462.00 R 294/345: Telegram
The Ambassador in France (Herrich) to the Secretary of State
323. L–184, from Logan.
1. It is not entirely clear from your L–80, June 14, 1 p.m. what Department’s feeling is on priority position that should be accorded [Page 39] our past Army costs. The instruction gives inference that we should maintain the priority granted by the agreement pending and should merely extend the dates of payment, whereas second class of American claims would be subordinated to service of international loan, costs of control, Reparation Commission, etc., and the future current costs of the Allies’ Armies. If this understanding of your instruction be correct, it would mean that our Army costs would enjoy an absolute priority on the proceeds of the experts’ plan after the first 2 years. I do not feel that a priority of that nature, if really intended, could be obtained; my feeling is that the proper priority should be (1) service of the loan; (2) costs of control, Reparation Commission, etc.; (3) then our Army costs to come next and before current costs of the Allies; however, if it became absolutely necessary we should be ready to place our past Army costs on a parity with current Allied Army costs. Reparations and all other treaty costs, our other claims included, would follow.
Also I am not quite clear from figures in paragraph 5, your L–81, June 14, 2 p.m., whether Department wishes to have included interest on arrears at 4½ percent, as provided paragraph VII of [Army Costs Agreement?]. I am inclined to feel that it is wholly desirable in new negotiations that we waive questions of interest entirely and instead ask merely for flat annual installments of capital amount, or ask for interest only as a trading point.
2. In answer to paragraph 1 of your L–91, June 28, I have nothing to add to my L–179, June 25, 7 p.m.
I agree that it is premature to make decision on acceptance of bonds before we know exact nature of any proposal. I had in mind that time may come when the Allies might offer us a considerable block of bonds in satisfaction for all or a part of our Army costs with request that from then on we look only to the bonds for satisfaction of this claim. It is my feeling that if the Allies accept blocks of bonds, it is probably desirable that we do the same, but I agree that this matter can wait.
3. Your telegram, paragraph 8. By my remarks about ships I did not mean to intimate that I expected any possible question on validity of title, but merely that we were in stronger position by not relying on article 297 as source of our title, but by relying instead on our expropriation, as article 297 bears more on the question of attribution of liquidated proceeds. Article 44[244?], annex 3 wholly inapplicable to us because only ships that were German on January 10, 1920, covered. I am familiar with the Brazilian ships’ case and vessels held by other South American powers. Bayne’s letter to which you refer takes same position on source of title to our ships which I suggest. I think that the niceties as to the origin of title may be forgotten. The only question of practical importance is whether we [Page 40] would permit a credit for value of ships, and if so, when. I wish to understand clearly an important declaration in your L–91, that if Government of the United States retains German ships “due credit will be given therefor on American claims against Germany.” The Allies will in this connection doubtless point out that we have retained and have exercised full proprietary rights over these ships for more than 7 years; and as there does not seem to be any indication at present of return of the vessels the Allies will be likely to inquire how much more time must elapse before the ships shall be considered as retained.
To a degree, retention is a question of fact and Allies might from practical viewpoint reasonably take the position that United States has already retained the vessels in accordance with a definite expropriation whereas other enemy property was and still is only sequestrated, and they may ask why credit should not be computed forthwith. I should appreciate further comment on the matter of credit, especially the time thereof and whether on Army costs or on other claims.
4. In regard to subparagraph (a) of paragraph 8, I agree that an effort should be made to obtain priority of American Army costs over deliveries in kind, but I am not confident this priority will be accorded. Should cash become inadequate there are other methods by which our Army costs could be obtained without direct transfer into foreign currencies; for example, acquisition by the Government of commodities in Germany to be paid for out of special bank fund, or financing out of this fund German purchases by American nationals who in turn would pay Government of the United States in American currency. Logan.
- Telegram in three sections.↩