862.50/8–1645: Telegram

No. 979
The Assistant Secretary of State ( Clayton ) and the Director of the Office of Financial and Development Policy ( Collado ) to the Deputy to the Assistant Secretary of State for Economic Affairs ( Thorp )1


8296. For Thorp from Clayton and Collado.

The tenor of a number of recent telegrams addressed to us and to Despres by the Department leads us to believe that we should not await our return before giving a few general explanations on the German economic decisions of Potsdam. There appears to be an [Page 939] unfortunate tendency to interpret the reparations operating agreement2 as an indication of complete abandonment of four power treatment of Germany. This is not stated in the texts and should not be accepted as a necessary conclusion even though there may be many among the military forces in Germany who believe that a zonal treatment or a tripartite treatment of the western zones will be the only practicable method of operation.

(Sent to Department as No. 8296; repeated to USPolAd Berlin for Despres as No. 80.)

The economic principles3 specifically provide that the Control Council should attempt to formulate “common policies” covering a variety of important economic questions including the scale of deindustrialization, the scale of reparation deliveries, import and export programs, the standard of living and inter-area distribution of foodstuffs and other supplies. In addition finance communications and transport are recognized to require centralized handling. The reparations agreement does not contradict any of these general principles; it rather provides certain detailed operating decisions and provides for a method of operation within common principles that it is believed will result in less administrative friction and difficulty. It is still necessary to reach common decisions if possible with respect to deindustrialization[;] with respect to the vesting of external assets and their distribution among claimant nations beyond the decisions specifically embodied in the Potsdam Agreement; with respect to restitution; to the treatment of Allied property in Germany; to the treatment of gold regarding which we have sent a separate telegram.4

Even within the reparations operating agreement itself it is necessary for the Reparations Commission and the Control Council to reach decisions regarding the scale of demilitarization in the western zones and the schedules of deliveries involved in paragraphs 4 (a) and (b). Procedures for handling this work are now being discussed in Berlin.

We recognized that in practice it may be difficult to arrive at common decisions in the Control Council and in the Reparations Commission on all of the points on which it is hoped common policy will be determined. Moreover we recognized that in practical operation within such policies the zonal treatment will undoubtedly provide less friction. We even recognize that the Soviets may undertake deindustrialization removals in the eastern zone on a scale not parallel to that which will be determined for the western zones. General Clay has however indicated a considerable degree of confidence [Page 940] in his ability to work out at least some common policies in the Control Council and such efforts should obviously not be abandoned prematurely.

We believe it desirable to outline in a little more detail our views as to the handling of sections 4 (a) and (b) of the reparations agreement. The 10% of removals is of course clear reparation for the Soviets and Poles. The 15% of capital goods and the raw materials to be exchanged for them are also to be considered reparations goods. Thus items received by the US and UK from the Soviets in this category are available in the first instance as reparations to the western occupying powers or through them to other reparations claimants. If it is necessary and desirable to utilize the products within the western zones such amounts of the products shall be considered as new imports from the western reparations claimants and as such subject in [to?] the usual first charge on exports.5

. . . . . . . . . . . . . .

  1. Sent to the Secretary of State over the signature of Winant.
  2. Document No. 1383, p. 1485.
  3. Document No. 1383, p. 1483.
  4. Document No. 978.
  5. For the paragraphs omitted here, see document No. 892.