Foreign Relations of the United States, 1947, Council of Foreign Ministers; Germany and Austria, Volume II

740.00119 EW/8–647

Report by the United States Delegate to the Inter-Allied Reparation Agency (Dorr)²

secret

Report of Discussions in Berlin Concerning Availability of Data on Proposed Level of Industry July 16–July 26, 1947

I. The Mission.

On June 4, 1947 the Department instructed me by telegram to make recommendations to it for the simplification of procedures for handling industrial capital equipment reparations from Germany.³ It soon became obvious that compliance with such instructions would depend on knowledge of the type and quantity of industrial capital equipment which might be available for distribution in the future, and of the practical problems which faced those authorities in Berlin charged with the duties of deciding what equipment could be made available for reparation, of inventorying, valuing, dismantling and packing such equipment, and of allocating it between the USSR and the West. Accordingly, the Department was informed of and approved my intention to go to Berlin for consultation with appropriate OMGUS officials.

Before my departure, in the course of its consideration of a new level for German industry, the question was raised by the Department as to whether the proposed new level would provide sufficient industrial capital equipment for reparation purposes to permit the United States to fulfill its reparation commitments to IARA nations.^* A reply was received from OMGUS which stated that the proposed level of industry had not been drawn up with reparation obligations in mind, that while there would be a very considerable body of industrial capital equipment available, it would not, in the judgment of OMGUS, be of the type desired by IARA, that the goals of an establishment of an adequate level of industry sufficient to permit Germany to support herself and to contribute to European recovery, and the goal of providing adequate industrial capital equipment reparation for IARA nations seemed mutually inconsistent and urging that the Department’s instructions in regard to the amount of reparation to be made available should be clarified.

The Department repeated this telegram to me with instructions to comment,^† I answered briefly, but indicated I could not make a full comment without further knowledge of what the new level of industry implied as to the amount and kind of plant which would remain available for reparation. As I was going to Berlin anyway in connection with the procedural question which had already been raised by the Department, I was instructed to look into this question at the same time.

On July 14, 1947 it came to my attention that, (a) although the question of whether the proposed level of industry made adequate provision for reparation commitments appeared to be an open issue still under debate between the Office of Military Government and the State Department, and (b) General Clay had asked for further instructions, (c) General Clay had nevertheless announced that he intended to make the proposed plan public on Wednesday, July 16. In view of my imminent departure for Berlin (planned for that day) I thought it advisable to telephone the Department to determine whether there was any change in the situation, and whether it was still desirable that I should attempt to go into the reparation implications of the proposed new level. I was instructed that it was more than ever important that I go to Berlin at once and secure as much information as possible concerning the kind and quantity of industrial capital equipment which would remain available for reparation under the projected new plan. Accordingly, I left that evening for Germany and arrived in Berlin soon after lunch on July 16. I was accompanied by my Deputy, Mr. Alexander B. Daspit, and by Mr. Edward O’Flaherty, United States Expert Adviser to the Tripartite Commission for the Restitution of Monetary Gold (since my mission also included discussions with officials of the Finance Division of the Office of Military Government concerning the amount and character of looted gold found in Germany).

II. Interview of July 16 With the Economic Director of the Office of Military Government.

As soon as possible after my arrival in Berlin I conferred with Ambassador Robert Murphy, United States Political Advisor to the Office of Military Government, and gave him a general explanation of my mission. Shortly afterward, at the suggestion of Mr. Orren Mc Junkins,^‡ from whom I first sought information as to the reparation implications of the new level of industry, Mr. McJunkins and I, accompanied by Messrs. Daspit and O’Flaherty called upon Mr. Lawrence Wilkinson, Economic Director of the Office of Military Government, with whom I was already acquainted. A Mr. Spencer of the Economic Directorate was with Mr. Wilkinson and remained in the room during the interview, which occurred sometime between six and seven o’clock in the evening.

I saw that Mr. Wilkinson was very much occupied, and in view of the lateness of the hour I suggested that perhaps it would be better to defer discussion until the next day. Wilkinson, however, pressed me to explain my mission. I explained briefly my interest and expressed my desire to go over with him the proposed level of industry and to discuss what plants might be expected to become available for reparation under the projected new level. Wilkinson stated that there were many newspaper men who would like to know the same thing, but that the level of industry agreement would not be publicly released that day as had originally been planned. I replied that I realized no public release was being made and that I was not requesting the information for communication to IARA, but solely in confidence in fulfillment of my mission as United States Delegate and as a representative of the State Department. Wilkinson stated, however, that he could not make any release whatever. Upon my pressing the point, he picked up the telephone and called General Clay. I protested that if it were a question of securing General Clay’s consent, I would prefer to state the case to him myself. Wilkinson, however, put the question to General Clay in terms of asking confirmation of his own stand and without mentioning any of the points which I had stressed in favor of my request.

Since I did not speak to General Clay on the telephone myself, I can only report what Wilkinson stated was the General’s attitude. This was that a clear and unambiguous order had been received from the War Department forbidding the release of the information I was asking for to anyone, but that if I could secure authority from the War Department there would be no difficulty. Wilkinson went on to emphasize that, of course, the Office of the Military Government was anxious to give me the desired data and had no desire to keep anything from me, but that so long as the War Department order stood it would be impossible to grant my request. He continued that, of course, if a cable were sent to Washington explaining the situation and authorization were received, the Office of Military Government would be only too glad to cooperate. I pressed Wilkinson to state exactly the type of authorization which it would be necessary to receive and he repeatedly stated that there was no desire whatever to hold back any information. The whole tenor of the discussion was that there was an unfortunate technical obstacle in the way of my being informed, and that as soon as this was cleared there would be no further difficulty.^§

Mr. Daspit and I went almost immediately from Wilkinson’s office to the code room of the Office of the U.S. Political Advisor where I despatched a cable to the Department explaining the situation and asking that the appropriate authorization be requested.⁸

III. Interview With General Clay, July 23.

I remained in Berlin after the Wilkinson interview of July 16 awaiting instructions from the Department, attending to various matters concerning the restitution of monetary gold, and conferring with British reparations personnel. At about 3:30 on the afternoon of July 23 I received word that General Clay wished to speak to me and went immediately to his office. No one else was present at our interview.

General Clay began by saying that he had received a directive from the War Department ordering him to acquaint me with the details of the proposed level of industry plan. He said he had appealed to the War Department to reverse this order and meanwhile had no intention of complying with it. He said that in any event, rather than comply with it he would resign. He further directed that during my stay in Berlin I should address any communications to the State Department solely through War Department channels.

I expressed surprise and concern at the position taken by General Clay. I explained to him several times the circumstances of the meeting in Mr. Wilkinson’s office and repeatedly stressed that I had been, as I understood it, invited to secure clearance from the War Department so that information as to the reparation implications of the new level of industry plan might be revealed to me. General Clay insisted that my use of the Office of the Political Advisor’s cables had been improper, and that that was not an official channel for communication with Washington. I stated that I had understood that this was a regular State Department channel of communication and that as an employee of the State Department this was for me the proper means of communication. I did my best to conciliate General Clay and to urge on him that I not only had no idea that he would object to my being informed regarding the level of industry, but that I had understood from Wilkinson that the course I had followed would be agreeable to him.

I then urged that he consider with me the merits of whether or not I should not be informed concerning the level of industry. I pointed out that the Department had instructed me to make recommendations for the revision of reparation procedure and that obviously I could not do this intelligently without knowing something about the prospective nature and volume of reparation to be made available and having a full understanding of the procedures currently being followed and the practical considerations which might affect any change. I also stressed the fact that as United States Delegate to IARA, I would have to be in a position to explain and, if necessary, defend such decisions that might be taken concerning the level of industry if, as seemed not unlikely, questions were raised in the Assembly. Furthermore, I pointed out that he himself had raised with the Department the question of whether or not it was possible to have both a satisfactory level of industry and a level of reparations which would be satisfactory to IARA. I stressed the fact that he had himself expressed an opinion concerning what might and what might not be satisfactory to IARA, and that the Department was naturally interested in seeing whether the reactions of the United States representative on that body were the same.

General Clay then stated with considerable emphasis and not without heat that the question of German level of industry was of exclusive concern to Germany and to the Office of Military Government, that it was fully subject to his control and could be changed tomorrow if he thought fit. He indicated that he considered it highly undesirable that anyone else should have anything whatever to do with the establishment of such level. I expressed some surprise and noted that the General had in public statements repeatedly pointed out the fact that the German problem was merely part of the European problem, and that the recovery of Germany was intimately tied up with the recovery of Europe. I also said that whether or not he considered the matter one of exclusive German concern, I was sure that he would wish to take into consideration all relevant factors in arriving at his decision. The General expressed some disagreement with this view, stating that in a case like this there were always bound to be differences of opinion, and that the main point was to arrive at a prompt decision. He went on to say that he had no interest whatever in my problems or in whether I was able to accomplish my mission well or badly. I replied that I could not accept his statement as a serious expression of his attitude, and that I was sure that on more mature consideration he would wish to take a different position. I pointed out that there were constantly recurring situations in which the handling of affairs at IARA might be either a help or a hindrance to the Office of Military Government, stressing particularly the argument over German rolling stock in IARA countries, and the desirability from the Zone Commander’s standpoint of the prompt handling of reparation items allocated to IARA.

General Clay stated several times that the projected level of industry plan had no implications whatever in regard to reparation. I inquired why, if that were so, was it necessary to promulgate a plan since the objective of the original level of industry plan of limiting German industry for security purposes had apparently been largely abandoned under the new directive for the governing of Germany. General Clay replied that the new plan was solely for the purpose of reassuring German interests and demonstrating to them that the threat of plant removal was no longer one which they needed to fear. I expressed my understanding that one purpose of establishing a new level of industry was to establish the amount of reparation and to carry out the understandings for resumption of reparation removals which had been arrived at between Secretary Marshall and Mr. Bevin at Moscow. General Clay denied that there had been any such understanding or that there was any assurance whatever that reparation removals would be resumed. He stated that the Cabinet had voted against the resumption of reparation removals, and that the Secretary of State’s vote had been the lone dissent from this proposition. He repeatedly questioned the economic value to the recipient nations of such removals despite my calling to his attention the eagerness of most IARA countries to receive capital equipment and the keen competition which has prevailed in IARA.

General Clay stated further that he was bound by an agreement with the British Zone Commander not to release any information to third parties regarding the proposed new level.

I attempted throughout to conciliate General Clay and went so far as to state that if he really felt so strongly opposed to my receiving this information, I would not on my own responsibility force the issue and would, if he desired, withdraw my request. He stated that it was too late, that he had communicated with the War Department and that there was nothing to do now but to await a reply from Washington. I expressed strong regret at this and indicated that in that event, my only course was to seek further instructions from the Department. The interview ended at about 4:30 p.m.

IV. Later Developments.

After the meeting I immediately made notes of my conversation with General Clay. The preceding section of this report is based on such notes. The following day I communicated the substance of my conversation to my Deputy, Mr. Daspit, and I also communicated the main facts to Ambassador Murphy.

On the evening of July 23 I telephoned Mr. Joseph A. Todd of the Division of German-Austrian Economic Affairs, and explained the situation to him. He instructed me to stand by for further developments. On Friday evening Mr. Todd telephoned me to say that because of the absence from Washington of Mr. Howard Petersen, Assistant Secretary of War, it would be impossible to settle the controversy before the following week. I pointed out that a new session of the IARA Assembly was scheduled for the following Monday and that I felt that I should be in Brussels at that time. It was agreed that I would report the situation by cable and return to Brussels. The following morning I despatched Berlin telegram 1758 of 26 July 1947.⁹ Before leaving Berlin I called again on General Clay and informed him of my intended departure and of the fact that I had communicated the situation to the Department. General Clay was rather affable. He stated, however, that he considered the request I had made unreasonable. He said also that he hoped that when I next returned to Berlin I would find someone in his place with whom I would be able to get along better. I assured him I would regret very much seeing anyone else in his place, and that I was sincerely sorry that he did not feel that we could get along together. We shook hands at parting and I had the feeling that short of abandoning my position completely I had accomplished as much as was possible to accomplish to avoid personal acrimony or an open break.

V. Conclusion.

I cannot avoid the conclusion that General Clay has a strong emotional bias against the entire idea of reparation from industrial capital equipment, which sometimes leads him into not altogether temperate statements and attitudes which are not always well reasoned. I am strongly of the opinion that if there is to be an effective program of industrial capital equipment removal from Germany, a broad but clear and explicit agreement for full cooperation and full exchange of information between representatives of the Office Military Government and of the U.S. Delegation to IARA and the IARA Secretariat is essential. Under present conditions adequate joint planning, though badly needed, cannot be achieved and the entire program is therefore severely hampered.

[Brussels,] 30 July 1947.

Russell H. Dorr

2. The source text was transmitted as an enclosure to a letter of August 6, 1947, from Dorr to Joseph A. Todd of the Division of Occupied-Area Economic Affairs, not printed.
3. Deptel to Brussels 770, June 4, 1947. Such instruction was, as I understand it, issued as an aid to the implementation of a four-power agreement reached at the Moscow Conference of March–April 1947, that existing procedures concerning industrial capital equipment reparations should be revised to secure more rapid and efficient distribution of this type of reparation. [Footnote in the source text. For the agreed and unagreed points regarding German reparations reached during the Fourth Session of the Council of Foreign Ministers, Moscow, March 10–April 25, 1947, see Part II, Paragraph II of document CFM (47) (M) 148, April 23, 1947, pp. 461, 467.]
4. See WDSCA IAD WX–81354. [Footnote in source text.]
5. A copy is attached as Annex A. [Footnote in source text. The Annex was a copy of telegram 962, July 10, 1947, to Brussels, supra.]
6. United States member of the RD & R Directorate of the Allied Control Authority. [Footnote in source text.]
7. I have subsequently re-checked this with Messrs. McJunkins, O’Flaherty and Daspit, and they all agree with my recollection of the transaction. Following this interview, Mr. McJunkins said as we were walking down the hall of the Economics building “If I were you I would send that cable right away”. [Footnote in source text.]
8. Telegram 1701, July 16, 1947, from Berlin, not printed.
9. Not printed.