Office of the Historian

740.00119 EW/10–2545

The United States Political Adviser for Germany (Murphy) to the Secretary of State

Berlin, October 25, 1945—noon.
[Received 12:48 p.m.]

842. At the fifteenth meeting of the Coordinating Committee on 23 October the matter of advance deliveries on account of reparations was discussed. Specifically, the questions were:

(a)
The Economics Directorate’s report that 30 factories in western Germany are now available for delivery; and
(b)
The British member’s proposal on a method of evaluation and allocation of plants between the Soviets and Poland on one hand and Western claimants on the other (see my 802 of 18 October, 2 [3] p.m.).

British member stated that the allocation of reparations among Western claimants would be handled by a special authority and thus would not be the duty of the Control Council; that Western claimants would be notified of available plants through diplomatic channels; and that so far only France had filed bids other than the original Soviet requests. General Clay offered amendments as follows:

(1)
That the preliminary approximate assessment of plants should be based on the 1938 Reichsmark valuation as shown by the company’s records less depreciation and bomb damage;
(2)
A simplification of the process of accurate evaluation; and
(3)
That the Zone commanders be given the job of making the accurate evaluation and inventory at the time of packing the material.

The primary argument arose from the Soviet attempt to get immediate delivery of a maximum number of plants at once from the western zones. The Soviet member argued:

(1)
That the Soviets should be allocated at once 75 percent of the plants now declared available since the Potsdam Agreement does not [Page 1361] require the Soviet share to be kept at 25 percent at all times during the allocation process;
(2)
That this would constitute a negligible proportion of the total number of plants eventually to be allocated out of the Western Zones;
(3)
That the Soviet requests for factories were filed over 2 months before any other requests and should therefore receive prior treatment;
(4)
That to hold up the Soviet bids until the Western claimants had filed their requests would be unfair to the Soviets as causing undue delay;
(5)
And, that Soviet needs and war losses are greater than those of the Western claimants.

In reply the British member argued that the Council is a trustee for all Western claimants and cannot allocate plants to the Soviets before it hears which plants the Western claimants want; and that the delay in the filing of Western claims was caused by the failure of the Four Powers to decide until very recently where such claims should be filed. The discussion became somewhat acrimonious, with the Russian member asking that the minutes record that the British member was seeking not only to block the implementation of Potsdam but also to prevent others from doing it, and that the present British proposals are merely intended as a means of shelving the original Soviet demands for plants.

In an attempt to reach a compromise, General Clay suggested:

(1)
That the proposed procedure be amended to provide that in all allocations for advance deliveries, the Soviet be allocated not less than 25 percent, based on preliminary evaluations; and
(2)
That, as a symbol of the Council’s desire to begin at once with the destruction of war potential as well as to make allocations to Russia, two factories be allocated to the Soviets within the next few days. On this point the British refused to concur in allocation until procedure had been approved. The French member made a similar suggestion that in cases where Western claimants make no bid for a plant within 2 weeks, it be allocated to the Soviets.

After very prolonged discussion, the meeting decided to refer the matter to the Reparations Deliveries and Restitution Directorate to draw up an agreed procedure in the light of the amendments proposed, as a matter of urgency. The British member finally agreed, also to General Clay’s suggestion as to the two factories, after arguing that he could not do so unless the entire procedure were agreed to.

Repeated to London as 122 for Reinstein and to Paris for Angell as 97; sent to Department as 842.

Murphy