Foreign Relations of the United States, 1948, Germany and Austria, Volume II

740.00119 EW/4–3048: Telegram

The Secretary of State to the Embassy in the United Kingdom

secret

Washington, April 30, 1948—7 p. m.

1561. For the Ambassador.

1. It has been Dept’s intention to ask you to discuss reparation deliveries to Soviet satellites with Brit and French when policy decision on subject is reached here (re Delsec 1699, April 29¹). Following is present status of problem.

2. Dept’s view is that deliveries to Soviet satellites should be continued except in case of products to be withheld on security grounds. In determining what should be withheld, Dept believes same general policy should be followed as in field of trade relations with countries in Soviet orbit. US policy is to deny to these countries, in addition to military supplies, products of direct significance to war production, and those the denial of which would affect production in key sectors of economies of Soviet orbit countries.²

3. In formulating its views, Dept has had in mind that US restrictions would be ineffective unless it is possible equally to deny Soviet orbit access to alternative sources of supply, particularly ERP countries, Western Germany and Canada. In order obtain cooperation of other countries to such policy and to avoid undue restrictions on East–West trade, it is clear goods to be denied Soviet orbit will have to be kept to a small and relatively important list.

4. Study is under way here by technical committee to determine weak spots in economy of Soviet orbit which would be affected by denial of exports. Meanwhile, a preliminary list has been worked out for purposes of consideration of current export licenses, copy of which is being air pouched to you. Dept believes this list not entirely satisfactory and hopes it will be substantially refined and clarified as result of study mentioned above. Dept believes this will call for reducing its scope, but is not certain this view will be accepted.

5. As you probably know, all reparation and restitution deliveries from US zone to Soviet satellites were suspended by Gen. Clay some weeks ago. In response to his request for instructions, he was told of policy decision on US trade referred to above and asked to apply it to reparation deliveries. While he apparently thought he could apply it in the case of restitution, he did not think he could in the case of reparations. There are about thirty thousand tons of equipment from Category One war plants awaiting delivery to satellites. Although this is general purpose equipment (specialized equipment having been destroyed), Clay pointed out that source of this equipment made it necessarily war potential.

6. Dept has proposed withholding of undelivered equipment which is on present working list of goods to be denied Soviet orbit on strategic grounds, and resumption of deliveries of all other equipment. Adjustments would be made in subsequent allocations to satellites to take into account equipment thus withheld. Army Dept has questioned feasibility and desirability of attempting to apply list to goods now awaiting removal, which Army estimates would in large part fall in the category of goods to be withheld. We are examining with Army inventories of equipment allocated to satellites to see if we can reach agreement on facts and practicability of making segregation of kind we propose.

7. Early decision here important before end IARA Assembly meeting in Brussels beginning May 4 at which Czechs have given notice they will raise question of their suspension of deliveries to them. Dept hopes policy decision will be reached early next week.

8. When matter is taken up with Brit and French, they will undoubtedly raise question of our attitude toward shipment from ERP countries, particularly in light of Section 117(d) of Economic Cooperation Act. We will wish discuss this question with them, but feel this aspect of matter should await completion of more detailed studies here on strategic factors and appraisal of effect of applying restrictions to East–West trade. However, we think that decisions can be made in near future with respect to reparations and restitution deliveries from Germany and hope that we will be able to obtain their cooperation and support in such policies. We think it should also be possible to apply the policies parallel to US export policy rather quickly to bizone trade with Soviet sphere. We have discussed with Dorr the line of action we propose and manner in which we would attempt to fit this into the framework of IARA activities and Paris Reparation Agreement (re second para Delsec 1699). We suggest that, when time for discussion with Brit and French is reached, you ask him to come to London to give you further background and to assist you in your discussions.

9. Definitive instructions will be telegraphed soon as possible. Until then any expression US views should be entirely tentative.

Marshall

1. Not printed. In it Ambassador Douglas reported that there would soon be some discussion at the London Conference of the broad question of reparations to the U.S.S.R. and the Satellites. Douglas asked for guidance regarding the resumption of reparations deliveries to the U.S.S.R. and the Satellites, (740.00119 EW/4–2948)
2. Documentation regarding United States policy on trade with the Soviet Union and Eastern Europe is included in volume iv .