740.00119 (Potsdam)/7–2545

No. 927
The Chief of the Division of Economic Security Controls (Rubin) to the Acting Chief of the Division of Economic Security Controls (Oliver)1

[Extract]
top secret

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Next, as to reparations: The discussions in Moscow did not advance the cause a great deal. There was agreement on certain basic [Page 871]principles—that Germany was to be treated as an economic unit, that removals should be primarily for the purpose of destroying German war capacity, that reparation should be used to build up Europe, that reparation should to a maximum extent be taken from existing capital wealth of Germany, that in order to avoid building up Germany long-run manufactured goods reparations should be kept to a minimum, that the German standard of living should not exceed that of Europe as an average, excluding USSR and UK, and (on this the Russians I think did not agree) that essential imports into Germany should be a first charge on German exports.2 However, there was no discussion—the Russians holding back—of definitions of war booty or restitution. When the boys arrived here, they got reparation put on the agenda—where it had not been—and they got the economic subcommittee to adopt their reparation principles—the Russians still excepting on the ground noted above. Then, however, the Russians threw in a definition of war booty—or war trophies as they call it3—which included everything.…

The outcome of that was a general scrapping of what had gone before, and the drafting of a memo proposing that Russia compensate itself and Poland out of the Russian zone, leaving the rest of us to compensate the rest of the reparation claimants out of our zones.4 This was supposed to figure out approximately to the percentages which had been agreed to in Moscow—56% for USSR, 22% each for the UK and US, each to cut its share in proportion as other countries were cut in. It was argued that the Russian zone contained about 50% of the reparation material in Germany, and that this sort of deal would about work out equitably. Also, it was argued that maybe this sort of thing was best after all—given a situation in which it was doubtful whether we could actually pull together in governing Germany and dividing up reparation items in each other’s zones. It was pointed out that the Russians had refused to agree that Allied representatives could freely circulate in their zone, and that the other type of overall plan made for friction in the future. Could be.

The plan outlined above was presented, orally, to the Russians yesterday.5 At the same time, I understand that we stated we wouldn’t consider their 20 billion plan6 (now presented for the first time, though promised for weeks) on the ground that their war-booty definition outmoded it. It was then indicated that maybe the USSR would discuss our plan, if, in addition, they could get 2 billion [Page 872]dollars worth out of the Ruhr. They said that their zone had mostly light industries and agriculture, and that what they needed was heavy industry. We, I understand, said that we’d be glad to give them things from the Ruhr; but that we’d do it in exchange for other things—mostly food, potash and lumber—from their area. A compromise proposal was that we give them part of the 2 billion as reparation and that the rest should be traded; but I think that Pauley has said that he wants to work out the trade deal first. On the other hand, as of this afternoon, the Russians had said that we couldn’t get anywhere on that sort of basis—that we had to agree first on reparation and give them at least a percentage figure on what they’d get from the Ruhr before we could come to the trade questions. (I forgot to say that Clayton tossed out, for tentative consideration and not as a fixed formula or plan, the suggestion that 50% of Ruhr 1938 capacity should remain there, the rest (believed to be more than 50% of 1938 capacity because of construction in excess of bomb damage) should be available as reparation removals, and that half of this might go to Russia—but without saying whether on trade or straight reparation). Result so far—disagreement. But another meeting is going on now—it now being slightly past midnight.

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  1. Printed from a carbon copy of an extract.
  2. See vol. i, documents Nos. 367 and 375.
  3. See document No. 904.
  4. See document No. 916 and later drafts thereof.
  5. See document No. 925.
  6. document No. 920.