The Ambassador in the Soviet Union (Steinhardt) to the Secretary of State
Moscow, March 12,1940—2 p.m. [Received 2:30 p.m.]
277. My telegram No. 266, March 9, 9 p.m. The German Embassy in Moscow, although avoiding any direct participation in tho Finnish-Soviet negotiations, nevertheless is apparently being kept fully informed of their progress by the Soviet Government. A member of that Embassy, who is fully conversant with the terms presented to the Finnish delegation, has stated in strict confidence that the delay in concluding the negotiations has been occasioned by the demand of the Soviet Government for inclusion within the territory to be ceded to it on the Karelian Isthmus of the important power and industrial center of Imatra northeast of Viborg. The Finns have been endeavoring to obtain a modification of the Soviet demand on this point inasmuch as the Imatra power station serves all of Southern Finland and its loss would be a serious blow to Finnish national economy. My informant said that the fact that Stalin had up to yesterday not taken part in the discussions may indicate that the Soviet Government would be prepared to make a concession, but he was strongly of the opinion that with this possible exception no other modification in Soviet terms was to be anticipated.
My informant was frank in admitting that the German Government is desirous of seeing the Soviet-Finnish conflict terminated on almost any terms and advanced the opinion that the Finns would do well to accept since he professed to regard the prospect of effective British or French assistance as illusory. He expressed doubt however which he was careful to characterize as a personal opinion that Germany would take direct action against Sweden in the event that the Swedish Government conceded transit to French and British troops to Finland but stated that since the Soviet Union and Germany would in such an event be allies Germany would send airplanes and submarines to Murmansk. He added he thought that if the present negotiations are successful the Soviet Government might attempt to solve the awkward problem of its commitments to the Kuusinen government by creating an autonomous Finnish or Karelian People's Republic within the Soviet Union comprising the area ceded by Finland and the area "ceded" by the Soviet Union under the treaty of December 3 , 1939, with Kuusinen as its head.
Source: Foreign relations of the United States. Diplomatic papers. 1940. Volume I. General. (ACTIVITIES OF THE SOVIET UNION IN E A S T E R N EUROPE, AND SOVIET RELATIONS WITH THE BELLIGERENT POWERS). Department of State, Historical Division, Bureau of Public Affairs, 1959. (University of Wisconsin Digital Collections)