The Representative on the Allied
Commission on Reparations (Pauley) to the President
My Dear Mr. President: The question of the disposition of the German Naval and Merchant fleets has been raised by Generalissimo Stalin. As I understand it, he suggests that one-third of the tonnage of these fleets be allocated to each of the three powers.1
Most of the German Naval and Merchant tonnage is in the possession of the U. K., with some little in the hands of the U. S., and a small although unknown amount is held by the Russians in areas which they occupied.[Page 972]
Clearly under our proposed definition of “war booty”, the Naval ships would be excluded from reparations. But the Merchant vessels not belonging to the German armed forces would be deemed reparations. I quote our definition of war booty:
“War Booty shall be limited to finished equipment and supplies produced for and belonging to the German armed forces exclusive of any facilities used to produce such equipment or supplies.”2
Under any definition of war booty heretofore laid down, the German Naval fleet would be so classified and therefore excluded from reparations. If we award one-third of the German Naval tonnage to Russia, we would be making an outright gift to the Soviet Union. While I do not object to making this gift, I believe that it should be subject to certain specific conditions. These conditions are that:
One, Agreement be reached on proper definitions of war booty, restitution, and reparations, including particularly the boundaries of Germany from which reparations will be exacted.
Two, Whatever allocation of ships is made to the U. S. S. R. shall not be delivered until the Japanese War is terminated.
Three, The U. S. S. R. agree to provide approximately 50,000 barrels per day of petroleum or petroleum products from Hungary and Rumania to relieve the present burden on the U. S. and U. K. of providing tankers, needed for the Pacific war, for hauling petroleum supplies to Europe and the Mediterranean area.
In general, it would appear that the U. S. would be better off to view the German Merchant tonnage as reparations rather than as war booty,—particularly since most of this Merchant tonnage is in the possession of the U. K. Under the Soviet proposal, by yielding our claim to some of the Naval vessels as war booty, we would acquire a full one-third interest in the Merchant tonnage as reparations. These Merchant vessels could be reassigned by ourselves to countries like Norway as reparations to help replace her great war shipping losses. It would certainly seem that the power to allocate Merchant ships as reparations will prove useful to the U. S. in trading for such other assets as we may ourselves desire to acquire as reparations.
Of course, the Merchant tonnage should not be turned over to the U. S. S. R. for immediate operation. That country is not a member of the shipping pool. Moreover, it could not man the ships with experienced personnel for the most efficient use in the prosecution of the Japanese War.
In the circumstances, it is my recommendation that this whole matter of ships be referred to the Allied Commission on Reparations for immediate consideration and for report. All of the members of this commission are presently here.