The Representative on the Allied
Commission on Reparations (Pauley) to the Secretary of
Dear Mr. Secretary: There is no real difference in the US and UK figures. There was an apparent difference because the British (and the Soviets) have been using 1938 replacement value plus 15%, while we have been using 1938 depreciated value plus 15%. We did this as a protection against a later argument over the value of machinery when removed. However, we are willing to use “new cost” basis for second-hand machinery, provided it is agreed that the same basis will be accepted at the time of removal of the property. This is very important especially if the promise to deliver reparations is made in dollar value. Annex I2 shows our figures on both bases of evaluation. When we use the British method of evaluation we have substantially the same results as they do.
The Ruhr contains about 45 percent of the total reparations which we find should be taken from the Western Zones under the reparations policies of the U. S. Government, i. e., demilitarization without destruction of the German people. The additional reparations which may be given to Russia could be taken exclusively from the Ruhr, if, after consideration, you and the President think this wise. However, I think it would be better and safer to draw from the entire Western area, including all three zones. I suggest this because there are disarmament targets in the western zones, which are not in the Ruhr; the Ruhr industries are often integrated with industries just outside the Ruhr; and finally because it is not easy to define “the Ruhr” nor to build up statistics for a unit which exists more in conversation than as a defined political and census area.3 A summary of the possible reparations removals from the Ruhr is given in Annex II for your information.
For your information I attach Annex III and IV which show industry by industry what we find must be taken in reparations from Germany as a whole and from the western zones to fulfill US policy. You will note that while the tables are compiled in Reichsmarks, the totals are converted to dollars on varying bases in Annex I.
I trust that this letter and the information given will fully serve your purpose. If not I shall be glad to supplement this material.