740.00119 Control (Germany)/1–846: Telegram

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

[Extracts]
secret

61. Thirtieth meeting Coordinating Committee held with British chairman2 January 7.…

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Regarding evaluation of plants for advance deliveries on account of reparations, Sokolovsky3 argued that the index of prices based upon 1938 is satisfactory for industrial equipment but that raw materials and agriculture products, such as the Soviet must return for part of such advance reparations, have increased in price well above 1938 levels. Robertson argued that German Government subsidies had held prices of industrial equipment down in 1938 so that price indices may have been distorted. He pointed to agreements with satellite countries where capital, plant and equipment was valued on the basis of 1938 prices plus 15%, whereas raw material was valued on the basis of 1938 prices plus 10%. He asked why Sokolovsky recommended a complete reversal regarding Germany. Sokolovsky pointed out that Soviet must take aggregate facilities in some cases and thus must accept some equipment it does not want. Clay4 suggested compromise, (1) use of 1938 prices for both capital goods and reciprocal deliveries, (2) establish floor (minimum residual value of a plant after deduction of depreciation and war damage) 25% rather than 30% as formerly agreed by French, British, and Americans, [Page 482]and (3) that receiving country could reject 10% by value of plant and equipment—prior to delivery—which had been allocated to it for reparations. Sokolovsky compromised on basis of reciprocal deliveries priced at 1938 level plus 5% and with 22% being used as figure on residual value in place of Clay’s 25%. This plus 1938 price for capital goods and 10% rejection right was basis of unanimous agreement.

Regarding definition of restitution Sokolovsky repeated known Soviet position.5 The French proposal, which has British and American agreement, would apply restitution to goods removed “whatever the means of disposition may have been”. The French would also add, “when among the aforesaid property there are goods which have been yielded without constraint, they will be handed over to the government concerned, which will confiscate them for its own benefit”.

No agreement was reached. Taking up the discussion of the special meeting of December 31 (see our cable 1363 of December 31, 1945, 12 midnight6). Sokolovsky announced willingness to agree to 5.8 million tons annual steel production, with capacity to be established by steel experts at not over 6.5 million tons. Robertson stated that assumption is that annual review will always result in a downward revision of production and that he could not accept that assumption. He agreed to accept an annual production figure as low as 5.5 up to 1949 and suggested leaving capacity open for later determination. Clay stated this would mean two reparations programs and suggested compromise of 5.8 annual production and 7.0 capacity. Sokolovsky agreed but Robertson said British had already violated instructions by going as low as 7.5 on capacity and he could go no further. Stating that he was exceeding his authority, Sokolovsky advanced his capacity figure to 7.2 but with British refusal to compromise further, matter was referred to Control Council.

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Sent to Department, repeated to Moscow as 6 and London as 11.

Murphy
  1. Lt. Gen. Sir Brian H. Robertson.
  2. Army Gen. Vassily Danilovich Sokolovsky, Deputy Military Governor, Soviet Military Administration in Germany; Soviet member, Coordinating Committee, Allied Control Council for Germany.
  3. Lt. Gen. Lucius D. Clay, Deputy Military Governor, U. S. Zone of Occupation in Germany; U. S. member, Coordinating Committee, Allied Control Council for Germany; Director, Office of Military Government of the United States for Germany (OMGUS).
  4. For documentation on this subject see telegrams 1126, November 28; 1176, December 4; and 1252, December 13; Foreign Relations, 1945, vol. iii, pp. 1426, 1440, and 1462, respectively.
  5. Ibid., p. 1499.