740.00119 EW/2–1448
Memorandum by the Assistant Secretary of State for Occupied Areas (Saltzman) to the Under Secretary of State (Lovett)
This afternoon I had a conversation with Secretary Harriman about the dismantling program.
He said that he thought it would be desirable, if possible, to suspend dismantling activity until the necessary legislative action has been taken here to assure the European recovery plan. He felt also that it would be very desirable, until the ERP is assured, for us to continue our present procedures respecting reparations deliveries, viz. not to make any deliveries to the Soviet Union or Poland.
He believes that it is desirable to review the whole dismantling question with specific reference to the ERP, pointing out that the matter of German level of industry and reparations has never actually been formally considered with that in mind. This suggestion is in line with the recommendation which he circulated in the Cabinet in a memorandum dated January 23, 1948.1
When he was in Europe last summer he was impressed with the expense which the British were incurring in their zone in the process of dismantling. He showed me figures respecting four plants in the British zone which would indicate that the Reichsmarks cost of dismantling (not including shipping costs) was a very substantial percentage of the estimated replacement cost of the plants in 1938 and of the assumed reparations value of the plants. He is under the impression that in the American zone General Clay is accomplishing this more [Page 727] economically, and believes this is because we are not carrying dismantling as far in each plant as the British. In this connection he believes that with reference to the 15% capital equipment deliveries to the Soviet Union in exchange for reciprocal deliveries of commodities, we should examine carefully the dismantling costs involved to see what their effect may be in reducing the benefit which is supposed to be derived from the receipt of the commodities from the Soviet Union.
He believes that it is reasonable for us to propose to the British and French that they join us either in total suspension of deliveries to the Soviet Union and Poland or in suspension of the so-called 10% and continuation of the 15% on a current “barter” kind of basis.