740.00119 Potsdam/7–745: Telegram

No. 368
The Director of the Office of Financial and Development Policy (Collado) and the Adviser on German Economic Affairs (Despres) to the Secretary of State 1

1. For the Secretary, From Collado and Despres.

Pursuant to our discussion, you may wish to consider the following paragraph as a substitute for para. 3 in the proposed telegram to Pauley,2

“The Dept is fully in accord with the general principle embodied in your proposed formula of apportionment under which the major powers would decide the apportionment among themselves of the aggregate share of reparation going to them collectively but would not try to fix definitely the apportionment between the major powers, on the one hand, and the other Allies on the other, in advance of consultation with other Allies. We also agree that inclusion of France as a major power in such a formula raises the most acute difficulties in the absence of French representation on the Reparation Commission. We therefore favor your proposing in the Commission a three power formula of the type which you have recommended, but we feel that you should state to your colleagues that we would prefer a formula fixing the relative shares of the four powers which will occupy Germany if the absence of French representation on the Commission did not make consideration of such a formula impracticable. We also believe that the percentages recommended by you, would give too large a share of total reparation to Britain and the US, and that unless Russia is willing to accept much less than 50 percent of total reparation little will be available under your formula for the other Allies. We propose therefore that you consider a modification of your ratios. For example, if it were agreed that the Big Three share should be divided seventy percent to USSR and fifteen percent each to US and UK, and that at least thirty percent of total reparation would be reserved for other Allies, this would give Russia about fifty percent of total reparation and US and UK about ten percent each. We hope that you will consider some such modification, because our limited capacity to absorb reparation in goods and labor services and our disinclination to assert a claim to gold looted by the Germans in Allied countries make it unlikely that we can collect a larger share of total reparation than ten percent. Moreover, our direct war damage has been relatively small, even though the volume of our resources devoted to the war has been large.”

  1. Sent over the signature of Grew.
  2. Replying to document No. 366.