462.00 R 29/123: Telegram

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

765. For Boyden from Davis. Treasury B–7.

See Rathbone’s 432 and 439, March 18 and March 20, respectively.

  • First: We agree substantially with the views expressed by Rathbone and as the State Department has prepared a note to the Allied Governments expressing this Government’s views in respect to certain interpretations which they have desired to place upon the Treaty, it does not seem necessary for you to make any further presentation regarding letter of March 4 to the Germans communicated in Rathbone’s 382.67
  • Second: As to raw material and food required by Germany under Article 235, this Article necessarily refers to such products as may be imported with the approval of the Reparation Commission, otherwise there can be no deduction from the 20,000,000,000 marks. I am of the opinion that Germany is to pay on May 1, 1921, 20,000,000,000 gold marks less the value of the food and raw materials imported [Page 383] by her with the approval of the Reparation Commission, and less the costs of the Armies of Occupation and the amounts with which Germany is to be credited for deliveries under the Annexes of the Reparation Chapter. There is some confusion regarding this which can only be accounted for by the fact that after the Allied Governments, before the Treaty was finally presented to Germany, had given out the notice that Germany would be made to pay 20,000,000,000 gold marks within two years, it was fully realized by all parties that this would be utterly impossible. As a compromise, the changes were made which in effect only required Germany to pay within the first two years the amount of the credits above mentioned, and as provided for in Annex 2, paragraph 12 (c)–l, such bonds as have not been redeemed by May 19, 1921, shall be funded by the delivery of bonds of longer maturity. As to Paragraph seven of Rathbone’s 432, I do not believe it was considered by any one at the time of adopting Article 235 that Germany would accumulate any appreciable amount of foreign exchange to apply on her obligations contained therein.
  • Third: Our conception is that the Reparation Commission has duties as well as rights and that the former consist in avoiding policies which will prevent Germany’s economic recovery and the decrease of her capacity to make reparation. The Allied and Associated Powers did not attempt under the Brussels Agreement to force Germany to requisition securities held by her nationals, but at the request of Germany, consented to her so doing and to giving her facilities for disposing of them. I agree with Rathbone that the Allied Powers will soon ascertain that Germany cannot obtain any appreciable amounts through forced sales of German private properties and investments in neutral countries and that as the condition of affairs in Germany grows more desperate, they will recognize the necessity of a liberal and broad policy and the advisability of informing Germany that there is no further intention of acquiring or forcing the sale of German private interests in neutral countries. It is unfortunate, however, to delay this recognition and allow matters to become worse.
  • Fifth [Fourth]: Of course if Germany desires to employ neutral securities belonging to her nationals in the purchase of raw materials and food, we shall offer no objections, but our objection has been to an attempt to force Germany to do this and to the idea that her food and raw materials could be obtained in this manner.
  1. Ante, p. 366.