860N.51/8: Telegram
The Ambassador in the Soviet Union (Steinhardt) to the Secretary of State
[Received 11:30 p.m.]
1520. Department’s 732, November 4, 8 p.m.45 The following information concerning the treatment being accorded the property of Reich Germans and German Baits in the Baltic States has been received in the strictest confidence from a member of the German Embassy.
- 1.
- My informant stated that Reich German industrial property in the Baltic States has not been nationalized following the Soviet occupation and that in certain cases where predominately German firms had been included in the nationalization lists they were subsequently denationalized as the result of a German protest. The exemption of such property according to this source rests on the provisions of the 1925 Consular Treaty between Germany and the Soviet Union46 which exempted German property in the future from sequestration by Soviet authorities without compensation. It was added, however, that although technically not nationalized the question of compensation and ultimate disposition of the property is presenting considerable difficulties and that the conversations which are being conducted by the German commissions in the Baltic States with the Soviet authorities have not been successful thus far; it was stated for example that the Russians were maintaining that the provisions of the 1925 Treaty applied only to German property located within the then Soviet Union and not to property in recently acquired areas. The German Government has refused to accept this interpretation and has been successful in maintaining the principle that the provisions of the 1925 Treaty must now be applied to the Baltic States as well. Bank deposits, however, and other financial assets of German firms held in Latvia, Lithuania and Estonia have been nationalized and the German Government has not yet been successful in having such assets released. My informant stated further that the Estonian Shale Oil Company to which the Department undoubtedly refers [Page 441] has not been nationalized by the Soviets; not, however, by virtue of the 1925 Treaty but pursuant to a special arrangement in the process of being worked out whereby German engineers and technicians will continue the administration and operations of the complicated process required for the extraction of oil from shale. The special treatment being accorded to the Shale Oil Company in Estonia, according to my informant, is believed to be due to the recognition by the Soviet authorities that they would probably be unable to operate the plant successfully with their own engineers and technicians.
- 2.
- With respect to the industrial property of German Baits in the three Baltic States such property has not been nationalized by reason of special arrangements in connection with the repatriation of the Baltic German minorities. It was stated that the negotiations in respect of such property have not yet been completed. The question of compensation is still under discussion. The provisions of the Treaty of 1925 do not apply to either industrial or personal property belonging to Baltic German minorities. Bank deposits and other financial assets of German Baits in Latvian, Lithuanian and Estonian banks have, however, been nationalized.
In conclusion my informant expressed the opinion that judging from the difficulties thus far encountered in the negotiations it is doubtful that German or Baltic German firms will receive adequate compensation for their property in the Baltic States and that although such property is technically not being nationalized the ultimate outcome will amount to substantially the same thing. My informant added that as the actual negotiations on the question of Baltic German property were being conducted with the local Soviet authorities by the German commissions in Riga, Kaunas and Tallinn, the German Embassy here was not familiar with all of the details of what he described as very complicated negotiations and it is possible, therefore, that further and more detailed information on the subject might be obtained from the American Embassy at Berlin.