740.00119 (Potsdam)/7–3145

No. 900
The Representative on the Allied Commission on Reparations (Pauley) to the Secretary of State1

My Dear Mr. Secretary: The attached memorandum on the relationship between reparations and ceded German territory embodies what we believe to be certain improvements over a similar memorandum submitted to you in my letter of July 16th.2

The purpose of this proposal is quite simple. It aims to distribute reparation burdens as well as benefits among those receiving ceded German territory. The first three points provide that any exportable surpluses of commodities from any ceded territory shall be subject to the following priorities:

  • First, Shipment into Germany to such extent as these commodities are needed to sustain minimum subsistence.
  • Second, To pay for imports into Germany where needed to sustain minimum subsistence.
  • Third, For payment into the general reparation fund to be allocated among claimant nations.

The fourth and last point provides that the value of capital equipment and natural resources located in any ceded territory shall be accounted for as reparations delivered to the receiving nation.

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Since I understand that the subject of the eastern boundaries of Germany will be considered at today’s meeting of the beads of the Governments, I urge that you give this subject your immediate personal consideration.


Edwin W. Pauley

Memorandum by the United States Section, Allied Commission on Reparations

Re: Relationship between Reparations and ceded German territory.

As a part of any treaty recognizing the ceding of any portion of Germany as its boundaries existed at the end of 1937, it shall be provided that:

Any property or current production available for removal from any ceded territory shall be first utilized within Germany to whatever extent occupation authorities require to avoid the necessity of imports into Germany.
Thereafter, the value or proceeds of any property or current production from any ceded territory available for delivery outside of Germany shall be first used to pay for approved imports into Germany.
If sufficient funds are available to pay for all such approved imports, the proceeds or value of any assets delivered from any ceded territory shall be treated as a reparations delivery to such nation or nations and in such amounts as may be designated by the Allied Commission on Reparations, or a permanent Reparations Agency to be created.
The value of capital equipment and natural resources within the boundaries of any territory ceded from Germany to any other nation shall be accounted for as reparations. To the extent that the production of such equipment or resources is pledged for reparations or to pay for approved imports into Germany, the reparation value of such equipment and resources shall be correspondingly decreased.

(Practically, the foregoing obligations may well have to be funded both in the form of agreements to deliver certain fixed quantities of coal, zinc, coke, iron, steel, cement, calcinated soda, etc., for a definite period of years, and by reducing the amount of reparations which will be delivered to the nation receiving ceded territory or delivered to another nation for whose security territory may be ceded.[)]

  1. Printed from a copy on which there is an uncertified typed signature.
  2. document No. 893.