840.6362/4–2046: Telegram

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

secret

927. Reference urtels 970, 972 and London’s 4165, 4166.70 Statements of Dept’s position on problem of new coal directive and on reparations removals affecting production of mine supplies transmitted to Clay by War for comment. These messages follow for your info.

[Page 772]

Dept anxious to make clear that no intervention in Berlin negotiations was intended. On the contrary Dept’s inquiries are the result of French notes delivered insistently, failure of Brit-Fr negotiation at Essen ending Feb [Apr] 14 and necessity new directive to supplant expiring one after April. French recently requested detailed discussions in Wash. We have avoided them until we receive Clay’s comments on new directive.

Message to Clay

No action will be taken by State on German coal problem without full consultation with you. State appreciates your views and recognizes importance of points you make. They desire to lay before you aspects of policy having greatest impact here and secure agreement future policy and action.

I.
Expiration of July 1945 directive, Fr notes and desire for conversations make it necessary to attempt to frame a policy which provides attainable goals and machinery adequate for implementation rather than unsatisfactory directive of type used in past. Discussion of background of policy follows.
II.
U.S. policy on German coal must be accommodation of (1) policy of reactivating Ger economy to level of 1949 [sic] decisions as quickly as possible and thereby easing various burdens and risks occupation and (2) policy of strengthening non-Ger nations of Europe by reparation removals, US loans and Ger aid such as coal exports. Necessity of accommodating two types of objectives clearly posed by dependence of Ger coal production on supplies from other industries, avoidance unrest and adequate food for workers contributing to coal production, all of which have been given priority since beginning occupation.
III.
Fr obstructionism on central agencies, etc., results partly from desire Fr assure coal supplies for future by control Ruhr. Therefore Fr insist on coal exports now and in future and are not likely to allow difficulties securing Ger coal to affect their position. On contrary only confidence that their coal supply is assured is likely to help change their present position.
IV.
Recovery in Fr and Western Europe proceeding well as result of their own efforts and some US aid. Coal is bottleneck in Fr, especially in steel making. US coal extremely expensive and must be paid for in scarce dollars at time when loan is sought here and not suitable for steel making. Brit coal not available in quantity as pre-war, while present US strike makes extra effort Ruhr exports advisable Apr–May. State basically interested in longer term settlement which will resolve legitimate Fr desire for assured Ger coal supply and permit steady Ger recovery.
V.
State believes Brit not following this policy. Level of industry positions and other evidence indicates Brit desire avoid weakening Ger economy as far as possible, even at cost other objectives. General recovery Brit zone also believed evidence, especially levels of steel and vehicle production, power consumption. Believe Brit have revived industry generally rather than giving highest priorities to mining and ancillary industries. We cannot, after careful study of statistics available on distribution of industry Brit and US zones, believe that recent Brit zone activity levels are comparable with 15 percent production in US zone.
VI.
Technique by which Brit have accomplished disproportionate recovery believed comprised two elements. First and minor based our knowledge from intelligence reports and Ger personnel North Germ Coal Control is coal stealing, blackmarketing and evasion of priorities through excessive use at mine and local use by industry connived in by Ger officials. Brit efforts to prevent such leaks not believed adequate. Second major technique appears statistical, obvious, and remediable. Transport shortage in early months occupation made allocation of transport rather than coal necessary. No ACC supervision consumption coal not requiring movement. Brit secured what they desired of this plus their share of allocations made on basis of higher concentration industry and population in their zone. Despite end of transport shortage for coal movement as proven by fall in stocks at mine no change has been made in allocation methods.
VII.
State believes that allocation must be expanded to include numerous types of coal consumption, mainly in producing areas, not now counted. Objective is to include in deduction from pithead production only coal used strictly in mining. Among these categories are: (1) that part of colliery consumption of coal chargeable to commercial sales of power. Present high figures indicate Brit zone figures must include such coal use to explain why they are about as high as all hard coal, Germ colliery consumption in 1938. (2) Black markets. (3) Brown coal shipped directly to power plants. (4) Coal chargeable to gas or by-product production resulting from coking operations. (5) Other industrial uses not now included in allocation. Total of these categories will result in large amount of unallocated coal consumption, we believe.
VIII.
Final State objective simply to secure revised statistical basis for coal allocation including all amounts coal consumed for purposes other than coal getting so that Ger consumption, properly proportionate in each zone so that recovery is equalized, can be compared with that of liberated countries; and thus Ger consumption of coal at an increasing level may be justified.
IX.
Following is proposed new policy statement on which your comments are requested. Principal elements which State feels obliged to support urgently are inclusion of all categories consumption and use of comparison consumption levels Ger and importing countries. State feels your comments urgent so that some statement may be given Fr who are pressing them.

Text of Draft Coal Directive

“The following statement of policy with respect to Ger coal production and distribution supplants Pres Truman’s directive of July 1945. It applies to the period beginning May 1, 1946.

It is US policy:

1.
To seek to maximize production and movement of Ger coal by assigning highest priority to the coal mining and related industries, especially those producing supplies essential to mining;
2.
To seek to allocate coal within Germany in a manner such as to achieve uniform rates of industrial recovery and activity among the four zones of occupation;
3.
To seek to allocate coal as between use within Ger and exports to countries dependent on Ger coal in a manner such as to achieve a level of coal availability for the importing countries which are United Nations relatively higher by 15 per cent than the level of coal consumption in Germany; coal availability in the importing countries to be measured by the standard of their consumption in 1938 and that in Ger by estimated 1949 consumption based upon level of industry agreement. (110,000,000 tons hard coal equivalent);
4.
To seek to concert with the other zone commanders with a view to ensuring that each will take effective measures to secure payment for current and past coal exports from Germany;
5.
To seek agreement to provide food supplies for mine workers adequate to maintain labor supply and efficiency at levels which will provide maximum production and movement of coal;
6.
To seek a system of coal allocation based upon net pithead coal production less only such coal as is used strictly for the operations of mining and is issued to coal miners, rather than upon ‘merchantable coal’, thus taking explicitly into account in allocations those quantities of coal consumed in mining regions for other purposes.

It is realized that the accomplishment of the policy stated in para 6 above, will require time to prepare new methods of statistical reporting, to examine the various uses of coal hitherto not reported in order to decide what portion of each must be considered in allocations and otherwise, to introduce a new method of allocating Ger coal. Until the new method is worked out and installed it is believed that an interim formula should be applied. The following formula is suggested for the interim.

‘Ger consumption of merchantable coal should be permitted at a monthly level of 3,500,000 tons, hard coal equivalent, or 70 percent [Page 775]of merchantable coal, whichever is higher; and the remainder of merchantable coal should be exported. All consumption of coal outside the allocations, i.e., those categories of coal consumption which together with merchantable coal are net pithead production, should be held at the amounts consumed in Dec. 1945.’”

State offers the above formula as suggestion only with request for your special comment and suggestion as to whether this or any similar formula is feasible.

State emphasizes desire to have coal question settled by quadripartite agreement Berlin but urges necessity for taking into account policy considerations cited above.

New Subject: Reparations and Goal Production

Difficulties of adjustment inherent in the removal of plants under the reparations program, reurtel 972 of Apr 8, are appreciated by Dept, and it is evident that simultaneous removals and reactivation programs will require careful planning and careful timing. It is, also fully appreciated that success demands maximizing inter-zonal economic planning and treatment of Ger as an economic unit.

It seems important, however, to distinguish cases where:

a)
level of industry allowed is, in fact, incompatible with a production goal, over long period; which would be the case should supporting industry be incapable of maintaining a production level of 155 million tons production hard coal equivalent. In this case revision, at appropriate time, of level of industry settlement is called for.
b)
level of industry allowed is not sufficient to make good urgent capital requirements, in order to put industry on a sustaining basis, where only normal depreciation allowances are required. In this case, which we assume to be the case of mining supplies referred in CC–2862 of April 10,71 capital formation must come at expense of delay in revival of industries of lower priority; and appears to require concerted interzonal planning on agreed strict priority basis.
c)
level of industry capacity in gen is adequate, but composition of capacity and production in each branch has not shaken down in such a way as to mesh with requirements at each stage. This problem is basic in level of industry settlement, and will undoubtedly prove troublesome over next several years. The Edelstahlwerke relation to VKF seems to be a case of this kind.

Dept suggests, for your consideration, that:

1.
Highest priority to production of supplies and parts for mining in plants within level of industry plan. This must involve sufficient control so that (2) below is unassailable.
2.
Presentation to Control Council for quadripartite agreement of each case in which plant removal will endanger coal output. Each [Page 776]case so presented should be supported with proof that all efforts to secure necessary supplies in plants retained have been made and should include: a) statement of period for which reparation plants must be retained. b) Proposal for securing alternate source of supply by the end of this period.

Sent to Berlin as 927 repeat[ed] to London as 3396 and to Paris as 1792.

Byrnes
  1. Telegram 970, April 8, printed supra; telegrams 972, 4165, 4166 not printed. Telegram 972, April 8, reported on the difficulty of increasing coal production in the face of reparations removals of plants manufacturing equipment essential to the coal mining industry (862.60/4–846). Telegram 4165, April 15, indicated that there had been no agreement at a conference between French and British officials on French requests for increased coal allocations from the Ruhr (840.6362/4–1546). Telegram 4166, April 15, reported informally that the British Government considered the end of April 1946 to be the termination date of the 1945 coal directive, and inquired, in case the directive should terminate as of that date, whether Department considered it worthwhile for a new directive to be issued (840.6362/4–1546).
  2. Not printed.