462.00 R 294/345: Telegram
The Secretary of State to the Ambassador in France (Herrick)
216. L–95, for Logan. Reference to your L–184, July 2, noon.
(1) Our Army costs may be subordinated to the service of the proposed loan and, should it be necessary, to the costs of the Reparation Commission and agencies of control, but they should rank ahead of the Allied current Army costs. As the Army Costs Agreement by article II, paragraph 3, recognizes that the American claim should rank ahead of Allied current costs after January 1, 1927, I see no valid reason, in view of the clear equity of our position, for the Allied contention that their current Army costs rank ahead of or on [Page 41] parity with unpaid American past Army costs after that date. If the experts’ plan works, Germany’s payments would be increased and the Allied costs would be reduced to such an extent that question might not be of any great practical importance. American claims apart from Army costs should rank equally with reparations and all other treaty charges lumped together, and after the loan service, costs of control, and accrued and current Army costs.
In regard to interest, article II, paragraph 7, of the Army Costs Agreement properly recognized that this Government is entitled to receive interest if there is delay beyond 1926 in payment of installments agreed upon of a claim that even now is equitably overdue.
Please cable Department if you believe that it is absolutely necessary to be in position where some concession on these points be offered in order to facilitate suitable arrangement providing for payment of claims.
(2) Your observations concerning ships will receive Department’s comment later.
(3) Your paragraph 4. It is desired that you endeavor to obtain priority of American Army costs payments over the cash amounts that are to be allocated to cover deliveries in kind, restitution, clearings and similar matters. This arrangement would be equitable for the reasons set forth in Department’s telegram L–80, June 14, 1 p.m., especially paragraph 3. If you are unable to obtain full priority for American Army costs, then priority to be accorded in favor of these other charges should be limited to a moderate amount, say,500,000,000 gold marks annually.
(4) If it should not prove feasible to limit the suggested prior charges to an amount approximating 350,000,000 [sic] gold marks as estimated in last part paragraph 3 of Department’s telegram L–80, June 14, 1 p.m., which seems to depend principally on the limitation of current Army costs to 240,000,000 gold marks a year, it is obvious that payment of claims of the United States would not be made on basis calculated in the last paragraph of Department’s L–81, June 14, 2 p.m. In this contingency the Government of the United States might be compelled to ask for a larger percentage than that indicated. Refer Department’s June 14, 1 p.m., paragraphs 8 and 11. While awaiting assurances on reduction to an economical basis of costs of control and current Army costs and also indication that the Allies are agreeable to payment American claims along lines of Department’s June 14, 1 p.m., you may, if you think it advisable for purposes of negotiation, ask at first for a larger percentage than 2½ The Department recognizes the advisability of making its demands as moderate as possible, but obviously it does not desire to have to consider taking a percentage smaller than that indicated.