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

740.00119 EW/6–248: Telegram

The Ambassador in the United Kingdom (Douglas) to the Secretary of State

top secret   us urgent

London, June 2, 1948—11 p. m.

2425. For Saltzman.

I. At a meeting between the French, British and American groups held this afternoon,¹ the following paper reproduces tentative draft of the identic instructions to military governors relating to revised procedures for reparations. It was agreed it should be submitted to governments and to military governors, particularly General Clay and General Robertson for comment.

• “1. As a result of further discussions, through the diplomatic channel, between representatives of the Governments of the U.S., the U.K. and France, an agreed procedure for making reparations available from the three western zones has been worked out as a means of overcoming the present deadlock resulting from the fact that the quadripartite allocating machinery is presently inoperative. It will be put into operation urgently in order speedily to complete the reparations program.

• “2. Action will be taken by the three commanders-in-chief of the western zones, each acting with respect to the capital equipment in his own zone, but in consultation with his two colleagues on the basis of existing reparations lists. Each will be responsible for making a division of capital equipment for reparations as between the IARA and the USSR. 75 percent in each broad industrial category declared for reparations being made available to IARA and 25 percent in each broad industrial category declared for reparations being provisionally selected and held for future delivery to the USSR. Of the 25 percent, 15 percent will be delivered to the USSR against a Soviet undertaking to supply to the western zone commanders reciprocal deliveries to an equivalent value, over an agreed period of time, corresponding to the delivery of capital equipment.

  Without prejudice to action under the foregoing sentence, discussions will shortly be held among the three western occupying powers to determine whether past deliveries of the 15 percent share of capital equipment to the USSR which have not been matched by reciprocal deliveries equivalent in value from the USSR will affect the quantity and timing of future reciprocal deliveries. The disposition of the remaining 10 percent will also be the subject of further discussion between the three western powers concerned.

• “3. The list of equipment to which this procedure will immediately apply is governed by the following factors:

  (a) A number of plants on the existing reparations lists are still under examination by the US Government with a view to their possible retention in Germany in the interests of ERP. The US Government, however, will in the very near future supply an initial list of plants which have been excluded from such examination, and additional lists of similar exclusions will be supplied from time to time and as soon as possible.

  (b) The question of the application of the principle of paragraph 117 D of the Foreign Assistance Act of 1948 to the delivery of reparations equipment is under consideration. This consideration is not likely to be completed in time to be taken into account when the first division of equipment for reparations is made by the military governors. Meanwhile, the general principle of the paragraph in question is to be borne in mind.

• “4. You should accordingly proceed on the basis of the list of capital equipment excluded from examination by the US Government (3(a) above), contriving as far as possible to avoid the selection for the USSR of plants which have an obvious war potential. You should report urgently, after consultation with your colleagues, as to when you think this work will be completed as regards the initial selection of plants. At an agreed date, which will have to be fixed after consultation between governments in the light of your reply, you will then proceed separately but concurrently:

  (I) To notify IARA of the assets made available to it for reparations in this initial selection, with a request to allocate such assets as soon as possible.

  (II) To notify the Soviet commander-in-chief of the action which is being taken. The terms of this communication are now under consideration between the three governments and will be transmitted to you shortly for your consideration.

• “5. You should proceed in conformity with the relevant provisions of the preceding paragraphs to make additional divisions of reparations as promptly as circumstances permit.
• “6. You should quickly dismantle all equipment made available to IARA within your zone. Equipment selected for the USSR may be dismantled, or left standing at your administrative convenience, pending agreement with the Soviet commnder-in-chief as to its disposal.
• “7. You should cooperate with your (US, UK and French as the case may be) colleagues in enforcing whatever priority in the allocation of materials or services may be necessary to the smooth and speedy execution of the reparations programs in the three western zones.
• “8. You will be responsible for arranging delivery to the recipient countries in conformity with allocations made in due course by the International Allied Reparations Agency.

• “9. You should report proposals concerted with your colleagues on the manner and timing of the presentation of the above procedures to the German people. In this connection you should know that it has been arranged that the French Foreign Minister will make an early statement in the Chamber of Deputies to the following effect:

  “‘The question of reparations from Germany has been discussed through diplomatic channels among the occupying powers of the western zones and I have been given assurances by the other two, and we all agree that means will be found promptly to make capital equipment from the western zones of Germany available for reparations purposes.’”

II. You will note that this paper sets aside for further consideration certain critical questions, and that among them is the disposition of the 10 percent share of the 25 percent to be selected for the USSR. It may be that by agreeing, if we do agree, to this paper, although we will have broken the jam in regard to reparations for the IARA countries west of the Iron Curtain we will at the same time have lost or impaired our bargaining power in connection with the issues remaining to be resolved.

III. The following suggested agreement among the three governments concerned is submitted for your consideration and advice: Consideration will be given to means, compatible with the terms of the Paris Act on reparations, of applying to Albania, Czechoslovakia and Yugoslavia, a policy to be determined under the provisions of paragraph 3(b) of the identic instructions to military governors relating to revised procedure for reparations.

IV. You will note there has been deleted from the proposed statement which Bidault will make, the following language: “Inasmuch as the quadripartite reparations allocating machinery is now, at least temporarily, inoperative” and “during the period in which this condition exists.” This deletion was made on the advice of General Clay who considered that if the language deleted was agreed to, the Soviets might construe it to be an invitation to reassemble the quadripartite machine.

V. Wisner will arrive in Washington tomorrow and will be able to explain the above to you. I would very much appreciate your advice and comments as soon as possible.

(For Berlin only):

VI. Will General Clay also give me his comments and criticisms?

Sent Department 2425; repeated Berlin for General Clay and Murphy 168.

Douglas

1. The meeting under reference here occurred after the conclusion of the London Conference on Germany, but it included many of the representatives who had participated in the London Conference. Generals Clay and Robertson had, however, already returned to Germany.