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

740.00119 EW/1–1548

Policy Paper Prepared by the Department of State ¹

secret

[ Washington ,] January 15, 1948.

Proposed Recommendations by the Secretary of State to the Cabinet on German Reparations

The Secretary of State recommends the following decisions to be taken by the Administration with respect to the program of removing German plants as reparation:

1. That this Government suspend indefinitely all deliveries of plants to the Soviet Union (and Poland) from the U.S. Zone of Germany, except for the final portions of certain plants the delivery of which was never suspended and is now being completed pursuant to the advance deliveries and war plants equipment programs. Announcement would be made only after further discussions with the British and with the French, if at all, and the final decision would depend upon whether or not UK and French agreement is obtainable.

2. If such announcement is made, it would declare that deliveries on account of the 10% uncompensated Soviet share are indefinitely suspended pending achievement of quadripartite agreement on economic unification of Germany; but that notwithstanding failure to achieve such agreement, the United States will consider the terms under which it might resume deliveries of the 15% for which the Soviet Union is required by the Potsdam Protocol² to make compensating deliveries in commodities if the Soviet Union promptly satisfies its obligations now due in this regard.

3. That the plant removals program based on the August 1947 Bizonal Level of Industry³ be maintained and deliveries continued to all the countries signatories of the Paris Agreement on Reparation.⁴

4. That the Department of State continue negotiations with the British and initiate negotiations with the French seeking common agreement to suspend deliveries to the USSR from all the Western Zones of Germany, pointing out the relationship between such common agreement and Congressional consideration of the European Recovery Program.

5. That before any public announcement of the foregoing decisions the Secretary of State confer with Senator Vandenberg and Representatives Eaton and Herter (or their respective Committees) and

a) Inform them that pending public governmental decision General Clay has been instructed to make no further deliveries from the U.S. Zone to the Soviet Union except for the final portions of certain plants the delivery of which was never suspended and is now being completed pursuant to the advance deliveries and war plants equipment programs, and that pending further discussions with the British it is not desired to make any announcement which might prejudice the situation in Berlin or the commencement of reciprocal deliveries by the Soviet Union.

b) Seek to persuade them that the dismantling program generally should continue during the consideration of the reparations program by the Congress.

c) If unsuccessful in b), and if, and only if, it appears indispensable to Congressional support for the European Recovery Program, agree that dismantling generally be temporarily suspended pending such Congressional consideration, except for such plants as have been so far dismantled already as substantially to impair their further usefulness in Germany.

[If any suggestions are made to bring economic pressure on the United Kingdom and France designed to require them to suspend deliveries to the USSR against their own judgments of their respective situations, such should be firmly opposed.]⁵

1. The Secretary of State circulated copies of this paper at the Cabinet meeting on January 16, 1948. Members of the Cabinet undertook to study the paper and discuss it at the next Cabinet meeting.
2. Regarding the decisions reached at the conference of heads of government at Berlin (Potsdam), July 17–August 2, 1945, see Part IV of the Report on the Conference, Foreign Relations, The Conference of Berlin (The Potsdam Conference), 1945, vol. ii, p. 1505.
3. For the text of the Revised Plan for the Level of Industry in the United States–United Kingdom Zones of Occupation in Germany, signed in London on August 27 and released to the press on August 29, 1947, see Germany 1947–1949, pp. 358–362, Department of State Bulletin, September 7, 1947, pp. 468–472, Carlyle, Documents on International Affairs, pp. 626–632, or Ruhm von Oppen, Documents on Germany, pp. 239–245. For documentation on the preparation of this Revised Plan, see Foreign Relations, 1947, vol. ii, pp. 977 ff.
4. The reference here is to the Agreement on Reparations from Germany, on the Establishment of an Inter-Allied Reparation Agency and on the Restitution of Monetary Gold, signed in Paris on December 21, 1945; for the text, see Department of State, Treaties and Other International Acts Series No. 1655. For documentation on the negotiations leading to the conclusion of the Paris agreement, see Foreign Relations, 1945, vol. iii, pp. 1169 ff.
5. Brackets appear in the source text.