3. No indemnity for costs of war or damages due to military operations.

4. Cessation of economic war and reparation of damages sustained by private persons through the economic war.

5. Resumption of commercial intercourse and the same provisionally on the basis of the old commercial treaty and twenty years' preference subject to restriction in respect of any Customs union with neighbouring countries.

6. Mutual assistance in raw materials and industrial articles.

A further point was contemplated, dealing with the evacuation of the occupied areas, but the formulation of this had to be postponed until after consultation with the German Supreme Military Command, whose co-operation was here required owing to the mingling of German and Austro-Hungarian troops on the Russian front. The Army Command has indicated a period of at least six months as necessary for the evacuation.

In discussing this draft with the German delegates two points in particular were found to present great difficulty. One was that of evacuation. The German Army Command declared categorically that no evacuation of the occupied districts could be thought of until after conclusion of the general peace. The second difficulty arose in connection with the question as to treatment of the occupied districts. Germany insisted that in the peace treaty with Russia it should be simply stated that Russia had conceded to the peoples within its territory the right of self-determination, and that the nations in question had already availed themselves of that right. The plain standpoint laid down in our draft we were unable to carry through, although it was shared by the other Allies. However, in formulating the answer sent on December 25, 1916, to the Russian peace proposals a compromise was, after persistent efforts on our part, ultimately arrived at which at least prevented the full adoption of the divergent German point of view on these two points. In the matter of evacuation the Germans agreed that the withdrawal of certain bodies of troops before the general peace might be discussed.

In the matter of annexations a satisfactory manner of formulating this was found, making it applicable only in the event of general peace. Had the Entente then been disposed to make peace the principle of "no annexations" would have succeeded throughout.

Even allowing for the conciliatory form given through our endeavours to this answer by the four Powers to the Russian proposals, the German Headquarters evinced extreme indignation. Several highly outspoken telegrams from the German Supreme Command to the German delegates prove this. The head of the German Delegation came near to being recalled on this account, and if this had been done it is likely that German foreign policy would have been placed in the hands of a firm adherent of the sternest military views. As this, however, could only have had an unfavourable effect on the further progress of the negotiations, we were obliged to do all in our power to retain Herr Kühlmann. With this end in view he was informed and invited to advise Berlin that if Germany persisted in its harsh policy Austria-Hungary would be compelled to conclude a separate peace with Russia. This declaration on the part of the Minister for Foreign Affairs did not fail to create a certain impression in Berlin, and was largely responsible for the fact that Kühlmann was able to remain.

Kühlmann's difficult position and his desire to strengthen it rendered the discussion of the territorial questions, which were first officially touched upon on December 27, but had been already taken up in private meetings with the Russian delegates, a particularly awkward matter. Germany insisted that the then Russian front was not to be evacuated until six months after the general peace. Russia was disposed to agree to this, but demanded on the other hand that the fate of Poland was not to be decided until after evacuation. Against this the Germans were inclined to give up its original standpoint to the effect that the populations of occupied territories had already availed themselves of the right of self-determination conceded, and allow a new inquiry to be made among the population, but insisted that this should be done during the occupation. No solution could be arrived at on this point, though Austria-Hungary made repeated efforts at mediation. The negotiations had arrived at this stage when they were first interrupted on December 29.

On resuming the negotiations on January 6 the situation was little changed. Kühlmann's position was at any rate somewhat firmer than before, albeit only at the cost of some concessions to the German military party. In these circumstances the negotiations, in which Trotski now took part as spokesman for the Russians, led only to altogether fruitless theoretical discussions and the right of self-determination, which could not bring about any lessening of the distance between the two firmly maintained points of view. In order to get the proceedings out of this deadlock further endeavours were made on the part of Austria to arrive at a compromise between the German and Russian standpoints, the more so as it was generally, and especially in the case of Poland, desirable to solve the territorial question on the basis of complete self-determination. Our proposals to the German delegates were to the effect that the Russian standpoint should so far be met as to allow the plebiscite demanded by the Russians, this to be taken, as the Germans insisted should be the case, during the German occupation, but with extensive guarantees for free expression of the will of the people. On this point we had long discussions with the German delegates, based on detailed drafts prepared by us.