Translation of document 3579-PS

                     SECRET REICH MATTER
                                              w 4520/40 G rS
10 Copies
Copy 1.

                         MEMORANDUM

1. In the period from 24 August — 12 September of this year
negotiations have taken place in Moscow upon Russian
request, in order to reexamine the state of the deliveries
by both parties according to the Economic Agreement of 11
February 1940. The negotiations have shown that the German
deliveries of the first half year fall short of the quota of
the agreement by approximately 73 million Reichsmark. The
Russians have transmitted proposals for the adjustment of
this deficit, which fundamentally aim at a shortening of the
period of delivery. The negotiations were interrupted on 12
September, in order to examine the Soviet proposals in
Berlin and to draft German counter-proposals concerning
additional deliveries to the Soviet Union. The Russians have
sent information, that, according to the terms of the
agreement, they would temporarily discontinue the
deliveries, if neither their proposals nor our counter-
proposals would bring about the fixed proportions of the
deliveries.

2. The German delivery obligations for the next half year
amount to --

     Until 11 February
     1941…233
     million Reichsmark.
     Until 11 May 1941 including the above mentioned
     deficit of 73 million
     Reichsmark…311 million
     Reichsmark.

To this must be added the German deliveries in exchange for
Bessarabian grain and Bessarabian oil crops (40 million
Reichsmark) and deliveries in exchange for the German raw
material purchases
from the Baltic territories. The examination, carried out
jointly with the Reich Economic Ministry and the OKW, has
shown that the execution of the armament program ordered by
the Fuehrer permits neither an adjustment of the existing
deficit of 73 million Reichsmark nor the fulfillment of the
remaining German quota within the time specified. There is
furthermore the directive of the Reich Marshal to avoid
deliveries to Russia which directly or indirectly would
strengthen the Russian war potential. If these decisions
remain in force, then we shall have to expect an
interruption of the Russian deliveries to Germany within a
short period.

3. This means that the large imports of raw materials, esp.
Of grain, mineral oil, cotton, rare metals and non-ferrous
metals, phosphates will at least temporarily cease and at
best will be resumed later upon a much lower scale and with
great sacrifices in German deliveries. In the opinion of the
Reich Food Ministry this would be especially serious in the
case of the grain supply. To date Russian has delivered to
us almost 1 million tons of grain. Russia is the only
country which has a good grain crop and which therefore
would be in a position to make further great deliveries. The
Reich Food Ministry points to the fact that the national
grain reserve will be used up during this grain production
year [Getreidewirtschaftsjahr] so that we would start the
next grain year without such a reserve.

4. The Reich Economic Minister, the Reich Food Minister, and
the OKW have requested to ask the Fuehrer once more for a
decision regarding the continuation of the economic
relations with the Soviet Union. The raw material deliveries
of Russia can only be approximately kept on the present
level if the German deliveries to the USSR in the amount
specified in section 2 (233 million Reichsmark, or 311
million Reichsmark plus 40 million Reichsmark of Bessarabian
grain etc.) are made available and if they receive a
priority as previously or at least a privileged equality
with armament orders. Since it is principally a question of
deliveries of machines, rolling mill products and coal, such
an arrangement can only be made at the expense of the
armament orders.

5. Probably as a reaction to the changed German attitude,
the Russians have cancelled everything which in the economic
agreement of 11 February 1940 had been planned at long
range. That means that they do not want any processes,
installations and equipment to be delivered over a long
period, but that they want to restrict themselves to goods
which will benefit their economy,
esp. Their armament within the next 8-10 months. Therefore
the conflict with our own military demands in the remaining
small sector of deliveries of machinery and rolling mill
products is still very much stronger than it used to be.

6. To date the Russian deliveries have been a very
substantial support of the German war economy. Since the new
economic agreements have become valid, Russia has delivered
raw materials for more than 300 million Reichsmark; this
includes grain for approx. 100 million Reichsmark. So far
Russia has received an equivalent amounting to only approx.
150 million Reichsmark. The disparity existing at present
between the  German and the Soviet deliveries is caused by
the fact that in the month of August there were Russian
deliveries in the amount of 65 million Reichsmark as against
German deliveries in the amount of 20 million Reichsmark.
Our only economic connection with Iran, Afghanistan,
Manchukuo, China, Japan, and beyond that to South America is
the way through Russia, which is being exploited to an
increasing degree for German raw material imports (soya from
Manchukuo).

                                   Berlin, 28 September 1940
                                          (signed) Schnurre.