740.00119 Control (Germany)/12–2145
The Acting Secretary of State to the Secretary of the Treasury (Vinson)
My Dear Mr. Secretary: As you know, there have been extended discussions between officers of our two Departments on the subject of implementation of the law vesting German external assets, which was recently issued by the Allied Control Council, and on the impending negotiations with the European neutral countries on recognition of this law and disposition of these assets. These discussions have involved the manner in which the negotiations with the neutrals are to be carried out, and the sanctions and inducements which will be available to the negotiators. The enclosed copy of a cable, which has been sent by the Department today,74 reflects one aspect of the substantial agreement achieved in these discussions.
It is my understanding that the Treasury Department objected to the use in the draft cable of certain words which made it specifically appear, in presenting this matter to the British and French Governments, that unilateral action with respect to sanctions would under no circumstances be taken by this Government. This language has been stricken, and you will note that the cable now recommends only that the threat of concerted action should be available to our negotiators.
I should like to make clear, however, as has previously been indicated in informal conversations by officers of this Department, that it seems most unlikely that this Government will unilaterally impose sanctions of the type set forth in the cable. It is the Department’s carefully considered view that such action as the withdrawal of presently outstanding general licenses, the limitation of scarce supplies, and the like, will be ineffective and therefore economically as well as politically undesirable unless joined in by at least the United Kingdom and France. I need hardly point out, for example, that limitation of coal supplies by the United States will be of no valuable effect if other countries are in a position to and in fact do make coal supplies available to the neutral countries. In addition, you will recognize the strong political undesirability of such unilateral application of sanctions as would make it appear that this program is solely of concern to the United States, rather than being the United Nations program which it properly is.
[Page 929]One further change has been made in the cable. As has been pointed out by the Department informally, the circumstances of our relations with the neutral governments at any given future moment cannot now be foreseen. The decision on application of the agreed sanctions can be made only in the light of all of the existing relevant conditions and circumstances. Other programs may have to be considered. To the extent possible, the Department is anxious to reach firm agreement with the British and French Governments on a program which would, in whole or in part, be put into operation should negotiations with the neutrals fail. Nevertheless, the decision to apply the measures suggested in the enclosed cable must be made only in the light of overall considerations of policy affecting our relations with the country in question. To reflect this point, an additional sentence has been added to the draft cable. This sentence, which has been inserted at the end of the third from last paragraph of the telegram, reads “At such time as the imposition of sanctions may become necessary with respect to any neutral the decision on the extent to which we will apply such sanctions will naturally take into consideration then existing political and economic conditions with respect to that neutral.”
I believe it important to outline briefly the approach which the Department will instruct the principal Allied negotiator to make with reference to inducements and sanctions. Initially, it should be pointed out to the neutrals that it is our common desire to eliminate existing financial and trade restrictions in so far as these restrictions arise out of the Allied economic warfare program. Allied desire to return to free trade, international cooperation and understanding has been fully stated on numerous occasions. Unfortunately, but understandably, the removal of such restrictions and the inclusion of the neutrals at this stage in the United Nations’ program for international cooperation and understanding cannot be undertaken while Axis persons, funds and entities remain relatively free in areas outside of Axis territory. Our program for reestablishing free trade and international cooperation cannot be satisfactorily executed while those forces which fought against these doctrines continue to exist. While we are just as anxious as the neutrals to terminate our so-called “black lists”, our blocking of neutral funds, our financial restrictions on current transactions and similar controls, such controls cannot be removed until agreement is reached which will not only achieve our security objectives, but will also assure that those countries which were devastated and depleted by Axis aggression have made available to them the maximum possible of Axis funds for rehabilitation and reparation.
Failure to reach agreement on these issues, it should be indicated, will necessitate our reviewing the further steps that must be taken to [Page 930] protect ourselves and to achieve our objectives. Such steps will require additional supervisory controls over trade and financial restrictions to assure that our security objectives are met. Obviously, we are not any more anxious than the neutrals to embark upon such a program, which is in opposition to our desires as it is to theirs. It is for that reason that we seek in the spirit of negotiation to achieve our objectives. Presumably, the neutrals share our anxiety to prevent future aggression and to assist in the relief and rehabilitation of devastated and depleted areas. The fact that without reaching agreement on these objectives we not only cannot find our way clear to remove existing controls, but must consider imposition of increased controls, distasteful though they may be, should sufficiently underline the importance with which we view the question of Axis assets and persons.
I feel that by discussing inducements and sanctions along the above lines, we present a reasonable and strong case, which makes very likely our obtaining our objectives. Should we subsequently find that our objectives are not being met, we can specify in greater detail those additional steps which we will have to undertake. This further step will depend, as stated above, on all the existing relevant conditions and circumstances.
Sincerely yours,
- Reference is to telegram 11022, December 21, to London, supra; Department file copy of this letter bears the drafting date December 21.↩