CFM Files: Box 58

The Secretary General of the Inter-Allied Reparations Agency (Sutton) to the Secretary General of the Council of Foreign Ministers 36

Sir: On October 10, 1946 the President of the Inter-Allied Reparations Agency had the honor to submit to the Council of Foreign Ministers the resolution of the Agency’s assembly, adopted on October 8, 1946.37 According to your letter of December 13 confirming the receipt of the resolution, it was to be considered at the subsequent meeting of the members of the Council of Foreign Ministers in Moscow in March.

I have been instructed by the assembly to present the enclosed memorandum supplementing the resolution of October 8, 1946.

I must add that, in view of the great importance for the assembly of all questions concerning reparations from Germany and in view of the special knowledge that has been acquired by the members of the assembly in the field of technical and administrative problems concerning these reparations, the assembly has instructed the President of the Agency and myself to consider ourselves as being at the disposal of the Council of Foreign Ministers in case the Council should desire to receive further information concerning questions arising from the enclosed memorandum.38

I have [etc.]

N. E. P. Sutton
[Page 392]

Memorandum From the Inter-Allied Reparations Agency to the Council of Foreign Ministers

I. Basic Aim of the Paris Agreement on Reparations

The Inter-Allied Reparations Agency was created by the Paris Agreement on Reparations of January 14, 1946.39 The aim of this agreement, signed by eighteen governments, was to secure a just distribution among the countries which signed this agreement of the assets declared subject to reparations from the western zones of Germany in accordance with the Potsdam Declaration.

II. Basis for Reparations

The powers which signed the Potsdam Declaration agreed to establish a general policy regarding reparations and the elimination of the war industry potential of Germany which, while leaving sufficient resources to enable the German people to subsist without outside aid, will force Germany to compensate to the greatest possible extent for the losses and sufferings caused by her to the United Nations and to meet the responsibilities which the German people cannot evade.

III. Importance of Including Industrial Capital Equipment in Reparations

The Potsdam Declaration considers the deliveries of industrial capital equipment as one form of reparations. The real value of this type of reparations for countries receiving reparations depends to a considerable degree on the speed with which they are made available and delivered, and on the speed with which factories are dismantled. The countries represented at the Paris Conference and at present members of the Inter-Allied Reparations Agency therefore especially hoped that speedy large-scale deliveries of this kind of reparations would constitute a rapid and considerable form of help for restoration of the economy of those countries whose industry was subjected to destruction, deterioration and disorganization as a result of the war with Germany.

IV. Industrial Capital Equipment Subject to Reparations to Date

The rate of delivery of reparations from Germany in the form of industrial capital equipment has been extremely slow, and the amount [Page 393] received has been very small. Furthermore, the member governments of this Agency have not received information as to the general volume of capital equipment to be delivered by Germany, and as a consequence thereof they have not been able to determine to what extent they can count on this type of reparations in the formulation of plans for the rebuilding of their economic structure.

Up to the present time, the Allied Powers have left the Inter-Allied Reparations Agency only the following lists of industrial capital equipment:

Up to May 28, 1946, 71 plants distributed in accordance with the Potsdam Declaration, which provides for advance supplies of industrial capital equipment until the establishment of an over-all amount of equipment subject to withdrawal from Germany.
In November 1946, general purpose lathes from 51 war plants.
In November 1946, general purpose lathes and equipment to a value of 75 million reichsmarks, from the British zone.
In December 1946, general purpose lathes and equipment to a value of 15 million reichsmarks from the French zone.

Of the 122 plants indicated in a and b, it has been impossible to date to distribute the equipment of 30 thereof among the member governments of the Agency, since the corresponding inventories have not been received from the Allied Control Authorities. The items mentioned in c and d are still in the process of being identified by the corresponding zonal authorities.

Furthermore, only a small part of the equipment distributed to date by the Inter-Allied Reparations Agency among the member governments of the Agency has been furnished by it.

It is expected that the Inter-Allied Reparations Agency will soon conclude the distribution among member governments of the Agency of all usable industrial capital equipment given the Agency and for which inventories have been received. This amount of equipment is not only small in itself but is also insignificant as aid in the restoration of the economies of the countries concerned.

V. Effect on the Paris Agreement of the Present Situation With Respect to Reparations

The percentage quotas of Governments which signed the Paris Agreements, the primary aim of which was to guarantee an equitable distribution of all German assets subject to reparations, were established after a detailed statistical study of the war effort and losses of each country; furthermore, the assumption that the amount of industrial capital equipment included in reparations would be significant [Page 394] was likewise taken into consideration. The problem of effecting an equitable distribution of reparations in accordance with such percentage quotas, taking into account the small amount of industrial capital equipment made available to date, is already becoming most difficult. If the industrial capital equipment in Germany should not be made available in large amounts, it will be impossible to carry out some of the important decisions of the Paris Convention in their present form as planned.

  1. This communication was first circulated to the Deputies for Germany as document CFM(D) (47) (G)39, January 31, 1947. At their 23rd Meeting at London, February 17, 1947, the Deputies agreed to refer this communication to the Council of Foreign Ministers at its forthcoming Moscow Session. At its 2nd Meeting, March 11, the Council of Foreign Ministers decided that the communication, which had been circulated as an enclosure to document CFM(47) (M)1, March 10, 1947, not printed, would not be considered as a separate item on the agenda but would be considered at the time the overall matter of reparations was considered.
  2. For the texts of the letter and resolution under reference, see Foreign Relations, 1946, vol. ii, pp. 15621563.
  3. At its 8th Meeting, March 18, the Council of Foreign Ministers agreed that the Deputies for Germany should hear representatives of the I.A.R.A. and then report to the Council; see the United States Delegation Minutes of that Council meeting, p. 257. For the report of the Deputies to the Council on the hearing given the representatives of the I.A.R.A., see document CFM(47) (M)98, April 3, 1947, p. 434.
  4. For the text of the agreement under reference, see Department of State, Treaties and Other International Acts Series, No. 1655 or 61 Stat. (pt. 3) 3157. For additional documentation on the establishment of the Inter-Allied Reparation Agency, see the index entry in Foreign Relations, 1945, volume iii .