Cabinet met the other day. The financing of English–Soviet trade was discussed. Two schemes were presented. One, from the Foreign Office, proposed a loan from the British to the Soviet government for a term of 20 or 25 years at a rate of 6–7% interest. The British government would raise the money on the London market at 1.5–3% interest, and the difference in the percentages would be paid as compensation to British citizens who had suffered losses as a result of our revolution. The loan was estimated at approximately 30 to 40 million pounds. The other scheme, from the Board of Trade, provided for ordinary financial credits for five years at 6% interest to the tune of 10 million pounds. The credits would not be linked to the old debts. The Board of Trade’s idea prevailed, and Nixon (head of the export department at the Board of Trade) was advised to begin negotiations with Ozersky.

The reasons for the Cabinet taking this particular course are, in my view, the following: (1) In the current unstable situation, the British government does not want to bind itself to a lengthy term of 25 years, especially in relation to the USSR; (2) The British government wants to trade with the USSR, but does not want to make a political sensation out of it. Indeed, a 25-year loan really would have been a huge sensation; (3) The British are psychologically unaccustomed to sudden leaps. Switching from the current practice of giving 18-month credits to a 25-year loan would certainly have been a tremendous leap. The British government prefers something in between.

Should one be happy or sorry about such a turn of events? Collier was undoubtedly disappointed by the Cabinet’s decision. He told me so himself during our recent lunch at the embassy. Marshall is even more disappointed. My feelings are ambivalent, but I see no reason to be distressed.