740.00119 Council/4–2447: Telegram

The Ambassador in the Soviet Union (Smith) to the Acting Secretary of State


1541. Delsec 1467. Following is text (subject to minor changes in language reconciliation) informal understanding on method charging French reparation accounts for Saar agreed among US, French, British delegations:

US agreement limited to principle, on ground figures appropriate for negotiation Berlin.

French desire question of reparation charge for Saar be raised in ACA as further test Soviet intentions. Question tripartite action in case Russian rejection left entirely open, though British sought commitment in favor of such action. For your information British motivation believed to be primarily heavy overcharge category B account in IARA due to receipt ships and desire to have large amount charged to French.

Instructions and US preferences among alternatives in understanding to OMGUS on implementation in ACA will be transmitted via War shortly.

  • “1. The charge will be calculated in respect of (a) capital equipment in the Saar which would have been removed as reparation if the Saar had remained an integral part of the economy of Germany; (b) additional capital equipment retained in Germany in order to maintain the economy of Germany at the determined level despite the loss of the Saar.
  • “2. The determination of 1 (a) will be made either as a lump sum representing the reparation value of the plants if available and claimed by France which may be spread over an appropriate period; or a percentage of the value of each branch of capital equipment allocated to IARA, the percentage to be fixed in accordance with the ratio of industrial plant in the Saar to industrial plant in the remainder of the western zones.
  • “3. The determination of 1 (b) will be made by calculating the capital value, as reparation, of plant retained in the western zones to compensate for the loss of the net surplus, if any, of the balance of commodity and other appropriate items in the balance of payments of the Saar expressed in 1938 values on the assumption of postwar German economy.
  • “If 1 (a) is determined as a percentage, the amount under 1 (b) shall be converted into a percentage.
  • “4. As an interim measure, pending final calculation, of the figures under 2 and 3 above by the Control Council, the debit on French reparation account will be assumed to be (75 million reichsmarks, British) [Page 490](40 million reichsmarks to be spread over—months or—percent French).
  • “5. In the allocation of capital equipment between east and west in Berlin, account should be taken of the receipt by IARA of the value of the Saar as reparation, as calculated in accordance with paragraphs 1–4 above. The shares between east and west should be adjusted accordingly, in the course of successive allocations, as may be agreed by the Control Council.
  • “6. The US, UK and French members of the Control Council will be instructed forthwith to submit proposals for the charge to IARA (France) of the reparation value of the Saar.
  • “7. The assembly of IARA should determine the method by which and rate at which the charge should be brought to France’s category B account in IARA.
  • “8. The delegates to IARA of the US, UK and France will be instructed in due course to submit to the IARA assembly proposals for the charge of the reparation value of the Saar, calculated in accordance with the above principles, to France’s category B reparation account.”

Sent Department as 1541, repeated Berlin for OMGUS as 328, Brussels for Dorr as 22.