740.00119 (Potsdam)/7–2945

No. 947
The Assistant Secretary of State ( Clayton ) to the Secretary of State

Memorandum

This memorandum is in confirmation of my statement to you this morning on reparations and is written merely for the purpose of placing my views on record and not for the purpose of prolonging the discussion.

1.
I think enough has been said at Yalta and at Moscow to justify the Russians in feeling that they have a right to 50% of whatever reparations in kind can be got out of Germany.
2.
The only practicable method of apportionment between the different claimant countries is on a zonal basis so far as Russia is concerned.
3.
If the Russian zone contained 50% of the movable industrial capital equipment of Germany of the kind which the Russians seek, the problem would be simple.
4.
The most reliable information we have is that the Russian Zone contains only 40% of the movable industrial capital equipment of Germany and that this equipment consists predominantly of the light industries (textiles, printing, apparel, saw mills, etc.) and contains relatively little of the heavy industrial type which the Russians want.
60% of the movable industrial capital equipment of Germany is in the Western Zone, about half of it in the Ruhr. This equipment, particularly in the Ruhr, is predominantly of the heavy type (iron and steel, chemicals, etc.) which the Russians want.
5.
I suggest, therefore, that we should be prepared to trade with the Russians on the following basis:
(a)
Reparations claims of Russia and Poland to be satisfied from the Russian Zone plus 25% of such industrial capital equipment as we decide should be removed from the Ruhr (estimated roughly at ½ of such equipment) on condition that an additional like amount of such equipment would be exchanged for an equivalent value in food, coal, zinc, potash, timber and oil to be made available to us by the Russians from their zone.
(b)
All other claimants for reparations (U. S., U. K., France, et al.) to be satisfied out of the Western Zone.
6.
German merchant fleet not considered in the above but to be covered by a separate arrangement.
7.
United Nations property in Germany and satellite countries, if taken for reparations, to be safeguarded or compensated for in accordance with memoranda of the U. S. Delegation of July 25.1

Since the Russians must bow to the U. K. and U. S. decision regarding their right to receive reparations from the Western Zone, I feel that any decision to exclude them from any participation in the distribution of the heavy equipment in the Ruhr as reparation, would be considered by the Russians as a reversal of the Yalta and Moscow position, since no Allied understanding would be necessary to enable them to get reparations from their own zone. Furthermore, we are committed to the substantial de-industrialization of the Ruhr, and it is doubtful if other claimant nations for reparations will be able to use all the equipment which will be removed from that area. In other words, to give a reasonable percentage of such equipment to the Russians will cost nothing.

W L C[layton]