740.00119 EW/10–1646: Telegram
The United States Political Adviser for Germany (Murphy) to the Secretary of State
urgent
[Received October 16—4:30 p.m.]
2392. Your 2901 [2091], October 11.79 I do not concur in Department’s proposals, although we are fully cognizant of undesirable aspects of current status of reparations removals. However, we are convinced there are bigger issues at stake than (1) accommodating IARA, (2) increasing flow of machine tools, et cetera, to Britain (we assume Britain has already moved from its zone tools of the type most urgently needed), (3) possibility of some reparations payments to liberated countries out of current output, (4) possible further deterioration of machinery, (5) Soviet accusations (which in any event will become bitter and more valid in the event the Department’s suggestions were followed), and (6) an attempt at stabilizing the German economy prior to the time that we even know the political boundaries of the territory under consideration.
The main reason for stopping dismantling was that Potsdam also contained provisions other than reparations which were not being lived up to and it was felt that capital equipment was a strong bargaining tool to achieve compliance with these other provisions. Further removals were stopped because in the absence of economic unity and a final determination of boundaries, it was altogether impossible to determine what industries should be left in Germany to allow a potentially self-sustaining economy. By arranging increased [Page 624] removals to claimants other than Soviet and French, we would largely destroy the validity of that argument which incidentally appears perfectly valid today.
It now appears that the entire reparations question must be reviewed to break the present stalemate and to consider Soviet demands for reparations from current production. Rather than overhaul the plan twice—now temporarily to satisfy IARA and later to consider current production—it is thought most desirable to combine the two into one broad and definitive review and change. Furthermore, the impracticability of determining a bi-zonal level of industry should be considered.
I might add that IARA now has eight odd non-ferrous metal plants on which allocations have not been made and on which deliveries will follow immediately after allocations. In addition, General Clay has stated in session of Coordinating Committee and not for publication that the American Zone will lift its embargo on deliveries of general-purpose equipment in war plants in its zone.80 There are already approximately 30,000 pieces of general equipment which have been inventoried and valued at over 100,000,000 reichsmarks. These, and presumably even larger amounts from the British Zone, are now available for allocation and delivery.
I believe that we should maintain our bargaining position on reparations removals until such time as we are able to obtain compliance with other highly important Potsdam provisions. Economic objectives should include establishment of central agencies, free interzonal trade and travel, financial reform of the type envisaged in the Colm–Goldsmith report,81 and a centralized budget for reparations and occupation costs.
A second aspect of the reparations problem is raised by the new Soviet request for reparations out of current production, which goes beyond Potsdam and therefore gives us the opportunity to demand that certain political conditions be met as a quid pro quo. As the Department is aware, preliminary discussions regarding this subject have been taking place here with Soviet representatives. These discussions have to date been limited to economic and certain financial considerations. It is our impression that the Soviets may be in such urgent [Page 625] need of German current production (especially hard consumer goods) that they would consider granting an important measure of political freedom to the German population in their zone in addition to steps toward economic and financial unity. Minimum political conditions to be demanded from Soviets in return for reparations out of current production would be granting of basic civil liberties and political equality. For example, a genuinely free German press limited only to prevent Nazi, militarist, or anti-Allied propaganda, free interchange of newspapers with other zones, equality of opportunity for all democratic political parties including Social Democratic Party, freedom of movement, freedom from arbitrary arrest, ands right to fair and public trial. Thus, in addition to economic and financial unity, we should try to obtain equally important political objectives. This may be our last opportunity to use such a potent bargaining position in Germany for this purpose.
Repeated to Paris for Secdel as 339; to London as 350, to Moscow as 324, to Brussels for Dorr as 113.
- Same as telegram 5498, October 11, to Paris, p. 611.↩
- As reported in telegram 2332, October 9, from Berlin, General Clay offered to retract his stop order on such reparations deliveries and suggested that a lump inventory be made by consolidating the United States zone list with those in the other two western zones. This proposal, made at the 82nd Coordinating Committee meeting, October 7, was approved and the Economic Directorate was charged with drawing up the inventory subject to approval by the Coordinating Committee. (740.00119 Control (Germany)/10–946)↩
- For a summary of the report see War Department’s telegram CC–5635, May 23, p. 556.↩