800.515/6–2845: Telegram

No. 383
The Secretary of State to the Ambassador in the United Kingdom (Winant)1
secret
u. s. urgent

5499. It is hoped Brit in expressing views reported urtel 6507 June 28 rptd Paris 409 and Moscow 224,2 were addressing themselves to procedural matters and not exhibiting negative attitude toward policy of extirpating spearheads of German economic penetration in European neutral countries and Turkey. Following observations regarding reftel and 3669 from Paris, rptd London 439 June 18,3 were informally made by Oliver to McCombe of Brit Emb:

1.
US proposal for agreement to address notes to neutrals was suggested as holding device until ACC should be able to act. It was prompted by repeated reports from Iberian Peninsula that delay was encouraging dissipation and weakening our chances of achieving control. Presentation such notes need not immediately raise legal questions in neutral countries. On other hand, statement our position might forestall nationalizing decrees by neutrals. It was not contemplated all neutrals would be treated exactly alike or Turkey should be approached at same time. Rather, objective was to obtain general agreement among occupying powers in order that there should be available way of forestalling inconsistent neutral action should need arise.
2.
McCombe was told that principal objective was economic security. Our attention should be directed primarily to extirpation of German spearheads in neutral European countries, Turkey, and perhaps other American republics which have not made satisfactory progress under replacement program. It was observed Reparation Commission, lacking attributes of sovereignty in Germany, was hardly an appropriate body for attempting to control directly German assets abroad. Apparently, Monckton’s reports from Moscow regarding presentation of vesting decree purporting to take over all German external assets primarily for reparation purposes had taken London by surprise. (No such decree has been cleared by Department [Page 558]and other agencies interested in control of German external assets.)
3.
Surprise was expressed at generally negative tone of Brit reaction. It was pointed out Bretton Woods Resolution VI4 obligates neutrals to hold German assets for Allied disposition and this portion of resolution did not relate to loot and flight capital alone. Moreover, sections 12 and 14 of EAC draft general order5 very clearly provide for occupying powers to assert control over German external assets. In this connection it was observed French proposal that EAC depart from its advisory role and assume interim operational function as to external assets was impractical.
4.
It was recognized that personnel problems would arise. However, they might not be so serious as Brit suggest because US does not visualize problem as one of operating great variety of going business enterprises but of eliminating spearheads of German aggression. Concerns such as parastatal enterprises, insurance companies, banks, airlines, tourist agencies, motion picture companies and the like should be wound up straight away. Industrial plants important to local economy should continue in operation under local freezing controls and German controlling interests be transferred to unobjectionable persons.
5.
It was agreed approach to Turkey not as urgent as to neutrals. If Russians have unilaterally approached Turks along lines suggested by US for joint action after all occupying powers had agreed, Moscow was to be instructed to voice objection. US could not admit, however, Brit contention that proposal should have been cleared with them before being suggested to other occupying powers. Such a course would inevitably have delayed action even further.
6.
It was pointed out that should Brit continue to object it might become necessary to take action in American zone with respect to external assets of German corporations domiciled therein. It was stated that such procedure would be regarded as unfortunate but perhaps necessary if agreement could not be reached soon. Later, Madrid’s 1439, July 36 (428 to London and 354 to Paris) was used to illustrate dangers inherent in further delay and to point out keen interest of US Zone Commander in external assets of corporations domiciled in US Zone. McCombe indicated understanding and agreement with our position.
7.
In view Span situation take up matter with MEWFO again along lines of foregoing.

Sent to London. Repeated to Paris as 3121, to Moscow as 1534, to Madrid as 1146, to Bern as 2244, to Stockholm as 1276 and to Ankara as 685.

Byrnes
C[ovey] T. O[liver]
  1. This message was repeated to the American Embassy at Moscow as telegram No. 1534.
  2. Document No. 382.
  3. Not printed.
  4. Proceedings and Documents of the United Nations Monetary and Financial Conference, Bretton Woods, New Hampshire, July 1–22, 1944 (Washington, Government Printing Office, 1948; Department of State publication No. 2866), vol. i, p. 939.
  5. See the accompaniment to document No. 1038, printed in vol. ii .
  6. Not printed.