The Secretary of State to the United States Political Adviser for Germany (Murphy)65

298. Subject is procedure for procurement and financing of German imports from U.S. proposed by General Hilldring66 with concurrence of Generals Somervell67 and Clay68 (urtel unnumbered Aug. 1069). [Page 1522] This proposal was resisted by Dept officers in discussions with War Dept in Washington at end of July but Dept was subsequently requested by Clayton not to continue opposition if proposal was adopted by War Dept. Subject is still under discussion in War Dept and between Hilldring and Clayton in London.

Dept officers were not impressed by Hilldring argument that unless all supplies for any zone in Germany allocated for procurement in U.S. were purchased by War Dept and consigned to Commanding General USFET,70 U.S. would be unable to secure reimbursement for cost of imports into its zone from proceeds of exports from other zones, notably the British. British have accepted throughout inter-governmental discussions the principle that proceeds of exports from all zones should be pooled to pay for German imports, and this principle is incorporated in paragraph III 19 of the Berlin protocol.71

Furthermore Dept officers believed that the fundamental reason for Hilldring’s proposal was that Clay desired to have an additional bargaining weapon vis-à-vis the other zone commanders in negotiations for the exchange of interzonal surpluses (e.g. coal from the Ruhr). They felt that Clay would in any case have large and sufficient bargaining power in that he, through his representation in CRAB,72 would be screening and passing judgment upon all import requirements of the other zones whether procured in U.S. or elsewhere. Issued was therefore simply one of how much power to vest in a U.S. field representative.

Foregoing is for your background information.

  1. This message was repeated to London as telegram 7103 for William L. Clayton, Assistant Secretary of State for Economic Affairs, and Emilio G. Collado, Director of the Office of Financial and Development Policy, with the following addition: “Dept understands informally from CAD [Civil Affairs Division, War Department] that Hilldring in discussions of his proposal in London has encountered firm opposition not only from British War Office but also from ‘Treasury and State Dept officials there’. Should we interpret this to mean that while favoring Clay’s having ‘a considerable measure of control over supplies imported from the U.S.’ (urtel 8296 Aug. 16) yon are now resisting Hilldring’s specific proposal [?]” (862.50/8–1845) For text of telegram 8296, see Foreign Relations, The Conference of Berlin (The Potsdam Conference), 1945, vol. ii, p. 829. Mr. Clayton was in London as head of the United States Delegation to the Third Session of the Council of the United Nations Relief and Rehabilitation Administration as well as to hold discussions with British officials on commercial and financial policy.
  2. Maj. Gen. John H. Hilldring, Adjutant General, War Department.
  3. Lt. Gen. Brehon B. Somervell, Commanding General, Army Service Forces.
  4. Lt. Gen. Lucius D. Clay, United States Deputy Military Governor for Germany; Commanding General, United States Group, Control Council for Germany; United States representative on the Coordinating Committee.
  5. Not printed.
  6. Commanding General, United States Forces, European Theater, General of the Army Dwight D. Eisenhower. General Eisenhower was also United States Military Governor for Germany, and United States representative on the Allied Control Council for Germany.
  7. Reference is to the Report on the Tripartite Conference of Berlin; for text of paragraph III 19, see Conference of Berlin (Potsdam), vol. ii, p. 1505.
  8. Combined Resources Allocation Board, an Anglo-American interim body established pending the setting up of the quadripartite machinery of the Allied Control Authority in Germany to deal with questions of military and civilian needs, production quotas, and export-import requirements.