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.

I also pointed out that in my judgment whereas the Japanese had enjoyed the sympathy of most of the civilized powers at the outset of and during the continuance of the war, they would forfeit it if they turned the war into one merely for getting money--and, moreover, they would almost certainly fail to get the money, and would simply find themselves at the end of a year, even if things prospered with them, in possession of territory they did not want, having spent enormous additional sums of money, and lost enormous additional numbers of men, and yet without a penny of remuneration.