Foreign Relations of the United States, 1946, The British Commonwealth, Western and Central Europe, Volume V

740.00119 Council/10–1146: Telegram

The Acting Secretary of State to the Ambassador in France (Caffery)

secret
us urgent

Washington, October 11, 1946.

5498. Secdel 1110. For Cohen and Thorp⁷⁰ and Matthews. You will have seen Brussels tels Oct 9 and 10 re action of IARA assembly deploring slowness reparations deliveries and formally bringing matters attention CFM.⁷¹ Dept appreciates pressure under which you and delegation are working and that you may not have time or wish to consider this subject now. However, it may prove helpful to you to have Dept’s thinking in event you have time to consider subject and wish to discuss with Clay and British prior to CFM discussion.

Aside from recent IARA action tels from Dorr and other info reaching Dept indicate continuation present reparation deadlock (1) will focus increasing attacks on US in IARA and may lead to breakup IARA and (2) has caused serious concern to Brit who believe suspension reparation removals unjustly penalizes reparation recipients other than Soviet Union and France and injures UK industrial rehabilitation and export program presently handicapped by serious bottlenecks in machine tools. (See Brussels 1216 Sep 18 to Dept, rptd to Paris for Thorp as 140; 1177 Sep 11 to Dept; 103 Sep 13 to USPolAd rptd Dept as 1197; and 1245 Sep 24, rptd Lisbon for Rubin⁷² and Stockholm.)⁷³ Dept further concerned (3) that reconstruction needs liberated countries will already be scheduled for satisfaction by other means if delay continues much beyond next 9 months, with result that reparation claims cannot be satisfied in ways agreed Potsdam and Paris Act on Reparation but will produce demands for other satisfaction such as reparation from current output including resistance to payment for Ger exports of coal etc; (4) that further substantial delay in removals will lead to accelerated deterioration of machinery which under present conditions cannot be avoided; (5) that continued existence excess capacity in US–UK zones will provide USSR with basis propaganda accusation of western aggressive aims against eastern Europe as well as argument that Ger capacity to pay reparation in current output of steel, machinery etc. exists; and (6) that it is highly undesirable, from the standpoint of stabilizing the Ger economy further to delay the selection and removal of capital equipment eventually to be taken for reparation. It will be particularly unfortunate if such removals are made at a time when industrial activity has been stabilized in the Soviet zone and perhaps when such action might handicap the Western Occupying Powers in their relations with a new or prospective Ger Govt.

Having foregoing in mind, Dept has been seeking some solution which would permit resumption limited reparation removals and at same time would maintain position against deliveries to Soviets and French while they oppose Potsdam economic unity policy. Following suggestion might accomplish purpose:

(1) ACA to complete rapidly determination of surplus capacity under Level of Industry Agreement in each zone and if possible lists of plants eventually to be removed from each zone.

(2) US and UK to agree on partial implementation of Level of Industry Plan on bizonal basis by making available for actual reparation delivery those plants earmarked for reparation on above lists which would be unneeded for agreed standard of living even if UK and US zones alone treated as economic unit. Such plants would presumably include all pure war plants in US–UK zones (from which only general purpose equipment is declared available for reparation) and certain proportions of basic industries such as iron and steel, non-ferrous metals and chemicals which were expanded greatly for war use and would not be required for peaceful uses. (In this connection it should be mentioned that McJunkins of RDR Division OMGUS in informal and possibly personal expression of views to Dorr indicated guarding of 100 war plants in US zone is expensive commitment of which he believed zone commander would like to be freed earliest possible moment.)

(3) US–UK to submit list of such plants to ACA for allocation between USSR (and Poland) and IARA with specific proviso that no actual dismantling and delivery of plants is contemplated by US–UK to powers unwilling to treat Ger as unit. In event ACA failure to agree allocation on this understanding US–UK unilaterally to set aside about 25 per cent for delivery (possibly in each broad category of industry) to Soviets contingent ultimate agreement treatment Ger as economic unit and to turn over remainder to IARA for allocation and removal without delay.

(4) US–UK in making plants available to IARA for distribution to state that delivery of any plants allocated to France contingent on Fr participation US–UK zone unification.

Soviets and French would doubtless not concur in such plan so would have to be put into effect by US and UK jointly. This involves certain possible disadvantages:

(a) Existing stop order has color of excuse that impossible determine surplus industry capacity in absence knowledge as to whether Potsdam economic unity policy will be followed. Would lose benefit such justification if follow above proposal.

(b) It may aggravate relations with French generally and, particularly in light impending elections, may affect position elements domestic Fr politics favorable to western orientation.

(c) Would be impossible exclude Yugo and Czecho since they are IARA countries and not responsible present impasse in Germany. Question arises, however, whether proposal can be considered as opposed to present policy of refusing economic assistance to Czecho and Yugo. Under Paris reparations agreement Czecho and Yugo would be entitled to 4.3 and 9.6 percent of reparation made available through IARA.

Dept believes Secdel in better position to weigh pros and cons on basis atmosphere in Paris. Plan could be implemented either immediately, if British agree, or withheld pending outcome CFM session on Germany. If you deem it wise to withhold implementation until after CFM session you may still consider it desirable, if British agree, for US and UK representatives IARA to make announcement they will carry out such a plan if CFM unable to reach agreement.

Sent Paris as 5498, Secdel 1110, rptd Brussels for Dorr as 1160, USPolAd Berlin as 2091, London as 7159. Dorr shld repeat his 1177 of Sep 11 to Paris, Berlin and London, his 1197 of Sep 13 already rptd to Berlin as 103 to Paris and London, his 1216 of Sep 18, already rptd to Paris as 140 for Thorp, to Berlin and London.

Acheson

70. Willard L. Thorp, Deputy to the Under Secretary of State (Clayton); member, U.S. delegation, Paris Peace Conference.
71. Telegrams not printed; IARA’s complaints concerning the slowness of deliveries were not fully taken up by the Council of Foreign Ministers until its 4th Session in Moscow, March 10–April 24, 1947. The text of a communication from IARA on this subject to the Council of Foreign Ministers is scheduled to be printed in volume ii.
72. Seymour J. Rubin, Deputy Director, Office of Economic Security Policy; member, U.S. delegation to negotiate disposition of German assets in Portugal.
73. None printed.