740.00119 EW/10–1446
The United States Political Adviser for Germany (Murphy) to the Director of the Office of European Affairs (Matthews)
personal
Dear Doc: I thought you might be interested in the following substance of a personal telegram from General Echols78 to General Clay on the question of reparations from current German production.
[Page 622]According to this telegram, while General Clay was requested to review this matter with the Assistant Secretary of War, Mr. Petersen, who is now in Berlin, General Echols pointed out that this appears to be “another subject which was discussed by General Draper with high officials of the State Department without knowledge of the War Department”. General Echols said that he understood this to be a matter of high policy which should have received SWNCC consideration before being taken up with top officials of the State Department.
General Clay has now replied to Echols along the following lines: Secretary of State Byrnes indicated in discussion that there was no objection to our endeavoring to find possible compromise basis concerning Russian desire for reparations from current production provided total amount was not too large. Accordingly Draper has been discussing this matter with Koval and Kolpakov of the Economic Directorate, and Kolpakov has personally drafted proposal along following lines which we consider reasonable basis for discussion:
- 1.
- The amount of reparations in current output to be divided between the Soviet Union (including Poland) and IARA nations would take into account the value of German assets owned abroad and the capital removals going to each.
- 2.
- Recipient nations would furnish raw materials for the production of reparations until a favorable balance of trade permitted the German economy to furnish raw materials.
- 3.
- Central German administrative departments would be established, in particular a department with responsibility for implementing the agreement on reparations from current output.
- 4.
- Zone Commanders would retain responsibility for the capital removal program; otherwise, economic zonal boundaries would be entirely removed.
- 5.
- A balanced import-export program for Germany as a whole would be agreed to eliminate the burden on the occupying powers.
- 6.
- Ban on dismantling reparations plants would be lifted.
- 7.
- Reparations from current output from Germany as a whole is provided in amounts agreed by Control Council and the level of industry and capital removal program are correspondingly revised.
- We (General Clay) recognize need for limitation of total amount of reparations including reparations from current production and/or time limit on latter. Kolpakov’s proposal leaves open question occupation costs and division of responsibility for past and future deficits which will need further discussion. We hope to have something more definite before meeting Council of Foreign Ministers. (End of paraphrase of General Clay’s telegram which began in third paragraph of this letter).
Bill Draper tells me that the only time he discussed the above with Will Clayton General Echols was with him.
The Russians have submitted a paper which is now being discussed. Both General Clay and General Draper tell me that they have never [Page 623] had any intention of making commitments on this subject without full consultation but that General Clay did understand from Mr. Byrnes that there was no objection to exploring the matter and feeling out the Russians in order that we might be better prepared to discuss it if the subject comes up at the Council of Foreign Ministers.
Undoubtedly at that time we shall want to tie in whatever agreement is made on this subject with political considerations. The Russian need for commodities out of German production is so urgent and apparent that we would be well-advised to use the opportunity to obtain very definite commitments from them on the subject of the introduction into the Soviet zone of occupation of our form of democratic methods.
Yours ever,
- Maj. Gen. Oliver P. Echols, Assistant Deputy Military Governor, U.S. Zone of Occupation in Germany.↩