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

740.00119 EW/7–3147

Memorandum by the Assistant Secretary of State for Occupied Areas (Hilldring) to the Secretary of State

secret

[Washington,] July 31, 1947.

Subject: Resumption of Reparation Deliveries from the Bizonal Areas.

Discussion

This subject was discussed at the President’s Cabinet meeting on June 27¹⁰ and the discussion reported in your note of that date (Tab A¹¹). General Clay has since recommended (CC 9862 of 12 July, Tab B¹¹) that there be no further deliveries until the question of German unification is definitely decided, or, as an alternative, that deliveries of equipment in excess of the revised level of industry¹² be made to limited IARA nations (i.e. presumably excluding Czechoslovakia, Yugoslavia and Albania) pending Soviet fulfillment of the provisions of the Potsdam Protocol. It is considered certain that the IARA Assembly would refuse to agree to such exclusion.

French concern about the new Level of Industry Agreement can probably be met in large part if they are convinced that the purpose of the new level is to permit immediate resumption of reparation removals and not to utilize all the retained capacity in the near future. France and other countries would fail to understand the reason for our determining and announcing a new level of industry unless we also announced as soon after as possible that we were resuming deliveries of capital equipment in accordance with the new level.

A postponement of deliveries until German unification is accomplished would: (a) make it impossible for European countries, in drawing up coordinated recovery plans, to calculate with certainty on the receipt of German equipment (b) decrease the value of eventual deliveries because of further deterioration, German destruction and because the recipients will have made arrangements for equipment from other sources (c) increase the resentment of IARA countries (d) increase the pressure from the Russians and the IARA countries to substitute reparations from current output for capital removals.

Recommendations

It is recommended that, at an early Cabinet meeting, you recommend to the President that he permit the simultaneous resumption of reparation deliveries to both the Soviet Union and the IARA. If the President believes that we should not for the time being resume reparation deliveries to the Soviet Union, it is recommended that you urge him to permit deliveries to the IARA alone, including those members of IARA which are regarded as under the domination of the Soviet Union, i.e., Albania, Czechoslovakia, and Yugoslavia. This second recommendation conforms to General Clay’s alternative position, except as to the three countries mentioned.

10. For Secretary of the Navy Forrestal’s diary entry on the Cabinet meeting of June 27, 1947, see Walter Millis (ed.), The Forrestal Diaries (New York, The Viking Press, 1951), pp. 286–288.
11. Tab not found attached to source text.
11. Tab not found attached to source text.
12. For documentation regarding the revised level of industry plan for the United States-United Kingdom zones of occupation of Germany, see pp. 977 ff.