The Assistant Secretary of
) and the Director of the Office of Financial and Development
) to the
Deputy to the Assistant Secretary of State for Economic
8296. For Thorp from Clayton and Collado.
The tenor of a number of recent telegrams addressed to us and to Despres by the Department leads us to believe that we should not await our return before giving a few general explanations on the German economic decisions of Potsdam. …
. . . . . . . . . . . . . .
With respect to import programs and the financing thereof every attempt will have to be made to agree with the Soviets in the Control Council on an approved program. The Soviets have agreed that approved imports shall be a first charge on exports. If as appears quite likely it becomes impossible to agree upon an approved import program in the Control Council the matter will revert to the zone commanders who will assess their own first charges on exports. At this level it will undoubtedly be desirable to arrange tripartite programs and we would agree with General Clay and General Hilldring that there would be some bargaining advantage on the supply side especially in connection with obtaining coal required from the Ruhr if General Clay had a considerable measure of control over supplies imported from the US and was thus able to do much of the combined programming at his end.
With respect to finance the President as you undoubtedly know did sign the directive3 a copy of which was sent to Phelps and consequently the War Department must assume full US financial responsibility whether we operate on a zonal or a combined basis. General Hilldring who is in London recognizes that of course the reparation agreement decisions with respect to capital equipment supersede any mention of facilities in the last paragraph and that in practice it will not be practicable to assess a first charge against exports of capital equipment to other claimants either.[Page 830]
In the first instance the results of joint programming of imports into [in?] the Control Council will determine whether there is any use attempting to discuss quadripartite financing. If this becomes impossible we would recommend a tripartite sharing of financial responsibility pending eventual assessment of a first charge on German exports which may take two or three years to work itself oat.
In this connection we discussed at Potsdam and have solidified our views in London with respect to the financing of displaced persons in Germany. These are embodied in the following paragraph in our proposal on displaced persons:4
“The administration5 is authorized to make agreements with the governments or occupying authorities in control of areas of Germany for the care or transportation of displaced persons provided that the basis [basic?] supplies equipment and transportation whether indigenous or imported necessary for the care and transportation of displaced persons within Germany shall not be a charge on the resources of the administration.”
We do not wish to put the additional financial burden on UNRRA whose funds will at best be severely limited in relation to demands put upon it; we should point out that the military will have to make most of the supply arrangements in any event; and we do not believe UNRRA is in a position to advance a revolving fund against a first charge on Germany which can be implemented only by the military and after UNRRA ceases to exist. It is possible that the British may resist this proposal and General Hilldring has indicated objection to UNRRA operations unless UNRRA does the financing. We strongly believe that such objections should be overruled.