462.11 W 892/306: Telegram
The Ambassador in France (Herrick) to the Secretary of State
310. L–177, from Logan.
(1) Department’s L–80, June 14, 1 p.m. As soon as the Department has reached a decision on the points presented below, I think that the Principal Allied Powers should be advised of the position of our Government in regard to participation in the proceeds of the Dawes Plan, but I am not yet sure that exactly the right time has come for this notification. The Allies should be firmly committed among themselves and for that reason I suggest that the Department’s [Page 25] announcement be deferred until I have ascertained the results of the Herriot-MacDonald conference and also the object and scope of the inter-Allied meeting which has been reported in the press as set for July 16. I expect to obtain data on these two matters in a couple of days, and I shall then report immediately to the Department, giving my recommendations.
(2) In fixing the amount to be attributed to American claims with the exception of Army costs at 2½ percent, does Department mean that that percentage is to be computed on the lump annual installment before deduction of our prior Army costs annuity, or is it to be computed on the remainder of the net installment after deduction of our Army annuity?
(3) I understand Department’s statement that the 2½ percent allocation is to start with the beginning of the third year as being in substance a reply to a question I raised in a previous telegram,25 and a decision that the Government of the United States will not assert participation in proceeds of the loan for which the Dawes Plan provides, of course assuming that the loan is used for purposes described. If the loan were used in whole or in part for a direct cash reparation payment it would, pro tanto, come within the terms of the Army Costs Agreement.
(4) I am not entirely clear on the purport of latter part of your paragraph 3, which I understand as meaning that the special Belgian payment provided for by article 232 of the Treaty of Versailles should not have special priority but should be lumped in with other reparation claims. If this be proper construction I wholly agree.
(5) I understand that we should assert participation in extra capital sums received from the flotation of railway bonds or otherwise. Department’s instruction goes on to say that if Treasury bonds are sold, interest provided for therein should nevertheless be included in computation of German installments for purpose of assessing the 2½ percent. Would this not be a double employment, of the same fund? That is, the United States, having received a capital amount of the bonds, will be deemed to be earning interest on the amount received. Agent General for reparation payments or the trustee would have to pay interest accruing on bonds themselves directly to purchasers, so that if our Government demands a percentage of interest so paid, the amount paid it would have to come out of other receipts under the plan. I fear that the Allies would raise objection to this double employment of bond interest for credit to the United States.
(6) I appreciate how extremely difficult it is to make even an approximate estimate of the ultimate total of awards by the Mixed [Page 26] Claims Commission, and I realize that this matter is of less importance than fixation of our participation at 2½ percent.
I have received Department’s telegram L–81, June 14, 2 p.m. Allies are certain to ask for approximation of our total claim in order that they may have some idea about number of years it would require to satisfy our claim in full, assuming the successful operation of the Dawes Plan. Capital claims are already fixed, of course, even if capital debt of Germany is not yet fixed under the plan. For that reason I recommend that the Department consider drawing up a rough estimate without any commitment and with all necessary reservations which could then be transmitted to the Allies, at least confidentially. It is desirable, naturally, that for purposes of negotiation the total amount be estimated at as low a figure as is prudently possible.
(7) Department has presented effective answers to questions I have previously raised, but one minor point seems to have been overlooked. If it should become desirable to allocate blocks of bonds to individual powers directly in order that they might float them internally along with their own, perhaps without governmental guarantee, would the Government of the United States accept any portion of a block?
(8) I am inclined to agree with Department’s stand in regard to German ships, but for reasons somewhat different. I doubt the desirability of assimilating these ships to private property under article 297, Treaty of Versailles, as Department intimates in paragraph 6. The Reparation Commission has already decided, I believe correctly, that the shipping clauses of the treaty and article 297 were mutually exclusive and that German vessels held by the Allied Powers were not retained under article 297 of the treaty, but were delivered to the commission under annex 3, part 8, except such vessels as had been previously condemned as good prize or had been legally expropriated otherwise; and in my opinion our strong point is that the former German ships were not German at the time of the signing or of the coming into force of the treaty, but had already become American vessels by the lawful process of expropriation.
The Allied Governments may, however, take the view that as we are brushing aside technical questions of law, the matter of the ships should be considered on a broad, equitable basis. The vessels differ appreciably from private property held by the Alien Property Custodian, for they have actually been expropriated and allocated to the Government of the United States by itself. I think that [position taken by Department is proper?], however, inasmuch as these ships are the only thing that we got out of the war.
(9) I am pleased with the spirit and detail of Department’s telegram; I believe it marks a great step forward toward successful [Page 27] operation of the plan, and the possible realization of our claims. If any of the matters referred to above demand lengthy consideration, I suggest that when the moment is auspicious for annexes to our general position to be presented to the Allies, it will not be necessary for all details to have been adjusted in final form. They can be worked out during the interim between the official announcement of our position and the forthcoming negotiations. Logan.