862.50/3–846: Telegram

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

secret

730. See my 729. On March 8, with the four Deputy Military Governors acting as principals, the Control Council reached agreement on the last undecided item on the levels of industry when Sokolovsky agreed to 9.0 million kw capacity in electrical power. The French continued the reservation that the compromise on pharmaceuticals and dyestuffs would have to be approved by the French Govt.

Subject to these reservations, the Control Council accepted the plan, subject to approval at a subsequent meeting of the Coordinating Committee (this to allow the British to review the plan) and agreed to instruct the Economics Directorate to determine the amount of productive capacity which will be left in Germany as a whole and to determine the amount of productive capacity which will be moved from the Western Zones and also to determine allocations of such removals and to prepare a list of plants available.

Clay stressed that the purpose of the plan was not to establish production limitations but was to allow early planned reparations removals. He stressed that the plan contained definite disarmament objectives, such as long term agreement on steel capacity and elimination or limitation of many industries, but that the remaining figures [Page 524]for light industry must be allowed to vary as time requires. He stressed that production in light industry must be based on world markets and, therefore, that amount and type of production may vary considerably. He also stressed that in the plan it has been assumed that the Saar and Ruhr are an integral part of Germany; that, this being a Governmental problem, it could not be raised in the Control Council, but that, if boundary or other changes should be made, the agreed plan would have to be modified as it probably would no longer be sound.

Koeltz stated that French interpretation was that maximum amount of food imports indefinitely was 1.5 billion reichsmarks (1936 value). He stated that this would be the French position even if the population should exceed the assumed 66.5 million. He stated that any population increase could not be allowed to affect the proposed commercial balance.

Robertson agreed with Clay’s above comments and emphasized the British contention that a population of over 66.5 million would require modification of the plan. He asked Sokolovsky for the Russian view on this point, and received the reply that the British worry on this score is imaginary as Sokolovsky believes that the population figure will prove to be under 66.5 million. Robertson stressed that he could not accept the plan until it had been referred to the British Govt. It was agreed that the provisional acceptance of the plan would allow the Economic Directorate to proceed.

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Murphy