Foreign Relations of the United States: Diplomatic Papers, 1945, General: Political and Economic Matters, Volume II

840.48/5–1545

The British Embassy to the Department of State

His Majesty’s Government in the United Kingdom have asked for immediate re-examination by the United States Government and the Government of Canada of the future financing of military relief supplies in Europe as for their part they are unable to contemplate continued participation in an extended arrangement on the financial basis which has hitherto obtained.

2. Civil Affairs supplies provided by the United States, United Kingdom and Canada are now going forward to areas of Europe under the control of SCAEF and SACMED. Some of the countries in these areas can be regarded as able to pay for these supplies and some are unlikely to be able to do so. In order to consider any new arrangement as to the finance of relief supplies it is suggested that the position of the countries for which a responsibility for provision of supplies has been assumed by the three governments should first be examined.

A. SHAEF Area

(I) Liberated Countries in Northwest Europe

(a) France: The provision of civilian supplies to France (with the exception of coal and P.O.L.⁵⁹) is no longer a responsibility of the Theatre Commander. It is expected that all Civil Affairs supplies furnished to France will be paid for by the French Provisional Government and arrangements are going forward to bill them accordingly.

(b) Belgium: The period of military responsibility for supplies to Belgium is still continuing and is unlikely to terminate before September 1st at the earliest. The Belgians would, however, appear to be able to pay for these supplies and the Belgian Government has been informed that payment will be expected.

(c) Holland: It is expected that Holland will also be able to pay for Civil Affairs supplies received. It is not at the moment possible to estimate how soon military responsibility for provision of supplies can be terminated in Holland.

(d) Norway: The position regarding Norway would appear to be the same as in the case of Holland. The military period is in any event likely to be short.

(e) Denmark: From the point of view of foreign exchange resources Denmark’s position with regard to payment for Civil Affairs supplies is perhaps rather more doubtful, but, having regard to her position as an exporter of needed foodstuffs, there would not seem to be much room for doubt that arrangements can be made for Denmark to pay for any supplies which she receives on Civil Affairs account. These supplies in any event are likely to be small in quantity and value, with the exception of coal. In the case of Denmark also the period of military responsibility will probably be short.

(II) Conquered Territory in Northwest Europe

Germany: His Majesty’s Government are glad to note that the view of the United States Government as to payment for supplies furnished to Germany is the same as their own, namely that the cost of such supplies should form a first charge on Germany’s capacity to make foreign payments. It is the view of His Majesty’s Government that Germany should be dealt with essentially as a problem on its own. At the present time no estimate can be made either of the length of time during which it may be necessary to furnish needed imports as a matter of military responsibility, nor of the type or quantity of such supplies. Equally, Germany’s capacity to make payment for these supplies is extremely difficult to assess at this time. In these circumstances there must be recognition of the fact that there is no certainty of repayment. Moreover, until the position has been clarified and German assets are available to pay currently for supplies there is a temporary financing problem for which a solution on a combined basis is necessary. His Majesty’s Government agree that procurement of necessary supplies to Germany should continue on the lines of the June 8th Agreement, but at the same time consider that provision must be made against the contingency that Germany may not ultimately be able to pay in full. It is strongly recommended that some arrangement should be made for sharing this risk more widely than amongst the United States, Canada and the United Kingdom and under any such arrangement His Majesty’s Government would expect that its share would be less than 25 per cent of any residual loss. It is further the view of His Majesty’s Government that since the United Nations Relief and Rehabilitation Administration is charged with the duty of looking after displaced persons in Germany, it should assume financial responsibility for all supplies provided to such persons as soon as possible.

B. SACMED Area:

(1) Provision of supplies for Greece, Yugoslavia and Albania will shortly cease to be a responsibility of the United States, United Kingdom and Canada and the financial liability in respect of these supplies has already passed to UNRRA in respect of Greece and Yugoslavia and will shortly pass to UNRRA in respect of Albania. There is therefore no need to examine this problem in this context.

(2) Italy and Austria: The furnishing of civilian supplies to Italy during the progressive stages of liberation has now been the responsibility of the three participating governments for nearly two years and its cost already amounts to well in excess of $200,000,000. Now that the war in Europe has ended it seems clear that the United States, United Kingdom and Canada can no longer be expected alone to bear the burden of bringing relief supplies to Italy. In the view of His Majesty’s Government it would now be entirely appropriate to extend the field of activities of UNRRA both to Italy and Austria. Both countries will need to receive very substantial relief assistance. In His Majesty’s Government’s view the only satisfactory arrangement, bearing in mind the heavy tasks which will fall on the three Governments elsewhere, will be to place upon UNRRA the full responsibility for providing relief in these two countries. His Majesty’s Government hope that the United States and Canadian Governments will be prepared to support a proposal to UNRRA on these lines. Such a proposal should, it is suggested, be considered at the UNRRA Council meeting in July.

His Majesty’s Government consider, however, that if UNRRA is to be asked to undertake additional commitments in respect of Italy and Austria, the question of the provision of further funds for UNRRA cannot be avoided, since it would be unlikely that the other members of the Council of UNRRA would agree to the assumption by the Administration of large new commitments for ex-enemy countries if this were to involve a contraction of the sums available for expenditure on relief in allied countries. This is the more likely in that many member Governments already regard the available resources of UNRRA as inadequate to ensure their basic relief and emergency rehabilitation. His Majesty’s Government are therefore anxious to discuss possible means of supplementing the financial resources available to UNRRA.

In the first place it is suggested that additional sources of finance for UNRRA may be found by obtaining contributions from neutral and other countries. This particular question might well figure on the Agenda of the next meeting of the UNRRA Council, and His Majesty’s Government would be interested to know how the United States Government considers that such further contributions could best be obtained. It is also hoped that other member governments whose burden of external indebtedness is not so heavy as that of the United Kingdom may feel able not only to meet the target contributions which were recommended at Atlantic City⁶⁰ but to increase those contributions wherever possible. In so far as the United Kingdom is concerned, for supply reasons which are well known, the United Kingdom contribution to UNRRA is still far from being exhausted since only some £14,000,000. out of a total of £80,000,000. have been committed. This position is in contrast to that of other major contributors. His Majesty’s Government would thus not feel able to consider the grant of further assistance to UNRRA until their contribution had been more fully drawn upon. When that situation arises His Majesty’s Government will, of course, consider the matter further in the light of the then prevailing situation.

If the Council of UNRRA agree that responsibility for supplies to Italy and Austria should be undertaken by UNRRA the manner in which supplies provided to Italy as a military responsibility from the present time until UNRRA takes over has to be settled. The Council does not meet until July and although it is very difficult to estimate with certainty it seems probable that the limit of $400,000,000. will have been reached in terms of deliveries on Civil Affairs account at some point in June. In order to prevent any additional loss falling on the United States, United Kingdom or Canada it would seem necessary to obtain the authority of the Council that UNRRA’s financial responsibility in Italy be made retroactive, say to July 1st. The actual responsibility for procurement and shipment of supplies could however continue to be discharged by the military authorities until such time as UNRRA was ready to take over on somewhat the same basis as the transfer, of responsibility was carried out in the Balkans.

His Majesty’s Government, however, desire to make clear that should the Council of UNRRA be unwilling to extend UNRRA’s scope to Italy and Austria or should there be an intervening period between the reaching of the $400,000,000 limit and the assumption of financial responsibility by UNRRA they, for their part, could only accept a liability for loss in respect of supplies furnished to these two countries in excess of the $400,000,000. limit to the value of supplies and services made available from the United Kingdom and colonies. His Majesty’s Government are nevertheless anxious that their external financial difficulties, of which the United States Government is aware, should not impede the flow of supplies to these areas and they would therefore, be prepared to continue to procure supplies on the basis of the June 8th, 1944 arrangement provided that revised arrangements are made by which the United Kingdom’s ultimate financial liability in respect of these supplies will be limited to those furnished from the United Kingdom and colonies.

The proposals made in this memorandum may be summarized as follows:

(i) His Majesty’s Government is prepared to continue to accept procurement responsibility for the provision of civil affairs supplies furnished on a combined basis (outside UNRRA) for Northwest Europe and Germany on the basis of the British Embassy’s Aide Mémoire of June 8th, 1944.

(ii) So far as the ultimate financial responsibility for supplies to Germany is concerned

(a) His Majesty’s Government agree that their cost should be a first charge on Germany’s capacity to pay

(b) provision should be made against the contingency that Germany may not ultimately be able to pay in full by making an arrangement under which the risk is more widely shared

(c) the financial responsibility for supplies for displaced persons be assumed by UNRRA.

(iii) His Majesty’s Government is prepared to continue to accept procurement responsibility on a similar basis for supplies to Italy and Austria on the understanding that the Governments of the United States and Canada support a proposal to the Council of UNRRA at its Third Session that UNRRA accept responsibility for these two countries and provided that any loss suffered by reason of the provision of such supplies to Italy and Austria above $400,000,000. and not borne by UNRRA should, so far as the United Kingdom is concerned, be limited to the value of supplies and services made available from the United Kingdom and colonies.

Washington, 15 May, 1945.

59. Petroleum, Oil and Lubricants.
60. See Department of State, First Session of the Council of the United Nations Relief and Rehabilitation Administration: Selected Documents, Atlantic City. New Jersey, November 10–December 1, 1943.