Foreign Relations of the United States, 1946, The Far East, Volume VIII

740.00119 PW/7–1246

Memorandum by the State–War–Navy Coordinating Committee to the Secretary of State

top secret
SWN–4541

Washington, 12 July 1946.

Subject: War Booty

References:	a. SWNCC 310
	b. SWNCC 310/1

By informal action on 12 July 1946, the State–War–Navy Coordinating Committee approved SWNCC 310 after amending, a copy of which is enclosed.

It is requested that the Department of State reach an agreement with the Union of Soviet Socialist Republics on the conclusion in paragraph 4 b of the approved paper and that upon attaining such agreement, the Department of State request the United States member of the Far Eastern Commission to present the conclusion in paragraph 4 a to the Commission.⁷⁰

For the State–War–Navy Coordinating Committee:

J. H. Hilldring

State Department Member

[Annex]

War Booty⁷¹

the problem

1. To determine the United States position with respect to war booty and other external assets as factors in the Japanese reparations settlement.

facts bearing on the problem

2. See Appendix “A”.

discussion

3. See Appendix “B”.

conclusion

4. It is concluded that:

a. No distinction should be made between war booty and other types of Japanese external assets as they may be applied to the fulfillment of recognized and approved national reparations claims, providing that simultaneous agreement be reached that:

(1) All countries at war with Japan may retain all types of Japanese property, supplies, or equipment, military, quasi-military, or civilian, under their administrative control, existing within their territories on the date of Japanese capitulation, or removed to their countries prior to 1 June 1946, and that no unilateral removals will be made by any country after that date.

(2) Japanese external assets as defined in a above should be offset against total national percentage shares of total Japanese assets, both those within Japan declared available for reparations and those outside Japan; and

(3) All countries at war with Japan should supply to the reparations agency for Japan inventories of all types of Japanese property, supplies, or equipment, military, quasi-military, or civilian, held by them except for military supplies and equipment actually destroyed.

(4) The proposals here made shall be limited in their application to Japanese assets and not be construed as a waiver of claim to property of United Nations Nationals seized as war booty.

b. Prior to submittal of the above conclusions for inter-allied consideration, the United States should secure the agreement of the Government of the Union of Soviet Socialist Republics to the propositions that:

(1) Paragraphs 4 a (1), (2), and (3) [(3), and (4)]⁷² are to be accepted as the policy of the two governments;

(2) All Japanese assets at present in Korea are to be retained in Korea and held in trust for the benefit of the Korean people; and

(3) The two governments will inform the Far Eastern Commission of those decisions and, if the Union of Soviet Socialist Republics so desires, will jointly suggest that Japanese assets in Korea retained temporarily within the administrative control of the United States and the Union of Soviet Socialist Republics should not be offset against the total reparations allotments to the United States and the Union of Soviet Socialist Republics.

recommendations

5. It is recommended that:

a. Upon approval of this paper by the SWNCC, the State Department be requested to reach an agreement with the Union of Soviet Socialist Republics on the conclusion in paragraph 4 b above; and

b. Upon the attainment of such an agreement, the United States member of the Far Eastern Commission be requested to present the conclusion in paragraph 4 a above to the Commission.

[Subannex 1]

Appendix “A”

Facts Bearing on the Problem

1. The position of the U.S. Government in regard to “War Booty” has been expressed in several communications and papers, including the following:

a. Telegram No. 27 of January 4, 1946 to Chungking:⁷³ “Hague Regulations Land Warfare 1907⁷⁴ to which China adhered 1917 provide in article 53 limitations on war booty regarded by Dept as valid (urtel 2226, Dec 27⁷⁵). Only (1) movable, (2) government owned property, (3) susceptible of military use, for example cash, arms depots, means of transport, may properly be treated as war booty aside from battlefield booty. All three conditions must be met. In general private property may be taken only if paid for or returned later. Undoubtedly complexities of Jap and puppet ownership and corporations will make final determination difficult but rule above is only feasible guide.”

b. Telegram 392 March 5 to Moscow:⁷⁶ “This Govt does not accept any interpretation of war booty to include industrial enterprises, or the components thereof, such as Jap industries and equipment in Manchuria, and it therefore cannot accept the assertion made by the Soviet Govt, as reported by the Chinese Govt, that these industrial enterprises are subject to consideration as war booty. As stated in this Govt’s previous note, the ultimate disposition of Jap external assets such as the industries of Manchuria is a matter of common interest and concern to those Allies who bore the major burden in defeating Japan. The U.S., as a major participant in the war against Japan, cannot recognize any final disposition made of Jap external assets, including industrial property, either by the Soviet Govt or by agreement between the Soviet and Chinese Govts, without its prior approval; and it cannot agree to the removal of industrial properties from Manchuria as war booty and if any such properties have been so removed it will expect to receive a full accounting thereof.”

c. Telegram 416 of March 7 to Moscow:⁷⁷ “The US Govt regards as unprecedented and inequitable the Russian contention that enterprises in Manchuria which served the needs of the Jap Army constitute trophies of the Red Army. Jap external assets in the form of industrial enterprises in Manchuria are on the territory of a friendly Ally which eight years resisted Jap aggression. The U.S. Govt can find no justification for the Russian contention that consideration of those industrial enterprises are reparations is a subject separate from the question of war trophies. As a matter of fact, the US Govt has already informed the Chinese Govt and the Soviet Govt of its position that title to all Jap-owned property in countries at war with Japan and invaded or occupied by the Japanese shall be taken by the country in which such property is physically located with its value charged against that country’s reparations claim. It hopes to receive Soviet concurrence in this position.”

d. FEC 014/1 of 11 April 1946 contains the following paragraphs on which the United States made no reservations: “Part IV—Economic, paragraph 4. Reparations and Restitution: Reparations. Reparations for Japanese aggression shall be made:

a. Through the transfer—as may be determined by the appropriate Allied authorities—of Japanese property located outside of the area to be retained by Japan.”

“Part IV, Economic, paragraph 7:

7. Japanese Property located Abroad.

Existing Japanese external assets and existing Japanese assets located in territories detached from Japan under the terms of surrender, including assets owned in whole or part by the Imperial Household and Government, shall be disclosed to the occupying authorities and held for disposition according to the decision of the Allied authorities.”

e. Memorandum of May 22, 1946 by Mr. Yingling⁷⁸—Le: “Subject: Definition of ‘War Booty’. It seems to me that it would be unwise to attempt to formulate a definition of ‘war booty’ for use in possible discussions with the Soviet Government. Assuming that such a definition could be agreed upon it is unlikely that it would have any moving effect on the Soviet authorities. I believe that it would be better to consider questions of war booty with the Soviet Government on an ad hoc basis.

“Aside from the provisions of the fourth Hague Convention respecting the laws and customs of war on land,⁷⁹ it is doubted that there is anything which could be considered international law on the subject of war booty. The provisions of the convention referred to could be used by the Department without further definition. One of the disadvantages of a definition by the Department is that it would not of itself have any authority as law and yet it might be used against us now or at some future time.

“The idea of attempting to formulate a legal definition, having in mind justification of what this Government has done, does not appeal to me as a proper approach to the subject.”

2. The Soviet attitude on the subject of war booty may be illustrated by the following excerpts:

a. Telegram 650 of March 5 from Moscow:⁸⁰ “.… the question of reparations is subject to consideration separate from the question of war trophies. 1. Molotov defines as ‘war trophies’ any property which ‘served the needs’ of Kwantung Army and maintains that such property does not come into question from standpoint of reparations.”

b. Conversation with Mr. Novikov of March 19: “1. Acting under instructions to obtain the views of the USSR concerning the grounds for their objection to inclusion of the phrase ‘seizure and disposition of Japanese overseas property and investments’ in the agenda of the Reparations Committee; to obtain, if possible, an expression of views from the USSR concerning a proper method of handling the reparations problem, we were entitled, I believe, to come away with the following impressions.

“2. Mr. Novikov objected to the phrase because it implied FEC jurisdiction beyond Japan’s Main Islands. In practical terms, the objection derived from opposition to an FEC operation which might entail survey, investigation, recording, and reporting of Japanese assets outside of Japan. While such operations were probably necessary in connection with determining the final reparations settlement, they should not, he maintained, be carried out by the FEC, but through normal diplomatic channels.”

c. Conversation with Mr. Novikov of March 21: “Mr. Novikov in commenting upon the paragraph dealing with the functions of the committee with respect to external assets pointed out the futility in his judgment in attempting to assign such responsibilities to this committee so long as the issue, particularly in reference to Manchuria, was being negotiated at a much higher level. His objection was recognized and it was suggested that alternative wording might be substituted which avoided that issue until there had been governmental decision, and which thus left the committee free to proceed on the matters clearly within its scope.

“Mr. Novikov again reiterated his argument that external assets must be taken into account in allocating internal assets and that reports from the countries on the Commission with respect to the value of Japanese assets available to them as reparations could appropriately be secured by a committee within the Commission.”

d. Conversation with Mr. Novikov of April 17: “Mr. Novikov remarked that: (1) The Soviet Government had not replied to his request for comment or instructions and presumed that the matter remained a matter for study in Moscow; (2) He could not, of course, object to presentation of its proposal to the FEC by the United States and, in fact, believed that an airing of views in the FEC might be most desirable; (3) He had serious doubts that the FEC was the proper agency before which to negotiate the manner for handling reparations and believed that Mr. Molotov might, in Paris, raise the matter for discussion there; (4) His present views on the matter of handling reparations were only his own and had no standing officially. Nevertheless, his own views were: (a) That the reparations operations included disposal of Japanese assets both within and outside of Japan.”

e. Telegram 1306 of April 23 from Moscow:⁸¹ “3. Of Japanese property located on former Japanese territories or on territories occupied by Japan only that portion should not be included in reparations which enters into the category of war trophies.”

f. Conversation with Mr. Korobochkin of May 7: “3. Mr. Korobochkin commented on the United States proposal before the Far Eastern Commission in the following sense: (a) In general, the USSR does not object to the United States proposals, (b) He suggested that reference to Japanese assets to be returned as restitution be covered in a separate paragraph. The reference to war booty should be included in a similar manner, (c) USSR considers it appropriate to include all Japanese property and assets mentioned in the Potsdam Declaration as available for withdrawal in reparations transfers from Japan, (d) Categories of property and assets specifically mentioned by Mr. Korobochkin as proper for reparations removals included armaments, ships, transportation equipment, industrial facilities, industrial raw materials, gold, precious metals, foreign exchange and securities, (e) War trophies or war booty should not be considered as available for reparations removal. (f) Assets other than war booty located in areas outside of Japan would be considered in various categories by the Soviet Government at a later time, (g) The USSR agrees that Japanese assets in territories occupied by Japan but areas which had not participated in the war against Japan, and assets in neutral countries, should be considered as available for distribution as reparations, (h) The Soviet Government regards the disposition of Japanese assets in Korea as a subject proper for discussion by the Reparations Committee.”

g. FEC 014/2 of May 13, contains Soviet proposals regarding FEC 014/1; it makes no comment whatever upon Part IV, paragraphs 4 and 7 (quoted in paragraph 1 d above) and hence by implication accepts these statements.

3. The Chinese position is complicated by application of war booty theories in reoccupied areas other than Manchuria. In such areas Chinese military authorities have been pursuing a course very similar to that of the Russians with full recognition, however, on the part of the central government that their position is necessarily limited by their rejection of the actions of the Russians in Manchuria. The view of the Chinese Government on the latter is summarized in telegram 392 of March 5 to Moscow: “… that the Chinese Govt considers the claim of the Soviet Govt as far exceeding the scope of war booty as generally recognized by international law;”.

4. The British position is indicated in telegram 2789 of March 9 from London,⁸² of which the following is an excerpt: “Roberts⁸³ is also instructed to add that in absence of agreement resulting from such discussion HMG regard it as appropriate that the state in whose territory they are located should retain such assets on a custodian basis to be debited against that state’s eventual share of Jap reparations. HMG cannot acquiesce in unilateral removal of assets by third party nor can they recognize any agreement between individual govts which purports to arrange for final disposal and ownership of Jap property rights, interests and assets.”

[Subannex 2]

Appendix “B”

Discussion

1. War booty has become a major stumbling block in the handling of a Japanese reparations settlement. The views of the United Kingdom, United States, and Union of Soviet Socialist Republics regarding Japanese properties in Manchuria have proved irreconcilable. At present, the problem involves not only actual properties which might be applied to the reparations settlement, but also Soviet concepts of national honor and prestige.

2. China is the only country which suffers directly and immediately from the Soviet removal of industrial equipment from Manchuria as war booty. Other countries suffer indirectly, to the extent that any allocation of assets from within Japan to Russia reduces the total amounts upon which other countries can draw and to the extent that Russia’s broad definition of war booty creates an undesired precedent in the future of warfare. The Chinese indicate at the present time far less interest in the solution of the war booty controversy than do either the United Kingdom or the United States. This growing indifference may be explained in terms of a practical recognition of the unlikelihood that Russia will disgorge industrial equipment already seized as war booty; a growing feeling that Manchuria should not be too heavily industrialized; and a strong desire to expedite transfers of those assets from within Japan which can improve the national welfare and strengthen the national economy of China.

3. A distinction should be drawn between the legal-political and reparations aspects of the problem of war booty. However proper and supportable the United States–United Kingdom view on how war booty should be defined, it is improbable that it can be forced upon the Union of Soviet Socialist Republics in such a way as to produce disgorging of what the Union of Soviet Socialist Republics has already removed. What might be accomplished through pressing the definition is the firm establishment of a United States–United Kingdom legal position. If the political advantages of following such a course are sufficiently great to delay indefinitely a Japanese reparations settlement or to exclude the Union of Soviet Socialist Republics from that settlement, the United States–United Kingdom legal position should be inflexibly supported. However, if prompt advances in the reparations settlement with Russian participation are desired, then the conclusions of this paper should be adopted. The fundamental decision, in short, is whether the legal-political aspects of the war booty problem as presented in Manchuria exceed in importance the reparations settlement. It is considered that they do not and that the conclusions of this paper should be adopted as contributing materially to progress in making transfers of those Japanese assets within Japan, and within the neutral countries available for reparations and thus speeding the reconstruction and rehabilitation of war devastated areas in reparations claimant countries. The Secretary of State has approved the conclusion of the paper from the political point of view.

4. What is proposed is that all Japanese assets, military, quasi-military, or civilian in character, irrespective of whether or not defined as war booty, which are found in countries at war with Japan, or which have fallen under the administrative control of active belligerents should be considered Japanese “external assets”. The Legal Adviser to the Secretary of State can find no legal objection to so doing. Having adopted that principle, it is proposed that full inventory of such assets be prepared by reparations claimant countries and submitted to the Japanese reparations agency. It is further proposed that such assets, whether in the territories of such countries on 2 September 1945 or subsequently removed there by one of the belligerents, should be retained by the country in whose territory they now are and should be applied against the fulfillment of the full reparations claim submitted by the claimant country. In effect, such a program would mean that India, China, the Netherlands, etc., would report military and quasi-military equipment by their own definition at the same time that they reported other Japanese assets in their territories. The Russians would make a similar report, the difference being that by their definition industrial property would be listed under the military and quasi-military category rather than under the category of strictly civilian external assets. In both cases, the total amounts reported would be applied against the reparations allocation. This policy would place Japanese military equipment found by United States forces on the China coast, in the Philippines and on the Islands of the Pacific within the United States reparations allotment. However, a large part of such equipment will have been destroyed, and it is proposed that no accounting is necessary for military and quasi-military equipment and supplies actually destroyed, thus providing, incidentally, inducement to destroy Japanese military equipment, which would be in accord with United States policy.

5. The problem of Korea is a delicate one, since it is the United States position that assets found in Korea should be retained by the Korean people. The temper of the Far Eastern Commission at the present time is one which would not favor considering liberated Korea as a reparations claimant country. Hence, the Union of Soviet Socialist Republics and the United States should agree bi-laterally to retain in Korea all Japanese assets at present there and to hold them in trust for the benefit of the Korean people.

It is immaterial to the United States whether or not Japanese assets in southern Korea are applied against the total United States reparations apportionment. The United States claim will be so large, and its insistence upon recognition of priority for fulfillment of claims for occupation costs will be so clear, that application of assets in southern Korea to the total United States claim will not materially affect vital United States interests. The Russians, on the other hand, may regard application of the same principle in their case as a device to deprive them of any possible claim upon assets within Japan. They will not want to be penalized for benevolence in Korea. If, however, it is made clear to the Russians that the United States is ready to associate itself with the Russians in a request to the Far Eastern Commission that Japanese assets being retained temporarily within the administrative control of both the United States and the Union of Soviet Socialist Republics in Korea should not be offset against total reparations allotments to those two countries, the Union of Soviet Socialist Republics may be willing to accept the general principles of this paper.

6. Adoption in the FEC of the above conclusions should be urged only if it is perfectly clear that the Russians in good faith can give assurances that full inventory of all types of military, quasi-military and civilian Japanese property will be supplied prior to an allotment, if any, of Japanese assets from within Japan to the Union of Soviet Socialist Republics. An assurance from the Union of Soviet Socialist Republics on this point, as well as regarding Japanese assets in Korea, should be a precondition for submittal of the conclusions of this paper to other members of the FEC.

70. Notation by Ernest A. Gross, Special Assistant to the Assistant Secretary of State for Occupied Areas (Hilldring): “Pursuant to informal SWNCC clearance, discussions have been held between General Hilldring and the Ambassador of USSR. Secretary of State authorized these discussions prior to his departure for Paris. EAG”. For conversation on June 24, see memorandum dated June 25, supra. In a memorandum of July 17, the Secretary of SWNCC (Moseley) asked that General McCoy be notified “when such an agreement has been reached” with the Soviet Ambassador; for the Department’s reply, see memorandum of September 25 by Mr. Martin to Mr. Moseley, p. 569.
71. SWNCC 310, June 17, as revised July 12, was based on a study representing State Department views submitted to SWNCC for approval; this was received on July 12.
72. Correction based upon revision by SWNCC on July 23, reported in its SWN–4599, July 23, not printed (740.00119 P.W./7–2346).
73. Foreign Relations, 1945, vol. vii, p. 1423.
74. Ibid, 1907, pt. 2, p. 1216.
75. Ibid., 1945, vol. vii, p. 1421.
76. Vol. x, p. 1113.
77. Ibid., p. 1115.
78. Raymund T. Yingling, Assistant to the Legal Adviser.
79. Signed at The Hague, October 18, 1907, Foreign Relations. 1907, pt. 2, p. 1204.
80. Vol. x, p. 1112.
81. Ante, p. 492.
82. Vol. x, p. 1116.
83. Frank K. Roberts, British Chargé in the Soviet Union.