862.00/1–648: Telegram
The Secretary of State to the United States Political Adviser for Germany (Murphy)
227. Personal for the Ambassador. Reurtel 259, Feb 1.1 Anxious to have whole Saar settlement concluded in Berlin if possible before opening London discussion and Dept accordingly prepared to press UK to change its position.
Original Clay position that dollar loss resulting from integration of Saar into Fr economy should not be offset by insistence on dollar [Page 58] settlement of entire balance Bizonia-Fr zone trade rested on sound premise that US/UK should be prepared to accept financial consequences of decision on Saar and that any attempt to require France to settle interzonal trade balance in dollars would sooner or later necessitate corresponding increase in US assistance to France. Moreover, Brit insistence on dollar settlement interzonal trade until trizonal fusion constitutes in fact pressure on Fr to subscribe to trizonal fusion despite understanding reached in London last Dec that no pressure wld be put on French. If Gen Clay concurs we shall therefore seek to persuade Brit to accept proposal that trade between Bizonia and Fr zone remain on Reiehsmark basis (except for settlement of any balance due Bizonia on trade account exclusive of coal), but that we shall be prepared to reconsider matter at end six months in light development such trade and degree of cooperativeness displayed by Fr in Germany. Fr wld simply be advised that we reserve right to reopen issue at end specified period. In order to discuss this with Brit here request you supply us with best estimate on loss of dollars Saar settlement likely to cause JEIA in 1948 and on extent to which such loss likely to affect Brit obligation to convert JEIA sterling assets. Latter estimate shd be based on anticipated expenditure JEIA dollars for balance of year, assuming availability of ERP funds for financing Taw material imports.
Proposed compromise on amount of Saar reparation adjustment appears acceptable on assumption reasonably plausible justification of amount can be made in IARA. Pls clarify whether Brit oppose compromise, and if so, on what grounds. Believe Fr can be persuaded to accept compromise if pointed out that failure to agree may throw whole issue into IARA where they are likely to obtain much less favorable settlement.