German–Soviet Credit Agreement (1939)

CREDIT AGREEMENT OF AUGUST 19, 1939 BETWEEN THE GERMAN REICH AND THE UNION OF SOVIET SOCIALIST REPUBLICS

Representatives of the Government of the German Reich and representatives of the Government of the Union of Soviet Socialist Republics have conducted negotiations with each other on placing additional Soviet orders in Germany, and have come to the following agreement:

Article I

1. The Government of the Union of Soviet Socialist Republics will cause the Trade Delegation of the USSR in Germany, or the importing organization of the USSR, to take placed additional orders to the amount of 200 million Reichsmark with German firms.

2. The additional orders shall be placed exclusively for supplies for capital investment purposes, that is in particular for:

• Equipment of factories,
• Installations,
• Fittings of various kinds,
• Machinery and machine tools of all kinds,
• Construction of apparatus,
• Equipment for the naphtha industry,
• Equipment for the chemical industry,
• Products of the electro-technical industry,
• Ships, vehicles, means of transport,
• Measuring instruments,
• Laboratory equipment.

3. The usual spare parts for such supplies are also included. There are further included contracts for technical assistance and bringing installations into operation, where these are stipulated in connection with orders placed under this Credit Agreement.

4. The value of individual orders shall not be less than 50,000 Reichsmarks.

5. Not included in the additional orders, are orders for so-called current business. Such are, in particular:

• Raw materials,
• Semi-finished products,
• Spare parts (other than those mentioned in paragraph 3),
• Chemical products,
• Consumer goods,
• Articles of daily use.

6. The Trade Delegation and the importing organizations shall be free in the choice of firms when placing orders. German firms shall likewise be free to decide whether, and to what extent, they wish to except orders under this Agreement.

7. Orders from List A will be placed within a period of two years from the date of the conclusion of this Agreement. By the end of the first year from the conclusion of this Agreement, the value of the orders shall not exceed 120 million Reichsmark.

8. Orders will be placed by the Trade Delegation, or, with joint liability of the Trade Delegation, by the importing organizations of the USSR.

9. The German Government undertake to give the Trade Delegation and the importing organizations of the USSR the necessary assistance in placing orders, in each individual case where required, particularly in respect of delivery dates and the quality of goods.

10. The delivery terms for orders placed under this Agreement shall be the normal ones and the prices for such supplies shall be reasonable.

11. Article VII of the German-Soviet Agreement on Trade and Payments, on December 19, 1938, shall also supply to orders placed under this Agreement.

Article II

The German Government declare that the German Gold Discount Bank ("Dego") has given them an understanding to finance the additional orders to the amount of 200 million Reichsmark on the following terms:

1. The Trade Delegation of the USSR in Germany shall deposit bills of exchange with "Dego". These bills shall have an average term of seven years and shall be drawn for each individual transaction in such a way that

30 percent of the amount of the order shall run for 6 ½ years,

40 percent of the amount of the order shall run for 7 years,

30 percent of the amount of the order shall run for 7 ½ years.

The bills of exchange shall be drawn by the importing organizations of the USSR and endorsed for acceptance by the Trade Delegation of the USSR. The bills shall be drawn in Reichsmark and shall be payable in Berlin.

2. On the basis of the bills of exchange, "Dego" shall make a credit available to the Trade Delegation and the importing organizations of the USSR, which shall be used to pay the German firms cash in Reichsmark. "Dego" will not require endorsement of this credit by the German suppliers.

3. The bills of exchange shall bear 5 percent interest per annum. This shall be paid by the Trade Delegation to "Dego" at the end of each quarter through the Trade Delegation's current account with "Dego". The interest shall be covered by bills of exchange if "Dego" so requires.

4. The Trade Delegation of the USSR in Germany shall have the right to redeem before maturity the bills of exchange deposited with "Dego", in accordance with paragraphs 1 and 3 of this article, in which case interest will be paid only of the period that has elapsed.

Article III

The agreement on the technical method of payment, in accordance with Article II of this agreement, will be concluded between "Dego" and the Trade Delegation of the USSR.

Article IV

Orders shall be placed in accordance with the provisions laid down in the General Delivery Conditions, the Arbitration Agreement, and the Final Protocol, signed on March 20, 1935, by the Russian Committee of German Industry, on the one side, and by the Trade Delegation, on the other side, with amendments which may be agreed on in an exchange of letters between the appropriate agencies of both sides.

Article V

1. The Government of the USSR give an undertaking to take measures for the delivery to Germany of the goods set out in List C, to the minimum values indicated therein, within two years from the conclusion of this agreement. The prices of these goods shall be reasonable.

2. Delivery of, and payment for, the Soviet goods shall be made in accordance with the provisions of the German-Soviet Agreement on Trade and Payments, of December 19, 1938.

3. Should the Agreement of December 19, 1938, not be extended during the term of this Agreement or, in the event of extension, be amended, it shall continue to apply unless otherwise agreed upon, until such time as all bills of exchange and interest on the credit have all been paid up and the amounts paid in for Soviet deliveries of goods have been used for the redemption of all bills of exchange, including the previous ones.

4. This applies also to Articles VII and VIII of the above-mentioned Agreement of December 19, 1938.

5. The German Government undertake to issue permits promptly for the import of Soviet goods into Germany, to an amount sufficient to cover at due date the credit provided for in this Agreement, and the payment of interest thereon, as well as to meet all other liabilities of the USSR bills of exchange in Germany. With this object in view, the two Governments shall, in due time, enter into negotiations for drawing up annual lists of such goods the import of which into Germany meets the requirements of German economy on the one hand and Soviet possibilities and interests on the other.

6. The German Government further undertake to render assistance to the Trade Delegation of the USSR in Germany and to the Soviet importing organizations in placing orders and obtaining supplies of other goods set out in List B, against the free amounts resulting from the sale of Soviet goods in Germany.

Article VI

At least 60 percent of the German supplies shall be carried by German ships, if available, at rates which are usual and normal in view of the freight situation on the Germany-USSR run. The remainder of German supplies shall be carried by Soviet ships, using German seaports.

Article VII

1. Should difficulties arise in placing and duly executing the orders provided for in this Agreement, or in the delivery of other goods - against the credit as well as against the current proceeds resulting from Soviet exports - the two Governments shall immediately enter into negotiations for the purpose of removing such difficulties. If no settlement is reached the further obligations of the Government of the Union of Soviet Socialist Republics under Article V of this Agreement, regarding the execution of measures for the delivery of Soviet goods to Germany, as set out in List C, shall be suspended until the ration provided for in paragraph 3 of this Article is reached.

2. The same shall apply in the event of difficulties arise in the delivery of Soviet goods to the extent provided for in Article V of this Agreement: the two Governments shall immediately enter into negotiations for the purpose of removing such difficulties. If no settlement is reached the further obligations of the German Government under Article I of this Agreement, in connection with facilitating the placing and due execution of orders against the credit, shall be suspended until the ratio provided for in the following paragraph of this article is reached.

3. In the cases referred to in this article, the Government concerned shall not be released from their obligations to take all measures to reach, in the shortest time, a ratio between the orders in accordance with Lists A and B on the one hand and the contracts for the supply of Soviet goods, in accordance with List C, on the other hand, corresponding to the totals of these lists. In this connection, the two Governments shall take the necessary measures for the execution of the orders and contracts in accordance with the terms contained therein.

Article VIII

This Agreement shall enter into force on the date of signature.

Done in duplicate in the German and Russian languages, both texts being equally authentic.

Berlin, August 19, 1939.

For the German Government: Dr. K. Schnurre

For the Government of the USSR: E. Babarin

CONFIDENTIAL PROTOCOL

In connection with the Credit Agreement between the German Government and the Government of the Union of Soviet Socialist Republics, signed today, the undersigned have agreed as follows:

The German Government will refund ½ percent per annum of the interest agreed upon and paid, so that an actual interest rate of 4 ½ percent per annum on the credit will remain. This refund will be made at fixe repayment rates, to be agreed upon between "Dego" and the Trade Delegation, in such a manner that 10 percent of the interest paid by the Trade Delegation for each accounting period will be refunded at the payment dates. Payment of such amounts shall be made in Reichsmark into one of the special accounts opened under the Agreement on Trade and Payments of December 19, 1938, of the Trade Delegation of the USSR in German, or of the National Bank of the USSR.

It is understood that the right, specified in paragraph 17 of Article IV of the above-mentioned agreement of December 19, 1938, of using the balances in the special accounts for payments of interest, extends also to the interest on the credit which is the subject of the Credit Agreement signed today between the German Government and the Government of the Union of Soviet Socialist Republics.

Berlin, August 19, 1939.

For the German Government: Dr. K. Schnurre

For the Government of the USSR: E. Barabin