C.F.M. Files: Lot M–88: Box 2063: US Delegation Minutes

United States Delegation Record, Council of Foreign Ministers, Second Session, Twenty-First Meeting, Palais du Luxembourg, Paris, June 18, 1946, 3:30 p.m. 39

secret

Agenda

M. Molotov stated that the Deputies had made a report as to the agenda for today.40

[Page 529]

Mr. Jebb stated that the Deputies had met this morning and had approved CFM(D) (46) 182 on the report of the Rumanian draft treaty.41 They had then considered the agenda for the Ministers and had decided that if they succeeded in getting through with points 5, 6 and 7 of the former agenda they might take up the other outstanding economic points, that is, those listed on the Deputies’ agenda which had been circulated to the Ministers. It was unlikely that this would happen because it had been decided that the present meeting would last only approximately two hours. The Deputies had then discussed the next agenda of the Ministers and had gone through the Italian draft treaty and taken out the political points which deserved the attention of the Ministers. These had been placed in an order which the Deputies considered desirable. The last three items had been placed at the end because there were reports outstanding on them which should be examined by the Ministers.

Reparations

M. Molotov suggested opening the discussion on reparations. He said that the viewpoint of the Soviet Delegation was well-known from the documents on this question.

Mr. Byrnes stated that the U.S. Delegation had nothing to add. According to its information the estimate given at the previous session of the value of Italian assets in Rumania, Bulgaria and Hungary appeared to be substantially correct. As he recalled it, these assets were worth approximately $60 to $75 million although there was no way to obtain exact information. Mr. Byrnes continued that two merchant vessels which were now in New York might be included to pay Soviet reparations. The United States Deputy had advised the Soviet Deputy that the latter might visit and inspect these vessels in order to estimate their condition and value. The United States Deputy had only informed the Soviet Deputy yesterday and therefore the Soviet representatives had not had an opportunity to visit these ships.

Mr. Bevin stated that the U.K. Delegation had given careful consideration to the Soviet proposal regarding reparations from current production. It did not think that any country should base its claims for reparations on current production. Independent of from what source reparations should come, they should be separate and distinct from the economy of a country. Mr. Bevin thought that it might be a good idea to drop this Soviet claim for reparations and that all claims for reparations from Italy should be confined to those of Yugoslavia and Greece, who had suffered so much from Italian aggression. The major nations should not insist on reparations from Italy.

Mr. Bevin continued that the English had greatly suffered from Italian aggression. Malta had been seriously damaged. Nevertheless [Page 530] the British were not advancing any claims for reparations from Italy. He repeated that all the great Powers should renounce such claims. The British had incurred heavy losses in shipping due to Italian action. They were not raising this question. When it was a question of what should be paid in reparations Mr. Bevin recommended that in addition to Italian foreign assets the assets contained in ceded territories might also be included. Mr. Bevin thought that M. Molotov should take into consideration the attempt of the great Powers to assist Italy in returning to a democratic way of life and thus renounce reparations claims on that country.

M. Bidault stated that he would like to review the French position on reparations. The United States Delegate had spoken of two Italian merchant vessels. This item did not appear in the French proposal. Mr. Byrnes had also spoken of Italian assets in the Balkan countries as being a source of reparations for the Soviet Union. In this case there was a difference between these two sources of reparations and the Soviet claim for reparations in the amount of $100 million as well as reparations for Yugoslavia, Greece and possibly Albania. This eventuality was covered in the French proposal. According to paragraph VI of the French proposal a proportion of Italian current production, to extend over a period of 8 years, and if need be to remain in abeyance for the first 2 years, might be used for reparations payments. This amount, which would be very small, would be fixed by the Commission. With respect to France, that country did not desire any reparations from Italy other than those obtainable from Italian assets in France, Italian property in territory ceded to France and allocation of certain war materials. Mr. Bidault thought that it was economically sound to grant to Yugoslavia, Greece and Albania the Italian property in the territories ceded to them. The outstanding question was therefore that concerning the $100 million worth of reparations for the Soviet Union. It seemed to him that the question of reparations from current production was the most important subject under discussion. If the Ministers took into consideration the agreed upon sources of reparations, i.e., Italian assets in the Balkans and the two merchant vessels, there would remain only a small amount required from Italian current production. He doubted whether this amount would be detrimental to Italian economy. Therefore, it seemed to him that it was not a question of reparations but more of dialectic difficulties. These should be easy to overcome.

M. Molotov stated that he wished to give some additional answers to the observations made. Mr. Byrnes had referred to Italian assets in the Balkans in the sum of $60 to $75 million. According to Soviet sources these assets were considerably less. The Soviet Delegation would like to have an opportunity to study the United States data on [Page 531] these assets. The Soviet Delegation considered it acceptable to include this source in the Italian reparations account. With respect to the two merchant vessels the Soviet Delegation would accept the American proposal to use the vessels as a source of Italian reparations. The Soviet Government would avail itself of the opportunity to inspect the vessels. M. Bidault had expressed the French view in favor of meeting Soviet claims for reparations. It appeared that it was only Mr. Bevin who was unwilling to admit the Soviet right to reparations.

M. Molotov did not know whether to thank Mr. Bevin for his frankness or to react in another manner, but he would undertake to explain the Soviet point of view. The Soviet Union had greatly suffered by the armies of occupation during the war. He believed that this was well understood throughout the world. The workers and peasants of England knew that this was true. Twenty-five million persons in the Soviet Union were left homeless. This was one of the greatest problems the Soviet Union had to encounter at the present time—to provide housing for its people. In addition tens of thousands of villages, thousands of industrial enterprises and kilometers of railroads must be rehabilitated. On the one hand Mr. Bevin proposed that the Soviet Union renounce reparations and on the other he has suggested that damage suffered by British property owners in Italy be made good in full. He has furthermore suggested that Italian property in England be turned over to the British Government. From these sources alone England would obtain as much as the Soviet Union would acquire if it received reparations in the amount of $100 million. In addition, Italy was bearing tremendous expenses in maintaining the British army of occupation. If these costs were reduced sufficiently there would be sufficient resources to meet the Soviet moderate claims. Mr. Bevin’s attitude could not be accounted for by any motive which would give the same treatment to the claims of Great Britain as the claims of the Soviet Union. The Soviet Union considered its claims against Italy as just and it would be well if Great Britain did not regard Italy as its colony. The Soviet Delegation considered acceptable the French proposal subject to certain amendments of the United States Delegation. It therefore wished to advance a proposal along the following lines: 1. The proposal of the French Delegation regarding Italian responsibility for reparations is acceptable; 2. It is proposed that the amount of reparations due to the Soviet Union be fixed at $100 million as admitted by the United States and French Delegations and that it be payable over a period of 6 years, as proposed by the French Delegation on the understanding that reparation deliveries include deliveries from current production. It would be impossible to do without deliveries from current production. 3. Reparations in [Page 532] the amount of $200 million for Yugoslavia, Greece and Albania should be discussed at the Peace Conference.

Mr. Bevin stated that he did not wish to infer that Italy should not pay reparations. He based his remarks on the source of reparations. It was his understanding that M. Molotov in yesterday’s discussion wished to assist democratic Italy. That was why he had offered the suggestion of limiting reparations to the small Powers which had suffered so much. He believed that the large Powers should come to the aid of the small ones. He was conscious of the suffering and damages done during the war. No-one living in London during the war could have other feelings. During the years 1939–1941 London had lost two million houses and this did not include the period of the V–1 and V–2 enemy attacks. He had never thought that reparations could cover all damages done during the war. At the end of the last war the United States had entered the picture and helped in the payment of reparations to France and the United Kingdom. In the final analysis all countries had lost by this course. M. Molotov had referred to the workers and peasants, In his country they could not understand it if he conceded reparations to one country and not to another when the houses of the workers and peasants had been destroyed in that latter country. With respect to the British army of occupation he explained that under the revised armistice terms the British Government was giving the Italian Government credit for all relief extended there. It had done this willingly and without hesitation. He had only made his suggestion regarding the renunciation of reparation claims in order to find a way out of the present difficulties. He would not oppose the suggestion made by Mr. Byrnes at the last meeting but he was especially concerned at the question of reparations from current production. It seemed to him that this was a weapon one powder could use to its own advantage to injure the economy of another country no matter how large or how small the demands on current production would be. If he could be shown that this was not the case he would willingly consider reparations from this source. However, he did not wish to place himself in the position that one country could go to Italy and say that the workers and peasants of that country must work for the reparations receiving country, must accept its conditions even to the point of receiving credits from abroad in order to fulfill reparations demands. This would be to the detriment of the normal economic development of Italy.

Mr. Bevin continued that he had no objections to Italian assets in the Balkan countries being used as reparations. He did not object to the two merchant vessels being used for this purpose. But he strenously objected to reparations coming from current production as a principle [Page 533] which he could not accept. He had grave doubts that such a principle should be introduced into this problem. He could not see any connection between reparations from current production and restitution of British property in Italy. If restitution were carried out the properties would be used for production in Italy, to the advantage of Italy. That was one of the reasons for the British desire to see inclusion of a restitution clause in the treaty. The British companies in question had gone to Italy, observed Italian law, developed prosperity and contributed to the Italian economy. It was only reasonable to ask that they should be restored. However, the principle of obtaining reparations from current production, no matter how small such production might be, was of great concern to Mr. Bevin. The British Government was willing to do all in its power by reciprocal trade, credits and other means to endeavor to assist in the reconstruction of all devastated countries. Mr. Bevin was not speaking of that aspect of the situation. In conclusion, he wished to find a settlement of this question so as to relieve the Ministers of a great difficulty in preparing for the peace but he did not wish to accept a principle which he considered fundamentally wrong.

M. Molotov suggested that the Ministers get down to facts. The Soviet Delegation had advanced a claim for reparations in the amount of $100 million. The Italian assets in the Balkans and the merchant vessels represented a little less than half of this amount according to Soviet information. Therefore a little more than one-half would have to come from current production. That meant that over a period of 6 years Italy would obtain orders approximately $10 to $15 million a year. This would not be a heavy burden on Italian economy. With respect to the Allied armies of occupation in Italy, the Italian Government had recently stated that occupational costs had amounted to 400 billion lire. This amounted to $4 billion. Moreover, Italy had been required to bear large expenses in connection with assistance rendered to the Allies in connection with the fight against the common enemy. Furthermore, the British had laid claims to all Italian assets in Great Britain and had insisted on restitution of British property in Italy in the amount of over $100 million. These claims were beyond all comparison with those very moderate claims advanced by the Soviet Government. If M. Molotov’s figures were not sufficient he suggested that Italy be asked which claims would be the easier to fulfill—the Soviet claims or those obligations which have been met in favor of Great Britain and those new obligations which were being presented. This might help to clarify the situation.

Mr. Byrnes inquired whether he could insert a few words in the private conversation between M. Molotov and Mr. Bevin. He had proposed [Page 534] at the last session of the CFM that the Soviet claim to $100 million be met from four sources. These were from:

1.
Industrial equipment designed for the manufacture of war implements not required for permitted military establishments or readily susceptible for conversion to civilian purposes.
2.
Italian assets in Rumania, Bulgaria and Hungary.
3.
Two Italian merchant vessels—the Saturnia and Vulcania.
4.
If these three sources did not provide reparations in the amount of $100 million the deficit should be provided by naval vessels and trophies of war captured by the U.S. and U.K. navies.

If the estimates submitted by the U.S. Delegation concerning Italian assets in the Balkans are correct, or nearly correct, $50 million worth of reparations should be obtained from this source. The vessels are worth about $25 million. This would leave a deficit of $25 million. If the information of the U.S. Delegation is wrong and the Soviet information is correct regarding Italian assets in the Balkan countries, then there would be a deficit of approximately $50 million instead of $25 million.

Mr. Byrnes stated that the U.S. Government was willing to make up this deficit from the Italian war ships. He inquired whether M. Molotov would not agree to this proposal.

M. Molotov stated that the Soviet Government held a different view. The information at its disposal was quite different. It believed that Italian assets in the Balkans were worth approximately $15 to $20 million. The value of the merchant vessels according to 1938 prices, and taking into consideration their present condition, amounted to $7 to $10 million. With respect to the Italian Navy, the Soviet Government maintained the view expressed at the Berlin Conference concerning the German Navy to the effect that war ships could not be included as reparations. Therefore, reparations from Italy must come from Italian current production. This would be easy for Italy if that country undertook to make deliveries over a period of 6 years. M. Molotov stated that according to his information when the Italian Government was informed of the proposal to obtain reparations deliveries from Italian current production the Italian Government had displayed great interest in fulfilling orders placed by the Soviet Union.

Mr. Byrnes stated that it was his understanding that at Potsdam the question had never been raised as to whether war ships should or should not be counted as reparations. At that time they were war trophies since the war was still being prosecuted. There was never a question of dividing up the German fleet amongst all the reparations claimants but just among the Three Powers. The French did not participate at the Potsdam Conference. If this solution were not acceptable Mr. Byrnes wished to offer a second one. The Soviet Delegation had suggested submitting to a Peace Conference the question of [Page 535] reparations to be paid to Greece, Yugoslavia and Albania. Such reparations represented two-thirds of those demanded from Italy. He thought it might be a good idea to submit to the Peace Conference the allocation of the other third. He suggested that the Conference might decide on Italian reparations to the Soviet Union as well as Italian reparations to Greece, Yugoslavia and Albania. The CFM had agreed that Italian assets in the Balkans and the two Italian merchant vessels should be sources of Italian reparations. Might it not be advisable to inquire of the Peace Conference how the deficit should be made up between these sources and the $100 million Soviet claim? The Soviet Government had stated that it might be wise to consult Italy on this question. Italy could be consulted during the Peace Conference. The views of the other interested nations could be heard and the matter disposed of The CFM had discussed this question at great length and had reached no agreement. Mr. Byrnes stated that he was ready to submit the question to a Peace Conference.

M. Molotov stated that the Soviet Delegation had proposed that the question of reparations for Yugoslavia and Greece be settled in the first instance in the CFM. Since the majority of the members of the CFM had opposed this proposal the Soviet Delegation had suggested that this matter be settled at the Peace Conference since Yugoslavia and Greece were not represented in the CFM. The Soviet Government was represented in the CFM. The question of reparations to the Soviet Union had been discussed at great length. It was time to decide this matter and it should not be postponed.

Mr. Bevin inquired whether there were any Italian assets in Germany. He wondered whether the deficit in Italian reparations to the Soviet Union might be made up from this source.

M. Molotov and Mr. Byrnes stated that they had no information on this matter.

Mr. Byrnes said that it might be possible to obtain information from the Control Commission in Germany.

Mr. Bevin suggested that if Italian assets in the Soviet Zone were included in the Italian reparations to the Soviet Union it might help to bring down the deficit. He added that Great Britain made no claims to Italian assets in the British Zone.

M. Molotov stated that the Soviet Union had no claim to Italian assets in Germany. He continued that it would be easier for Italy if less foreign assets were seized and Italy were obliged to make reparation deliveries out of current production which was of a temporary nature.

The Foreign Ministers decided to postpone the present discussion and to adjourn until the following day at 3 p.m.

The meeting adjourned at 5:45 p.m.

  1. For a list of persons present at this meeting, see the Record of Decisions, infra.
  2. The Report of the Deputies to the Council, C.F.M. (46) 116, June 18, 1946, not printed, set forth the suggested agenda for the Council as follows:
    1.
    Franco-Italian frontier, Rectification no. 4 (Tenda and Briga) Art. 2.
    2.
    Treaty Commission (Allied Inspectorate). Art. 76 and 62.
    3.
    Withdrawal of Allied troops. Art. 64.
    4.
    Italian Colonies, Art. 17.
    5.
    Dodecanese. Art. 12 and 13.
    6.
    Frontier between Italy and Yugoslavia. Art. 4.
    7.
    Frontier between Italy and Austria. Art. 3.
    8.
    Limitations to be imposed on the Italian Navy. (Final Report of the Naval Committee on Articles 48, 49, 50 and 51).

    The articles under reference in this agenda are those in C.F.M.(D) (46) 177, June 13, not printed.

  3. Dated June 15, 1946; not printed.