740.00119 EW/7–2845

No. 941
The Representative on the Allied Commission on Reparations ( Pauley ) to the Secretary of State 1

Dear Mr. Secretary: Our original calculations of maximum reparations, exclusive of current production, available from Germany, within its 1937 borders, amounted to something between $5–$6 billions. This estimate, however, included not only industrial and mining capacity but also among other things foreign investments, livestock and agricultural machinery. If we place the reparations figure at $5 billions and assume that 50% is in the Russian zone of occupancy there remains in the Western Zones, occupied by the U. S., U. K., and France $2.5 billions of removable “once-for-all” reparations. Twelve and one-half percent of this figure would be $312 millions.

Under a zonal system of reparations, and particularly in view of the tremendous shortages of food and fuel not only in the Western Zones of Germany, but also in all of Western Europe, it appears to be unwise to remove anything except direct war potentials for reparations purposes. We estimate the value of removable direct war potential in the Western Zones to amount to $1,710,000,000 of which 12½ percent would amount to $214,000,000.

This sum differs so widely from the figure which the Russians have in mind that I believe that the mere mention of this figure at this time would preclude any agreement being made at all. Accordingly I suggest that in your discussions with the Russians you talk only of total removables from the Western Zones and simply mention that they would receive 12½ percent of all equipment which the U. S., U. K., and France remove from these Zones.

Respectfully yours,

Edwin W. Pauley
  1. Printed from a carbon copy on which there is an uncertified typed signature.