800.515/8–2045: Telegram

The Ambassador in the United Kingdom ( Winant ) to the Secretary of State 98

8411. In response British invitation Rubin has been in London since August 14 and has participated with Safehaven and Treasury representatives of Embassy in discussions with British Ministry of Economic Warfare Foreign Office, Foreign Office and Treasury on subject of German external assets. Preliminary meeting held August 14 with British and meetings held next 2 days with French present. British pointed out that neutral replies to our démarches would probably question our right to German external assets and insist that neutral claims should be satisfied out of such assets. Primary problem raised by British was how to meet these objections.

Memorandum drafted by Rubin and cleared with Collado99 was submitted merely as expression of opinion on basis of which recommendation would be made to US Government. On same basis, viz., that participants in meeting would recommend memorandum, as modified during meetings, to their Governments, memorandum was approved. Memorandum being sent forward in entirety1 via Andrews of London Embassy,2 leaving here August 18. Substance of memorandum is as follows:

Potsdam protocol waives USSR rights in receiving German external assets except in countries reserved in protocol.3 US, UK and France must act re others although our view (this point not discussed with British or French) is that USSR should be consulted before contemplated program is inaugurated.
It may be expected neutrals will contest Allied claims to such assets. To obviate difficulties involved in neutral position so far as possible, following program should be presented to neutrals by three Governments concerned, acting on behalf United Nations:
Allies have suffered great damage during course of war including severe depletion of natural resources. Neutrals have profited at least relatively and partially because of programs Allies forced to undertake to prevent more aid to enemy such as preclusive purchasing.
A necessary (though not sufficient) condition of neutral eventual participation with other nations on a full association basis is that they make some contribution to rehabilitation of countries which have suffered immense damage in fight against Fascism. Though surrender of German assets is not really contribution by neutrals, willingness to have such assets used in such manner may be taken as evidence of their willingness to share some of burdens with United Nations. Neutrals should therefore consent to program designed both to eliminate German influence and to realize on German external assets for such purposes.
Program to be presented envisages liquidation of German external assets, with compensation to German owners in German currency, purchasers to be either United Nations or neutral nationals. In all cases circumstances of sale and purchasers must be subject to approval of Three Powers acting on this matter. Elimination of undesirable persons of course one of primary conditions. Proceeds of sale to be made available to United Nations, acting through Three Powers. Proceeds would be used, in discretion of Three Powers, for such purposes as reparation, rehabilitation, payment for essential imports into Germany. To meet probable neutral objection that this may represent large scale capital withdrawals from their territory, Three Powers will agree to use proceeds for purchase to extent practicable of local products in accordance with fairly long range program to be worked out with neutrals. Such program would contemplate purchasing, to extent possible, local indigenous products which might otherwise be export surpluses, such products to be shipped (probably on repatriation [reparation?] account, though neutrals have no legitimate interest in this point) to United Nations for relief and rehabilitation, perhaps to Germany as essential imports (if approved by Allied Control Commission) to relieve possible burden on occupying powers. Such program damages neutral economy and foreign exchange position as little as possible, gives neutrals advantageous procedure for liquidating German investment in their territory and makes products immediately available to meet United Nations needs.
If agreed in principle, US to draft note incorporating above for concurrence UK and France. In addition following points included in memorandum but not to be included in note to neutrals.
Legal objections may be expected. These will include argument Allies have no jurisdiction and, even conceding jurisdiction, have failed to exercise their power to act as government of Germany. Memorandum states that question of extraterritorial effect of decree is largely political and that legal objections raised by neutrals can [Page 898] be cured by their own political decision to cooperate and public statement that such decree as Allied Control Commission may issue is in accordance local public policy. Also that Allied Control Commission has full governmental powers under surrender documents and lastly that Allied Control Commission will (if it has not by then already done so) issue appropriate vesting law. British feel that issuance of vesting law should be postponed pending this approach to neutrals; Rubin indicated his views that order should be issued as soon as possible, given agreement with USSR that US, UK, and France would manage external assets in neutrals. At French suggestion memorandum also includes paragraph to effect that Allies will cause German Government, when constituted, to recognize validity of steps taken by Allied Control Commission or by neutrals, with Allied Control Commission consent, under this program but not of steps otherwise taken by neutrals.
Rubin memorandum suggested that claims of neutrals be rejected outright, on ground advances to Germans represented by German clearing deficits should not be given any priority or even equal position with claims of Allies attributable to war damage, etc. British indicated belief that we should clarify our position re other types of claims as well as clearing balances. This portion of memorandum as modified by British indicates that:
Claims arising out of war transactions—clearings—to be rejected outright;
Pre-war debts—memorandum indicates that neutrals should not be informed of this now, but that offering the neutrals chance to use German assets to pay these claims, provided amount of claims is not large “might be considered as less prejudicial” than other alternative concessions. We reserved our position completely after indicating reluctance to make this concession.
Unmatured pre-war debts—to remain for such treatment as future may bring to all such claims.
Claims with respect to property in Germany. Neutrals cannot sell their property and expect to transfer proceeds out of Germany. However we recognize in general their right to property though like all other property in Germany it must be subject to general program of removals, requisitioning, etc., against payment comparable to that given to German nationals. Program of removals as it affects United Nations and neutral property is expressly reserved as subject for further negotiation. Discussion at meeting indicated that British position was not yet formulated on extent to which United Nations or neutral ownership should impede program of removals for reparation purposes.
Suggested Department consider above urgently on principles. If approved in principle Department will, under terms of memorandum, have obligation of drafting proposed démarche.
There was also discussed possible desirability of establishing an informal consultative body, on which US, UK and France would be represented, to deal with current operating problems with respect to German external assets and to discuss policy questions in first instance, [Page 899] referring major questions to governments. Such a body would deal with such problems as British proposal that paper bags paid for by Germans and now held in Sweden be shipped to British Zone in Germany and problem of disposal of German owned canned fish discovered in Tangier. Until action by Allied Control Commission on vesting or similar order such body would discuss manner of disposition of German external assets and serve as allocation agency under plan described in above memorandum. This suggestion had been discussed by Rubin with Fagen4 and Labouisse5 in Paris. Suggestion seemed to have favourable reception here, all being agreed some expeditious method of dealing with operating problems and an informal forum for preliminary policy discussions were needed. Suggest this be given consideration with view to formulating definite proposal.
Proposal contained in this telegram has been approved by Clayton, Collado and Stinebower.6

Above sent Department, repeated Paris 537 via courier pouch for information and comment, Moscow 300 for information and comment on question of consultation with USSR on this proposal and to USPolAd7 Berlin 86 from Winant for Murphy and Pauley.

  1. The text of this telegram was subsequently transmitted in a circular airgram of September 4 to the diplomatic missions in Ankara, Bern, Kabul, Lisbon, Madrid, Rome, and Stockholm.
  2. Emilio G. Collado, Director of the Office of Financial and Development Policy.
  3. Not printed.
  4. Archie M. Andrews, Junior Economic Analyst.
  5. See section III, paragraphs 8 and 9, Conference of Berlin (Potsdam), vol. ii, pp. 1478, 1486.
  6. Melvin Fagen of the Foreign Economic Administration.
  7. Henry R. Labouisse, Jr., American Adviser on Economic Affairs at the Embassy in France.
  8. Leroy D. Stinebower, Director of the Office of International Trade Policy.
  9. United States Political Adviser for Germany, Robert D. Murphy.