462.00 R 29/123: Telegram

The Ambassador in France (Wallace) to the Acting Secretary of State

767. R–439 for Davis. Supplementing my R–432.66

Bayne and I were of opinion when letter of March 4 was sent to Germans that Reparation Commission had authority transmit that letter. We are still of that opinion.
The relevant phrase in article 235 provides in effect that such supplies of food and raw materials as may be judged essential to enable Germany to meet her obligations for reparations may also with approval be paid for out of twenty billion mark payment. This cannot mean that Germany may reduce the payment provided for by the total cost of all essential food and raw materials used by Germany up to the specified date whether acquired without or within boundaries of Germany. It was intended at most that cost of but not sanctioned [sic] essential food and raw materials would be so deducted because approval is provided for. Obviously no approval would be given to deduction of cost of food and raw materials originating in Germany because cost would be provided in paper marks in ordinary business operation and German Government would provide same in any purchases from its nationals deemed by it to be necessary. It follows that approval need not be given for deductions if Germany has other assets applicable to purchases. Assume value of deliveries under annexes ten billion marks and that German Government had twenty billion marks foreign exchange in hand. If cost of requisite food and raw materials which had to be imported, say five billion marks, do not believe Reparation Commission required to deduct that sum from payment due May 1921, in other words Reparation Commission has authority to require Germany to avail of assets in its possession or that it can obtain to purchase food and raw materials. If after having availed of such assets for that purpose Germany cannot make payment in addition specified in article 235, then the further question arise[s] as to whether amount of payment required will be reduced by value of such approved essential food and raw materials purchases; this [Page 376] latter question do not understand to be prejudiced by letter of March 4th, paragraph third. Foregoing deals solely with legal aspect. On policy I agree with your views but delegates to Reparation [Commission] apparently refuse to agree with us on that aspect of question of policy. Rathbone.
  1. Ante, p. 371.