Finland was attempting to come to terms with the
Soviets, the Allies made a last effort to prevent it.
The French on March 1 promised to dispatch immediately

50,000 trOOps to Finland. Again Sweden balked at

 

90New York Times, February 8, 1940.

91Foreign Relations: 1940, I, pp. 295-96.

215

consenting to the passage of Allied troops: conversely,
it advised the Finnish Government to make peace.92 The
Allied effort to keep the Russo-Finnish war alive most
likely was a singular act by the French: the British by
this time, according to Steinhardt, "considered aid to
Finland large enough to stoP Russia but decided that the
Baltic was not the place to fight out the war."93 This
did not mean, however, that the British along with the
French, so Steinhardt stated, did not share his Opinion
that Stalin was "definitely committed to a German vic-
tory and that the Soviets will do everything within

their power to aid and abet Germany." The French, he
said, referred to the Soviet Union as Germany's “Achilles'
heel" and were gradually persuading the British to accept
the same view. "I think," the American Ambassador con-
cluded, "the French and British have been seriously
tempted to go to the assistance of Finland ever since
they arrived at the conclusion that they must defeat the

Soviets before they can defeat Germany, but that for

 

921bid., p. 296.

93Steinhardt to Loy Henderson, March 2, 1940, Stein-
hardt MSS.

216

various reasons--principa11y strategic--they have come to
the final conclusion that the place to defeat Russia is in
the Black Sea area." He was convinced that an Anglo—French
fleet would soon enter the Black Sea and launch an attack
against Baku and Batum.

By the beginning of March, 1940, Finland was in
desperate military straits. Finnish Foreign Minister Vaino
Tanner on March 4 informed Secretary Hull that soundings
had been going on with Russia.94 Steinhardt thought the
Opening of informal discussions of "considerable signifi-
cance."95 The obvious explanation, Steinhardt ventured,
was that the coming thaw would render military operations
virtually impossible for at least one or two months.
Without having obtained a final military decision, the
Soviet Government, he continued, would be compelled to
maintain "a force believed to approximate 1,000,000 under
arms on the Finnish front with the consequent drain on
Soviet internal economy, complicated by the possibility of
serious developments in the Black Sea area. ,. ." Though
the Soviet Government no doubt was concerned about possible

f

94Hull, Memoirs of Cordell Hull, p. 742.

95Foreign Relations: 1940, I, pp. 297-98.

217

developments in the Black Sea area, Steinhardt took a very
narrow view concerning Soviet military posture and economy.
There is little doubt that Soviet military power could
have annihilated the Finnish. What he failed to perceive
was the Soviet desire to extricate itself from a hazardous
situation. Instead of continuing the war, Soviet leaders
chose to gamble on the prOposition that militarily the
Finns could not go on, that the Swedes and Norwegians
would continue to refuse passage for Western troops, and
that if the Allies nevertheless invaded Scandinavia, the
Germans would intervene before effective aid could reach
the Finns.96 From the Kremlin's point of view, a peace
settlement was worth the risks involved.

From the Finnish viewpoint, the Soviet terms were
unduly harsh. Nevertheless, the Finnish Government thought
it better to submit than have Finland wiped off the face
of the map.97 The Finns were bitter at Sweden's attitude
not only for failing to come to Finland's aid but for using

strong pressure on Finland to make terms at almost any price.

 

fl

6Langer and Gleason, The Challenge to Isolation,
pp. 404-05.

97Foreign Relations: 1940, I, pp. 298—99.

 

218

Hull on March 7 cabled Steinhardt to inform Commissar
Molotov that although the United States Government had

no desire to intervene in the negotiations, America was
interested, and a deep impression would be made on our
public opinion if the Soviet Union took a generous atti-
tude toward the Finns?8 The Secretary authorized Stein-
hardt, if the Ambassador thought wise, to imply that

the moral embargo might be relaxed to the same degree

to which the Soviets abated the severity of their de-
mands on Finland. Steinhardt reported that Molotov,

upon receiving Hull's plea for moderation, was "effu-
sively cordial and expressed great satisfaction for the
friendly interest now and heretofore shown by the Presi-
dent and the United States Government in the restoration
of peace between Finland and the Soviet Union."99 Molotov
gave the Ambassador the terms of the treaty: pressed on
the formation of the Finnish Government, Molotov retorted,
"The Soviet Union is not interested in the composition of

the Finnish Government." Steinhardt was unconvinced. The

 

98Hull, Memoirs of Cordell Hull, p, 742.

 

99Foreign Relations: 1940, I, pp. 305-06.

219

Russo-Finnish peace treaty was signed in Moscow on March
12. Though it contained several harsh measures, at least
in ending the war it left Finland an independent country
free to choose its own government, Steinhardt's doubts
notwithstanding.

Steinhardt had the good fortune to have as his
colleague and friend in Moscow, the same man who was the
Swedish Minister to Lima. In consequence, according to
Steinhardt, "Washington was the only capital outside of
Moscow, Helsinki, and Stockholm which was correctly ad-
vised of what was going on."100 Hull suggested, however,
that the Ambassador ". . .take care to avoid creating the
impression that the Finns are obtaining advice from you,
in View of Russian assertion that their real grievance
against Finland was the use of Finland by non-Baltics in
a manner disliked by Russia."101 In speaking of the nego-
tiations, Steinhardt stated that the Germans were very
quiet throughout the whole course of the proceedings. They

went out of their way, he said, to let everyone know that

 

100Steinhardt to Mrs. William Rosenblatt. June 11.

1940, Steinhardt MSS.

O:I'Foreign Relations: 1940, I, p. 301.

 

220

they had nothing to do with the negotiations and pretended
not to be interested. On the other hand, the French used
"every instrumentality available to cause the peace nego-
tiations to collapse."102 According to the New Deal diplo-
mat, it was necessary for the Department of State to "sit
on" the French Foreign Office. "In the light of what we
all know now," Steinhardt wrote, "the peace should be
marked 'Made in Sweden.’ It was unquestionably acquiesced
in by the Finns under considerable pressure from Sweden."103
In turn, the French, he said, felt betrayed by the Swedes.
Steinhardt felt the same way. The Swedes, he stated, "are
about the most selfish people on earth": all their efforts
were "directed toward a single goal, to keep Sweden out

of the war and preserve her territorial integrity."104

It was a naive View; under the circumstances Sweden, as a

small and insignificant country in the European power struc-

ture, had no room for choice. It is evident that the

 

102Steinhardt to Mrs. William Rosenblatt, June 11,

1940, Steinhardt MSS.
103 .
Steinhardt to Loy Henderson, March 16, 1940,
Steinhardt MSS.

104Steinhardt to Loy Henderson. February 23. 1940'

Steinhardt MSS.

221

American Ambassador regretted the fact that the Allies were
unable to have their military showdown with the Soviet Union
during the Soviet-Finnish war.

Following the termination of the Russo-Finnish war,
Steinhardt advanced observations on the general position
of the Soviet Union and the probable lines of its policy in
the immediate future. "The conclusion of peace with Fin-
land," Steinhardt explained, "testifies to the policy Of
realism and prudence which on the whole has been character—
istic of Stalin's conduct of Soviet foreign affairs."105
He suggested that it was Stalin's personal decision,
against the Opposition of the Red Army and certain members
of the Politboro (Political Bureau of the Central Commit-
tee of the All-Union Communist Party), to conclude a nego-
tiated peace with Finland. Stalin, the Ambassador contin-
ued, realized that "extended military operations would be
required to achieve maximum aims and that such continuation
would involve serious risk of war with England and France."

The Soviet Union, free of northern complications, Steinhardt

conjectured, would move to safeguard its frontiers in the

 

fi’r_ __._ 1*

105Foreign Relations: 1940, III, pp. 188-190.

222

Caucusus and Black Sea areas against the anticipated Anglo-
French assault. Even so, in his judgment, Russia desired
to avoid war with France and Britain; since the conclusion
of the war the Soviet Union had curtailed violent press
attack against the Allies. However, Steinhardt regarded
this changed attitude "solely as a maneuver rather than

an expressed change of policy . . . ." It was still his
firm conviction that the Soviet Union did not intend "in
any way to alter its basic policy of collaboration with
Germany."

During the first half of 1940, Steinhardt had two
Opportunities to view first-hand Russian life away from
the Soviet capital. On both trips he was impressed by
the poor condition of the Soviet railway system: he found
rundown roadbeds, single tracks existing at strategh:
points, and negligible maintenance of existing lines. On
the first trip, taken under war conditions, Steinhardt
visited Leningrad, Latvia, and Estonia.106 In the Baltic

States, he Observed that Soviet influence was great and

steadily increasing; the Soviets, he conjectured,

 

06Foreign Relations: 1940, I, pp. 360-61.

223

constituted "virtually an army of occupation." He found
living conditions in Leningrad "decidedly improved."

The second trip--to the Caucusus, Black Sea area,
Crimea, and the Ukraine——followed the conclusion of the
war and afforded him an opportunity to investigate Soviet
military posture in that area.107 Traveling in a "special
green saloon coach with a private dining room and equipped
with radio," Steinhardt visited Rostov, Baku, Batum,
Sochi, Crimea, Odessa, and Kiev.108 The Ambassador made
most of his observations from the train windows. Sur—
prisingly, he found no extraordinay military activity in
the area and concluded that the Soviets contemplated no
offensive military venture. In his subsequent intelligence
report . he observed that the Soviet Union was "extremely
vulnerable to naval and air attack in this region." He
noted a serious food shortage; "attributable to a consider-
able degree of faulty distribution facilities and methods."

He indicated inadequate shipping and port facilities in

the Black Sea.

 

1O7Forgign Relations: 1940, III, pp. 195-96.

108New York Times, March 28, 1940.

224

During the war Steinhardt favored the restriction
of American passports to the Soviet Union to members of
the Foreign Service and accredited newspaper correspondents.109
He pointed to the known sympathies Of Americans with the
Finnish cause and the increasing irritation of the Soviet
authorities at the anti-Soviet manifestation in the United
States. The presence of additional Americans in the Soviet
Union, he thought might be seized upon by the Soviets to
create incidents. Not only were travel and living condi-
tions difficult, he said, but the Embassy was unable to
to maintain contact with American citizens in the country.
In addition, he concluded, it was becoming increasingly
difficult for aliens to obtain exit visas.

Steinhardt found the life of a diplomat difficult
and trying in the Soviet Union. As the winter snows dis-
.appeared in Moscow, he eagerly anticipated his annual leave.
Most Of all, he was "thoroughly tired out."110 Complaining

that life in Moscow under general conditions was "unbearable,"

he found that war conditions increased the difficulties and

 

www—

09Foreign Relations: 194QL_III, p. 252.

110Steinhardt to Loy Henderson. March 2, 1940.
Steinhardt MSS.

 

225

strain. The "steady course of truculent arrogance" of
Soviet officials, he observed, annoyed foreign diplomats.
He thought the Russian attitude was evidence that they
lacked "that which they boast of possessing-~Kultur."
The Ambassador chided American author Theodore Dreiser
for having lauded the Russians' high standard of living.
"When I read this," Steinhardt snorted, "I felt like
kidnapping Dreiser and making him live here thirty days-—
not under the wing of Intourist but merely as a foreign
ambassador."

Steinhardt characterized the Moscow post as "the
most important and yet the most treacherous . . . "
He assured Henderson that the Soviet Government was no

longer the same as that with which the assistant Chief had

to deal.112 The Stalin regime, he disclosed, had "gone

imperialist in a distinctly parvenu manner, lacking even
the finesse of the so-called capitalist imperialist gov-
ernments. What counts now is the territorial extension

of the Soviet empire." All other aims and pretenses, he

 

111Steinhardt to John H. Browning: December 19'

1939, Steinhardt MSS.

112Steinhardt to Loy Henderson. January 29' 1940'
Steinhardt MSS.

226

continued, were subordinated internally for that purpose.
Externally, he proceeded, the bluff of "safeguarding"
small countriesvms still maintained for its effect on the
"stupid masses" in other countries, because camp followers,
particularly if attached to the enemy camp, were still
useful. Henderson, however, encouraged the Ambassador.
He informed Steinhardt that the prestige of the Embassy
in Moscow, in so far as the Department was concerned, had
never been higher.113 "YOu may be interested to know
that Mr. Bullitt, who had always kept a weather eye on
Moscow, has become one of your most ardent admirers,"
Henderson disclosed. In spite of these accolades,
Steinhardt bemoaned the publicity received during the
past few months by Joseph Kennedy, William Bullitt, and
Joseph Davies.114 "Joking aside," he wrote, "I am getting
tired of being ignored, first because I don't hire the
corps of publicity agents."

Before leaving Moscow for a rest in the United

States, Steinhardt made a final report on Nazi-Soviet

 

113Loy Henderson to Steinhardt, April 5, 1940,
Steinhardt MSS.

114Steinhardt to Willis Thornton. March 8. 1940'
Steinhardt MSS.

227

relations. In his view, Marxian ideology had ceased to be
a determining factor in the formulation of Soviet policy
but the belief in the fundamental hostility of other coun-
tries toward the Soviet Union in large measure retained
its vigor. In spite of enormous efforts of industrializa-
tion and rearmament on the part of the Russians, it was
his belief that the Communists were neither politically,
economically,rKX'militarily prepared to undergo without
serious risk to the regime the extensive efforts such a
conflict would require. Soviet foreign policy, he ascer-
tained, was predicated on two principles: protection
against Soviet involvement in a major war; and prevention
of a coalition of the western European powers excluding
the Soviet Union. The Nazi—Soviet pact, he explained,
placed the Soviet Union in the position of ostensible
neutrality but in reality in a position more closely ap-
proaching that of an associate of Germany. He looked upon
the Nazi-Soviet pact as one based on mutual interest;
Germany's interests were best served with a neutral Soviet
Union. The Soviet Union, Steinhardt speculated, did not
want a quick and overwhelming German victory which would

revive the possibility of Nazi menace to the Soviet Union.

228

On April 25 Steinhardt left Moscow for home leave.
Less than two months later on June 13 the German war machine
rolled into Paris. Most historians suggest that the Kremlin
underwent a change in policy from that date. It would
appear from evidence given by Steinhardt (i.e. the curtail-
ment of the press attack on the Allies) that a more realis-
tic date would be that coinciding with the German occupation
of Norway and Denmark in early April, 1940, It might also
be reasonably argued that the Soviets' willingness to con-
clude the Finnish war was based not so much on the fear of
Allied mischief in the Black Sea area as it was a concern
with an eventual attack from Nazi Germany. How else would
one explain Steinhardt's inability to see a military
buildanain southern Russia? His restricted viewing of
the area should not have prevented him from seeing a mili-
tary build-up of the magnitude necessary to prevent an
Allied attack.

The hard line and "tit-for-tat" policy employed
by Steinhardt might have been used successfully in peace-
ful times; it is doubtful it would enjoy the same degree of

success in an emergency situation.

Chapter 5
DIPLOMACY ON THE HIGHWAY TO WAR

Ambassador Steinhardt returned to the United States
from his first nine gruelling months in the Soviet Union
physically tired and mentally depressed. His spirits were
no doubt noticeably uplifted when at the Department of
State Secretary Hull and Under Secretary Welles lauded the
Ambassador's work in the Soviet Union.1 In like manner it
must have encouraged Steinhardt upon being informed that
George P. Brill, President of the Macmillan Company and a
recent visitor to the Soviet Union, thought it "a joy to
meet an Ambassador with such lively personality, with such
a wholesome whole-hearted interest in his job."2 Brill

observed that Steinhardt was a "fount of information, a real

 

lSteinhardt to Mrs. Dulcie Steinhardt, June 6, 1940,
Steinhardt MSS.

2
George P. Brill to Richard Waldo, July 1, 1940,
Steinhardt MSS.

229

230

worker, and a brilliant intelligent one." The foreign
world would surely get the proper perspective of America,
he stated, "if all our Ambassadors were as keen as Lau-
rence Steinhardt."

Nothing did more to lift Steinhardt's sagging
morale than the Ambassador's call at the White House.
The President was effervescent. Invited to luncheon, the
New Deal diplomat was astonished to find no one else
present but the President and himself. Roosevelt greeted
Steinhardt with the statement: "You have done a 100%
job. You have kept your head under the most trying con-
ditions, and I am proud of you:"3 Roosevelt informed
the envoy that beginning in September, he (Roosevelt)
had requested the Department of State to place every
telegram from Moscow on his desk; moreover, he stated,
he had read everyone of them. Roosevelt disclosed to
the undoubted pleasure of Steinhardt, that even the
"career boys" admitted that the diplomat had done "a mag-
nificent job." The President impishly concluded: "When
the career boys praise one of my political appointees to

me, he must be good:" The President's glowing praise was

231

sufficient reason for the Ambassador to jump and click
his heels together as he left the Executive Mansion.
However, there was little occasion for joy in
the troubled world of spring, 1940. After a winter
lull in the EurOpean war that cynics called the "phony
war," Hitler loosed his armour divisions against the
western powers. Between April 9 and June 22 he taught

the world the awful meaning of Blitzkripg--lightening

 

war: Denmark, Norway, Netherlands, Belgium, and

France were successfully battered into submission.

The British army at Dunkirk saved itself from annihila-
tion only by fleeing across the English Channel. When
the French submitted to Hitler's harsh terms on June

22 at Campiegne, outside Paris, the Fuehrer controlled
nearly all of western Europe.

Roosevelt responded to these disasters in a
variety of ways. Even while the British and the French
were retreating, he sold them, without legal authority,
surplus government arms. When Italy entered the war
against France while the nation was reeling before the
force of Hitler's military juggernaut, the President cast

aside all pretense of impartiality and characterized the

232

invasion as a stab in the back. He also froze the Ameri-
can assets of the conquered nations to keep them out of
German hands and maintained diplomatic relations with the
exile governments. During the first four months of 1940
he asked Congress to appropriate $4 billion for national
defense.

In England's desperate hour, Winston Churchill
in May, 1940, succeeded the discredited Neville Chamber-
lain as British prime minister. Churchill stiffened
Britain's national backbone with his indomitable spirit
and eloquent words. "I have nothing to offer but blood,
toil, tears, and sweat," he told Parliament on May 13.
Soon thereafter France fell victim to the Nazis and Bri-
tain became the sole survivor among the western Allies.
However, all was not hOpeless. Churchill and other
British strategists, chiefly Sir Stafford Cripps, sensed
a shift in Soviet policy. It seemed to them that the
Soviet Union, alarmed by the overwhelming Germannvictor-
ies in France and the Low Countries, was beginning to
shift toward a policy of active defense which recognized

that Hitler might at some time turn his might eastward.

233

Various strategic moves on the part of the Russians
indicated that Stalin wanted a better defensive position
with regard to Germany. Stalin demanded from Estonia, Lat-
via, and Lithuania that Soviet trOOps be permitted to
occupy these countries fully, and that their governments be
reorganized so as to be more friendly to Russia. (The Bal—
tic countries had to accede and the Soviet occupation began
on June 15.) Within a fortnight Russia occupied Bessarabia
and part of Bukovina. It provided the Soviet Union a more
defensible southwestern frontier. The occupation of the
Baltic States and the Romanian territory straightened the
curve in her western border.4

Churchill instructed British Ambassador Lord
Lothian (Philip Kerr) to discuss the British position re-
garding the Soviet Union with the Americans. At the White
House, with Under Secretary Welles present, Lord Lothian
informed Roosevelt that his Government now supported the
view taken by Cripps; namely, that while there was no
indication that the Soviet Union was as yet prepared to break

away from her agreements with Germany, there was a very

4Hull, Memoirs of Cordell Hull, p. 810.

 

234

clear indication that increasing apprehension existed on
the part of Molotov and the Soviet Government with regard
to the unexpected German victories and the strengthening
of Germany's position vis—a-vis Russia as a result thereof.
Lord Lothian suggested that inasmuch as Russia was believed
to be very anxious to improve her relations with the United
States, it would be most helpful if the United States would
indicate to Russia its desire that the equilibrium in Eur-
ope be maintained and that closer relations between the
British and Soviet Union would do much to accomplish this
end.5

The United States Government had previously con—
sidered a rapprochement with the Soviets. Shortly after
the cessation of Russo-Finnish hostilities, Ambassador
Steinhardt had dispatched from Moscow a list of Soviet
grievances against the United States. They included: a
speech by Assistant Secretary of War Louis Johnson at a
dinner of the Bankers Association on January 15, 1940, in
which the Secretary made several "unfriendly" remarks con-

cerning the Soviet Union; humiliation by American author-

ities of Soviet citizens whose documents and visas were in

 

5Forgign Relations: 1949. III, pp. 321-22.

235

order but still investigated at Ellis Island; disruption
of commercial agreements between Soviet economic organi-
zations and American firms encouraged by United States
Government; the Moral Embargo; banking restriction on
Amtorg; visits by Soviet citizens to American plants
made difficult and sometimes impossible; Soviet citizens
and institutions (Bookniga, Amkino, and New York Intour-
ist office) were persecuted and court proceedings were
instituted against organizations connected with the
Soviet Union; and, the American Merchant Marine placed
difficulties in the way of the chartering of steamers
designated to export goods to the Soviet Union.6 The
United States, for its part, objected to the numerous im-
pediments and difficulties confronted by the American
Embassy, Soviet refusal to grant an American Consulate
in Vladivostok, and the unwillingness of Kremlin officials
to grant visa and passports to American citizens trapped
by the war in Eastern Europe.

American policy was influenced by the desire to

do nothing that would drive Russia further into closer

fi—

6Ibid.. pp. 259-63.

236

relations with the Germans. Yet, at the same time, the
Administration wanted to limit exports to Russia so as
not to afford her surpluses of strategic materials that
could be sent on to Germany.7 The Soviet Union, cut off
by the war from access to a variety of strategic mater-
ials, was intent on keeping Open her trade channels with
the United States. At times, according to Secretary
Hull, the Soviet Union wanted the impossible. Such were
her efforts to buy a complete battleship. Although the
Administration was willing that one should be built for
her, the Soviets insisted, however, that the latest
American devices and inventions be incorporated in it.
This, the Administration could not or would not do; the
Soviets, in turn, bristled with indignation.

Relations between Washington and Moscow had
reached their low point during the Soviet-Finnish war.
In mid-1940 the Moral Embargo continued in force even after
the main reason for it--Russian bombardment Of Finnish
cities and towns--ceased to exist. Although the Adminis-

tration had been pursuing a cautious policy with the

 

7Hull, Memoirs of Cordell Hull, p. 743.

237

Soviet Union and desired better relations with the Russians,
it appears as if the British position as given by Lord
Lothian provided the impetus for real effort by the United
States to effect an American settlement with Russia.

Throughout the summer of 1940, Under Secretary of
State Sumner Welles and Soviet Ambassador Oumansky conferred
on Soviet-American relations. The parleys failed to produce
any tangible results. In part, this was due to the person—
ality of the Soviet Ambassador who at times was difficult,
irrascible, and arrogant; at other times he was downright
rude and ill-mannered. Disliked by various Department of
State officials, he served poorly the cause of the Soviet
Union. It was rumored that he failed to keep the Soviet
Foreign Office informed and desired to catapult himself
into the Communist hierarchy.

Ambassador Steinhardt absented himself from his post
during four critical months. In late August he left the
United States via Japan on his return to Moscow. In Tokyo
he conferred with American Ambassador Joseph Grew who ar-

ranged a dinner meeting for Steinhardt and Japanese Foreign

 

8Foreign Relations: 1940, III, pp. 406-08.

238

Minister Yosuke Matsuoka. The latter informed Steinhardt

that Japan favored a Japanese-Soviet rapprochement. Mat-

suoka stated that if Russia and Japan would be able to com-

 

pose their differences, the Japanese position in the Far
East would be "much easier." The Foreign Minister questioned
Steinhardt as to the strength of the Soviet army and was
told that the army was very effective. Ambassador Stein-
hardt gained the impression that up to that time, little if
any progress had been made towards an amelioration of the
strain on Russo-Japanese relations.9 Steinhardt's visit
with Grew also afforded the New Deal diplomat the Oppor-
tunity to speak with the Soviet Ambassador to Japan who
informed Steinhardt that at "the present time there could
not be anticipated any improvements between Soviet Russia
and Japan."10 The Russian also said that there would be

no immediate change in the policy of his government in
rendering aid to Chiang Kai-shek. Steinhardt added that
the Soviet Ambassador "either unaware that the Japanese and

other Embassies in Moscow operate under similar conditions

 

9Foreign Relations: 1940, I, pp. 643-45.

10Ibid.

 

239

or ignoring the humorous aspects of his Objections . . .
complained with bitterness of the surveillance which he
and his staff were subjected to in Japan."

Leaving Tokyo, Steinhardt traveled the Trans-Siber-
ian Railroad back to Moscow. He observed that on both
sides of the Soviet-Manchurian frontier extreme measures
had been taken by both the Japanese and Soviet authorities
to conceal fairly extensive military measures. He reported
that there was a large number of soldiers and officers in
evidence from Otphor to Moscow, that planes and hangars
viewed from the train were antiquated and in a state of
disrepair, and the the railway bore evidence of heavy wear
with little maintenance work in progress. He observed a
shortage of food in Eastern Siberia but thought the food
condition somewhat better in Central Siberia.

In Steinhardt's absence from the Soviet Union.
Prime Minister Churchill had dispatched Sir Stafford Cripps
to Moscow with instructions to labor unceasingly for an
Anglo-Russian rapprochgment. Arriving back in Moscow, Stein-

hardt found Cripps "extremely gloomy and disappointed . . . ."11

 

1111616., p. 611.

240

Cripps, in an interview with Stalin, had been told that
the Kremlin's policy was designed to avoid the involve-
ment of the Soviet Union in the war and, in particular,
to avoid a conflict with the German army. Stalin informed
Cripps that he (Stalin) preferred to run the risk of war
without Allies in the event of a British defeat, because
he believed that even should Germany be victorious over
Great Britain, German military power would be weakened
appreciably. In addition, so Stalin told Cripps, after
the efforts involved in the war, it would be very diffi-
cult for the Nazi leaders to persuade the German peOple
to embark on a new major military victory. Furthermore,
Cripps was told that the Soviets would not continue trade
negotiations unless the British Government released the
gold and ships which had been sequestered following the
incorporation of the Baltic States. Stalin also let the
British statesman know that the Soviet Union wanted a voice
in the control of the Dardanelles; he preferred joint
Turkish-Soviet control of the Straits and possibly one or
more bases in the vicinity but implied that the Soviet
Government would be satisfied with a commitment on the

part of the Turkish Government to consult the Soviets before

241

taking any action under the Montreaux Convention. Cripps
concluded, following his conversations with Stalin, that
any alternative of Soviet policy toward Germany would
only occur when the military power of Germany had been
sufficiently impaired to obviate the possibility of a
German invasion of Russia. Consequently, Cripps thought
that any hope of even indirect Soviet assistance in the
immediate future would depend on the ability of Great
Britain to withstand the German attack and by so doing
to seriously impair German military power.

Steinhardt found an "extremely cordial" Molotov
at the Soviet Foreign Office. He reminded the Commissar
that Washington had exhibited a desire in the Welles-
Oumansky talks to improve relations between the two
countries.12 Still an advocate of the "tit-for-tat" policy,
Steinhardt suggested that the Soviet Union demonstrate like
goodwill. The Ambassador pointed out that a favorite accu-
sation of the Soviet Government against the United States
was that the Soviets were being discriminated against.
Thereupon, Steinhardt produced a list Of acts of discrimina-

tion by the Soviet Government against the United States.

 

12Foreign Relations: 1940, III, 376-68.

242

He invited Molotov's attention to a number of obstacles
encountered by the Embassy during recent months and asked
him to remove them "as a first evidence of goodwill."
Steinhardt thought the American armament program "not at
all displeasing to the Soviet Union." According to Stein-
hardt, the Commissar gave "every indication of a desire to
see an improvement in our relations and indicated clearly
that if the American Government should show a desire to
improve relations his Government would be glad to cooper-
ate."

On the Following day, September 27, 1940, Germany,
Japan, and Italy signed in Berlin a Tripartite Pact. Stein-
hardt reported that a Pravda editorial in speaking of the
German-Italian-Japanese agreement stated "that the United
States is now making common cause in a military sense with
Great Britain and that the pact presages the development
of war on a world-wide stage between Germany, Italy, and
Japan on the one hand and England and the United States on
the other."13 Steinhardt suggested that the Soviet Union

would not be displeased with such a development. The general

 

13Foreign Relations: 1940, I, p. 654.

243

tone of the editorial in Steinhardt's Opinion indicated
that the Soviet attitude in that respect had undergone no
change and that the possibility of a Japanese-Soviet agree-
ment had been enhanced rather than diminished by the Tri-
partite Pact. As a result of the alliance, Steinhardt
said, the Soviet Union was now precluded from taking any
advantage by hostile action of any difficulties which
Japan might encounter in the Far East, without running
the risk of becoming involved in war with Germany and
Italy. He thought it possible that the Soviet Government
might be prepared to make greater concessions than hereto-
fore, particularly in respect to its assistance to China
in an endeavor to reach an agreement with the Japanese.
These conclusions indicate that Steinhardt had not

yet read the terms of the Pact. In Article Three of the
pact the signators agreed:

to assist one another with all political, eco-

nomic and military means when one of the three

contracting powers is attacked by a power at

present not involved in the European war or in

the Chinese-Japanese conflict.
Since another article specifically excluded Russia from

its application, the article was obviously aimed at the

United States. The terms of the contract did not, as

244

determined by Steinhardt, compel the members of the pact to
"assist one another with all political, economic and mili-
tary means" with respect to the Soviet Union. However, on
the other hand, it did not immunize the Soviets from attack
in event of war with one of the partners. Moreover, the
pact increased Soviet bargaining power vis-a-vis Japan
rather than decreasing it.

Japan became increasing anxious to make a treaty
of non-aggression and friendship with the Soviet Union,
this to be followed by negotiations on specific issues such
as Japanese oil concessions in northern Sakhalin, fishing
rights, frontier incidents, and Soviet aid to Nationalist
China. Steinhardt's counterpart from Japan, Yoshitsugu
Tatekawa, stated to the American that Japan was willing to
make greater concessions to attain its end; Japan was ready
to recognize Soviet control of Outer Mongolia and Soviet
special interests in Sinkiang, and trusted that in return
the Kremlin would recognize the Japanese position in Man—

churia and at least publicly renounce aid to Chiang Kai-shek.l4

 

14William L. Langer and S. Everett Gleason, The Unde-
clared WarLgl940-l94l (New York: Harper & Brothers Pub-
lishers), p. 121.

245

However, the Japanese Ambassador had no Opportunity to
present the Japanese terms, for Commissar Molotov waved
the whole matter aside with the remark that the question
of an agreement with Japan was "under study."

The possibility of a Soviet-Japanese rapproche-

 

mpg; set off a flurry of diplomatic activity both in
Washington and London° In the United States Welles re-
newed conversations with Soviet Ambassador Oumansky.

The British Foreign Office hastened Cripps to the Krem-
lin with an offer to Open the Burma Road. Molotov, for
his part, was surprised to hear that the Burma Road was
not a railroad.15 Cripps expressed the view to the
Foreign Commissar that the southward course of Japanese
aggression would not remove a future threat to the
Soviet Union and Soviet interests on the Asian continent
which a powerful Japan would present. Unable to impress
Molotov with this line of argument, Cripps recklessly
and improvidentally dangled the United States as bait.
He informed Molotov that a Russo-Japanese agreement

"would unquestionably affect the United States to the

 

15Foreign Relations: 1940, I, p. 614.

 

246

extent that should the Japanese aggression at some time
in the future be directed against the Soviet Union it
was not unlikely that the United States would feel called
upon to take a strong position against Japan."

Steinhardt thought the opening of the Burma Road
or any other concession in the Far East would have little
material bearing on the general course of Soviet policy.16
The greatest potential threat to the Soviet Union, he sur-
mised, remained the possibility of an attack by the Ger-
man army in the west. The fundamental error Of Allied
diplomacy in respect to the Soviet Union in his Opinion
was the attempt "to persuade the Soviet Union to under-
take positive action which if not leading immediately to
an armed conflict with Germany would at least involve the
risk of such contingency." On the other hand, he suggested,
the German policy had been directed toward assuring the
neutrality of the Soviet Union and the adOption by that
country of a passive role in the war. This was his explan-
ation as to why British diplomacy had thus far failed and

German diplomacy succeeded in their respective approaches

 

l61bid.. pp. 615-17.

247

to the Soviet Union. Soviet policy, he pointed out, was
still basically motivated by an intense desire to avoid
involvement in the European war. The Tripartite Pact, he
said, accentuated rather than diminished the Soviet fear
of an armed conflict with the Nazis. He saw two possibil-
ities arising from the pact: one, German desire to impede
further Soviet expansion in the west and at the same time
assure Germany means of pressure on the Soviet Union for
increased economic assistance; and two, Germany, Italy,
and Japan definitely planned military action against the
Soviet Union. If the first possibility were correct, he
did not think the Soviets through negotiation would pro-
voke the very event which its policy was designed to pre—
vent, namely, involvement in war with the Axis Powers.
If the second alternative were correct, he ventured the
Opinion that the Kremlin realized that in the event of
an attack by Germany, the Soviet Union would automatically
become a British ally.

The British, however, continued their efforts to
prevent a Japanese-Soviet agreement. Having failed in pre-
vious efforts to effect an Anglo-Russian accord, Downing

Street decided to "sweeten" its offer. Cripps presented

248

to Andrei Vishinsky, Assistant Foreign Commissar, a prO-
posal in which the British Government promised to conclude
no peace without prior consultation with the Soviet Union;
neither would it make agreements with third parties aimed
at the Soviet Union; neither would it attack Baku or Batum.
Furthermore, the British Government would conclude a com-
mercial agreement with the Soviet Union for the delivery
by Great Britain of rubber, tin, and other commodities
required by the Soviet Union. In return, the Soviet Union
was to Observe genuine neutrality in the war between Ger-
many and Great Britain; to adopt a policy of benevolent
neutrality in the event of involvement of Turkey or Iran
if either became involved in the war with the Axis; to
continue aid and support of Nationalist China; and to

sign a non-aggression pact with Britain at a propitious
moment after conclusion of the trade agreement.17 Cripps
evidently enlarged the British offer to include de facto
recognition to the Soviet acquisition of the three Baltic
States, Eastern Poland, Bessarabia, and Bukovina pending

the consultations provided for at the end of the war.18

 

17Foreign Relations: 1940, III, pp. 406-08.

 

18Langer and Gleason, The UndeclaredyWar, p. 124.

 

249

Meantime, Welles and Oumansky carried on negotiations
in Washington. On October 12, the State Department made a con-
cession to the Soviets by releasing all suspended shipments
of machine tools. It was presumed that negotiations thence-
forth would make better progress.

Ambassador Steinhardt was highly critical of British
as well as American attempts to court the Soviets. He recog—
nized that the Nazi—Soviet relationship had changed, but
assailed British attempts to create a "wedge" in Nazi-Soviet
relations. He reserved his sharpest criticism for British
efforts to involve the United States in their own particular
appeasement policy.19 Such efforts to make the United States
a "wet nurse" in weaning Soviet Russia from Germany, he said,
were destined to failure. Furthermore, he thought newspaper
talk of British plans were bound to react unfavorably on the
Kremlin because of its effect on the Germans. Steinhardt
realized that the Department of State's support Of Cripps'
program stemmed from anxiety t9 prevent a rapprochement be-
tween Soviet Russia and Japan, which policymakers thought

could prove highly dangerous to American interests in the

 

19Foreign Relations: 1940, III, pp. 406-08.

250

Far East. However, there is no indication to justify
their uneasiness. It is doubtful if the Soviet Union,
regardless of what she did, could have prevented Japanese
expansion into south Asia. Already the die had been
cast; Japan was determined to create what they euphe-
mistically called a Greater East Asia CO-Prosperity Sphere.
Even so, Steinhardt felt extremely pessimistic
about the chances of preventing a Russo-Japanese agree-
ment. He thought it obvious that the Kremlin had decided
that its purposes would be best served with such an
accord. Once the Far East conflict had begun, however,
he thought the Kremlin would probably withhold assistance
from Japan in the hOpe that that power would be defeated
by the United States and that the Soviet Union could reap
the harvest without military effort on its part. "It is
difficult," he conjectured, "to envisage a Japanese-Ameri-
can naval war, the ultimate outcome of which will not be
of material value to the Soviet Union, for should Japanese
naval power be destroyed, it would inevitably result in a
Japanese collapse which would allow the Soviet Union to
re-occupy sufficient territory to assure the safety of

Vladivostok."

251

As for resumption of the Welles-Oumansky talks
and the concessions made by the Department of State, Stein-
hardt thought they produced little but ill-effects in the
Kremlin. In the past few weeks, he stated, Soviet author-
ities had changed in their attitude toward the Embassy, the
United States, and Great Britain. Before the resumption of
the talks, Steinhardt reported that instructions had been
given to the Soviet press and radio not to publish or broad-
cast statements hostile to the United States.20 In like
manner, Steinhardt observed that the Soviet correspondent
in London gave a favorable impression on the ability of
the English to withstand German bombing; Pravda likewise
emphasized the democratic character of the British army
in contrast to its previous references to the army as im-
perialist and plutocratic.21 Ever since concessions had
been granted the Soviet Union, Steinhardt found Soviet
authorities "recalcitrant and uncooperative." They were

not Offering the United States any significant guidppro quO.

 

20Steinhardt to Hull, September 25, 1940, Department
Of State Archives, 711.61/753-54.

21Steinhardt to Hull, October 5, 1940, Department

of State Archives, 740.0011 European War/5859.

252

Steinhardt thought that Oumansky undoubtedly represented
to Molotov that Washington was seeking the good graces of
Moscow in anticipation of war with Japan. He concluded
his long despatch by saying:
. . . I assume that the "higher ups" regarded
international "policies" as more important than
profitable results and are still fooling them-
selves into believing the Soviet Union responds
to kindness or evidences of goodwill. My exper-
ience has been that they respond only to force
and if force cannot be applied, then to straight
oriental bartering or trading methods they under-
stand and the only language productive of results.
It also has the advantage of gaining their res-
pect. In my opinion, our prestige here has not
been at all enhanced by the concessions made to
Oumansky, . . . J'

Irrespective of the appeasement policies being
pursued in Washington and London, Steinhardt clung to his
"tit-for-tat" policy. When Solomon Lozovsky, Assistant
Commissar for Foreign Affairs, related to the American Am-
bassador a list of concessions still sought by the Soviet
Union, Steinhardt candidly informed him that he (Steinhardt)
would oppose any further concessions in Washington until the

Soviet Government "had given tangible evidence of its appre-

ciation of those already granted by removing the grievances"

 

22Foreign Relations: 1940, III, pp. 406-08.

253

cited by the Embassy.23 Thereupon, according to Stein-
hardt, Lozovsky adOpted "a more reasonable attitude."
Similarly, after delivering an official Government mes-
sage requesting greater COOperation between the two
governments, Steinhardt informed the Department that he
was more than ever of the opinion "that any concessions
made to the Soviet Union in administrative and commer-
cial fields should be effected on the basis of strict
reciprocity and with no eXpectation that they will in
the slightest degree affect the political policy of the
Soviet Union."24

It is difficult even in historical perspective
to add much to Steinhardt's contemporary estimate of
Soviet policy in the weeks following the conclusion of
the Tripartite Pact. His conviction that the Soviets
desired an American-Japanese conflict appears dubious.
It appears more probable that the Kremlin looked upon the

situation created by Japan's association with the Axis as

another providential Opportunity to exploit international

 

23Foreign Relations: 1940, III, pp. 405-06.

24Ibid.. pp. 400-03.

254

tension in Soviet interest. The Russians found themselves
in the enviable position of having their traditional Japanese
enemy soliciting for an agreement and anxious to Offer highly
attractive terms. Simultaneously the British, supported by
the Americans, were figuratively falling over their own feet
in their efforts to dissuade the Soviets from concluding an
agreement with Tokyo, and submitting exceedingly generous
terms. Steinhardt, as noted, bitterly opposed this appease-
ment policy.

Not long after the signing of the Tripartite Pact,
Hitler invited the Soviets to become full fledged members
of the agreement. News of Molotov's impending visit to
Berlin was made on Moscow radio on November 9. Cripps
"was not only surprised but shocked by the news."25 He
told Steinhardt that the "possibility could not be excluded
that should Molotov's visit to Berlin result in more exten-
sive collaboration between the Soviet Union and Germany,
influential circles in Great Britain might begin to press

for peace with Germany on an anti-Soviet basis." Steinhardt

observed "that British diplomacy had again failed to evaluate

 

l,—

25Ibidol pp. 573-74.

255

properly the basic facts motivating Soviet foreign policy
. , , ," In view of the recent British attempts to drive a
wedge between the Soviet Union and Germany, he thought it
only "natural that Germany desire a public reaffirmation
of Soviet loyalty to its existing agreements with Germany
. .. 3'26 Pending the outcome of the Berlin parley, Stein-
hardt thought it "inadvisable for us to make any concession
to the Soviet Government in respect of administrative or
commercial matters, . . . ."27 Expecting greater Soviet
economic and political collaboration with Germany as a
result of the Berlin conference, Steinhardt thought the
Soviet Union "would endeavor to utilize its purchases in
the United States for the purpose of defeating the British
blockade."

In reality the Berlin meeting of November 12 and
13. 1940, decreased rather than increased Nazi-Soviet co-
operation. Inviting the Soviets to become partners to the

Tripartite Pact, Hitler sketched an alluring future for

the Soviet Union, as for the Axis: "After the conquest of
K

2

63331.. pp. 580-81.

27Ibid.. pp. 573—74.

256

England, the British Empire would be apportioned as a gigan-
tic world-wide estate in bankruptcy of forty million square
kilometers." In this bankrupt estate there would be for
Russia accessto the ice-free and really Open ocean. Now was
not the time, according to Hitler, to engage in altercations
about "insignificant revisions" of existing arrangements.
However, Molotov was unimpressed by the vagary of such
phrases as "the New Order in EurOpe" and the "Greater Eastern
Asian Sphere." He demanded attention to the delimitation

of sphere of influence as between Germany and Russia and
queried the Fuehrer concerning German trOOp movements in
Finland and the Axis guarantee. Hitler countered with a
query concerning Soviet seizure of part of Bukovina.

Molotov left Berlin without promising Soviet support
to Hitler's grandiose schemes. The Soviet Foreign Minister
gave the German Ambassador on November 25 a message for
Hitler accepting the draft of the Four Power Pact subject
to the following conditions: one, that German troops be
immediately withdrawn from Finland; two, a mutual assistance
pact between the Soviet Union and Bulgaria securing Russian
access to the Straits; three, the area south of Batum and

Baku in the general direction of the Persian Gulf be recognized

257

as the center of the aspirations of the Soviet Union: and
four, Japan renounce her rights tt>concessions for coal and
oil in northern Sakhalin.28 Hitler's reaction is supposi-
tional. It is probable that the Soviet demands increased

his anxieties and convinced him that the Kremlin was actually
plotting war. Possessing his own plans concerning the fate
of the Balkans, Hitler became determined that nothing would
deter them; the Soviets, he concluded, would have to be elim-
inated. Thus Operation Barbarossa on December 18 became a
reality.

Meanwhile, unaware of the discord in the Berlin
proceedings, Washington awaited further deve10pments. Stein-
hardt was assured by the Department's European desk "that if
the after effects of the Molotov visit do not throw the Soviet
Union further into the German sphere, more sweeping conces-
sions may be made as a sort of reward to the Soviet Union."29
One had to admire, Henderson informed Steinhardt, the success
of the Soviet policy. "By remaining non-committal and whis-

pering here and there by back door methods," he continued,

 

28Langer and Gleason, The Undeclared War, pp. 136-46.

29Loy Henderson to Steinhardt, December 13, 1940,
Steinhardt MSS.

258

"it is able to gain concession after concession from all
quarters without sacrificing anything." Henderson doubted
if the so—called appeasement policy would get us any place;
however, "as long as that is our policy I am endeavoring
loyally to cooperate in carrying it out and I sincerely
hope that my misgivings are without basis." The obvious
conclusion to be drawn from these remarks is the recogni-
tion that the policy being pursued by the Roosevelt Admin-
istration was in variance with that being formulated by

the Department of State. It is probable that Roosevelt,
through correspondence with Prime Minister Churchill, was
influenced more by British policy. Inasmuch as the United
States was supposedly a neutral and Britain a combatant

in the European struggle, it is apparent that the two
policies would not necessarily coincide. To some extent,
Steinhardt was caught in the crossfire of diplomacy; he
could not serve both policies. It was not out-of-character
for Steinhardt to follow that policy which he determined to
be in America's best interest. To a degree, he was disin-
terested in British problems. Unable to see that ultimately
America's future was intertwined with other countries, it

was necessarily a narrow view. Steinhardt determined,

259

nevertheless, that from his own experience and from others
who had served in the Soviet Union, the "tit-for—tat" policy
best served America's interest.

Henderson praised Steinhardt's despatches. He
thought, and said that others agreed, that the telegrams
received from the Moscow Embassy were "so far as clarity
and style concerned . . . the best we are receiving from

30 What the Department received

any post in the world. . .."
from Moscow, Henderson said, assisted them more in their en-
deavors "to decide what is going on in the Balkans and the
Near East, as well as the Far East, than messages which have
been received from all other parts of the world put together."
He was convinced that "an active Ambassador" was needed in
Moscow during the period of international trouble.
Nevertheless, Steinhardt complained that the Moscow
Embassy was overworked and understaffed. He was much annoyed
when the Department late in 1940 transferred Charles "Chip"

Bohlen from Moscow to Tokyo; Bohlen was one of the few at

the Moscow Embassy who had any real expertness on Soviet

 

3OLoy Henderson to Steinhardt, December 13, 1940,
Steinhardt MSS.

260

affairs.31 The staff was deluged with thousands of visa
and refugee cases. Thousands of letters from the United
States inquiring about visas, whereabouts, welfare, immi-
gration, and relief inundated the Embassy.32

The refugee problem proved to be one of Steinhardt's
thorniest problems in the Soviet Union. Soviet authorities were
at all times obstinate, contrary, and uncOOperative in the
most routine cases. Under a Department circular of June,
1940, it was stated that in view of the international situ-
ation admission into the United States be examined with
the greatest care and that all applicants should be care—
fully scrutinized in the light of war conditions and other
factors and that a visa should be issued only when the
applicant conclusively established a legitimate reason or
a reasonable need for his presence in the United States

33

rather than for his departure abroad. William Green of

the American Federation of Labor and various members of

 

31Henry C. Cassidy, Moscow Dateline: 1941-1943
(Boston: Houghton Mifflin Company, 1943). p. 76. See also
Henderson to Steinhardt, December 13, 1940, Steinhardt MSS.

32Steinhardt to Hull, September 27, 1940, Department
of State Archives, 124.613/1076.

33Congressional Record, June 5, 1941, pp. 4754-55.

261

Jewish organizations interested themselves in the plight
of so-called well-known refugee intellectuals and labor
leaders trapped by the vicissitudes of war in Eastern
EurOpe. They appealed to the Department to relax its
visa requirements. The Department complied and on Sep-
tember 26 sent telegrams to its consuls saying that appli-
cations for visitor's visas should be granted "in the
absence of reason to believe they will engage in activ-
ities inimical to the United States." Clearance of
certain aplications took place in the United States
after the State Department had investigated information
made available by labor and rescue committees.

Steinhardt objected to the new procedure. He
stated that he was unable to comprehend such reliance
on alleged information said to be available in the United
States in regard to large numbers of individuals residing
thousands of miles away, virtually none of whom were per-
sonally known to their sponsors.34 Steinhardt objected
that the Department was acting contrary to law in saying

(as it did in the September 26 telegram) that such visas

 

34Isadore F. Stone, New York PM, October 3, 1943.

262

were to be granted "in the absence of reason to believe they
will engage in activities inimical to the United States."
"It would appear from the wording of the telegram," Stein-
hardt argued, "that the Department shifted the burden of
proof from the applicant to the consular officer to

establish the admissibility Of the alien, although Section

 

23 of the Act of 1924 provides that the burden of proof

is on the alien to show that he is not excludable under
any provision of our immigration laws." It would be vir-
tually impossible, he continued, for the examining Officer
to obtain specific information regarding the possible
future activities of these individuals in the United
States and in order to be able to assume that, there is
reason to believe that they will engage in activities
inimical to the United States.

In the same message, Steinhardt took exception to
some rabbis whose names had been cleared for visas by the
Department in Washington. "Some of the alleged rabbis,"
Steinhardt objected, "never had congregations outside their
own families." Of far greater concern to the Ambassador
was "a common practice long known to the Department and

recently applied in the Baltic States" which indicated that

263

visa applicants were being solicited by the Soviet Govern-
ment to sign an agreement to undertake espionage work in
the United States as condition precedent to the issuance
of visas.35 Nearly all of these individuals, he said, had
relatives remaining in Soviet territory and were therefore
subject to pressure in the United States if they failed to
carry out their agreement. Alexander Hafftka, one of the
refugees recommended by the President's Advisory Committee,
confirmed Steinhardt's suspicions. Hafftka informed Stein-
hardt that from ten to twenty percent of all those indi-
viduals (refugees in the Lithuanian area) had been or
were being solicited by the Soviet Commissariat for Inter—
nal Affairs (OGPU) to act as its agents after their arrival
in the United States.36 Hafftka added that OGPU solicited
the most presentable and intelligent men and the most attrac-
tive women, and those selected were almost invariably indi-
viduals having relatives within the Soviet Union or Soviet-
occupied territories.

In the end, Secretary Hull acceded to Steinhardt's

demands. Although each case was to be determined on its

 

35Foreign Relations: 1940, III, pp. 234-35.

36Foreign Relations: 1940, I, p. 598.

264

merits, the Department thought it advisable as a general
rule to withhold visas in all cases in which the appli-
cant had children, parents, husband, wife, brothers, or
sisters still remaining in controlled territory.37 If
the circumstances in any case strongly indicated appli-
cant could safely be granted a visa although some close
relative resided in controlled territory, the facts
thereof were to be reported to the Department with a re-
quest for an advisory opinion.

The refugee problem proved to be an embarrass—
ment to the New Deal diplomat. News of Steinhardt's
cable in which he objected to the Department's relaxed
visa requirements was leaked to Senator Robert Reynolds,
Democrat of North Carolina.38 An apologist for Hitler
before the war, Reynolds was then campaigning for a ten
year ban on all immigration. "I desire to acquaint the
members of this body," Reynolds said on the Senate floor
of Steinhardt, "with the fact that we have at least one

representative in that section of the world [Eastern

 

 

37Ibid., p. 603.

38New York PM, October 3, 1943.

265

Europe] whose prime interest is the interest of this
country, the United States of America, and is not inter-
ested in providing protection against firing squads in
EurOpe to thousands of refugees who are securing tourist
visas to come to this country. . .."39 In 1943 while
Steinhardt was in Turkey and in the midst of further
refugee problems, the speech was amplified in the New
York press by Isodore Stone};0 The article portrayed
Steinhardt as both heartless and anti-Semitic; a

crushing blow to anyone aspiring for a political career
in the Empire State. Both Reynolds and Stone perverted
the truth and in doing so discredited Ambassador Stein-
hardt. Although a Jew himself, Steinhardt was no Zion-
ist. He was, however, an ardent believer in America:

as such, he would do everything within reason to protect
the security of the country. Humanitarian considerations,
he thought, "should be subordinated to the best interests

and public welfare of the United States,"41 It was his

 

 

39Congressional Record, June 5, 1941, pp. 4754-55.

40New York PM, October 3, 1943.

41Foreign Relations: 1940, I, p. 617.

266

Opinion that pressure of sponsoring organizations and
individuals in the United States resulted in the admis-
sion of a substantial number of refugees "whose activ-
ities after their arrival in the United States . . .
bade no good for the immediate future of our country."
Even though he was a man without large social conscious-

ness, he was not calloused toward the plight of the

 

refugees. The fact that the Department of State heeded
his warnings testifies, in part, to the validity of

his claim that there were inherent problems in the
refugee situation.

Meantime, in the weeks and months following
Molotov's Berlin visit, Japan on the one hand and the
United States and Britain on the other continued court-
ing the Russian bear. Steinhardt reported to the Depart-
ment a late November conference between Japanese Ambassa-
dor Tatekawa and Commissar Molotov.42 Tatekawa informed
the American that he (Tatekawa) had inquired of Molotov

as to the Soviet Government's disposition toward the

 

Japanese proposal ofa non-aggression pact. Thereupon,

 

42Ibid., p. 676.

 

 

267

according to Tatekawa, the Commissar replied that after
the Nazi-Soviet non-aggression pact, Germany had "made
the Soviet Union a present" in the form of half of Poland
and that he was curious to know what "present" the Japan-
ese Government proposed to make in exchange for a non-
aggression pact. In reply to Molotov's reference to the
lower half of Sakhalin and "some islands," Tatekawa asked
Molotov why the Soviet Union which was already so huge
desired additional territory. Molotov replied, "You have
so many islands you could give us a few." Japan was still
unwilling to make "a present" large enough to satisfy the
appetites of those in the Kremlin.

Steinhardt thought the mere fact that the Soviet
Government showed a disposition to conclude a political
agreement with Japan indicated a general Soviet policy.43
He thought the Soviet Government had sought and was seeking
to eXploit, for its own immediate self interest, as a means
of exacting a higher price from Japan, the situation in the

Far East and in particular the existing tension between the

United States and Japan. It appeared to him that the Soviets

 

43Ibid., p. 680.

268

confidently believed that as Japanese difficulties increased,

the Japanese Government would eventually decide to "pay the

price" and that in consequence the Soviet Government had

"every reason to adopt a waiting attitude."44 He advised the

Department to bear in mind this aspect of Soviet policy in
the Far East when considering "the dubious pOssibility of
any cooperation between the Soviet Union and ourselves. ...
The possibility and probability could not be excluded, he
suggested, that in the event of a continued refusal by the
Japanese Government to satisfy Soviet demands, the Kremlin
would "attempt to create the impression of increasing col-
laboration with the United States in the Far East solely
for the purpose of endeavoring to force the Japanese to
accept its terms." He thought Soviet aims and tactics in
the Far East similar to those in which it thus far success-
fully pursued in relation to western Europe and the Euro-
pean war, "with Japan in Soviet eyes playing the part of
Germany and United States and Britain in the Far East the

role of France and Britain in Europe."

45

 

4 .
4Foreign Relapions: 1941, IV, p. 232.

45Foreign Relations: 1940, I, p. 680.

 

269

Prime Minister Churchill, as Hitler suspected,
never abandoned hope that the Soviet Union would come to
see that its own interest lay in reducing aid and drawing
closer to Britain. Intent on driving a wedge between Rus-
sians and the Germans, the British Foreign Office instruc-
ted Ambassador Cripps to inform the Soviets of Britain's
willingness (if not eagerness) to negotiate a trade agree-
ment with the Soviet Union. However, the Kremlin was dis-
interested. After waiting for nearly a month for the Rus-
sian reply, Cripps adopted a policy of "aloofness" toward
the Soviets.46 Steinhardt thought the British diplomat
"had finally become convinced that the Soviet authorities
were more amenable to retaliatory action than to the cus—
tomary diplomatic methods." The American envoy must have
determined that another convert had been won for the "tit-
for-tat" policy. Cripps' state of mind, concluded Stein-
hardt, was "characteristic of that of virtually every chief
of mission whose initial approach to the Soviet Government
had been one of belief in its sincerity, integrity, or hon-

esty of purpose and has invariably eventually resulted in a

 

fir—

46Steinhardt to Hull, December 16, 1940, Department

of State Archives, 741.61/915.

270

deep-seated bitterness and hatred as distinguished from

those individuals who have never had illusions about the
_ 47

character of the SOViet Government."

In spite of the Soviet rebuff in respect to the

trade agreement, London still continued in early 1941 its

efforts to line up Russia against the Axis. The principal

bait was to be an offer to release funds of the Baltic

States which were still blocked in London. Britain was

However, Steinhardt did object. He thought that any con-
cession Soviet Russia gained from the United States or
Great Britain would be used by the Kremlin to relieve
German demands. The Soviet Union, he said, endeavored to
extract concessions from the United States and Great Bri-
tain by holding out the hope that such concessions would
"result in driving a wedge between the Soviet Union and
Germany without any real intention at the present time on
the part of the Soviet Union to depart from its policy of

cooperation with Germany."49 Russia, he declared, hoped

agreeably surprised that Secretary Hull had no objections.48

 

47Steinhardt to Hull, February 8, 1941, Department

of State Archives, 741.61/920.

48Langer and Gleason, The Undeclared War, pp. 121-23.

49Foreign Relations: 1941, I, pp. 117-18.

 

271

by these means to gain concessions from the United States
and Great Britain without giving anything in return other
than "wishful thinking." In a sense, the Russians ful-
filled Steinhardt's doubts when on January 10, 1940, they
signed an economic agreement with the Germans promising a
speed-up of increased oil, mineral, and grain deliveries.
Soon thereafter the United States tried its hand
at driving the wedge in Nazi-Soviet relations. On Janu—
ary 21 Under Secretary Welles notified Soviet Ambassador
Oumansky that the United States Government had decided
that the policies set forth in the statement issued to the
press by the President on December 9, 1939, and generally
referred to as the "moral embargo," were no longer appli-
cable to the Union of Soviet Socialist Republics.50 Stein-
hardt feared that Soviet authorities would carry Out their
obligations to Germany with the aid Of increased exports
from the United States.51 However, he thought Soviet
authorities "too astute and too alive" to repercussions

likely to ensue in the United States to transport American

 

50Foreign Relations: 1941, I, p. 696.

51Ibid.,pp. 126-27.

272

imports directly to Germany. The Soviets could attain the
same end, Steinhardt suggested, by the delivery to Germany
of the Soviet commodities contracted for and replace them
with purchases in the United States for Soviet consumption.
He proposed that Soviet purchases in the United States or
elsewhere in the Western Hemisphere "be scrutinized with
the utmost care." He advised the Department to watch Sov-
iet gold shipment.52

Ambassador Steinhardt confronted diversionary prob-
lems in the early months of 1941. The only foreign church
in Moscow, a Catholic Church known as "Saint Louis des
Francais" and in the charge of an American (Father LeOpold
Braun), had been the victim of a series of desecrations
and robberies. In a note protesting discrimination against
the church, Steinhardt cited the agreement reached in 1933
by the Soviet Union and the United States whereby the Sov-
iets agreed to the maintenance of appropriate religious

institutions.53 In the note to the authorities, Steinhardt

 

52Steinhardt to Hull, March 7, 1941, Department of
States Archives, 861.24/446.

53Steinhardt to Hull, February 17, 1941, Department
of State Archives, 861.404/437.

273

did not restrict his complaints to the robberies but men-
tioned other vexations accorded the Church: excessively
high income taxes, electric light and property tax assess-
ments, and the coercion of the Church's altar boys to the
point where they feared to officiate. In its reply, the
Soviet Foreign Office stated that the members of the Church
had been negligent in their duties; under agreement with
the Soviet Government the congregation obligated itself
to "safeguard the church and its property and to bear
financial responsibility in the event of loss or damage."
Further strain in the relations between the United States
and the Soviet governments was obviated with the appre-
hension of "professional thieves" who had committed the
robberies. There is no evidence that the Church was re-
lieved of the other disturbances. After the fortunes of
war in the same year altered international relations, the
United States ironically saw fit to publicize the fact that
Russia had churches and permitted religious worship under
the 1936 Constitution.

SO too did problems involving exit visas continue
to plague the Ambassador. Numerous Americans were trapped

and unlawfully detained; another was in prison and sentenced

274

to death for espionage. When the State Department released
Mikhail N. Gorin, a Soviet citizen arrested in 1939 in the
United States for violating espionage laws, Steinhardt was
enraged. He was "stunned by the Department's action" with-
out affording him the "slightest Opportunity of capitalizing
on the Soviet Government's intense desire for his release, .
. . ."54 The Department's precipitous action, without giving
him forewarning, he thought denied him the use of a "tit-for—
tat" and destroyed his bargaining position for he had in-
tended to make Gorin's release contingent on the release
of Soviet-held Americans. Because of Steinhardt's inter-
vention, however, the Americans were later released and at
least one saved from the Russian firing squad.55

Churchill dealing in his memoirs with Soviet policy
in the spring of 1941, wrote scathingly in condemnation of
the Kremlin's course. "SO far as strategy, policy, fore-
sight, and competance are arbiters," he exclaimed, "Stalin

and his commissars showed themselves at this moment the most

completely outwitted bunglers Of the Second World War."

 

54Steinhardt to Hull, March 23, 1941, Department

of State Archives, 311.6121 Gorin, M.N./40.

55New York Times, May 10, 1941.

275

The British statesman based his strictures on the proposi-
tion that the Soviet leaders, after Molotov's visit to
Berlin in November, 1940, could not possibly have been un-
aware of the antagonism that had developed between the two
partners of August, 1939, and that they must have realized
that Hitler's objectives and intentions with respect to
the Balkans ran directly counter to Soviet interests.
According to Churchill, nothing would have made better sense,
from the Kremlin's standpoint, than for Soviet Russia to
have joined the British in an effort to strengthen the
Balkan States, so as to enable them to resist the antici-
pated Nazi advance.

On March 1, 1941, Hull advised Steinhardt to in-
form Molotov that the United States Government "while en-
deavoring to estimate the developing world situation, had
come into possession of information which it regards as
authentic, clearly indicating that it is the intention of
Germany to attack the Soviet Union in the not too distant
future."56 Steinhardt thought the deliverance of such a

message would be useless. "The cynical reaction of the

 

56Foreign Relations: 1941, I, p. 712.

276

Soviet Government to approaches of this character," he said,
"would lead it to regard the gesture as neither sincere nor
independent, and my visit to Molotov might be made the sub-
ject of a TASS [Telegraphic Agency of the Soviet Union] com-
munique or be imparted to the German Government, notwith-
standing any previous assurances to the contrary."57 In his
Opinion, if the Soviet Government had no evidence confirm-
ing the information, its release would be regarded by the
Soviets as an American attempt, at British instigation, to
drive a wedge between the Soviet Union and Germany.

On the other hand, should the Soviet Government pos-
sess information of that character, Steinhardt thought the
Kremlin would treat the news as confirmatory. If this were
the case, Steinhardt thought it might bear the following
consequences: one, it might hasten the conclusion of a
Soviet-Japanese political agreement; two, it might cause the
Soviets to consider a deal with Germany at Turkey's expense;
three, in view of the large number of German trOOps in north-
ern Norway, it might tempt the Soviets to consider the occu-

pation of Finland; four, it probably would be availed

57Ibid., pp. 713-14.

277

to justify renewed demands by the Soviet Government on
the United States for further concessions and increased
assistance; and five. it might accelerate Soviet assist-
ance to Germany in an endeavor to avoid or postpone a
German attack. Steinhardt deferred requesting an inter-
view with Molotov; on March 3 in Washington. Welles told
Oumansky that the United States had such information.
The Soviet response. as Steinhardt had expected. was

one of disbelief; in turn. as the Ambassador predicted.
the Soviets believed it to be British inspired. Even

so the Soviets hastened to compromise an agreement with
Japan and accelerated aid to Germany in an effort to
avoid the inevitable truth.

The weeks immediately preceding the Nazi invasion
of Russia constituted one of the most perplexing periods
of WOrld War II. Rumors and conflicting stories pervaded
Embassies the world over. Soon after receiving word from
Washington of the impending invasion. Steinhardt reported
speeches having been made by Communist Party officials at
factory meetings in Moscow in which speakers alluded to

the possibility of conflict between the Soviet Union and

 

278

Germany.58 Of greater significance, he wrote, was the
alleged statement by "a Party official" implying that Ger-
many was attempting to get control of the Dardanelles and
that would not be permitted. The official, according to
the Ambassador, declared that Germany was maintaining a
one-million man army on the Soviet Union's western frontier
and warned his audience that Russia had to be ready for any
aggression. Steinhardt reported that "all competant ob-
servers in Moscow" remained convinced that the Soviet Union
would not consider attacking a "strong Germany," and that
statements of the above character were intended to prepare
the pOpulation for eventualities, and that"they be taken

to indicate fear of a German attack."

From Washington, Henderson wrote that everyone
there was interested in "the growing coolness between Ger-
many and the Soviet Union" and that there was "a certain
amount of wishful thinking on the subject."59 Henderson
hoped that he (Henderson) was "too much of a pessimist"

but found it difficult to believe "that after all that has

 

581bid.. pp. 132-33.

59Loy Henderson to Steinhardt, March 31, 1941,
Steinhardt MSS.

279

happened, they will entirely terminate cooperation, let
alone enter into conflict with each other." It was his
opinion that if a conflict did break out, "it would be

of Germany's choosing, not as a result of any desire on
the part of the Soviet Union." He assured Steinhardt
that the Ambassador's letters were valuable in serving as
"a check on too much hopefulness" in so far as Soviet-
German relations were concerned.

Meanwhile, Steinhardt heeded the Department's
warning and prepared for evacuation. The American Em-
bassy, located exactly across the street from the Krem-
lin, was in the best possible position to catch any bombs
that missed their primary objective. Spaso House (irrev-
erently referred to as "Spasm House"), the Ambassador's
residence, became the embassy proper. A second embassy
was established at Terasovka, twenty miles northeast of
Moscow, on a bluff overlooking the Kliasma River. He im-
ported tents from the United States and prepared to set
them to house needy Americans who might be blasted out of
their hotels if the action started. "The Refuge," as it
was called, was equipped and provisioned to maintain one

hundred persons for at least two months. A vegetable

280

garden was planted, and a small portable power unit was
installed which could operate the pump of an artesian well
and provide power for the radio. Steinhardt did not know,
until it was too late to change, that the spot selected
for this safe retreat was close to a group of munitions
factories. It was said that more dogfights were held over
"The Refuge" than over Red Square.60

As Steinhardt prepared for evacuation from the
Soviet capital, Japanese Minister of Foreign Affairs Mat-
suoka stopped in Moscow enroute to a meeting in Berlin
with Adolf Hitler. Matsuoka informed Steinhardt that he
(Matsuoka) intended to ask Hitler "point blank" whether
the Nazis intended an invasion of the Soviet Union. The
New Deal diplomat concluded from Matsuoka's remarks that
any Japanese decision as to an agreement with Russia would
be "predicated on the information given him [Matsuoka] in
Berlin as to whether or not Germany contemplated an attack
on the Soviet Union." To Steinhardt, Matsuoka cunningly

denounced communism and said "that under no circumstances

.__.r

6oMargaret Bourke-White, Shooting the Russian War
(New York: Simon & Schuster, 1943), pp. 31-83. See also
Alice-Leone Moats, Blind Date with Mars (New York: Double-
day, Doran and Company, 1943), p. 210; Steinhardt to Hull,
March 20, 1941, Department of State Archives, 124.61/166.

 

281

would the Japanese ever accept communism."61 Hoping to
drive his own wedge between the United States and the
Soviet Union, Matsuoka informed the American "that any
clash between Japan and the United States could only
benefit the Soviet Union and would unquestionably result
in the 'communization' of China and probably all of the
continental Far East." He admitted that it was his in-
tention to reach a political agreement with the Soviet
Government but would not "pay an excessive price"; that
he had "little confidence the Soviet Government would
keep any such agreement longer than suited its purpose."
Uncertain as to what was to follow, Matsuoka left
Moscow for Berlin. In the conference that took place,
it is impossible with any degree of certainly to discover
exactly what information Matsuoka received concerning the
impending German assault on the Soviet Union. Isaac
Deutscher in his description of the deterioration of Nazi-
Soviet relations suggests that Hitler and Ribbentrop

gave Matsuoka "broad hints" of the forthcoming attack.62

 

61Foreign Relations: 1941, IV, p. 921.

62Isaac Deutscher, Stalin: A Pplitical Biography
(New York: Oxford University Press, Inc., 1949), pp. 441-60.

282

Others claim that Matsuoka was told nothing.63 Most writers
agree, however, that Hitler, at this time, Opposed a Japan-
ese-Soviet agreement. Nevertheless, Matsuoka upon arriving
back in Moscow informed Steinhardt "that the Germans were
fully prepared to invade the Soviet Union but had no inten-
tions Of doing so unless the Soviets substantially reduced
deliveries to Germany" and expressed the Opinion that the
rumors of a German attack on the Soviet Union had been
given out by the Germans in order to frighten the Soviets
into deliveries.64 Matsuoka further stated that both
Hitler and Ribbentrop had urged him to come to some agree-
ment with the Soviets and he told them that he was desirous
of doing so but would not "pay an excessive price." The
truth is that neither Hitler nor Ribbentrop encouraged Mat-
suoka to come to terms with the Soviets; both were dis-
pleased with the signing of the pact. In Berlin, Hitler
had encouraged the Japanese to move into South Asia and
attack Singapore and pledged his support if the Soviets

attacked Japan. Acting independently, Matsuoka attempted,

 

63F. C. Jones, Japan's New Order in East Asia, 1937-
1945 (New York: Oxford University Press, Inc., 1954), pp. 210-20.

64Foreign Relations: 1941, IV, pp. 932-34.

283

through a Japanese-Soviet accord, to protect Japan's
northern flank. His statement to Steinhardt can only
be interpreted as an effort to display "Tripartite"
solidarity. However, Matsuoka was a devious states-
man. After signing the pact with Russia and following
the German invasion of Russia, he wished to violate the
agreement and join the war against the Soviets.

On April 13, 1941, in Moscow, Matsuoka signed
with Molotov a five-year treaty of neutrality, pledging
each party to remain neutral if the other should become
involved in war. Russia agreed to respect the territor-
ial integrity of Manchukuo, and Japan gave a similar
pledge in respect to Outer Mongolia, which had fallen
under Soviet influence. Matsuoka, believing that Japan's
southward drive might bring conflict with Great Britain
or the United States or both. thought the promise of
Russia's neutrality worth a price. He promised surrender
of Japanese economic concessions in North Sakhalin (a pro-
mise that was not carried out). Stalin was happy that the
possibility of a two-front war had been eliminated. On
the day of Matsuoka's departure from Moscow, the Red leader

at the railway station made an ostentatious display of his

284

pleasure. It was there that Stalin, placing his arms
around the shoulders of Friederich Schulenburg, German
Ambassador to the Soviet Union, remarked: "We must re-
main friends and you must do everything to that end."
Steinhardt thought that Germany would hail the
treaty as a successful result of its effort to bring
about a Japanese-Soviet agreement. However, he thought
the treaty was brought about less by German influence
than by the fear of Japan that it might become involved
in hostilities with the United States and the desire of
the Soviet Government to prepare itself against a possible
German attack. At the same time, he determined that Mat-
suoka wanted to indicate to Germany that the Japanese did
not consider themselves bound under the Tripartite Pact
to go to war either with the United States or the Soviet
Union in the event that Germany declared war or took offen—
sive action against either country.65
In the early months of 1941 Germany completely

squeezed Russia out of the Balkans. The Kremlin vented its

displeasure. It announced in January that the Nazis had

 

65Steinhardt to Hull, April 13, 1941, Department of
State Archives, 761.941/81.

285

failed to consult them about the entry of German troops
into Bulgaria and had not agreed to it. On April 4 Molo-
tov summoned Schulenburg, the German Ambassador, to his
office and informed him that the Yugoslav Government had
proposed to the Soviet Government a treaty of non-aggres-
sion and friendship, and that the Soviets had decided to
accept and were about to sign the treaty. Molotov told
the Ambassador that he expected Germany to keep peace with
the southern Slavs; two days later German bombs drOpped in
Belgrade. Steinhardt thought the Soviet-Yugoslavia pact

a Russian effort to insure Yugoslav resistance to German
aggression. It is, however, too much to assume that Mos-
cow was deliberately encouraging the Yugoslavs to stand

up to the Axis; at best, it was a reminder to Berlin that
Moscow was still interested in the Balkans. Steinhardt
thought the Soviets contemplated no action under the pact
other than the possible furnishing of supplies to Yugo-
slavia.66 The Soviet Union, he said would still continue
to furnish and transport raw materials to Germany and would

"be careful to avoid any action which would be likely to

 

66Foreign Relations: 1941, I, p. 136.

286

provoke a German attack." He steadfastly adhered to the
belief that Soviet-German relations, despite occasional
strains, would prevail until such time "as either the Sov-
iet Union no longer had occasion to fear Germany or Ger-
many might consider it advantageous to direct its activi-
ties away from‘Western Europe toward the East or until‘
one party took action clearly inimical to the vital inter-
est of the other."67 Nevertheless, he thought the rela-
tionship was in the process of change; this did not mean,
however, that "an immediate clash between the two countries
must occur."

On May 6 Moscow was startled by the news that
Stalin had become Prime Minister. What made him step out
of the General Secretariat, for the first time since 1923,
and assume direct responsibility for the Government?
Steinhardt thought Stalin became head of the government
in name as well as in fact. It was, in his opinion, a logi-
cal development in the fusion of party and Government which
was begun in the purges of 1936. From the time of the

purges, he said, the rank and file of the party diminishedixi

 

67Ibid.. p. 137.

287

importance in the actual governing of the country, while
the party leaders began to assume the responsible govern-
ment positions. On the other hand, he suggested, the
timing of Stalin's move was significant and was determined
by the international situation in which the Soviet Union
was facing one of its most critical periods in history.
Although preoccupied with invasion rumors, Stein-
hardt took time to study the effect of Russian peasantry
on Soviet foreign policy. The Government, he said, could
not ignore the importance of peasant morale and loyalty.
A serious problem confronting the Kremlin in the event of
a German invasion, he suggested, was the disaffection of
the underprivileged Soviet peasants as a result of forced
Government policies of industrialization, collectivization,
high taxes, unreasonable requisitions, confiscations, arti-
ficially organized famines, labor discipline, purges, low
wages, and extortionary price fixing. Steinhardt thought
the peasantry "bitterly hostile" to the central government.
A fundamental difference, he pointed out, existed in the
jpeasants'ndnd between the Stalinist regime on the one hand
and the fatherland, the village, and soil on the other, the

Russian peasant being deeply and patriotically attached to

 

288

the latter. A Russia in the hands of the Nazis with crops
intact, farms fully equipped, and the peasants actively
sympathetic or even passive, would be a far different con-
quest than a Russia burnt to the ground, with farms deserted,
and the countryside filled with roaming bands of peasant
guerillas. Stalin, he mused, aware of the disloyalty among
his subjects, must have "given serious consideration to the
mind of the masses in resolving fundamental problems of
foreign policy .. .."68 Steinhardt, in conclusion, thought
it not improbable that the Stalinist regime would be over—
thrown "although such invasion would perhaps meet the same
fate eventually as did the invasion of 1918."

Until almost the eve of the Nazi offensive Washing-
ton continued tO be baffled by conflicting intelligence.
Reliable and accurate reports came in from Berlin, Stock-
holm, and Bucharest in early June. However, Steinhardt in
Moscow remained convinced that Stalin, in order to avoid
war, was willing to make any concession to the Nazis so long

as it did not impair the Soviet Union's ability to defend

itself.69 As late as May 25 Vishinsky assured Steinhardt

fiw

 

68Steinhardt to Hull, June 4, 1941, Department of

State Archives, 861.00/11891.

69Foreign Relations: 1941, I, p. 754.

 

 

289

that Nazi-Soviet relations were friendly and that, if trouble
arose, Soviet Russia was quite capable of defending itself.
Prime Minister Churchill, in speaking of the days immediately
preceding the Nazi invasion of Russia, stated: "Nothing that
any of us could do pierced the purblind prejudice and fixed
ideas which Stalin had raised between himself and the terrible
truth."

While adopting a wait and see attitude, the State
formulated a policy for dealing with the Soviet Union. It
embraced the following points: make no approaches to Russia;
treat any approaches with reserve until the Russians satis-
fied the Department that they were not maneuvering merely to
obtain unilateral concessions for themselves; reject any
Soviet suggestion that the United States make concessions for
the sake of improving American-Soviet relations, and require
a strict gpidppro guo; make no sacrifice of principles in
order to better relations; make the principle of reciprocity
the basis of day-to-day relations.70

The newly formulated Departmental plan of dealing

with Russia amounted to a virtual adoption of the "tit-for-tat"

 

70Hu11, Memoirs of Cordell Hull, pp. 972—73.

290

policy. In Moscow, Steinhardt was satisfied. He wrote Hull:

. . .I have been convinced for quite some time
that a firm policy such as outlined is best cal-
culated to maintain our prestige in Moscow and

to prepare the ground for the important develop-
ments with which we will ultimately be confronted.
My Observation of the psychology of the individ-
uals who are conducting Soviet foreign policy has
long convinced me that they do not and cannot be
induced to respond to the customary amenities,
that it is not possible to create "international
goodwill" with them, that they will always sacri-
fice the future in favor of an immediate gain,
and that they are not affected by ethical or
moral considerations, nor guided by the relation-
ships which are customary between individuals of
culture and breeding. Their psychology recognizes
only firmness, power, and force, and reflects
primitive instincts and reactions entirely devoid
of restraints Of civilization. I am of the opin-
ion that they must be dealt with on this basis
and this basis alone . . . 71

He stated that he found no evidence Of resentment on the part
of the Russians to reciprocal relations. As in the case of

all primitive peOple, he added, it is important that recipro-
city and retaliation not be carried to the point where it might
be considered as provocation; every act should be clearly
identifiable in each instance. If so identifiable, he con-
cluded, it did not appear to provoke further retaliation, but
on the contrary, frequently resulted in a relaxation or com-

plete withdrawal of the action which provoked the retaliation.

 

71Foreign Relations: 1941, I, pp. 758-60.

291

One June 22, 1941, Hitler unleashed his war machine
against the Soviet Union. In a radio broadcast, Molotov in
announcing the German invasion stated: "We must unite
around our brilliant Bolshevik Party, around our Government,
around our great leader, Comrade Stalin. Our cause is just.
Victory will be for us." He assured his listeners that the
fight was not being made against the German people, German
workers, intelligentsia, and peasant but against "the blood-
thirsty leaders of Fascism.72 Nevertheless, Cripps found the
Foreign Commissar "pale, nervous, and obviously shaken."73
Cripps reported that the Russians had been taken by surprise.
The Russians, he said, had considered the German moves as a
preparation for negotiations which the Kremlin felt confident
they could prolong sufficiently to cover their final prepara-
tions. Steinhardt related that a member of the American
Embassy had just returned from Sochi, a resort town on the
Black Sea, and reported having seen "several thousand Soviet

army officers there on vacation" when the war began. Whereby

Cripps did not contemplate the fall of Moscow under sixty days,

 

72Ibid., p. 625.

73Steinhardt to Hull, June 28, 1941, Department of
State Archives, 740.0011 European War/12615.

292

Steinhardt thought it not impossible that its collapse occur
before then.

The United States joined Britain in welcoming Russia
into the fellowship of the nations engaged in combating total—
itarianism. Secretary Hull, ill at home, phoned the President:
"We must give Russia all aid to the hilt. We have repeatedly
said we will give all the help we can to any nation resisting
the Axis."74 Steinhardt, when informing Molotov of the Admin-
istration's decision to aid the Soviet Union, found the For-
eign Commissar "more interested in the attitude of the United
States."75 Steinhardt read into Molotov's remarks "a tinge
of skepticism" with respect to United States willingness
and ability to furnish essential war materials. Steinhardt
suggested that the Soviet Union would receive more encourage—
ment from immediate shipments of almost any kind of military
supplies than it would promises for future deliveries. The
Soviet emphasis on plant equipment, Steinhardt thought indi-
cated an intention to continue resistance even if most of

Western Russia had to be abandoned;76

 

74Hull, Memoirs of Cordell Hull, p. 967.

75Steinhardt to Hull, June 29, 1941, Department of
State Archives, 740.0011 European war/12617.

76Steinhardt to Hull, June 30, 1941, Department of
State Archives, 740.0011 EurOpean War/ 12646.

293

Steinhardt reported that the German push had not been
as rapid as was expected. This, he attributed less to the
capacities of the Red Army than to "the careful, conservative,
long range plan of the German offensive."77 There was, he
said, in the second week of the war, little to indicate which
direction the main German effort would take after consolida-
tion had been accomplished. While Cripps evinced considerable
optimism concerning Soviet ability to prevent the fall of Mos-
cow, Steinhardt did not share the same feeling. The seizure
of Moscow, he predicted would be decided according to the
general strategy of the campaign by the German General Staff
rather than by the defensive strength of the Soviet armies.78
Steinhardt's pessimism regarding the fate of Moscow does
not mean that he foresaw a Russian collapse. Contrarily, he
held the view that the Stalinist regime was not likely to
make peace with Germany "so long as sufficient power of resis-
tance remains to ensure the grip of the Government on the

unoccupied areas of the country.. . . 379 He thought the

_,__

77Steinhardt to Hull, July 2, 1941, Department of
State Archives, 740.0011 European War/12741.

78Steinhardt to Hull, July 9, 1941, Department of
State Archives , 740.0011 European War/12955.

79Foreign Relations: 1941, I, pp. 640-41.

294

Soviets, if needed, would drop back and fight from the
Urals.

Steinhardt predicted German difficulties in organ-
izing Russian occupied territory. The Germans, he said,
would have difficulty in filling administrative positions
and would have to set up a semi-military regime. Agricul-
tural problems, he forecasted, would baffle the Nazis:
land distribution, requiring German administration, would
be of no consequence because the peasant in the end would
still be dissatisfied and resentful; collective farm machin-
ery was unsuitable for small farms; and, the peasants would
demand a greater amount of consumer goods than the Nazis
would be willing or able to provide.80 He thought Stalin
need not worry about disaffection if OGPU continued to
exercise the same control as it had in the past, the peo-
ple were fed, and the army remained loyal.

The military experts, almost to a man, agreed that
the Red Army would be crushed in three months. Henderson

was surprised that Steinhardt was still in Moscow.8

 

80Steinhardt to Hull, July 14, 1941, Department of
State Archives. 740.0011 EurOpean war/13127.

81Henderson to Steinhardt, August 18, 1941, Stein-
hardt MSS.

295

Military people in Washington, he said, "were convinced that
Moscow would fall by the first of August. Now no one seems
to know anything about anything." Under these conditions,
Roosevelt moved cautiously. On June 26 he announced that
the neutrality law would not be invoked against Russia be-
cause the security of the United States was not imperiled
by the conflict. Slowly steps were taken to facilitate pur-
chases Of American goods, and on July 26 the President au-
thorized Harry Hopkins to fly to Moscow as his personal
representative to discover just what Stalin needed. Hop-
kins, according to Steinhardt, was received by Stalin who
granted him very extended interviews and discussed "with a
frankness unparalleled . . . in recent Soviet history the
subject of his mission and the Soviet position."82 Stein-
hardt thought the visit "extremely gratifying to the Soviet
Union" and that it would prove to have exercised a most bene-
ficial effect upon Soviet-American relations in general and
particularly to have greatly encouraged Soviet war effort.

As the staying power of the Red Army became evident, the

 

82Steinhardt to the President, Secretary, and Under

Secretary, August 1, 1941, Department of State Archives,
740.0011 European War/13605.

296

United States promised on August 2 "to give all economic
assistance practicable for the purpose of strengthening
the Soviet Union in its struggle against armed aggression."
Not until November 7, however, did Roosevelt declare the
defense of Russia vital to the security of his own country
and thus make it eligible for Lend-Lease materials.

During the months of August and September the
Soviet military position deteriorated rapidly. Kiev was
being surrounded, the Nazi armies were on the point of
over-running the important Donetz Basin, and Leningrad
was already under siege. While the encirclement of Lenin-
grad appeared to be virtually complete, Steinhardt doubted
that the city would fall as soon as generally expected;
its eventual capture, he thought, was more likely to
result from the shortage of food than from German military
efforts.83 It appeared to him that it was the Soviet policy
to defend and hold each large city as long as possible irre-
spective of the cost of lives and damage to the city.
According to Steinhardt, Soviet authorities planned the

total destruction of cities behind German armies in an effort

 

83Steinhardt to Hull, September 10, 1941, Department

of State Archives, 740.0011 European War/14914.

297

to impede their progress and interfere with Nazi communi-
cations.

Steinhardt thought the morale in Moscow was excep-
tionally good during the early portions of the war.84 The
Nazis incessantly rained bombs and propaganda leaflets.

The prOpaganda urged the Russians to cast off their Bolshe-
vik masters and commissars, to rid the regime of Jews, and
to have no fear of the impending occupation by the Germans
who would see to it that their land was restored to them.
Steinhardt thought the leaflets received favorable recep-
tion, particularly by the rural population. He drove around
the city and found little evidence of important damage done
to military objectives. However, when the Nazi armies in
the first days of October opened their great drive to

smash the core of Soviet resistance and capture the his-
toric city, the citizens of Moscow became alarmed; public
concern over the procurement of food increased and the morale
of the pOpulation badly shaken by the flight of factory

managers, some of whom absconded the wages of the employees.85

 

fiv——v W..—

84Foreign Relations: 1941, I, pp. 642-43.

85Steinhardt to Hull, October 28, 1941, Department of
State Archives, 740.0011 EurOpean War/16219.

298

Steinhardt requested a leave for the United States but was
informed by Secretary Hull that he did not think the time
propitious since already the Germans had reports to the
effect that Steinhardt was leaving the Soviet Union "be-
cause Of the hopelessness of the situation."86

The Moscow population became more panic striken.
when on October 15 orders were issued to move government
Offices and foreign embassies eastward to Kuibyshev. The
American Embassy in Kuibyshev looked as though it might
once have been an apartment house; it boasted six kitchens.
a pair on each floor. The Ambassador had two tiny rooms.
One he used for storage purposes and the other his bedroom
which also served as a sitting room and. on occasion. even
as a dining room. There were several bathrooms in which
the plumbing seldom worked. Steinhardt reached his peak
as a diplomat when one day he told the telephone Operator:
"Call Vishinsky and tell him if he doesn't get a plumber
over here within half an hour to repair the toilet. I'll go

over and use his!"87

 

86Hull to Steinhardt. October 9. 1941. Department
Of State Archives. 123 Steinhardt/363. -

87Cassidy. Moscow Qateline: ‘1941-1943. p. 76;
see also Moats. Blind Date with Mars. p. 420.

299

In Kuibyshev Steinhardt anxiously awaited his re-
turn tO the United States.. He complained in a letter to
Hull of having been kept at his desk night and day seven
days a week without interruption during the past fourteen
months. "The mental and physical strain that has resulted
from this." he wrote the Judge. "has been aggravated by the
extraordinary disagreeable conditions of life in Moscow
even under normal conditions not to speak of the past four
months of war conditions and particularly by the tempera-
ment of the officials with whom I have had to deal."88

Finally word came granting the Ambassador permis-
sion to return home. President Roosevelt informed Stein-
hardt that it appeared as if "in the immediate future at
any rate it would now seem that Soviet-American relations
will consist almost exclusively of matters pertaining to
the furnishing of equipment and supplies to the Soviet
Union in order that it may be able to continue its resis-

tance to Germany."89 The President instructed Steinhardt

to place Major—General James H. Burns. "who is fully

 

88Steinhardt to Hull. November 3. 1941. Steinhardt

89Franklin D. Roosevelt to Steinhardt. November 5.
1941. Steinhardt MSS.

300

acquainted with the detailed problems of American supply
and production." in charge. Roosevelt suggested that the
New Deal diplomat "make immediate preparations to return to
the United States" so that he (Roosevelt) might "have an
Opportunity to talk Of a new post" and discuss "recent
developments in the Soviet Union."

Henderson at the EurOpean desk Offered his moral
support to the returning diplomat. "Be sure not to take
an attitude with anyone." he wrote Steinhardt. "that there
is anything for which you can be reproached or that you
are under any shadow in any way."90 Henderson stated
emphatically that the situation was to the contrary.

He assured the New Deal diplomat that in his (Henderson's)
mind Steinhardt had done "a first class job" and had con-
sistently sacrificed his personal interests. Everyone.
Henderson asserted. was pleased with Steinhardt's work

in the Soviet Union. "Just be your old confident self."
he concluded. "and everything will work out beautifully.

I don't need to tell you that the Secretary has a deep

affection for you and that neither he nor the President.

 

90Loy Henderson to Steinhardt. November 26. 1941.

Steinhardt MSS.

301

nor anyone else. so far as I know. has any intention of
letting you down."

Steinhardt had no reason for misgivings. Under
trying war conditions the Ambassador performed a commend-
able job in the Soviet Union. Life as a diplomat in
Moscow was no vacation. Soviet officials made life dif-
ficult and exasperating; Americans faced problems with
Soviet police. exchange rates. and unwarranted searches.
Authorities obstructed normal working procedure with
minor irritations. impediments. and delays.

Unlike his predecessors. Bullitt and Davies.
the third American ambassador to the Soviet Union was
not swayed by personal feelings. Every bit as anti-
Communistic as Bullitt. the New Deal diplomat became
neither exasperated nor ruffled by adversities. SO.
too. Kremlin leaders found the resolute and iron-willed
Steinhardt (unlike Davies) completely oblivious to flat-
tery and blandishment. Although Steinhardt was no favor—
ite among Communist authorities. it can be said. however.
that he was respected: this was really more important

in the long run for American interests. According to

302

Henderson. who was in a position tO know. Steinhardt was
"the best" of America's three ambassadors to the Soviet
Union.91

It would be an over-simplification to claim that
Ambassador Steinhardt understood all facets of Communist
Russia. As early as January. 1940.92 Steinhardt dis—
missed Marxian ideolOgy as a factor in Soviet foreign
policy. In attributing Soviet territorial expansion
solely to imperialistic designs. the American Ambassa-
dor dismissed altogether Communist Obsession with "cap-
italist encirclement" and the division of the world in—
to "two hostile camps." To what extent Communistic ide-
ology in the late 1930's was a factor in Soviet ideology
is indeterminable--to dismiss it entirely. as did Stein-
hardt. was wrong. In the more than two years that Am-

bassador Steinhardt served in the Soviet Union. there is

no evidence to suggest that he fully understood Communist

 

1Personal interview with Loy Henderson. Febru-
ary 9. 1967. Washington. D. C.

92Steinhardt to Loy Henderson. January 29. 1940.
Steinhardt MSS.

303

ideology. party hierarchy. or political structure. To
reject these various aspects of Soviet life was foolish
and short-sighted.

Ambassadorial life in Moscow would have been
enigmatic. difficult. and vexing even in peacetime. The
war magnified and increased the tension even though both
the United States and the Soviet Union were neutral through-
out the first stages of the European war. each had a dif-
ferent Objective. While Russia desperately strove to
stay out of the war. America veered a course just short
Of involvement. Dissimilar to the Soviet Union. the
United States had early committed itself to the side of
one of the belligerents.

America's unwritten pledge for an Allied victory
necessarily complicated United States policy. With their
backs against the wall. the British. unlike the Americans.
were naturally more willing to appease the Russians than
the Roosevelt Administration. It is difficult to deter-
mine whether the prevalent British view concerning the
eventual Nazi-Soviet break-up was one of omniscience or
the result of wishful thinking. Even so. Steinhardt

steadfastly claimed that this Split would not occur--

304

he was totally unable to see and penetrate the "unholy"

alliance. However. he cannot be completely faulted.

for even the Omnipotent Stalin was unable to foresee

the inevitable clash. Even had Steinhardt been able to

appreciate the inherent discord in the agreement. it is

extremely doubtful that he would have prevailed upon the
Soviets to change their neutralist policy.

Under the circumstances. the diplomatic strategy
best serving the interests of the United States in deal-
ing with the Soviet Union was the one of maintaining re-
ciprocal relations; in other words. the "tit-for-tat"
policy pursued by the New Deal diplomat. In the days
and months preceding the Japanese attack at Pearl Har-
bor. there was no single policy that satisfied the in-
terests of the United States. the Soviet Union. and
Britain. In reality. it took nothing less than Hitler's
Wehrmacht to force the Kremlin to abandon its neutralist
policy. Following United States entrance into the war
it was inevitable that the Americans and Russians cement
their international relations. Thereafter the Soviet
Union and the United States joined in a single course--

that of defeating the Axis warlords. Undoubtedly. the

305

years 1942 and 1943 marked the zenith of Russo-American
relations. Amicable relations persisted so long as each
country had need of the other. As hostilities waned.
however. the two countries returned to their pre-WOrld
War II relationship that. in a real sense. characterized

the mission of Ambassador Steinhardt.

Chapter 6

WARTIME AMBASSADOR TO TURKEY

Ambassador Steinhardt arrived back in the United
States from the Soviet Union on November 26. 1941. Less
than two weeks latei the Japanese attacked Pearl Harbor.
Congress responded the next day. December 8. with a declar-
ation of war against Japan. Germany and Italy honored their
treaty obligations to Japan and on December 11 declared war
against the United States. America was in the war "up to
its neck" in both Asia and Europe.

Had Steinhardt come home to resign from the service.
the bombs dropped by the Japanese in Hawaii resolved the de-
cision. He would not desert his country in its hour of
peril. After consultation at the White House. it was de-
cided that the New Deal diplomat would be shifted tO the
Embassy in Turkey. Rumors had persisted for weeks that
German forces might try to drive eastward through Turkey
to form a junction with the Japanese moving through the
Indian Ocean. Because the Turkish course was not yet fixed.

306

307

Ankara was considered at that time a more important post than
Moscow.1 Steinhardt was fascinated with his new assignment.
He believed it held "the key" to the whole Near and Middle
East. "What the Turks do or do not do during the next few
months." he asserted. "will have a tremendous bearing on the
duration of the war.”2
Turkey was the observation tower into the Balkans.
It was a window; what we tried to do was to make it a door.
Steinhardt had two principle missions in Turkey. He was
sent to reassert American prestige in that key nation and
to smooths out relations between Turkey and the Soviet Union.
After almost two decades of friendship in which Mos-
cow had On more than one occasion come to the aid of the
Ankara government. relations between Russia and Turkey be-
came estranged and confused. At the outbreak of war Official
relations between Turkey and Soviet Russia depended upon the
1925 Treaty of Neutrality and Non-Aggression which had been
renewed in 1935 for a further period of ten years. After
the rise of the Nazi regime. however. there was a lessening

of Soviet-Turkish cordiality. partly owing to "a natural

 

1New York Times. January 8. 1942.

2Steinhardt to Mrs. Lola Cintron. January 10. 1942.
Steinhardt MSS.

308

Turkish tendency" to look upon Berlin as their benefactor.3
Turkish feeling was that the most immediate threat to Turkey's
security came not from Germany but from Mediterranean Italy.
with her strategic outpost in the Dodecanese and her Old
ambitions to annex the Antalya district of southern Anatolia.
The formation of the Rome-Berlin Axis and Italian
penetration of Albania and the Balkans in 1939 forced Turkey
to search for new allies. Since the problem was one of rela-
tive naval strength in the Mediterranean. her natural sup-
porters could only be Britain and France. Under the circum-
stances. even if Moscow had been willing to extend military
assistance. Russian support was not within the realm of mili-
tary possibility. Even so. Moscow contemplated the signing
of a mutual assistance agreement between the two countries.
This was to be followed by closer collaboration-—to be
achieved with the aid of Turkey--with the other Balkan
countries. thus forming a "block of neutral Balkan States.“
Happily for Germany. this bloc was intended to weaken Anglo-

French strength in the Balkans.

 

3George Kirk. Survey of Internapional Affairs. 1939-
1946: The Migdle East in the War (London: Oxford University
Press. 1952). p. 443.

309

Turkey's approach to England and France in May. 1939.
fell nicely with the policies of the latter who were at that
moment busily seeking agreements with Poland. Romania. and
other small states against Axis aggression. To Moscow's
chagrin. Turkey turned a deaf ear to the overtures emanating
from the Kremlin. Turkish Foreign Minister Sfikrfi Saracoglu
gave a negative reply to Soviet proposals and on October 19.
1939. Signed the agreements with England and France. Even
though the agreement contained a clause stipulating that
under no circumstances was Turkey to go to war with Russia.
it was a defeat for both Soviet and German diplomacy.4

The Nazi-Soviet Pact. signed on the eve of the out-
break of European hostilities. complicated Turkey's position
enormously. With the Soviets directing their propaganda
against the "warmongers" in Britain and France. Turkey could
no longer remain both pro-Ally and pro-Russian. Meanwhile.
Russia's foreign policy was being determined by the new in-
ternational situation created by the Pact. Moscow desired
within the immediate future to settle her differences with

Romania over Bessarabia. However. Soviet ambitions were

 

4David J. Dallin. Soviet Russia's Foreign Pglicy.
1939-1942 (New Haven: Yale University Press. 1942). pp.
105-07.

310

ensnarled by the fact that Great Britain and France in April.
1939. had guaranteed Romanian independence and integrity.
In the tense situation following Hitler's invasion of Poland.
a diplomatic clash between Russia and Rumania might have pro-
duced sufficient spark to ignite a war between the Western
Allies and the Soviet Union. The Anglo-French—Rumanian
accord obligated the western powers to extend unlimited
military aid to Romania. particularly with their fleets.
provided they could pass the Dardanelles into the Black
Sea.5

Under the circumstances everything depended on Tur-
key. The Montreaux Convention of 1936. which regulated the
international status of the Dardanelles-—particular1y. accord-
ing to Article 19 of this Convention. which. incidentally had
been inserted on the insistence of the Soviet Union--Obligated
Turkey to permit passage through the Dardanelles Of the fleets
of those powers which were to assist Romania against aggres-
sion. Therefore. the Convention required Turkey to permit
the passage of Allied vessels through the straits. It was

only natural that Russia should look with disfavor on the

appearance of an Allied fleet in the Black Sea. Thereupon.

 

5Ibid.

311

the Kremlin began to press Turkey to close the Dardanelles
to ships that did not belong to Black Sea powers notwith-
standing the terms of the Montreaux Convention. The Turks
abjured Soviet pleadings and Russo-Turkish relations con-
tinued on a cool footing.

In mid-1940 after the fall of France and renewed
German interest in the Balkans. a Russian-Turkish rapproche-
pgpp seemed possible. However. the Germans found in the ar—
chives seized at the French Foreign Office a report from the
French Ambassador in Ankara. Published as a part of the
sixth German White Book in July. 1940. the reports revealed
anti-Soviet plans which had been discussed in the Cabinet
of the Turkish Foreign Minister Saracoglu.6 The Official
documents. referring to the Allied plans for an attack on
the Russian oil fields. provoked a storm in the Soviet press.
While concentrating its attacks on the Western powers. Pravda
also accused Turkey and Persia of "allowing themselves to

be harnessed to the chariot of foreign imperialism."7 To

 

6Franz von Papen. Memoirs. translated by Brian
Connell (New York: E. P. Dutton & CO.. Inc.. 1953). pp.
463-64. See also Kirk. Survey of International Affairs.

1939-1946. pp. 447-48; Dallin. Soviet Russia's Foreign
Policy. pp. 306-14.

7Pravda. July 5. 1940. as quoted in Kirk. Survey
of International Affairs. 1939-1946. pp. 447-48.

312

widen Russo-Turkish breach still further. Berlin embarked on
an energetic prOpaganda campaign in Turkey. Franz von Papen.
German Ambassador to Turkey. hinted to the Turks that Brit-
ish Secretary of Foreign Affairs. Anthony Eden. had promised
Russia the Dardanelles. The German Foreign Office also in-
formed Ankara Of Molotov's alleged demand for naval and mili-
tary bases on the Dardanelles and Bosporus.8

Turkish foreign policy by April 1. 1941. made a com-
plete about-face. Both Russian and British influence dimin-
ished in Ankara. On the heels of the isSuance of the sixth
gggman White Book. Turkey signed a trade agreement with the
Nazis. Even so. Hitler failed in his main objective which
was to entice Turkey into the Axis military bloc and thus
enable German troops and aviation to strike at Russia from
the south.9 In a German-TUrkish Non-Aggression Pact. Signed
just five days before Hitler marched his troops on the Soviet
Union. Turkey refused to tear up her treaty with England. and
in the course of negotiations it was categorically stated that

all existing agreements remained in force. Aware of Hitler's

 

8Dallin. Soviet Russia's Foreign Policy. pp. 306-14.

9Ibid.

313

future aims. Ankara was cognizant of the anti—Soviet impli-
cations of the new pact. Moscow interpreted the treaty as
a stab in the back by Turkey.

The German attack on Russia meant a lessening of
pressure on Turkey. When that attack began. Turkey at once
proclaimed her neutrality. and followed this with a reaffir-
mation Of her neutrality pact with Germany. Britain and
Russia in August. 1941. guaranteed aid to Turkey in the
event of an Axis attack. This was followed in October by
a German-Turkish Economic Pact. Turkey's neutrality became
valuable to both sides. or at least each side had determined
that Turkey would likely not be of immediate aid to it as
a belligerent. The British. under the standing Anglo-
Turkish Alliance. gave increasing aid to the Turks: planes.
special training and equipment. funds. and were also in the
position to grant or deny vital imports to Turkey. The en-
tire situation in which the Allies strove to strengthen
Turkey and enable her to maintain her position of armed
neutrality (plus sympathy toward and aid for the anti-Axis
countries) was formalized on December 3--just before Pearl

Harbor--when President Roosevelt declared the defense of

314

Turkey vital to the security of the United States and there-
by extended lend-lease to cover Turkey's needs.10

As the radius of military Operations widened. Turkey
came to be almost at the mid-point of the everspreading con-
flict. Ankara and Istanbul became important political cen-
ters. at times the most important of European diplomacy.
They seethed with political intrigues. with information and.
very Often. misinformation. The warring powers attributed
great importance to their diplomatic missions in Turkey.
Germany. constantly agitating Russo-Turco relations. sent there
her star diplomat Franz von Papen. who. before going to
Turkey. had been famous for his undercover work in the
United States in 1914 and 1915. and for his role in Hitler's
rise to power in 1933. Von Papen on January 5. 1942. stated
that President Ismet InOnfi had recently assured him that
Turkey was interested to the highest degree in the "destruc-
tion of the Russian colossus" and that Turkey's present neu-

trality was in the Axis interest. as otherwise the British

navy would be able to support the Russians in the Black

 

10Lewis V. Thomas and Richard N. Frye. The United
§tates and Turkey and Iran (Cambridge. Mass.: Harvard Uni-
versity Press. 1952). pp. 93-94.

315

Sea.11 When Steinhardt arrived in Ankara on March 3. 1942.

von Papen was at the height of his influence and the Turks.
allies of Germany in the first WOrld War. were making every
effort to remain neutral.

While the Turkish Government was thus delicately
walking the tight-rOpe Of not becoming involved with either
of the two warring blocs. on February 24 a man was killed
by the explosion of a bomb he was carrying in an Ankara
street while von Papen and his wife were walking only
eighteen yards away. The Department of State notified
Steinhardt that Berlin contacts claimed that the attempt
on von Papen's life was organized by Gestapo chief Heinrich
Himmler with Hitler's approval.12 Nazi leadership. accord-
ing to the information. tried to make it appear that the
Russians actually organized the attempt on von Papen's life
hOping thereby to lighten the task Of inducing Turkey to
renounce completely Anglo—American-Russian friendship and
permit passage of German trOOps through Turkey. Turkish

authorities on March 5 announced that the dead man was Omar

he

11Kirk. Survey of Internapional Affairs. p. 450.

12Sumner Welles to Steinhardt. March 14. 1942.
Department of State Archives. 740.0011 European War/20247.

316

Takat. a (Muslim) Macedonian Communist; his accomplices.
also Macedonian Communists. had been arrested. On the
night Of March 5 and 6 the police raided Soviet non—diplo-
matic offices in Ankara and called on the Soviet Consul-
General at Istanbul to give up a suspect who was in his
consulate. On his refusal. a police cordon was thrown
around the Consulate with the threat that they would force
an entry if the man was not surrendered within forty-eight
hours; he was given up within the time limit. On April 1
the four accused. two of whom were Soviet citizens connected
with the Soviet trade mission in Istanbul. were placed on
trial. The two Turks stated that they had acted as Commun-
ist couriers and had received lessons in revolver firing
from the two Russians for the purpose of assassinating an
important German and so provoking war between Germany and
Turkey.13

Before the trial Opened the Soviet Embassy exerted
strong pressure for the release of the two Russians. and
made it clear that their Government would regard the trial

as an unfriendly act. The Turkish Government refused to

back down and the Soviets recalled their Ambassador for

V—r

l3Kirk. Survey of International Affairs. pp. 453-54.

317

consultation. Steinhardt pleaded with both the Soviet Ambas-
sador and Turkish Foreign Minister Saracoglu for moderation
and the undesirability of permitting the trial to impair re-
lations between the Soviet Union and Turkey.14 Saracoglu
informed Steinhardt that the Turkish Government had warned
Istanbul editors "to be on their guard and to maintain a
scrupulously correct attitude toward the Soviet Union advis-
ing that under no circumstances should comments be made
which could even be construed as reflecting unfavorably on
the Soviet Union."15 The Foreign Minister criticized the
unfavorable atmosphere surrounding the trial Of the Russian
defendants and the favoritism Shown Turkish defendants which
had developed in the court room. pointing out that the con—
dition held "disagreeable possibilities." He concluded with
the statement that he was fearful that the proceedings might
affect vital interests of Turkey.

Steinhardt disagreed with the decision of the Turk—
ish Court. It was his Opinion that the State had not only

failed to establish guilt Of the Soviet citizens beyond a

 

l4Steinhardt to Hull. April 17. 1942. Department of
State Archives. 867.00/3139 and 867.00/3140.

15Steinhardt to Hull. April 21. 1942. Department of
State Archives. 867.00/3144.

318

reasonable doubt but had not even made a prima facie case
against them.16 He noted that the prosecution's entire
case rested on the testimony of the co-defendants and "sev-
eral none too reliable witnesses." Though the Turkish Offi-
cials permited the case to run its course. they attempted
to assuage Soviet feelings when on July 1 Cevat Acikalin.
one of Turkey's most distinguished diplomats. was sent to
Moscow as Ambassador. The two Russians were sentenced to
twenty years' imprisonment; on a retrial in December. 1942.
the terms were reduced to sixteen years. eight months.
(On August 9. 1944. a week after the Turks broke Off rela-
tions with Germany. the two Russians were released.)
Meantime. Steinhardt confronted problems surround-
ing Lend-Lease aid to Turkey. While the Ambassador was
still in Washington. the question arose as to the desira-
bility of continuing shipments of military supplies to that
country. The Administration did not wish to send the equip-
ment if there was a possibility that the Turks would join

the Axis. Although the Division of Near Eastern Affairs

claimed "no basis for a categorical opinion" regarding

 

16Steinhardt to Hull. May 4. 1942. Department Of
State Archives. 867.00/3151.

319

what Turkey would do. it thought late develOpments indicated
a willingness on the part of the Turks to defy Axis attack.l7
Thereupon. it was concluded that Lend-Lease aid to Turkey be
continued. Steinhardt thought that both our Lend-Lease
effort and defense program should be well advertised in Tur-
key. He solicited the cooperation Of American broadcasting
to combat German propaganda claims that there was little
likelihood that the program would continue to operate.18
Steinhardt found general dissatisfaction with the
Lend-Lease prOgram in Turkey. Prior to our entry into the
war. Turkey received material and supplies from the United
States under what was known as the re-transfer basis. The
Turks made known their desires or needs to the British. who
then made the necessary requisitions under Lend-Lease and
then re-transferred the goods to Turkey. The British re—
ceived no direct payment from the Turks for such materials;
such shipments were applied against the obligations of the

British Government under the terms of the British-Turkish

alliance.

 

v._—

17Foreign Relations: #1942. IV. p. 677.

18Steinhardt to John F. Royal. February 7. 1942.
Steinhardt MSS.

320

After the United States entry into the war Lend-
Lease aid to Turkey became more confused. In some instances
the Turkish Ambassador in London placed orders with Britain.
In others the Turkish Ambassador in Washington placed orders
in the United States. There were cases in which British
firms in Turkey placed orders in London on behalf of the
Turkish Government. and others again where Turkish Govern-
ment departments placed orders with British or American
agents in Turkey. TO alleviate the confusion and duplica-
tion a Coordinating Committee. supplemented by the addition
of United States representatives (including Ambassador
Steinhardt). was formed in Ankara. Henceforth. all Turkish
Government requirements. civilian and military. were initi-
ated by the Coordinating Committee and passed on to London.
Shipment of material was continued on the re-transfer basis.19
In spite of the efforts of the Coordinating Committee.
Turkish displeasure with Lend-Lease aid continued unabated.

Government officials complained that Britain diverted material

—.

, 19Steinhardt to Hull. May 18. 1942. Department Of
State Archives. 811.20 Defense (M)/6788. See also Foreign
Relations: 194;. IV. pp. 677; 681-86.

321

intended for Turkey to its own use. President InOnfi in-
formed Steinhardt that Turkey had not as yet been attacked
by Germany because the Turkish Government had made it clear
to the German Government that it would resist attack. The
President did not know how long this position would be
effective unless Britain and the United States furnished
at least a limited amount of war material with which to im-
plement the Turkish intention to resist aggression. Stein-
hardt recommended "the actual physical arrival in Turkey
of even a few hundred tons of war material in the immediate
future." It would have. he said. "an effect on the morale
of the Turkish Government out of all proportion to the ton-
nage involved and that conversely a continuance of the de-
lays and diversions of the past few months may have a de-
cidedly adverse effect on the willingness Of the Turkish
Government to resist a German attack."20

Steinhardt was caught in the middle of the British-
Turkish squabble over Lend-Lease. The British Ambassador-
in Washington. Viscount Halifax. complained to Under Secre-

tary Welles that his "supply people" had informed him that

Steinhardt had reported to the United States Government

 

20Foreign Relations: 1942. IV. pp. 683-84.

322

that Lend-Lease goods destined for Turkey had been taken by
British authorities for their own use and had been charged
against the Turkish loan.21 Halifax stated that this infor-
mation was untrue. Welles replied that he was surprised by
the information that Halifax had given since he (Welles)
understood that Ambassador Steinhardt "maintained close and
friendly OOOperative relations with the British Ambassador
[Sir Hughe Knatchbull-Hugessen] in Turkey." Welles informed
the British Ambassador that in his judgment "Steinhardt had
already. in the short time he had been in Turkey. proven
himself to be an exceptionally helpful and capable represen-
tative of the United States." He went on to say that reports
of the New Deal diplomat had been of the greatest value to
the Department and his relations and close friendship with
the Turkish Foreign Minister made him a particularly valuable
contact at this time. Welles Stated that he felt that stein-
hardt was entirely right in reporting to his own Government
information of any character. which in his own judgment. he
felt it should possess. and that he (Welles) "would not feel

disposed to give Mr. Steinhardt instructions which would in

wa

1Memorandum of conversation between British Ambas—
sador Viscount Halifax and Under Secretary Sumner Welles.
June 30. 1942. Department of State Archives. 867.24/338.

323

any sense limit his entire freedom of action with regard to
his reporting to this Government on what he saw fit.“
Because the Turks did not understand the terms of
Lend-Lease. Steinhardt advised a master Lend-Lease Agree-
ment be negotiated with Turkey.22 Welles advised the Am-
bassador that it was important that no erroneous impression
be given the Turkish authorities as to the Obligations and
responsibilities assumed by a country receiving Lend-Lease
assistance. "There is." the Under Secretary stated. "a dis-
tinct obligation on the part of the recipient to pay in
money or repay in kind or property or any benefit that the
President of the United States may deem satisfactory. There
is a further responsibility to the handling of the goods
received. This Government will also expect a commitment in
favor Of liberal trade and commercial policies after the
war."23 Steinhardt. in turn. assured the Under Secretary
that the Turkish authorities did not regard Lend-Lease sup-
plies as gifts; that on the contrary. on learning of greatly
increased shipments of Lend-Lease material. Turkish offi-

cials were apprehensive lest immediate payment in cash

 

22Foreign Relations: 1942. IV. p. 690.

231bid.0 P. 691.

324

might be sought.24 He suggested that the following stipula-
tions be included in any master Lend-Lease agreement negoti-
ated with Turkey: that because of re-transfer through
Britain. it be clearly specified in the agreement that the
materials previously received by Turkey was actually Ameri-
can Lend-Lease material delivered through the British as a
matter of convenience; require Turkey to deliver to the
United States specified quantities of the products (". . . the
most important of these articles is chrome; other articles
in which we are interested are copper. Opium. and antimony.")
which America considered essential: urge Turkey to pay cash
in dollars for an amount of American deliveries which would
correspond approximately to the value of the Turkish prod-
ucts which the United States bought in its preclusive pur-
chasing program in Turkey; and. compel Turkey to make pay-
ment out of frozen American funds in Turkey.

Contending forces in WOrld War II fought in Turkey
largely on an economic battleground. The Axis hoped to use
neutralist Turkey as a source for vital raw materials. On
the other hand. the Allies. not nearly as dependent on Tur-

kish material. resorted to preclusive and preemptive purchasing

 

2411318.. p. 692.

325

in an effort to prevent such raw material from reaching Ger-
many. Allied negotiators concentrated chiefly on such Turk-
ish commodities as: hemp. vegetable Oils. woolen rags.
flax. chromium. copper. antimony. and Opium. Of these ma-
terials. chrome received top consideration. Chrome was not
only important for Allied military use but beyond that. if
kept from German hands. it provided a definite opportunity
of hurting Axis military capacity. Allied Officials demanded
the complete and minute watch over the course of Turkish
chrome. both production and shipment. as well as negotia-
tions.

Berlin knew that Turkish chrome was essential to
German armament business. Germany had always been the prin-
cipal purchaser of Turkish chrome. but Britain had made it
a condition Of her alliance with Turkey in October. 1939.
that further sales be prohibited to the Axis. This condi-
tion applied only until the end of 1941. However. the
Western Powers could prevent Turkish chrome from reaching
Germany throughout 1942 by exercising their Option to con-
tinue exclusive purchases throughout that year. Apparently.
Germany had stockpiled sufficient chrome for short-term

needs. But as the Wehrmacht began to falter. conditions

326

forced Nazi leaders to look beyond immediate requirements.
As early as 1941. Germany (cut-Off from Turkish chrome
through 1942) negotiated for 1943 and 1944 chrome deliver-
ies. By the terms of the Clodius Agreement (so named be-
cause Dr. Carl Clodius was the German negotiator) of Octo-
ber. 1941. Turkey obligated herself to sell 90.000 tons Of
chromium to Germany in 1943 and again in 1944. Evidently.
Germany's stockpile of chrome was reduced sooner than Nazi
planners had anticipated. On June 2. 1942. Germany re-
quested and Turkey agreed to ship 45.000 tons (one-half of
the total amount to be shipped to Germany in 1943) of this
vital ore to Germany between January 15 and March 31. 1943.
As this was Germany's only available source. it was urgently
necessary for the Nazis to avail themselves of the Turkish
supply. The tussle with the Allies in Turkey over chrome
caused von Papen "endless troubles."25

Allied leaders become increasingly disturbed with
Turkey's willingness to consort with the Germans. Turkey's
record. they said. was "difficult to reconcile with the

attitude to be expected in a country which is allied to

Great Britain and the recipient of Lend-Lease" from the

 

5Von Papen. Memoirs. p. 475.

327

United States.26 However. from Turkey's point of view. a
refusal to ship chrome to Germany would be clearly an un-
neutral act. Fearful Of Nazi invasion and having thus far
received minimal Lend-Lease materials. Turkish authorities
claimed that the country could not defend itself. Further-
more. inasmuch as the Allies found it impossible to supply
all of Turkey's domestic needs. Government Officials asserted
Turkey's continued dependency on Axis trade.

Throughout 1942 Allied strategists considered var-
ious schemes for keeping chrome from the Germans. Hull
suggested that the destruction, by bombing or sabotage. of
the railway bridges across the Maritza River would "stOp
about eighty-five percent of chrome ore deliveries to Ger-
many."27 In the event of Axis invasion of Turkey. Stein-
hardt was ordered to formulate measures. including destruc-
tion. of all materials owned by the United States Government
which could not be moved out of the country. Special refer-

ence was made to chrome; regardless of the expense involved.

 

26Foreign Relations: 1942. IV. pp. 763-64.

27Memorandum for the President from Hull. March 22.
1942. Department of State Archives. 811.20 Defense (M) Tur-
key/6692.

328

either dumped into deep water or otherwise destroyed. it
28
was not to fall to the Germans.

However. the major problem concerned transportation.
Inadequate Turkish ports and railways hampered the movement
of chrome. There was considerable fear late in 1942 that
the Germans. who had previously contracted for the deliver-

ance of Turkish chrome for 1943 under the terms Of the Clod-

r.‘ '1. 'U“ ~
O
‘ | r

ius Agreement. would lay claim to ore already mined. If
the Allies. because of the lack of transportation. could not
move the chrome from Turkey before the end Of the year (1942).
Steinhardt Offered the following alternatives: reduce out-
put for the remainder of the year. render unusable or unavail-
able the ore unable to be moved. move ore out on rafts and
dump in deep water. or persuade the Turks to furnish Allies
high grade ore. the Germans low grade ore.29

When Steinhardt arrived in Turkey the Clodius Agree-

ment was a fait accompli. Therefore. it became necessary

after January 15. 1943. to attack the Agreement itself.

 

28Hull to Steinhardt. July 2. 1942. Department of
State Archives. 811.20 Defense (M) Turkey/15a.

29Foreign Relations: 194;. IV. p. 742.

329

Under the terms of the Clodius Agreement. he had no chance
of preventing all shipment of chrome to Germany. Nonethe-
less. he did manage to purchase 2.000 tons of blister OOpper
even though under the Clodius Agreement virtually all Of its
production in Turkey was consigned to Germany.30 He had simi-
lar success in his dealings with antimony,31 Oil seeds, and woolen
rags.33 He thought the Germans had been "seriously incon—
venienced" by their inability to obtain woolen rags in Tur-
key. He was informed that Germany had exhausted their
stocks of woolen rags and had counted on utilizing Turkish
rags for the manufacture of uniforms and blankets for the
winter's campaign in Russia. Both Hungary and Romania, he
said. were Offering lucrative compensation to the Turks for
woolen rags.

Economic competition between the Allies and Axis had.

in the long run. dire effect on the Turkish economy. With

 

._7.

3OSteinhardt to Hull. May 18. 1942. Department of
State Archives. 811.20 Defense (M) Turkey/6788.

31Steinhardt to Hull. May 19. 1942. Department Of
State Archives. 811.20 Defense (M)/6790.

32Forpji‘ngelations: 1942. IV. p. 744.

33Steinhardt to Hull. December 17. 1942. Department
of State Archives. 811.20 Defense (M) Turkey/198.

rev

330

both sides active in preemptive buying. Turkey turned it to
her own advantage without paying much heed to its possible
long-term effect upon prices. or the inflation which began
to appear. Essential imports ceased. and for want Of them
essential services began to dwindle. Serious shortages
appeared; replacements for overstrained machines were al-
most unobtainable from abroad and could not be produced at
home. Turks were unable to purchase spark plugs. tires. or
light bulbs. Shortages extended to the food supply which
was worsened by 1941's poor crop. Food rationing that was
introduced was consistently avoided and circumvented; the
black market became an accepted feature of normal life.

In consequence. the gap between rich and not-rich was fur-
ther widened. while many previously quite prosperous people
were reduced to misery. especially in the cities. At the
same time. the class of newly-rich war-profiteers stirred
up general resentment. Each week the Government imposed
new restrictions and controls. However. each attempt was
promptly perverted so that in the end it frequently worked

against the interests of those it was designed to protect.

 

34Thomas and Frye. The United States and Turkey and

Iran. pp. 93—95.

331

It was in this atmosphere that President InOnfi's
administration attempted a Varlik or capital levy tax. In
general design the tax was entirely defensible. quite com-
parable to measures resorted to in other war-distracted
countries. The ordinary tax collection machinery. always
poor at best and now widely evaded. was entirely unable to
reach the war profiteers. Hence. extraordinary machinery
was set up. In each community or administrative subidivi-
sion of a community. a local committee was chosen. This
committee considered the available tax lists and other per-
tinent information. and on that basis levied an assessment
upon each man's wealth. the tax to be paid in cash within
a relatively short period and under heavy penalty.

While the economy had been going from bad to worse
under the war's impact. Older Moslem Turkish concepts of
full and second-class citizenship. inherited from the Otto-
man Empire and only nominally superseded by the Republican
principle of laicism. began to reemerge. In the Situation.
"the minorities"--the Turkish-citizen Greek. Armenian. and
Jew—-became the scapegoats and held responsible for all Of
Turkey's wartime economic ills. Although not stipulated

in the law. only Moslem Turks sat on the tax boards. With

332

the final posting of the Varlik Vergisi in Istanbul. pande-
monium broke out. The law was imposed by old and supposed-
1y discarded methods; many persons made a partial payment

and then.sat tight to await develOpments.

 

The capital levy tax caused both Steinhardt and the ,
pa
Department of State to be uneasy. Although Washington con-
sidered the tax a matter of internal concern. it thought ipa

"considerable damage might be done American-Turkish rela-
tions."35 The Greek ArchbishOp in America informed Hull
that many Greek-Americans were disturbed over the difficul-
ties the Patriarchate faced as a result Of the tax. In like
manner. Jewish leaders in America. who had been pressing

for a more lenient attitude toward Jewish refugees. evi-
denced latent anti—Turkish feelings.

Foreign businesses were also ill-treated under the
tax. More concerned with American businesses than with
Turkish minorities. Steinhardt thought the tax would "prob-
ably result in the ruin of most of the businesses represent-
ing American manufactures"; thus he suggested that American

shippers "be warned Of the advisability Of communicating

 

35Hull to Steinhardt. January 11. 1943. Department

of State Archives. 867.512/210.

333

again with their Turkish customers before actually affect-
ing shipment."36 He presented three notes of protest to

the Turkish Government and handled the matter particularly
well. "Without requiring instructions from the Department."
he promptly represented "the American interest in an able
and forthright manner."37 Not only did Ambassador Stein-
hardt make firm representations. but when the Turkish For-
eign Office came back with a stereotyped reply. the Ambas-
sador went back at the Turks with a forceful rejoinder. re-
iterating his arguments concerning discriminations against
American business. In the end. the envoy prevented discrim-
inatory taxes from being levied against American commercial
interests.

Meantime Steinhardt faced war-time problems that
were not of Turkish making. When the forty-nine year Old
non-careerist had arrived in Ankara. he complained that he
had "expected to find an Embassy" but instead "found a
second-class Consulate consisting of a much smaller villa

than the plans in the department indicated . . . ."38 He

 

36Foreign Reletions: 1942. IV. p. 1079.

37lbid.. p. 1084.

38Steinhardt to Monnett B. Davis. May 8. 1942.
Steinhardt MSS.

334

complained that the Embassy was understaffed. Within a
matter of months. however. the situation underwent a drastic
change. After the United States became actively involved
in the war. American personnel streamed into Turkey. The
following American agencies had representatives in Turkey:
Lend-Lease. Office of Strategic Services. Office of‘War
Information. War Shipping Administration. and the United
States Commercial Corporation.39

As a war-time Ambassador. Steinhardt had to coordin-
ate the various activities. With representatives Of United
States Government agencies in Turkey. Steinhardt's effective-
ness as chief of mission could have been materially reduced
if he had not exercised full authority. A case in point
was that Of the Office of War Information. Steinhardt com-
piled a list of grievances against OWI and its senior repre-
sentative. Robert B. Parker: use of Embassy seal without
Embassy's knowledge; persistence in flying American flagcnmm
its Istanbul office after the Turkish Government had pro-

tested tO the Embassy; ordering personal supplies. such as

liquor and cigarettes. in the Ambassador's name without

 

39Steinhardt to Colvin W. Brown. June 17. 1943.
Steinhardt MSS.

335

Steinhardt's knowledge or consent; importing radio trans-
mitting apparatus by subterfuge and delivering same to
Turkish press under "Lend-Lease" without knowledge of Lend-
Lease representative in Ankara; forcibly breaking into Em-
bassy's confidential mail room; and. most importantly. con-
sistent refusal to seek or be guided by the Embassy's advice
concerning OWI activities in Turkey.40

Steinhardt and OWI representatives feuded Openly
for several months. It was reported that Parker. who had
returned to Washington. was spreading rumors that Steinhardt
would be recalled.41 Steinhardt. for his part. did not want
Parker back in Turkey.42 Although the Steinhardt-Parker
fracas generated ill-feelings on both sides. it was a minor
skirmish. The real tug—of—war over the control of propa-
ganda and psychological war activities was between the De-

partment of State and the Office Of War Information. The

State Department strongly opposed the complete militarization

 

4OPaul Alling to Sumner Welles. February 5. 1943.
Steinhardt MSS.

41George V. Allen to Steinhardt. January 16. 1943.
Steinhardt MSS.

42Steinhardt tO George V. Allen. March 12. 1943.
Steinhardt MSS.

336

of all United States information services and refused to ac-
cede to OWI demands.43 Steinhardt believed that OWI had in-
doctrinated their men to undermine the State Department.
that interference was world wide and relations in Turkey no
worse than elsewhere.44 He thought that he would be "an in-
grate" and "derelict" if he failed to support the members
Of his staff in their refusal "to be humiliated by a small
group of individuals who have deliberately embarked on a
course of undermining the prestige of the State Department
as well as authority in foreign affairs.” In his words.
he had an "intense loyalty to the State Department."
Similarly. President Roosevelt in a meeting with
Prime Minister Churchill at Casablanca. January 14-24. 1943.
used imprecise language that might well have undermined the
effectiveness of the American Embassy in Turkey. In discuss-
ing the Turkish question. the President gave the British the
responsibility of "playing the cards" in Turkey in the same
way that all matters connected with China were to be handled

by the United States.45 Churchill interpreted "playing the

 

43George V. Allen to Steinhardt. January 16. 1943.
Steinhardt MSS.

44Steinhardt to Paul H. Alling. May 22. 1943. Stein-
hardt MSS.

45Foreign Relations: 1943. IV. p. 1098.

337

cards" as meaning that Britain should take the lead in muni-
tions as well as diplomacy.46 Consequently. some British
officials were under the impression that the Casablanca un-
derstandings limited the independence of action by the
United States in the political and economic as well as the
military spheres in Turkey. Inasmuch as the phrase was
capable of wide interpretation. the Department desired a
clarification. Peculiarly. Roosevelt had failed to send
the State Department a copy Of the agreement: it was there-
fore necessary for Hull to Obtain a COpy of the Minutes Of
the Casablanca meeting from Admiral William D. Leahy. Roose-
velt's adviser.47

The Department of State refused to accept the Brit—
ish interpretation of "playing the cards" in Turkey. While
the Casablanca decision was not questioned. the Department
thought it related purely to the prosecution of the war.
and did not imply any agreement that Turkey was to be con-
sidered within a predominantly British sphere nor a fore-

runner to a broader "handing over Turkey to the British."48

 

46Winston Churchill. The Second WOrld War: TheHinqe
of Fate. VOl. IV (London: Cassell & CO.. Ltd.. 1951). p. 626.

47Hull. Memoirs of Cordell. II. pp. 1366-67.

48Foreign Relations: 1943. IV. p. 1099.

338

If the United States Government placed itself in the posi-
tion of renouncing all right of direct diplomatic relations
with the Turkish Government. there would have been. of
course. no need Of maintaining an American Embassy at Ankara.
After considerable haggling. it was decided that only in

the area of militarily equipping and supplying Turkey was

the British to hold the trump.

Despite the confusion caused by Roosevelt's inOp-
portune choice of words. Steinhardt thought the Turks re-
garded the Casablanca Conference as the turning point in
the war.49 Turkish leaders. he observed. showed no reluc—
tance to appear in public with Prime Minister Churchill who
had flown to Turkey shortly after his meeting with Roose—
velt. The Ambassador considered the Turkish acceptance of
Churchill as "an open Slap at Germany.“

For two days. January 30-31. Churchill and other
British officials huddled in conference with Turkish author-
ities at Adana. During the military conversations two main
points were considered: the provision of equipment for
Turkish forces prior and subsequent to any political move

by Turkey; and. the preparation of plans for the reinforcement

 

,—

49Steinhardt to Harry Hopkins. February 15. 1943.
Steinhardt MSS.

339

of the Turkish forces by British units in the event of their
coming into the war.50 The British assured the Turks that
they would ask nothing of Turkey that was not in her (Tur-
key's) interest and would never ask Turkey to enter the war
if such action would lead to disaster. They reminded the
Turks that the German need for Oil might cause the Axis in
desperation to attack Turkey; that Turkey must be strong
and armaments increased. Even if the Germans did not attack.
the British cajoled. Turkish interests might dictate she
intervene to prevent anarchy in the Balkans. There was
little doubt but that Britain wanted the Turks as active
Allied participants. Dropping yet another lure. the Brit-
ish hinted how important it would be for Turkey to be on
the winning side. After the Conference. a confident Chur-
chill wrote Stalin:

I have not asked for any precise political en-

gagement or promise about entering the war on

our side. but it is my opinion that they will

do so before the year is out. and that probably

earlier. by a strained interpretation of neu-

trality similar to that Of the United States

before she came in. they may allow us to use

their airfields for refuelling for British and
American bombing attacks on the Ploesti oil-wells.

 

50Churchill. Hinge Of Fate. pp. 635-640. See also
Sir Hughe.Knatchbull-Huggessen. Diplomat in Peace and War
(London: John Murray. 1949). pp. 188-89.

340

which are of vital importance to Germany. es-
peciallylnow that your armies have recovered
Maikop.

Premier Stalin was not very hopeful.

However. the Turks were as much concerned about their
futurelelations with Russia as they were about participa-
tion in the war. It is probable that Turkish leaders
viewed with alarm the complete annihilation of Germany.

For as a small nation. they undoubtedly looked upon a bal-
ance of power situation in Eastern EurOpe as serving their
best interests. Steinhardt thought that Turkey's "only
salvation from Russian aggression" lay in such protection
as she would be able to Obtain from the United States and
Britain.52 He thought there was "no longer the remotest
possibility of their going over to the Axis."53 Turkish
concern. he stated. was that the Russians might try to gain
control of the Balkans and dominate the Straits. In his

opinion the Turks would be willing to enter the war at the

right time provided they were certain that they would run

 

51Ihid.

52Steinhardt to Hull. February 3. 1943. Department
of State Archives. 740.0011 European War 1939/27663-1/2.

53Steinhardt to Franklin D. Roosevelt. March 5.
1943. Roosevelt MSS.

341

no serious risks. Turkish conception of no serious risks.
he asserted. would be an Allied landing in force in the
Balkans or sufficient Anglo-American forces. principally
tanks, anti-tank guns. and aircraft. close enough to the
Turkish frontier to assure their own forces adequate sup-
port. He assured the President that American prestige in
Turkey was "at the highest point in many years . . . ."
Steinhardt considered the Adana Conference a suc-
cess. George V. Allen. Chief of the Near East Division.
informed the Ambassador that American newspapers had given
him (Steinhardt) "the major credit not only for marked im-
provement in Soviet-Turkish relations. but also for arrang-
ing the Adana Conference."54 Admitting that commentators
sometimes exaggerate with regard to details. Allen suggested.
“there is of course an over-all basis of truth in what they
say. whether you actually discussed the arrangements for
the Churchill-InOnfi meeting in advance or not." Steinhardt
expressed his astonishment "at the exaggerated credit“ he
had received for arranging the Adana Conference; he admitted

no part in the arrangements whatsoever.55 He acknowledged.

 

54George V. Allen to Steinhardt. February 20. 1943.
Steinhardt MSS.

55Steinhardt to George V. Allen. March 12. 1943.
Steinhardt MSS.

342

however. his efforts to improve Soviet-TUrkish relations.
Following several months struggle without much headway. he
stated that "favorable events [Anglo-American landings in
Africa. Russian successes. and increasing difficulties for
the Axis in the Balkans] Opened up the path since which
time the going has been much easier." One is blamed fre-
quently for something for which one was not responsible.
he concluded. "so that a little credit here and there for
something with which one had no connection. gets things in
balance.”

Following the Adana Conference. the British sug-
gested a relaxation of preemptive Operations in Turkey.
They reasoned that Germany's financial embarrassment made
it unnecessary to carry on such extensive activities. Also.
in view of the fact that the Turkish Government had protested
unauthorized purchasing by the Allies. the British suggested
that its continuation might possibly upset Turkish good will.
Steinhardt disagreed on both counts. He thought it unwise
to relax British-American preemptive operations because Ger-
many lacked purchasing power.56 He argued that a relaxation

of Allied purchases "would in all probability result in

 

Ségoreiqn Relgtions: 1943. IV. p. 1117.

343

price decreases which would Obviously be of great assistance
to enemy buyers whereas by continuing in the market and main-
taining or even temporarily increasing prices would render
the German shortage of funds more acute." As for Turkish
protestations concerning unauthorized purchasing. he rea-
soned that the warning would have come from a higher level
than the Minister of Commerce if the Government had been
sincere; the protest. he said. was for the record.57 He
suggested continuance Of buying until Turkish investiga-
tions had been made. Steinhardt's arguments prevailed.
Eventually London and Washington adopted a "New Plan"

under which preemptive purchases were to be made in Tur-
key.58 The newly adopted plan granted the British and
American Ambassadors more latitude: each was supplied

funds to be spent on preemption as agreed between them-
selves. they were authorized to purchase upon agreement a
commodity in any amount and by any means they saw fit: and.

each Ambassador was permitted to employ the United Kingdom

Commercial Corporation and the United States Commercial

 

57Ibid.. p. 1120.

58Hull to Steinhardt. August 21. 1943. Department

of State Archives. 811.20 Defense (M) Turkey/841.

344

Corporation as they thought best in determining the strategy
of purchases. Preemption purchasing in Turkey was success-
ful largely because the Allies were in a stronger financial
position that the Axis. America and Britain's chief--almost
only--weapon was the ability to pay higher prices and give
better conditions of payment than the Germans.59 In view

of Axis competition it was impossible to employ normal busi-
ness methods.

On April 18. 1943. the Turks signed an economic
agreement with the Germans based essentially upon their pre-
vious pact of October. 1941. Both the Department of State
and the British Foreign Office viewed it with consternation.
As a sovereign and neutral state. the Turkish Government de-
sired and intended to carry on trade with both the Axis and
the Allies. While Turkey's leanings were toward the Allies.
Steinhardt pointed out that the Turkish authorities were
vitally concerned with their country's economy. particularly
as long as the country remained neutral.60 Turkey. he said.

was not an industrial state and was absolutely dependent

 

59Charge Robert F. Kelley to Hull. October 9. 1943.
Department of State Archives. 811.20 Defense (M) Turkey/841.

6OSteinhardt to Livingston Merchant. May 12. 1943.
Steinhardt MSS.

345

for imports of vital commodities such as newsprint. oil and
petroleum. machinery. and virtually all manufactured prod-
ucts. and at times. even cereal. The Allies. he remarked.
were either unwilling to furnish these items. or were unable
to deliver them because of inadequate transportation. If
the Turkish economy was "to survive for even sixty days"
many of these commodities. the Ambassador suggested. had to
be imported from the Axis. The Axis. Steinhardt continued.
being aware of this fact. set the terms on which it was
willing to provide these items. and the Turks had no alter-
native but to provide in exchange the commodities desired
by the Axis. It was. in his Opinion. "useless for us--as
well as unfair and even dangerous to our future ally--to
precipitate a breakdown in the country's economy by insist-
ing that the Turks refuse limited shipments to the Axis in
exchange for which they received products which we either
cannot or will not deliver." In conclusion. the New Deal
diplomat stated "that in cooperation with the British we
have been more successful in reducing and impeding deliver-
ies to the Axis than we have any right to expect by reason
of the foregoing position." It was one of the Ambassador's

more perceptive Observations.

346

Nevertheless. Allied policy makers continued to be
disturbed over the shipment of Turkish chrome to Germany.
Once again. Steinhardt did not share their concern. In
Spite of the Turco-German trade agreement. he determined
that the Turks were not filling the terms of the contract
to the letter. "If the Turks had really wanted to do so."
he asserted. "they could have completed the delivery of
45.000 tons . . . . They could have used. for example.
some of the boats which they have continued to assign to
us as it is easy for these boats to slide from Hydraapasha
to a southern Bulgarian port under escort where they cannot
be touched by the Russians.“61 On the other hand. Ambassa-
dor Steinhardt did not expect the Turks to be "so bare-
faced" as not to give the Germans any chrome. When the
Germans. he said. applied sufficient pressure "they will
suddenly get a few tons." The Germans. he estimated.
needed 150.000 tons Of chrome from Turkey in 1943; any-
thing less than 25.000 tons. he determined "a substantial
victory for us." Furthermore. he added. the Germans were

not getting the best quality and were having difficulty in

 

61Steinhardt to George V. Allen. May 10. 1943.
Steinhardt MSS.

347

extracting the quantity and quality of chrome hoped for from
the ore they were receiving; there were even cases of substi-
tution of a poorer quality of ore and "a ceaseless stream of
complaints from the Germans."

However. this line Of reasoning failed to quiet the
Department's solicitude over increased shipments of chrome
to Germany. The Ambassador suggested that increased chrome
deliveries resulted from the leverage Germany had recently
gained. Steinhardt pointed out that the Germans had recently
re-established control over the means of transportation in
the Balkans and were thus in a position to increase their
deliveries to Turkey. He suggested that the effectiveness
of the Allied blockade had forced Germany to depend more heav-
ily on Turkish commodities. Then too. he said. Turkey in or-
der to sustain their own national economy necessarily depended
on Axis' products. Furthermore. he stated. it would be just
as logical "to contend that the rate of movement of chrome
to Germany on April 19 (3.175 tons that day) if sustained
would yield Germany over a twelve month period 1.158.875

tons. as it would be to reason that if sustained. the rate

of chrome in April and May would yield Germany the entire

348

amount for which it qualifies."62 It appeared to Stein-
hardt that Minister of Foreign Affairs Numan Menemencioglu
had "fully redeemed his promise to place every obstacle in
the way of chrome deliveries to the Axis; "obstacle." as
defined by Webster's dictionary. he suggested. was "anything
that hinders progress."63 He regretted that the Office of
Economic Warfare did not appreciate or understand "what has
been accomplished during the past six months both in respect
of impeding deliveries of chrome to Germany or Of holding

to a minimum exports of other strategic materials to the
Axis in face of the difficulties which have confronted us

in a sovereign neutral country." Nevertheless. the New Deal
diplomat remained confident that he was winning. slowly but
surely. the battle over Turkish chrome.

The British. in turn. became dissatisfied with the
unshakeable Turkish affection for neutrality. Once again
Ambassador Steinhardt arose in defense Of the Turks. He was
convinced that negative Turk reaction to British suggestions

resulted from lack of major military operations on the

 

62Steinhardt to Hull. July 27. 1943. Department of
State Archives. 811.20 Defense (M) Turkey/708.

63Ibid.

349

Eastern front and the progressive accumulation of Axis forces
in the Balkans. sincerely believed by Turkish authorities to
be far superior in number to any Allied forces immediately
available for the defense of Turkey.64 It was his judgment
that the Turk Government would continue a policy of self-
interest; that Turkey's abandonment Of neutrality would not
be brought about solely by British pressure or persuasion.
but rather by the conviction of Turkish leaders that the
European war had "reached a stage at which Turkey's entry
would no longer entail serious risks." In addition. accord-
ing to Steinhardt. the Allied over-all European military
strategy had not been disclosed to the Turks; with no assur-
ance that powerful Allied forces would enter the eastern
Mediterranean and the Balkans. the Turks hesitated on any
departure from neutrality. Rather than an independent Bri-
tish policy toward Turkey. he thought that plans should de-
pend primarily on Allied military strategy and. in particu-
lar. the importance and role which the chiefs of staff
attached to Turkey.

The Combined Chiefs of Staff at the Quebec Conference

in August. 1943. formulated a Turkish policy. From a military

 

64Steinhardt to Hull. July 4. 1943. Department of
State Archives. 7400.0011 European War 1939/30012.

350

point of view, they decided that the time was not right
for Turkey to enter the war on the Allied side. They
determined that the Allies should continue efforts to
equip Turkey and increase her military effectiveness,
with particular reference to stopping the passage of
all German Shipping of military value throughout the
Dardanelles and the supplying of Turkish chrome to Ger-
many.

That fall Steinhardt decided to take leave from
the many pressing Turkish problems. Much to his dis-
comfiture, however, he was greeted back in the United
States with at least two hostile newspaper articles.
Drew Pearson in "Washington Merry-Go-Round" accused
the Ambassador, among other things, of attempting to
suppress a Turkish newspaper and proposing that issues
of two nationally distributed magazines be censored and
pay duty when imported into Turkey.66 According to
Pearson, the New Deal diplomat refused to let the Uni—

ted States Military and Naval Attaches, the Office of

 

65Hull, Memoirs of Cordell Hull, II, p. 1368.

6Drew Pearson, "Washington Merry-Go-Round," New
York Daily Mirror, October 2, 1943.

 

351

Strategic Services, and Office of War Information have
offices in the Embassy building in Istanbul "which stands
empty all but a few weeks of the year .. . J' Steinhardt,
the article continued, had himself photographed present-
ing Lend-Lease shipments to the Turkish Minister of For-
eign Affairs. He was also accused of presenting Lend-
Lease hair nets and nylon stockings to the wives of Tur-
kish deputies. The Ambassador denied the whole bundle
of Pearson's charges and suggested that the attack was
inspired by his old OWI foe, Robert B. Parker.67 In
connection with the article, Steinhardt thought it
proved how unreliable Pearson was, and "how right the
President was in calling him a chronic liar." Pearson.
he said, made no effort to communicate either with
himself or the Department of State to check upon the
validity of the Statements. Later, he lamented that
Pearson, after learning that not a single one of the
alleged statements were true, had "neither character

. 68
nor courage" to apologize.

 

67Steinhardt to Eugene Meyer, October 8, 1943,

Steinhardt MSS.

68Steinhardt to Theresa Rosenblatt, January 24,
1944, Steinhardt MSS.

352

It was during this same interlude that the article
(discussed in the previous chapter) by Isadore F. Stone
appeared charging the envoy with anti-refugee policies.6
the diplomat opined that there had "been some misunder-
standing in certain quarters in the United States on this
subject."70 The fact that his intervention had been of
"an informal nature" and had not been publicized either
in Turkey or the United States, he thought had given rise
"to the unfortunate mistaken belief" that he was neither
interested in the fate of the unfortunate Jewish refugees
nor that he "had not taken every action on their behalf
consistent with the proper discharge" of his functions
as the United States Ambassador to Turkey. With the
exception of the high Turkish Officials with who he had
discussed "the subject on innumerable occasions" and a
few informed representatives of various Jewish agencies,
he deduced that probably no one else was "aware of the
strenuous and persistent unofficial efforts" that he had

made "to aid not only Jewish refugees but the lot of the

 

69New York EM, October 3, 1943.

7OSteinhardt to Charles Barlas, December 22, 1943,

Steinhardt MSS.

353

minorities under the tax on fortunes." Charles Barlas, Of
the Jewish Agency for Palestine, wrote a letter to the
Department defending the New Deal diplomat. Steinhardt
thought there might be "some discreet way of bringing Mr.
Barlas's letter to the attention of 'smarty pants' Stone."71
He desired that Stone be informed that appropriate steps
had been taken to alleviate the plight of Jewish refugees
"long before he [Stone] burst into print in October and
nearly upset the applecart .. .. This was important,

he concluded, "lest a megalomaniac of his type harbor
any illusions that it was his article that caused me to
'repent' on my return to Ankara."

Meantime in the autumn of 1943 a series of con-
ferences were held to take stock of the general war posi-
tion and to decide on the course to pursue. The first
of these was held at Moscow in October. During the con-
ference, Commissar Molotov proposed that the three powers
--Britain, the United States, and the Soviet Union--"sug-

gest" to Turkey that she come into the war, but this

meant to suggest peremptorily; in other words, a command.

 

7lSteinhardt to George V. Allen, December 22, 1943,

Steinhardt MSS.

354

Secretary Hull, regarding this as purely a military matter,
cabled the President for advice. Inasmuch as the Allies
were straining their resources for the invasion of northern
France and supporting the Italian offensive, Roosevelt did
not think the time favorable to induce Turkey to declare

72
war.

During this period, British Foreign Minister Eden
had raised the question of acquiring air bases in Turkey.
The British had landed forces on the Italian island of
Leros, one of the Dodecanese group, but were endangered by
German counter-attacks. Also, Churchill wanted the Turks
to allow British submarines and merchant vessels to pass
through the Dardanelles. Eden suggested that Hull take
the question up with Molotov. The Soviet Commissar at
first objected because he felt this was "a mild move
and wanted the three powers to go all out in bringing
pressure on Turkey to come into the war as a full-scale
belligerent."73 They compromised, however, on an agree—

ment that Eden would make a request of Turkey to come for

the immediate use of air bases, while Britain and Russia

72Hull, Memoirs of Cordell Hull, II, p. 1301.

7
3lbid., p. 1312.

355

join at a later date in requesting Turkey's entry into the
war before the end Of 1943.

On the way home from the Moscow Conference, Eden
met at Cairo with Turkish Foreign Minister Menemencioglu.
The British Minister raised the question of Turkey's imme-
diately making air bases available to the Allies and enter-
ing the war. Returning to Turkey, Menemencioglu met with
forty-five party leaders whereupon they drafted a reply
to Eden's prOposals. The Turks rejected the Allied re-
quest for use of Turkish air bases on the grounds that it
would inevitably involve her in war with Germany. Like-
wise, Turkey refused to budge from her neutral position
claiming lack of military preparedness; that Britain had
not adequately supplied the Turks with military material.74
Steinhardt was impressed with the Turks' frankness. He
suggested that the Turks had decided "in principle" to
enter the war and cooperate with the Allies.75 However,

he stated that "certain conditions were precedent to its

entry, and were vital not only to Turkey but to the Allies."

 

74Steinhardt to Hull, November 19, 1943, Department

of State Archives, 740.0011 European War 1939/32004.

75Steinhardt to Hull, November 14, 1943, Department
of State Archives, 740.0011 European War 1939/31932.

356

Turkey, he said, recognized its military and economic
weaknesses and its need of Allied military support. The
Turkish Government, he concluded, was quite prepared "to
make its contributions in blood and suffering to the
Allied cause," but wished such contribution to further
the Allied cause rather than entail needless suffering
which might result from premature action, resulting in
Turkey becoming a liability rather than an asset.

The Teheran Conference, November 28-December 1,
1943, the first three-power conference on the highest
level, was attended by Roosevelt, Churchill, and Stalin.
Among other things, such as a plan for an international
organization to keep the peace, the three heads of state
discussed the Turkish situation. Stalin favored bring-
ing Turkey into the war "by the scruff of the neck if
necessary"; but he had little confidence in her coming
into the war voluntarily and Opposed any diversion of
Anglo-American resources from the intended offensive in
Western Europe.76 To Churchill's chagrin, Roosevelt sup-

ported Stalin's arguments, for the United States Chiefs

 

76Kirk, Survey of International Relations, pp. 459-60.

357

of Staff disliked the prospect of an entanglement in the
Balkans. Also. the President, zealous in winning the
confidence of the Soviet rulers, did not wish to arouse
Russian suspicions of competitive moves in the Balkans.
The Russians, for their part, took little further inter-
est in Turkey's entering the war. Even so, the three
statesmen agreed that the Governments of each should
request Turkey to enter the war and confirmed February
15, 1944, as the date of entry.

At a second Cairo Conference, December 4-6, 1943,
Roosevelt and Churchill met with Turkish President InOnu.
The Turk leader had agreed to go to Cairo only on the
condition that he was "being invited to a free discussion
as between equals, and not merely to be informed of deci-
sions concerning Turkey already arrived at in Teheran."75
Roosevelt and Churchill found the Turkish Government
ready to enter the war but subject to two conditions.
They asked for a joint military plan of action and they

desired a peep into the more distant political future.

The Turks were much influenced by two suspicions: the

W

77Steinhardt to Hull, December 2, 1943, Department
of State Archives, 740.0011 European War 1939/32358.

358

first, that they were being pressed to enter the war as
pawns on the general chessboard and in order to realize
the decisions reached at Teheran, in the general inter-
est no doubt, but with regard for the possible conse-
quences to themselves; the second, that their acquies-
cence would only make the occasion for the Allies to
use Turkish air and naval bases without assigning any
special role to the Turkish forces.7

Meanwhile, the Germans through "Operation
Cicero" was fully informed of Allied decisions made at
Moscow, Teheran, and Cairo. Cicero, the code name used
by the German spy, served as valet to the British Am—
bassador in Turkey, Sir Hughe Knatchhbull-Hugessen.
Through Cicero's efforts, von Papen and the Nazi hier-
archy learned of the Moscow decision to compel Turkey
to declare war. He kept the Germans informed of the
conversations between the Turkish President, Churchill,
and Roosevelt in Cairo, and of the manner in which the
Turkish Government managed to meet the increasing pres-

sure placed upon them to enter into the war. Although

 

78
p. 198.

Knatchbull-Hugessen, Diplomat in Peace and War,

359

von Papen called the flow of Cicero's information "price-
less,"79 L. C. Moyzisch, who has the standard work on
Cicero, states that the Germans made little use of the
information obtained.80 Nevertheless, it is noteworthy
that Cicero operated in the British rather than the Amer-
ican Embassy. Steinhardt kept such complete mastery and
control over the smallest ambassadorial details, that
the Axis would have found his office nearly impenetrable.
Nevertheless, the British continued their tactics
to pressure the Turks into military action. The British
Government informed Secretary Hull that it had learned
that the Turkish Government considered the United States
less insistent on Turkey's entering the war than were
the British. Thereupon, the British requested the State
Department to authorize Ambassador Steinhardt to "back
up any representation" that Knatchbull-Hugessen made "in

. . . . 81 . .
order to dispel the Turkish impreSSlon." Upon rece1v1ng

 

9 .
Von Papen, Mem01rs, p. 509.

80L. C. Moyzisch, Operation Cicero, translated by
Constantine Fitzgibbon and Heinrich Fraenkel (New York:
Coward-McCann, Inc., 1950), pp. 8-15.

 

81Hull, Memoirs of Cordell Hull, II, p. 1370.

 

360

these instructions, Steinhardt made it "unmistakably clear"
to Foreign Minister Menemencioglu that his government
"hoped the Turk Government would take an active part in
collaboration with the British in accelerating the impend-
ing victory of the United Nations."82 He believed the
British request stemmed from the fact that they, "parti-
cularly in Cairo, were nettled by the fulsome praise of
President Roosevelt and the obvious comparison made by
the Turks between his attitude towards them and that of
Eden . . . 983 He stated he "was glad" to have received
"the Department's instructions to make this point clear
to the Turks, thereby justifying the position already
taken" by him.

The New Deal diplomat thought that much of the
Turkish resistance to pressure arose, in part, from the
‘wartime economic prosperity being enjoyed by members of
the Turkish ruling class. Pointing out that the Turks were

selling their commodities to the highest bidder between

 

82Steinhardt to Hull, January 14, 1944, Department

of State Archives, 740.0011 European War 1939/32718.

83Steinhardt to George V. Allen, January 19, 1944,
Steinhardt MSS.

361

two rich contending camps, he suggested they were extremely
reluctant "to have this highly lucrative trade exchanged
over night for bursting bombs." Bear in mind, he said,
"that since the Middle Ages, Turkey had enjoyed no such
prosperity and no such inflation in prices as during the
past eighteen months, it is hard to reconcile our actuating
this prosperity while at the same time coaxing for the
country's entry into war." The Turks, he suggested, were
"no fools and are well aware of the fact that on the day
they enter the war the present prosperity bubble will
burst. They are keen enough to understand that as long
as they are being courted, they are going to receive
orchids and Sherry candies and that after the marriage
ceremony they will be told that 'two can leave as cheaply
as one'."8

The British continued their efforts to prick this
Turkish economic bubble. They informed the United States
Government that inasmuch as military conversations in
Ankara had reached a stalemate, they intended to withdraw,

without notice or explanation, the head of their military

 

84Ibid.

362

mission. suspend shipments of military supplies. and instruct
their Ambassador to avoid contact with members of the Turk-
ish Government.85 They requested. and received. United
States cooperation. The Department informed Steinhardt to
"cool Off" his relations with the Turks. Although the Amer—
ican Ambassador complied with these instructions. he did

not think that the British "sulking policy" vis-a-vis Tur-
key was likely "to bring the Turks around to asking that
supply of military equipment be continued."86 He thought
that the Turkish attitude would be influenced more by the
course of events in international politics and military
situations. He was doubtful if "half measures" would in-
duce the Turks to change their minds; more likely to succeed.
he suggested. was "the application of all inclusive and ef-
fecthmaeconomic pressure accompanied by disruption of rail
communications between Istanbul and Sofia . . . ." The
British. he stated. "were hurt at the unwillingness of the

Turks to accept their appraisal of German weakness in the

Balkans and their estimate of Turkish requirements of war

 

85Hull. Memoirs of Cordell Hull. II. p. 1371.

86Steinhardt to Hull. February 18. 1944. Department

of State Archives. 740.001 European War 1939/33294.

363

material . . . .” The American suggested that the British
had become "suSpicious of Turkish good faith as a result of
the increased movement of chrome to Germany and the decreased
movement to Britain" and were “dubious" that the Turks "gen—
uinely" desired to aid the Allies in bringing the war to a
Speedy end. The Turks. he continued. on the other hand.
were "hurt at the failure of the British to take them into
their confidence. to deliver more than a part of the prom-
ised war material. and to commit themselves to the delivery
. . . of what the Turks regard[ed] as their minimum addi-
tional requirements."

Anglo-Turkish relations continued to deteriorate.
Although the Turk Government had become "increasingly con-
cerned." Steinhardt believed that the Turks were not yet
ready to commit themselves to the date of entry into war.87
While the British policy of avoiding discussions on politi-
cal subjects with high Turk officials "may have had some
effect." he was inclined to believe that the cessation of

war materials had "produced far greater effect." There is

evidence. he said. that the Turks feared that the cessation

 

87Steinhardt to Hull. March 19. 1944. Department of
State Archives. 740.0011 EurOpean War 1939/34004.

364

of the delivery of war material might be followed by further
economic measures in the economic and commercial field. He
doubted that the measures thus far taken would succeed in
bringing Turkey soon into the war. If the British no longer
desired Turkey's immediate entry into the war and were will—
ing to see it postponed. Steinhardt conjectured that Turkey
could be brought into the war at a later date "after rela-
tively brief negotiations at the time." In the face Of
British anxiety. the American Ambassador was pleading for
patience.

The Department of State. inasmuch as the Turkish
problem was being handled principally by London. maintained
"a reserved attitude."88 The Department had difficulty
keeping in line the Foreign Economic Administration. who.
on economic grounds. would have been "delighted to organize
a blitz." Ably withstanding this pressure. the Department
(following Steinhardt's advice) continued its Shipment of
civilian supplies. not involving economic warfare Objectives.
and long-term educational schemes to Turkey.

In the meantime. the British Foreign Office.having

decided that its "sulking policy" had not been successful.

 

BBPaUl H. Alling t0 Steinhardt. March 14: 19440
Steinhardt MSS.

365

determined that it must review its entire policy in regard
to Turkey.89 Likewise. President Roosevelt desired to send
a personal letter to President InOnfi requesting him to deny
. 90

to the Germans further access to Turkish chrome. Roose-
velt sent a diSpatch to Stalin and Churchill. Originally
Churchill approved. but the next day he suggested that the
President's letter be held in reserve lest the Turks inter-
pret "so friendly a message" as a Sign of weakening on the
part of the Allies. However. the President and Prime Minis-
ter did agree on the issuance of a joint Anglo-American
declaration to Turkey concerning shipment Of strategic ma-
terial to the Axis.91 The two statesmen warned Turkey that:

The necessity of depriving the enemy of all means

of resistance at this imminent crisis in the war

compels a revision of the attitude of our two

Governments notwithstanding the temporary incon-

veniences to Turkish economy which may be caused

thereby. In consequence His Majesty's Government

and the United States Government feel bound to

warn the Turkish Government that with serious dis-

favor they view as prejudicial to their vital in-

terests. arrangements between Germany and her
satellites on the one hand and Turkey on the other

 

89Steinhardt to George V. Allen. March 21. 1944.
Steinhardt MSS.

90Hull. Memoirs of Cordell Hull. p. 1371.

91Hull to Steinhardt. April 8. 1944. Department of

State Archives. 740.00112 EurOpean War/10487.

366

under which the latter undertakes to provide

these countries commodities essential to con-

duct of the war. The renewal of any such agree-

ments or the conclusion of any agreements along

such lines will result in applying blockade

measures to Turkey similar to those which have

been applied to neutral countries by the two

Governments throughout the war.

Steinhardt reported that the Turks accepted the

note “in a friendly Spirit indicating a cooperative state

. 92 . . . .
of mind." Foreign Minister MenemenCioglu remarked that
reaction of the Turkish Government to the communication
would be one way "if it was a friendly request to cooper-
ate but that reaction would be quite different if it was
intended as a 'summons or a threat.'" Menemencioglu re-
ferred at length to the difficulties Turkey had encountered
in obtaining vitally needed supplies from the United States
and Britain. He also expressed his inability to understand
why the Allies had not long since taken action to relieve
him from his “dilemma“ by destroying means of transporta-
tion between Turkey and Germany and said such action would

make his position easier. Steinhardt was under the impres—

sion that the carrying out of the ”Special project" would

 

92Steinhardt to Hull. April 15. 1944. Department

of State Archives. 740.00112 European War/10546.

367

materially facilitate Menemencioglu's desire to cooperate
with the United Nations.

On April 20. 1944. Foreign Minister Menemencioglu
informed the Germans that the Turkish Government would
suspend all further delivery of chromium to the Axis from
May 1. The first noticeable effect of the decision. accord-
ing to Steinhardt. was the consternation the act evoked in
German circles.93 The steadily increasing strain on Anglo-
Turkish relations during the past two months. he said. was
well-known to the German Embassy and “had engendered convic-
tion that there was no longer any possibility of Turkey's
entry into war on the side of the Allies.“ On the other
hand. von Papen in his Memoirs states that he had ”long ex-
pected this decision.“94 Allied representations on the sub-
ject. the German envoy remarked. ”reached a crescendo. and
their success dealt the German economy a heavy blow." The
production of high grade armor plate depended entirely on
Turkish chrome deliveries. and their cessation. he concluded.
"affected the whole conduct of the war.“ When informed of

the Turkish determination. von Papen supposedly inquired

 

93Foreign Relations: 1944. V. p. 1066.

4VOn Papen. Memoirs. p. 524.

368

as to whether he should ”pack his bags.”95

The stOppage of chrome shipments to the Axis was
not only a victory for the State Department but was also
an important challenge to Germany. Chrome was so vital to
the Germans “that they scrupulously complied with their
part of the agreement.”96 they delivered supplies to the
value of 170.000 tons of chrome for which they received
but 65.000 tons of chrome from the Turks. Turkey's stop-
page was thus more than a discontinuance. it was a repudia-
tion of an agreement and a debt. It was a jolt to Germany's
prestige the world over. so the New York EEBEE reported.
and represented in part at least. ”the results of many
months of inconspicuous efforts by Ambassador Laurence A.
Steinhardt to persuade the Turks to throw in their lot with
the Allies.“ In like manner. George V. Allen. a veteran at
the Mid East desk in the State Department. informed Stein—
hardt that the diplomat's position in the United States was
"at its absolute zenith" on two counts: first. “the match-

less job“ he had done and was doing on the refugee question;

 

i,

95Foreign Relations: l244. V. 1066.

96New York Times. April 24. 1944.

369

and. two. chrome.97 Allen wrote that he was ”absolutely
positive that the Turkish embargo on chrome shipments to
Germany would never have been announced if it had not been
for the friendly relations“ Steinhardt had been able to
maintain in Ankara. “I know of no greater diplomatic ac-
complishment anywhere in recent years than the chrome em-
bargo.“ Allen announced. ”and it would be ungracious and
improper for anyone to overlook the outstanding part you
played in the accomplishment.“ Even though it is apparent
that the Roosevelt-Churchill joint declaration threatening
Turkey with blockade measures proved to be the determining
factor. it is recognizable that it followed Steinhardt's
importunities. To that extent. the New Deal diplomat must
be given credit for the cessation of Turkish shipments of
chrome to Germany.

Aside from the problem of cutting off the shipment
of supplies vital to Axis war effort. Steinhardt confronted
a vexing refugee question. Throughout the war. Turkey
served as the gateway through which refugees proceeded to

Palestine. At the beginning of hostilities. the British

 

97George V. Allen to Steinhardt. April 24. 1944.
Steinhardt MSS.

370

agreed to admit to Palestine two classes of person: one.
those who had been granted immigration certificates before
the rupture of relations; and. two. relatives of persons
actually residing in Palestine. The British in 1942 added
a third category--5.000 refugees from Bulgaria. Emmania.
and Hungary. whose admission into Palestine was agreed upon.
This number was increased in 1943 to 29.000 (including the
5.000 of 1942). In addition. there were numerous illegal
immigrants seeking their way through Turkey to Palestine.
Steinhardt assured the War Refugee Board that the
American Embassy in Ankara had made every effort to facili-
tate the transit of Jews from Axis countries through Turkey
en route to Palestine. Its efforts. he said. were hampered
by the unwillingness of the Axis countries to permit Jews
to depart and the difficulties of transportation.98 Con-
cerning the former. little could be accomplished in Turkey.
However. Turkish authorities. notwithstanding an already
overburdened rail system. had permitted the attachment
every ten days of a coach (carrying seventy-five refugees)

to a train running from Istanbul to Aleppo. In spite of

 

98Steinhardt to Hull. February 20. 1944. Depart-
ment of State Archives. 840.40 Refugees/5216.

371

this arrangement. Steinhardt found that no single group of
seventy-five persons had reached Istanbul. because it had
been impossible to arrange for the refugees to be released
from Axis territory. More unfortunate was the plight of

the illegal immigrant to Palestine who traveled by boat.
Bulgarian and Romanian promoters obtained the use of unsea-
worthy vessels and sold space at extortionate prices. If
the vessels were fortunate enough to reach Palestine. the
passengers not being admissible under the quota system were
deported to the Island of Mauritius. After the Struma dis-
aster of February 24. 1942. Steinhardt approached with cau—
tion the use of questionable vessels for evacuation purposes.
Even if the vessel were seaworthy. it faced the difficulty
of traversing the mine-ladened and submarine infested waters
of the Black Sea and Dardanelles.

On the other hand. Turkish officials thought that
the Allies had failed to cooPerate in the moving of the
refugees.99 Foreign Minister Menemencioglu complained that
although the Turkish Government had made certain provisions

for the transportation of refugees from the Balkans. “the

 

99Steinhardt to Hull. April 12. 1944. Department
of State Archives. 840.48 Refugees/5615.

372

British and American Governments had thus far taken no

steps in so far as he was aware to assist in the evacua-
tion of refugees to Palestine other than demand that such
steps be taken." He pointed out Turkey's acute shortage

of rolling stock. Under the circumstances. Steinhardt
thought that the United States Government should promise

the Turks. that if they permitted the authorization of a
refugee boat and the boat became lost. the United States
would replace same. The Ambassador likewise suggested

that the United Nations warn the Axis Governments by radio
that they would "be held accountable in the final settle-
ment for their mistreatment of the Jews and other minorities
in their territories."100 Although it would be an exaggera-
tion to claim complete credit for Steinhardt. President
Roosevelt followed the Ambassador's pleadings with a public
statement that none who participated in “the wholesale and

systematic murder of Jews in EurOpe” would go unpunished.101

 

100Steinhardt to Hull. February 20. 1944. Depart-
ment of State Archives. 840.40 Refugees/5216.

101Roosevelt's statement concerning Jewish problem.
March 24. 1944. Department of State Archives. 740.0011
European War/70544.

373

Overall. representatives of the War Refugee Board
and other Jewish relief organizations who had the opportun-
ity to view at first hand the Ambassador's efforts on behalf
of Jewish refugees were pleased with Steinhardt's accom-
plishments. Ira Hirschmann. representative of the War
Refugee Board. wrote John Pehle. Executive Director: “. . .
the establishment of the War Refugee Board and the dispatch
of representatives to Turkey working with the sympathetic
and resourceful aid of Ambassador Steinhardt resulted in
the rescue of thousands of refugees who were admitted into
Palestine. It is doubtful if these refugees would have
been permitted to enter Turkey. and proceed through Turkey.
without the personal intervention of the Ambassador and the
Board representatives on the scene in Turkey.“102 In simi-
lar vein. Charles Barlas of the Jewish Agency in Palestine.
remarked that it was “thanks” to Steinhardt's influence.
both personally and officially. “that thousands of Jewish
refugees were saved from the Nazi hell . . . of sufferings

and misfortune."103

 

102Ira Hirschmann to John Pehle. October 3. 1944.
Department of State Archives. 840.48 Refugees/10-344.
103 .
Charles Barlas to Steinhardt. January 17. 1945.
Steinhardt MSS.

374

Steinhardt hOped that his dealings with the refugee
problem in Turkey would dispel the bad publicity he had
previously received in the New York press. His chief "tub-
thumper“ was Hirschmann of the War Refugee Board. Upon re-
turning to New York. he set about to remove the tarnish
from the Ambassador's reputation. So obvious were his
efforts. it appears probably that the scheme was hatched

in Ankara; Hirschmann kept Steinhardt informed of the prog—

ress he was making. In Speeches before Jewish organizations.

Hirschmann made marked references to the New Deal diplomat:

On the brilliant pages of history of this time.
the record should illuminate the work of your
Ambassador Laurence A. Steinhardt. In a crucial
position in Turkey. he has devoted his unremit-
ting and whole-hearted efforts to this work.

He is a friend of humanity and we should be
grateful that he is in Turkey at this time. I
cannot speak too highly of the cooperation he
gave me without which I could not have functioned.
I hope you do not forget this.104

Steinhardt still harbored a desire to occupy the
Governor's chair in Albany. In the spring of 1942 he had
been sounded-out as to his willingness to accept the Demo-

cratic nomination as Lieutenant-Governor on a ticket headed

 

104Ira A. Hirschmann to John A. Browing' June 1'

1944. Steinhardt MSS.

375

l .
by John J. Bennett. Jr. 05 He was "not interested" that

year.106 (It was just as well for Thomas A. Dewey buried
Bennettin a 600.000 vote plurality.) Two years later.
Hirschmann reported that he “was surprised . . . to sense
an atmosphere which had been created which indicated two
things regarding“the Ambassador's name: (a) that Stein-
hardt had not demonstrated his friendship for the Jews;

(b) that the New Deal diplomat was ”not enough in the fore-
front as a figure politically."107 Hirschmann suggested
that the PM article by Stone was "a deeper sore“ than he
had judged. Similarly he found that the Ambassador's long
absence from the country had worked to his political dis-
advantage. He suggested that Steinhardt see Isadore Lubin.
Roosevelt's labor specialist. "Indicate a strong tradi-
tional interest in labor's progress.“ Hirschmann advised.
”If there is not enough background to justify this. then

you will have to indicate a strong new platform and undevi-

ating course in that direction." Hirschmann continued his

 

105John A. Browning to Steinhardt. May 8. 1942.
Steinhardt MSS.

06Steinhardt to John A. Browning. July 3. 1942.
Steinhardt MSS.

107Ira A. Hirschmann to Steinhardt. June 10. 1944.
Steinhardt MSS.

376

political spadework by investigating the men working on the
night desk at the New York Times.108 The Times. he dis-
covered. ”almost bends over backward to draw the line be-
tween news coverage and editorial tinge. Where a quote
appears which seems especially to build up an Ambassador.
the news re-write men are quick to use the blue pencil.“
Whether Hirschmann was successful in his campaign is diffi-
cult to determine; however. his efforts reiterate Stein-
hardt's interest in a political career.

However. there were still pressing problems con-
fronting the Ambassador in Turkey. The Turkish Government.
notwithstanding its agreement to discontinue chrome ship-
ments to Germany. continued negotiating with various Axis
powers: a Turkish-Hungarian accord had been concluded and
it was reported that negotiations with Germany and Romania
were underway.109 Steinhardt. along with the British Ambas-
sador. warned the Turks that they could only maintain their

"ambiguous trade with the Axis in strategic materials at

the expense" of Turkey's commercial relations with the

 

108Ira A. Hirschmann to Steinhardt. June 1. 1944.

Steinhardt MSS.

09Steinhardt to Hull. May 10. 1944. Department of
State Archives. 740.0012 European War 1939/10770.

377

United States and Britain. The two Allied Ambassadors em—
phasized to Turkish authorities that as soon as the Turks
”definitely decided to discontinue the supply to the Axis
of all the commodities . . . and evidenced its intentions
to cooperate wholeheartedly in the conomic field with the
Allies." the British and American Governments would be
ready to examine the question of Turkish needs.

Turkey faced serious domestic problems with the ces-
sation of Allied war purchases and Axis trade. It was re-
ported that the Foreign Economic Administration was "al-
ready scheming ways and means to reduce prices paid for
commodities in Turkey . . . .“110 Likewise. because of the
opening of the second front. channels for supplying Turkey
from United Nations sources had not improved. Under the
circumstances. according to Steinhardt. Turkey would "lose
practically the whole of her export markets and unless

other outlets for her exportable surpluses were quickly

found. the effect on the country's economy would be very

111

 

serious." The cessation of exports. he suggested. would
110 . . .
Paul H. Alling to Steinhardt. May 5. 1944. Stein-
hardt MSS.
lll

Steinhardt to Hull. June 3. 1944. Department of
State Archives. 811.20 Defense (M) Turkey/1055.

378

most immediately and seriously affect the peasant class in—
asmuch as Turkey's main exportable surpluses were chiefly
produced by the peasant labor. The prosperity of the
peasant. he said. had been of political importance to the
Government and serious disturbances might follow the loss
of outlets for peasant produced goods. Steinhardt pointed
out that the problem was immediate--that as Allied preem—
tion was disappearing and since Axis trade was diminishing
--it would be necessary to maintain Turkish economy if the
Allied objective was to completely cut off Turkey's exports
to the Axis. Whether accepting on good faith the Allied
promise of supplying vitally needed economic goods or labor-
ing under the thoughts of economic retaliation. Turkey on
June 16 decided to reduce by fifty percent the shipment of
strategic material to the Axis.

Immediately following Turkish acceptance of this
demand. the Allies requested that Turkey sever diplomatic
relations with Germany. Hull cabled Steinhardt on June 28
authorizing him to support British representations. Stein-
hardt reported on July 3 that the Turkish Prime Minister
Saracoglu informed him that the Turkish Government was pre—

pared to accede to this request but would like to receive

379

Anglo-American assurances that Turkey would be treated as

a full ally.112 Saracoglu requested that Turkey be given
such assistance as was possible from the United States and
Britain with reSpect to war materials and to the disposi—
tion of surplus Turkish exports and the provision of essen-
tial Turkish imports. Meanwhile. Molotov. whose support the
British sought in the maneuver. stated that the prOposed
request of Turkey was not in conformity with the Moscow
Conference decisions in that it did not include Turkey's
entrance into the war. Turkish authorities. on the other
hand. assured Allied leaders that Turkey's severance of re-
lations was the first step toward active belligerency. Al-
though Allied policymakers agreed in principle with the
views of the Soviet Government. they reasoned that Turkey's
severance of relations could be acted upon without delay.
involved no military commitments. and would have nearly the
same effect on Germany and in the Balkans as would a declar-
ation of war. while providing a useful first step toward a
declaration of war if this became desirable. A request for

a declaration of war. they thought wOuld involve long dis-

cussions relative to military supplies. possibly extending

 

112Hull. Memoirs of Cordell_Hull. pp. 1372-74.

380

beyond the period when Turkish belligerency would be of any
use to the Allies.113

Thus the Turks. amenable to Allied pressure. severed
diplomatic relations with the Germans on August 2. 1944.
Immediate military returns resulted in high altitude flights
over Turkey en route to Russia. expulsion from Turkey of
some two thousand Germans and other Axis agents. and the
use of Turkish airfields as bases for strategic bombing.
and of Turkish harbors for naval operations. In the end.
however. Turkey proved to be of little military consequence.
Allied strategists discarded efforts to force Turkey into
the war as a belligerent. In most respects "Operation Tur-
key" ended with that country's severance of relations with
Germany. Although Turkey proceeded on January 6. 1945. to
sever relations with Japan. the Turks did not declare war
on the Axis powers until February 22. 1945. The declaration
of war itself was merely a formality and a means to insure
Turkish representation in the United Nations.

The Steinhardt mission to Turkey was a success on

several counts. Even though Turkish officials may have

recognized that it was in the Turkey's national interest

 

113Foreign Relations: 1944. V. p. 882.

381

to remain neutral throughout the war. Steinhardt did nothing
to rock this diplomatic boat. With Turkey assigned to the
British “sphere.” the New Deal diplomat had to work hand in
glove with his British counterpart. More often than not.
Steinhardt rather than Knatchbull-Hugessen determined Allied
policy vis-a-vis Turkey. When the British desired a hard
policy toward Turkey. Steinhardt consistently tempered
Allied action. Cognizant of Turkey's sovereign rights as

a nation. he opposed Allied invasion of the country's neu-
tralist policy.

The credit for discontinuance of chrome shipment
belonged to Steinhardt "to an extent far greater than could
be claimed by or for any other individual in the British or
our Government."114 It was. according to Livingston Mer-
chant. Chief of the Eastern Hemisphere Division. "the most
complete and important single victory over the Axis" which
had been won in the field of economic warfare. "Everyone
who has been on the fringe of this long engagement.” he con-
cluded. “recognizes your [Steinhardt's] preeminent part.”

Sadly. Steinhardt could not claim the same amount

of success in dealing with the refugee problem. In a real

 

4Livingston T. Merchant to Steinhardt. June 6.
1944. Steinhardt MSS.

382

sense. it was virtually insoluble. With millions of Jews
held captive by Nazi warlords. Steinhardt could only help
those few thousand that found their way to Turkey. The
American Embassy. under the circumstances of war. did the
best they could in providing transportation and exit visas.
Certainly more Jews would have been saved from the Nazi
horrors had the United Nations been in the position to
afford better transportation. This. however. under the
vicissitudes of war they were unable to do.

The New Deal diplomat. to a limited extent. could
claim success in smoothing out relations between the Soviet
Union and Turkey. Though the two countries never reached
the degree of friendship that prevailed during the 1920's
and early 1930's. there was no great amount of friction
after the period of the von Papen bombing incident. Rela-
tions remained cool but correct; to that degree. it was
satisfactory to the British and Americans.

Toward the end of 1945 Allied leaders became confi-
dent of ultimate victory. They could commence looking for-
ward to postwar problems. With the Turkish problem resolved.
the Department of State ordered Steinhardt to London as the

future Ambassador to Czechoslovakia. His new post was one

383

of the key spots in EurOpe and perhaps the best testing
ground for our postwar relations with the Soviet Union.
The Department assured the envoy that he was. in view of
his experience. "best qualified to meet the complicated
problems which now exist and which will arise in the fu-
ture."115

Assured that his presence in Prague was in no wise
pressing. Steinhardt was asked to stay in Turkey for a
while longer. Fulfilling this request. Steinhardt asked
and received permission to return for a short stay in the
United States. It was while the Ambassador was home on
leave that the nation was saddened on April 12. 1945. with
the news that its President and Commander-in-Chief Franklin
D. Roosevelt was dead. Steinhardt joined the rest of the
nation in mourning its fallen leader. He went to Washing-
ton for the funeral. Amidst the cadence of the muffled
drums and sounds of the caisson bearing the President's
body. the New Deal Diplomat must have thought to himself:

This is the end of an era. the Roosevelt era.
The Roosevelt influence will go on. for he set

things in motion and motion does not cease with
a man's death.11

 

115Francis T. Williamson to Steinhardt. January 20.

1945. Steinhardt MSS.

116Kiplinger Washington Letter. April 12: 1945-

384

The death of President Roosevelt brought to a close
Laurence A. Steinhardt's role as a New Deal diplomat. How-
ever. it neither terminated nor completed his tenure in the
foreign service. As Roosevelt's successor. President Harry
S. Truman approved Steinhardt's appointment to Czechoslo-
vakia. The post in Prague. a particularly difficult one
following the Communist coup of February. 1948. was the Am-
bassador's last European assignment. After nearly three
years in Czechoslovakia. Steinhardt served as ambassador
to Canada. The New York native was this country's represen-
tative in Ottawa when on March 28. 1950. he was killed in
an airplane accident.

The irony of Steinhardt's service is the fact that
he was continually looked upon as a “political appointee."
Although he served seventeen years in the foreign service.
the professionals considered him a “non-careerist." Had
he lived and remained in the service another three years.
it is certain that Republican President Dwight Eisenhower
would have removed the Democrat from office. Neither his
length of service nor his qualifications would have re-

ceived much consideration.

385

While the inaccessibility of the full diplomatic
record after 1945 dictated limiting the study to the first
two-thirds of Steinhardt's service. the investigation of
ambassadorial diplomacy has offered a different perspective
of Roosevelt-Hull foreign policy.

Certain conclusions can be drawn from Steinhardt's
career as a New Deal diplomat. When in 1933 he accepted
assignment as Minister to Sweden. Steinhardt fully expected
to remain in the diplomatic service but for a short period
of time; least of all. to make it a career. Over the years.
he obviously sacrificed personal economic gain. What
caused him to change his mind? First and foremost. he en-
joyed the diplomatic life: he relished the attention and
the limelight. As succinctly stated by Loy W. Henderson.
"Steinhardt enjoyed being in the center of things.“ Vain
and self-confident. the New Deal envoy was also politically
ambitious. He served in the hOpe that a prestigious ambas—
sadorship would spring him to high office. It was a vain
hope for few American statesmen have risen to high position
via the route of diplomacy. Diplomats are by necessity too
far removed from day to day affiliation with domestic politi-

cal leaders to exploit the opportunities of the moment.

386

As a non-professional diplomat. Steinhardt's serv-
ice was a meritorious one. Because of his early training
in economics and law. the envoy scored well in disputes in-
volving finance and litigation. However. his greatest
assets appear to have been his comparative youth (he was
but forty-one when first entering the service). his desire
to perform a noteworthy job. and his ability to work long.
hard hours. He differed radically from the usual political
appointee. who upon the verge of retirement is old. tired.
and worn-out and accepts an appointment as the last chance
to carve his name in history. Only Steinhardt's first dip—
lomatic assignment (to Sweden) afforded the envoy a chance
to relax and enjoy "a vacation type life." His following
assignments demanded all his energy. He served loyally and
devotedly.

Like so many other diplomats from around the world.
Steinhardt was aristocratic minded. No doubt this allowed
him to move with ease among his fellow dignitaries in high
level diplomatic circles. However. an ambassador is obli-
gated to inform his government on every facet of life in
the country in which he serves. Apparently Steinhardt had

neither the ability nor desire to do this. Selecting his

387

acquaintances from the upper classes. Steinhardt showed
little appreciation for the plight of the masses nor the
social and economic problems nor the developments taking
place. In Sweden. for example. not a single known despatch
concerned itself with the great social program (analogous
to the New Deal reforms in the United States) being enacted
by the Swedes. Although preoccupied with the rising tide
of fascism in South America. the New Deal diplomat exhibited
little understanding of the indigenous Aprista movement in
Peru. Likewise. his great concern over the capital levy
tax in Turkey was not as to how it affected Turkish minori-
ties. but contrarily. how it affected American business
interests in that country.

As the world in the 1930's moved closer to disaster.
statesmen belatedly absorbed themselves with the menace of
fascism. With social problems relegated to a place of les-
ser importance. Steinhardt performed in a praiseworthy manner.
While Steinhardt was in the Soviet Union. Henderson thought
that telegrams from Moscow assisted the Department more than

.117

messages sent "from all other parts of the world put together.

 

117'Loy Henderson to Steinhardt. December 13. 1940'

Steinhardt MSS.

388

The tit-for-tat policy pursued by Steinhardt in the face
of British and. to some extent White House opposition was
realistic and in America's best interest. A diplomat with
less fortitude might have easily succumbed to the pressures
of a desperate Britain. Steinhardt left no doubt that his
primary interest was that which he thought benefited the
United States. Similarly. Steinhardt in Turkey fought
British pressures designed to drag the unprepared Turks
into the war. In Ankara. Steinhardt displayed a real un—
derstanding of the problems besetting a lesser power en-
snared in the moves and countermoves of the great powers.
Almost singlehanded he resisted determined Allied efforts
that he judged were not in Turkey's best interest.

To understand Steinhardt's service as a New Deal
diplomat. one must first understand the milieu in which he
moved. First of all. his Commander-in-Chief Franklin Roose-
velt served ostensibly as his own secretary of state; nei—
ther Cordell Hull nor the Department was kept fully informed.
Secondly. the problem for the diplomat in the field was com-
pounded by the fact that the Department failed to alert
their missions to world developments. It is virtually im-

possible to determine how capably Steinhardt carried out

389

Departmental instructions. Heads of missions while home

on leave received briefings and instructions; in the field
they received little advice. More often than not. diplomats
Operated on their own intuition and initiative.

William W. Kaufmann in The Diplomats quite accur-
ately portrays diplomacy in the 1930's.118 He remarked
that the foreign service during this period had remarkably
little to offer in the way of useful advice and assistance.
It is his contention that in the 1930's the professional
diplomat often failed to understand fully the new forces
that engulfed traditional diplomacy. The diplomat's uni-
verse. he concludes. ”was that of the eighteenth and nine-
teenth centuries. and it bore little relation to revolution-
ary cosmos which Nazi Germany. Fascist Italy. and Imperial
Japan were parts.”

The obstacles raised by Steinhardt's personality and
background. the complexity of the situation. and the Ameri-
can tradition of isolation must be borne in mind. In view
of the factors militating against a rapid and vivid appre-

ciation of the situation. what is surprising about Steinhardt

as a political appointee is that he performed so well.

 

118William W. Kaufmann. The:2}glomatsv P- 655-

BIBLIOGRAPHY
MANUSCRIPTS

Roosevelt. Franklin D. Papers. Roosevelt Memorial Library.
Hyde Park. New YOrk.

Steinhardt. Laurence A. Papers. Library of Congress. Wash—
ington. D. C. The papers number approximately 42.500
pieces and cover the entire period of his career in
the Foreign Service from 1933 until his death in
1950. One half of the collection is composed of
Steinhardt's letterbooks (1929-1950) and the remainder
consists of his incoming correspondence. Among the
notable figures represented by a number of letters
are George V. Allen. A. J. Drexel Biddle. Jr.. Joseph
E. Davies. James A. Farley. Loy W. Henderson. Cordell
Hull. Ruth Bryan Owen. Franklin D. Roosevelt. Edward
Stettinius. Jr.. Arthur Hayes Sulzberger. and Sumner

Welles.

ARCHIVES

Department of State Records. National Archives. Washington.
D. C.

GOVERNMENT PUBLICATIONS

Department of State. Foreign Relations of the United States:
The Soviet Union. 1933-1939. Washington. D. C.:
Government Printing Office. 1952.

390

391

. Foreign Relations of the United States. l940.
V01. I. General. Washington. D. C.: Government
Printing Office. 1959.

 

. Foreign Relations ofithe United_§tates. lggp.

V61. III. The British Commonwealth. The Soviet

Union. The Near East. and Africa. Washington. D. C.:
Government Printing Office. 1958.

 

. Foreign Relations of the United States. 1941.
V01. I. General. The Soviet Union. Washington. D. C.:
Government Printing Office. 1958.

 

. Foreign Relations of the United States. 1941.
Vol. IV. The Far East. Washington. D. C.: Govern—
ment Printing Office. 1956.

 

. Foreign Relations of the United States. 1942.
V01. IV. The Near East and Africa. Washington. D. C.:
Government Printing Office. 1963.

 

. Foreign Relations of the United States. 1943.
Vol. IV. The Near East and Africa. Washington. D. C.:
Government Printing Office. 1964.

 

. Foreign Relations of the United States. 1944.
vol. IV. The Near East. South Asia. Africa. and the
Far East. Washington. D. C.: Government Printing
Office. 1965.

 

BOOKS

Ander. O. Fritiof. The Building of Modern Sweden: The
Reign of Gustav V. l907el950. Rock Island. Illinois:
American Book Concern. 1958.

Andersson. Ingvar. A History of Sweden. Translated by Caro-
lyn Hanney. New York: Frederick A. Praeger Co..
1956.

392

Beals. Carleton. The Coming Struggle forglatin America.
New YOrk: J. B. Lippincott Company. 1938.

Bourke-White. Margaret. Shooting the Russian War. New York:
Simon and Schuster. 1943.

Cassidy. Henry C. Moscow Dateline: 1941-1943. Boston:
Houghton Mifflin Company. 1943.

Childs. Marquis W. Sweden: The Middle Way. New Haven:
Yale University Press. 1936.

. This is Democragy: Collective Bargaining in
Scandinavia. New Haven: Yale University Press.
1938.

 

Churchill. Winston. The Second WOrld War: The Hinge of
Fate. London: Cassel & Co.. Ltd.. 1951.

Dallin. David J. Soviet Russia's Foreign Policy. l939-1942.
New Haven: Yale University Press. 1942.

Davies. Joseph E. Mission to Moscow. New York: Simon and
Schuster. 1941.

Deutscher. Isaac. Stalin: A Political Biography. New York:
Oxford University Press. 1949.

Dodd. William E.. Jr. and Martha Dodd (eds.). Ambassador
Dodd's Diary. New York: Harcourt and Brace and Co..
1941.

Farley. James A. Jim Farley's Story: The Roosevelt Years.
New York: McGraw-Hill Book Company. Inc.. 1948.

Hull. Cordell. The Memoirs of Cordell Hull. New YOrk:
The Macmillan Company. 1948.

Inman. Samuel Guy. Latin America: Its Place in World Life.
New YOrk: Harcourt. Brace and Co.. 1937.

Jones. F. C. Japan's New Order in East Asia. 1937-1945.
New York: Oxford University Press. 1954.

393

Kantor. Harry. The Ideology andggrogram of the Peruvian
Aprista Movement. Berkeley. California: Univer-
sity of California Press. 1953.

Kaufmann. William W. “Two American Ambassadors: Bullitt
and Kennedy.” in The Diplomats ed. by Gordon A.
Craig and Felix Gilbert. Princeton. New Jersey:
Princeton University Press. 1953.

Kirk. George. Survey of International Affairs. 1939-1946:
The Middle East in the War. London: Oxford Uni—
versity Press. 1952.

Knatchbull-Hugessen. Sir Hughe. Diplomat in Peace and War.
London: John Murray. 1949.

Langer. William L. and S. Everett Gleason. The Challenge
to Isolation. New York: Harper & Brothers. 1952.

. The Undeclared War. l940-l941. New York:
Harper & Brothers. 1953.

 

Lundin. C. Leonard. Finland in the Second WOrld War.
Bloomington. Indiana: Indiana University Press.
1957.

Mecham. J. Lloyd. TheUnited States and Inter-American
Security. 1869fil940. Austin. Texas: University
of Texas Press. 1961.

Moats. Alice-Leone. Blindlpate with Mars. New York:
Doubleday. Doran. and Company. 1943.

Moyzisch. L. C. Operation Cicero. Trans. by Constantine
Fitzgibbon and Heinrich Fraenkel. Coward-McCann.
Inc .' I 1950 .

von Papen. Franz. Memoirs. Trans. by Brian Connell. New
YOrk: E. P. Dutton & Co.. Inc.. 1953.

Perkins. Dexter. A History of the Monroe Doctrine. Boston:
Little. Brown and Company. 1963.

Pratt. Julius. Cordell Hull. 1933-1944. 2 vols. New YOrk:
C00per Square Publishers. Inc.. 1964.

394
Schwartz. Andrew J. America and the Russo-Finnish War.
Washington. D. C.: Public Affairs Press. 1960.

Scott. Franklin. The United States and Scandinavia. Cam—
bridge: Harvard University Press. 1950.

Stewart. Oakley. A Short History of Sweden. New York:
Frederick A. Praeger Co.. 1966.

Strode. Hudson. Model for a World. New York: Harcourt.
Brace and Company. 1944.

Thomas. Lewis V. and Richard N. Frye. The United States
and Turkey and Iran. Cambridge: Harvard Univer-

sity Press. 1952.

Whittaker. John T. Americas to the South. New York: The
Macmillan Company. 1939.

Willkie. Wendell. One World. New York: Simon and Schuster.
1944.

ARTICLES AND NEWSPAPE RS

Chicago Tribune.

Davies. Joseph E. "How Russia Blasted Hitler's Spy Machine.”
American Magazine. CXXXIII. no. 6 (December. 1941).

Fenwick. Charles G. “Lima Conference in Relation to World
Peace." The Annals of the American Academy of P0-
lltical Science. vol. 204 (July. 1939).

New York EM.

New York Times. 1933-1945.

"South America II: Peru." Fortune Magazine. vol. XVII. no.
1 (January. 1938).

395

Ullman. Richard. "The Davies Mission and the United States-
Soviet Relations. 1937-1941." WOrld Pglitics. vol.
IX (January 1957).

Washington Post.

Wright. Gordon. "Ambassador Bullitt and the Fall of France.”
World Politics. vol. X (October. 1957).

PERSONAL INTERVIEWS

Allen. George V.. February 21. 1967. Washington. D. C.
Henderson. Loy. February 9. 1967. Washington. D. C.

Sherlock. Mrs. Dulcie Ann (Steinhardt). February 22. 1967.
Washington. D. C.

   

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