840.24/6–1145: Telegram

The Acting Secretary of State to the Ambassador in the United Kingdom (Winant)69

4693 and 4694.70 For Hawkins. The provision of civilian supplies by the combined military authorities in Western Europe and the Mediterranean (so-called Plan A) has been carried on up to the present under the following financial arrangements, agreed to by the U.K., Canadian, and U.S. Governments. Procurement in U.S. is financed by this Government, in British Commonwealth except Canada by U.K., in Canada by the Canadian Government, other countries half each by U.S. and U.K. Demand for payment will be made on all recipient governments, payment to be made to supplying countries jointly. Losses incurred as a result of non-payment will be shared, by appropriate division of proceeds from paying countries as follows: U.S. 67 percent, U.K. 25 percent, Canada 8 percent. Agreement covers one billion dollars in procurement and provides that when loss reaches 400 million, negotiations will take place regarding further arrangements.

[Page 1100]

Presumptive loss of 400 million on shipments to Italy and Balkans has now been reached. (Germany and Austria are regarded presumptively as paying on principle agreed to by U.S. and U.K. that payment for essential imports should be first charge on export including reparations except plant removals). France, Belgium, Netherlands and Norway have agreed to pay.

On May 16, U.K. requested negotiations be commenced and presented following proposals.

Existing arrangements continue for Northwest Europe.
Burden of initial financing of supplies for Germany should be spread more broadly, with result that U.K. share of any loan should be reduced. UNRRA should take over financing of supplies for displaced persons soon as possible. Meanwhile, any supplies furnished would continue under present arrangements.
Italian relief program should be shifted to UNRRA effective July 1 by action of forthcoming Council meeting.
Relief for Austria should be handled on same basis as Italy.
Any losses sustained in excess of 400 million on shipments to Italy and Austria should be borne by U.K. only to extent of supplies and services (including shipping) furnished by U.K. and colonies.
Proposals 3 and 4 raise question of new funds for UNRRA which should be considered. Since only pounds 14 million out of U.K. contribution of 80 millions have been used, U.K. unable to consider further contribution until present contribution exhausted. Admission of neutrals to UNRRA should be considered.

Negotiations held by representatives of three governments May 25, 28 and 30. Adjourned until about June 25 to permit informal consultation with UNRRA and consideration by governments.

No formal U.S. reply presented but following position taken orally in conversations:

U.S. desires U.S. loadings of Plan A supplies for Netherlands and Belgium, and coal and POL71 for France after July 1 to be treated as lend-lease from financial viewpoint. Proposal does not envisage change in supply and shipping arrangements. No change in Norway which has not requested lend-lease. Some adjustment perhaps later necessary for Denmark which is not eligible for lend-lease.
U.S. prepared continue some arrangements similar to existing ones for Germany until redeployment into zones. Thereafter, until development of overall foreign trade and interzonal program for all Germany under Control Council, U.S. unable to accept responsibility for supplies except for American zone. Establishment of effective organization for handling all German foreign and interzonal trade matter of great urgency. UNRRA should not take over financial responsibility for displaced persons until it has responsibility for their care, but should be urged to assume latter responsibility soon as possible.
Italy proposal raises question of future of UNRRA on which our position reserved. If adopted, would require additional funds [Page 1101] for UNRRA, either by special funds for benefit of Italy or by raising total assessment. In either case, we would expect burden to be shared generally by contributing members. Financial responsibility should not be assumed by UNRRA until it takes over operating responsibility which unlikely before October 1 or November 1.
In view unsettled reparations issue, we are unwilling to agree this time to UNRRA putting supplies into Austria, since might be used to support reparations program which we oppose. Willing to consider resolution by UNRRA Council authorizing Central Committee to approve Austrian program if satisfied as to conditions between Council meetings. Meanwhile Austria should be handled under same procedure as Germany although relief scale should be higher than German minimum disease and unrest formula.
U.S. willing to reduce Canadian share of losses to 5 percent and assume 3 percent difference. Unable accept reduction in British financial responsibility which we believe within British financial capability and commensurate with British general responsibility. Propose extension present agreement with adjustment for Canada for any supplies furnished under agreed programs (e.g. subject to German cutoff on redeployment) until some agreed date, per-sons loadings to October 1 or November 1.

Canadians stated willingness to consider sharing on an equitable basis in any unavoidable losses in future programs. Unable to accept responsibility for losses on shipments to enemy which might result from trading off by U.S. and U.K. of first charge principle and would wish to be assured against such loss.

British took issue principally with our proposal 5 which they stated impossible to accept in view of British financial position (point which we challenged in light of British dollar position). British urged take-over of Italian program by UNRRA should be earlier than envisaged by us. On our proposal 1, they stated only question was whether it would reduce receipts to extent that distribution could not be made under loss-sharing formula. Pending resolution of issues, U.K. unable to procure for Italy and Austria except in U.K. and colonies. Whether this last position firm or just threat not clear.

Informal discussions then took place with UNRRA for the purpose of ascertaining how UNRRA expects to spend its present funds and UNRRA estimate of funds used to complete present UNRRA job. Following information which will be presented at August Council meeting was furnished us on the understanding it would be kept in strict confidence and its distribution limited.

UNRRA will have shipped approximately quarter billion dollars of supplies by June 30 according to its estimates. Expects shipments last half this year, assuming continuation June rate, to amount $750 million. With exception Italian program, Northwest Europe emergency program, displaced persons in Germany last quarter 1945, and a few other small items all shipments to Eastern Europe and Balkans. [Page 1102] Procurement for these purposes for 1946 shipments of $400 million plus $200 million lead items for China will result in commitment of all present UNRRA funds by end of this year. Balance of $250 million represents administrative costs, health and other services and funds not available this year, bringing total to $1850 million.

UNRRA estimates tentatively completion its present responsibility on basis of tapering off in Europe to end of 1946 would require perhaps additional $1,500 million of which $600 million for China in addition to $200 million to be used from present fund. Chinese figures unscreened by UNRRA, but developed with assistance UNRRA staff and believed by UNRRA realistic on requirements basis. Estimate for 1946 includes nothing for Italy except projection present $50 million program through year or for Austria except for displaced persons.

All of foregoing figures are conditional upon supply and shipping availabilities, although UNRRA states if particular supplies not available, it will shift to other items in order to balance programs.

Detailed figures received only on June 9 and not yet checked by us as to realism of supply and shipping assumptions. General feeling of governmental participants was UNRRA had made persuasive case for need for additional funds if UNRRA relief mechanism is to be used to meet payment deficits of beneficiary countries upon exhaustion present UNRRA funds.

Discussion of policy questions raised is being carried on among interested agencies with a view to present matter to President in the near future. U.S. position will have to be determined before August Council meeting and probably much sooner. We will keep you informed of progress. Marris arrives London probably June 11 to participate similar British considerations. Suggest you keep closely in touch with him regarding development of British thinking.

Sent to London for Hawkins, inform Blaisdell and Taylor. Repeated to Paris for Labouisse,72 inform Ball, repeat to Murphy;73 to Caserta, repeat to Rome and Florence for Erhardt.74 Repeated by airgram to Ottawa. Copies of relevant documents follow by mail. Hawkins please inform Hornbeck and representatives of Legation Copenhagen now in London regarding Northwest Europe situation. Brussels and Oslo will be informed by separate telegrams.

  1. Repeated to Paris as telegram 2689, and to the United States Political Adviser at Caserta as 574.
  2. Telegram sent in two sections, each section bearing a separate telegram number.
  3. Petroleum, Oil, and Lubricants.
  4. Henry Richardson Labouisse, United States Adviser on Economic Affairs at Paris.
  5. Robert D. Murphy, United States Political Adviser for Germany, at SHAEF.
  6. John George Erhardt, United States Political Adviser on staff of Commanding General United States Army Forces, Mediterranean theater.