740.00119 EW/3–2248

Memorandum of Conversation, by Frank G. Wisner, Deputy to the Assistant Secretary of State for Occupied Areas

Participants: Ambassador Douglas
Secretary Harriman
Secretary Anderson
Under Secretary Chapman
Mr. Collisson
Mr. Blaisdell
Mr. Wisner

The following is the gist of a conversation participated in by Ambassador Douglas and the other above named individuals at approximately 3:45 P. M., March 19, 1948. Messrs. Harriman, Anderson and (in the absence of Mr. Krug from Washington) Mr. Chapman, met with Mr. Douglas at his request hi order to receive from him a report of the results of his negotiations on the subject of reparations and dismantling with the British and French during the recently adjourned tripartite discussions in London.

Mr. Douglas outlined the arguments which he had used with Bevin and Massigli including the fact that there is great pressure in the Congress for the cessation of dismantling and reparations deliveries. He made it very clear that unless the British and the French are willing to agree to modifications in the program, it is almost certain that the Congress will adopt drastic legislative provisions in connection with ERP. Mr. Douglas stated that Bevin insisted that he felt bound to continue deliveries to the Soviet Union and Poland), but that he believed it would be possible by “administrative delays” to slow down and minimize these deliveries during the coming weeks. He further agreed to review each month the reparations deliveries question as far as the Russians are concerned, with the view to determining whether intervening action on their part would warrant the adoption of further and more definite restrictive measures against them. As regards the dismantling program, Mr. Bevin agreed to cooperate with us in a review of the plants in the British zone which are listed for dismantling for the purpose of determining which of these should be retained in Germany as being better able to contribute to economic recovery there than if moved elsewhere. However, he stated that this would he upon the understanding that there would be no very substantial increase in the number of plants to be retained in Germany or in the German level of industry. He was opposed to the substitution of plants for those removed from the dismantling list on the ground that the Germans have been given very specific assurances that only the plants on the list would be removed and that the remaining plants could he put into working condition forthwith.

Massigli indicated that the French would be willing to join with [Page 739] us in the suspension of deliveries except those to be made on a current reciprocal basis in exchange for commodities. They raised some question as to the cloud which might be cast upon the title of plants allocated to the western nations as a result of the references in the preamble of the IARA reparation agreement of January 1946 to the Potsdam agreement and quadripartite allocation machinery. However, the French indicated that they were not too worried about this technical legal aspect. As regards the dismantling program, the French agreed to cooperate with us in a review of plants in their zone which are scheduled for dismantling, but made it very clear that they would be unwilling to consent to any substantial increase in the German level of industry.

Mr. Douglas expressed the view that if the total number of plants from all zones to be removed from the dismantling list should not exceed 15 to 20 and if these should not contain too high a percentage of the larger and more important plants, the agreement of the French as well as that of the British would almost certainly be obtainable with respect to this aspect of the matter.

Mr. Harriman spoke at considerable length and with great conviction against the present reparation and dismantling program in Germany and he said that, but for the problem of international relations which he acknowledges to be serious, he would favor the abandonment of the entire program. He further stated that this represented the view of all those in the Department of Commerce who were at all familiar with the subject. More specifically, Mr. Harriman pointed to the current world shortage of steel and other heavy industrial products, stating that it seems to be most unwise to dismantle German plants capable of producing these items. It was pointed out to Mr. Harriman that according to General Clay’s statements, including his testimony before Congressional Committees, it would be impossible under any circumstances to bring into production within the next four or five years the amount of plant in excess of that scheduled for retention. Mr. Harriman said that if this were in fact the case, he would agree with General Clay that such plants as could be put to use in the Western European nations should be dismantled and removed there. However, he said that the only people who have made these estimates are the people in Germany who have been faithfully and conscientiously following bad directives and it would require an independent and objective group of engineering experts (similar to the overseas consultants group which recently rendered a report on reparations in Japan) to convince him of the accuracy of these estimates. Mr. Harriman mentioned that General Noce had recently attempted to explain the dismantling program to certain persons in the Department of Commerce and the net result of his explanation was to make them all [Page 740] the more convinced that the dismantling program is ill-conceived and harmful. Specifically General Noce stated that electric generating plant had been removed arid that it would be necessary to reinstate all of the amount which had been removed and perhaps more in order to obtain sufficient electric power to meet the schedule of production deemed necessary under ERP.

Mr. Harriman expressed himself as being completely opposed to any further deliveries to the IARA satellite nations, and he said that it was the duty and responsibility of the State Department to work out through diplomatic means a method whereby reparation deliveries to the satellites might be discontinued. He acknowledged that this would be a difficult undertaking and he made no recommendations as to how one should proceed beyond indicating that we should be vigilant for an opportunity to seize upon difficulties and objections which might be raised by the satellites as a basis for proposing the abandonment of the IARA agreement. As regards further deliveries to Russia, Mr. Harriman is completely opposed to delivering any of the 10% and does not particularly favor deliveries on a reciprocal basis with respect to the 15%. He thinks that the method of evaluating the plants results in artificially low estimates and he referred again to the expense of dismantling, pointing out that he had received information from British officials that the cost in their zone of dismantling and delivering actually exceeded the entire value of the plant itself. (With respect to the latter point, it was made clear to Mr. Harriman that the American method of dismantling involves only the removal of machinery and equipment and does not extend to the dismantling of the buildings, foundations and fixtures of a permanent character.)

Mr. Harriman concluded with a recommendation that the Departments of State and Army concur in a unanimous resolution of the other three interested departments to despatch a group of engineering experts to Germany at the earliest possible date. He did not favor the use of the present working group for this purpose, stating that the group does not contain individuals with a sufficient degree of technical expertise and that the investigating group should be independent of the government agencies having had previous experience with the subject.

Messrs. Anderson, Chapman and Collisson all spoke in support of the contentions made by Mr. Harriman. Specifically, Mr. Anderson favored the indefinite suspension of all uncompensated deliveries to the Soviets, the suspension of deliveries to the satellite members of IARA, and the “urgent necessity” for sending a group of independent technical experts to Germany. Mr. Collisson stated that whereas he is prepared to proceed along the lines suggested by the State Department in the working group, he feels that the existing policy is wrong. The question of allocations was discussed briefly although inconclusively. [Page 741] Mr. Wisner stated that in his opinion it would be necessary to recognize that if further allocations are made now and before agreement is obtained with the British on the question of deliveries, certain deliveries to the Soviets may be expected to take place from the British zone. Mr. Douglas expressed concern as to the effect which an announced suspension of deliveries to Russia might have upon the over-all position in Berlin.

At the conclusion of the meeting Mr. Douglas indicated to Mr. Wisner that he proposed to have a further conversation with Mr. Harriman on Saturday morning or Monday.1

Frank G. Wisner
  1. No records have been found of any further conversations between Ambassador Douglas and Ambassador Harriman on March 27 or March 29.