740.00119 EW/6–2545: Telegram

No. 363
The Secretary of State ad interim to the Representative on the Allied Commission on Reparations (Pauley)

1488. For Pauley from the Acting Secretary.

1. Reurtel 2165, June 191 and 2262, June 25,2 the Department is not opposed to the discussion of an amount of reparations. While it is felt that a figure of twenty billion dollars is too high and that one approaching twelve or fourteen billion dollars would be more appropriate, the twenty billion dollar figure may be adopted as a starting point for exploration and discussion. In this connection it should be established (a) that transfers from Germany of existing wealth cannot [Page 520] now be expected to reach the figure ten billion dollars indicated in the Yalta discussions, (b) that attempts to secure from Germany within a reasonable period ten billion dollars of reparations transfers over and above exports required to pay for necessary German imports may result in the sacrifice of those German industrial disarmament objectives which are of prime concern to the United States.

The interest of this Government in questions of the total amount of reparations paid and the division of this total among various claimants is subservient to its interest in the firm application of those principles and procedures set forth under paragraph 3 of the Instructions for United States Representative on the Reparations Commission.3

[Page 521]

2. The Department feels that a Soviet receipt of 50 percent of total reparations payments as discussed at Yalta is not excessive on any probable basis of division. However, an allocation of 20 percent for United States, 20 percent for United Kingdom and 10 percent for the remaining countries leaves too little for these last claimants.

Although the Department concurs fully in your desire to avoid the possibility that the USSR become responsible for reparations for Eastern Europe on the one hand, and the United States and the United Kingdom for Western Europe on the other, the Department does not believe that your suggestion for an initial three-way distribution of reparations on the basis of 55, 22½ and 22½ percent should be put forward. Such an approach would be inconsistent with this Government’s stated desire for equal French participation in the discussions and decisions of the Reparations Commission. The Department is of the opinion that if any new formula were now proposed by you as a basis for discussion to replace the formula which we accepted at Yalta for discussion purposes, such new formula should provide for a four power apportionment. It would be prepared to support a four power formula along the lines you suggest which would include France on a proportionate basis along with the Big Three. The Department believes that in such a four power initial apportionment, the Soviet share should be sufficiently in excess of fifty percent so that the net portion of reparation finally allocated to the Soviet Union will be approximately fifty percent after joint contributions by the four powers for the benefit of the smaller Allies.

3. With reference to your suggestion that the United States assert to the fullest extent its demand for gold, among other things, it is the view of the Department that, apart from the question of gold restitution as against its use for reparation, the disadvantages resulting from such a demand on the part of this Government would greatly outweigh the benefits to be gained from an increase in this country’s gold stocks.

  1. Document No. 356.
  2. Document No. 358.
  3. The principles referred to, here printed from appendix 5 to the Pauley-Lubin Report (see vol. ii, p. 940), are as follows:

    • a. The Reparation Plan should assist in the elimination of industrial capacity in Germany considered to be dangerous to the security of the United Nations.
    • b. The Reparation Plan should aid in strengthening and developing on a sound basis the industries and trade of the devastated non-enemy countries of Europe and of other United Nations, and in raising the living standards of these countries.
    • c. The reparation burden should be distributed in so far as practicable so as to impose equality of sacrifice upon, and result in an equal general standard of living for the German populations of each of the zones under the control of the respective occupying nations.
    • d. This Government opposes any reparation plan based upon the assumption that the United States or any other country will finance directly or indirectly any reconstruction in Germany or reparation by Germany.
    • e. The Reparation Plan should not maintain or foster dependence of other countries upon the German economy.
    • f. The Reparation Plan should not be of such a nature as to promote or require the building up of German economic capacity.
    • g. To the maximum extent possible, reparations should be taken from the national wealth of Germany existing at the time of collapse, with primary emphasis upon the removal of industrial machinery, equipment and plants, particularly the shipbuilding, metallurgical, machine tool producing, electrical machinery, and chemical industries (including all industries producing oil and oil products, synthetic nitrogen and synthetic rubber), ships, rolling stock, patents, copyrights, and German foreign exchange assets including investments abroad. Capacity for the production of component parts that enter into the production of the industries noted above should also be eligible for removal. Reparation in kind should not include arms, ammunition, and implements of war. (This Government favors the inclusion of German ocean-going merchant tonnage in the shipping pool until the end of the war against Japan and its division on some fair basis thereafter, and negotiations with other governments are in progress on this subject.)
    • h. To the extent that for political reasons it may become necessary in the negotiations to agree that reparations be collected in the form of deliveries of goods from current production over a period of years, such goods should be of such nature and in such amounts as not to require the maintenance of the German war potential or the continued dependence of other countries on Germany after reparations cease. Accordingly, recurring reparations, over a period of years, should be:
      • “(1) As small as possible in relation to the reparations to be paid in the form of industrial plants and equipment; and
      • “(2) Primarily in the form of raw materials and natural resources, and to the smallest extent possible in the form of manufactured products.
    • i. The removal of plants and equipment shall take place regardless of the fact that they are owned in whole or in part, directly or indirectly, by United Nations nationals. Where plants or equipment which are owned in whole or in part by a United National [sic] national are to be so removed arrangements shall be made, if practicable and desired by the government of such national, for the owner to retain his interest in such plant and equipment after removal. If not practicable or so desired, Germany shall furnish to the government of such national adequate reparation to cover the interest of such national.
    • j. It will be inevitable that the German standard of living will be adversely affected by the carrying out of the Reparation Plan. However, the reparation exactions should be held within such limits as to leave the German people with sufficient means to provide a minimum subsistence standard of living without sustained outside relief; but under no condition should this limitation operate to require the retention in Germany of means to support basic living standards on a higher level than that existing in any one of the neighboring United Nations.
    • k. The Reparation Plan should not put the United States in a position where it will have to assume responsibility for sustained relief to the German people.”

  4. The initials of the signing officer do not appear on the substitute file copy.