The chief
difficulty came because of Japan's demand for a money indemnity. I felt
that it would be better for Russia to pay some indemnity than to go on
with the war, for there was little chance, in my judgment, of the war
turning out favorably for Russia, and the revolutionary movement already
under way bade fair to overthrow the negotiations entirely. I advised
the Russian Government to this effect, at the same time urging them to
abandon their pretensions on certain other points, notably concerning
the southern half of Saghalien, which the Japanese had taken. I also,
however, and equally strongly, advised the Japanese that in my judgment
it would be the gravest mistake on their part to insist on continuing
the war for the sake of a money indemnity; for Russia was absolutely
firm in refusing to give them an indemnity, and the longer the war
continued the less able she would be to pay. I pointed out that there
was no possible analogy between their case and that of Germany in the
war with France, which they were fond of quoting. The Germans held Paris
and half of France, and gave up much territory in lieu of the indemnity,
whereas the Japanese were still many thousand miles from Moscow, and had
no territory whatever which they wished to give up.
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