The two groups of plenipotentiaries were carried, each on an
American naval vessel, to Portsmouth, New Hampshire, and there at
the Navy Yard began their conference. Two-thirds of the terms
proposed by Japan were promptly accepted by the Russian envoys.
But an irretrievable split on the remainder seemed inevitable.
Japan demanded a money indemnity and the cession of the southern
half of the island of Saghalien, which Japanese forces had
already occupied. These demands the Russians refused.

Then Roosevelt took a hand in the proceedings. He urged the
Japanese delegates, through the Japanese Ambassador, to give up
their demand for an indemnity. He pointed out that, when it came
to "a question of rubles," the Russian Government and the Russian
people were firmly resolved not to yield. To Baron Rosen, one of
the Russian delegates, he recommended yielding in the matter of
Saghalien, since the Japanese were already in possession and
there were racial and historical grounds for considering the
southern half of the island logically Japanese territory. The
envoys met again, and the Japanese renewed their demands. The
Russians refused. Then the Japanese offered to waive the
indemnity if the Russians would yield on Saghalien. The offer was
accepted, and the peace was made.

Immediately Roosevelt was acclaimed by the world, including the
Russians and the Japanese, as a great peacemaker. The Nobel Peace
Prize of a medal and $40,000 was awarded to him. But it was not
long before both in Russia and Japan public opinion veered to the
point of asserting that he had caused peace to be made too soon
and to the detriment of the interests of the nation in question.