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

Bureau of Economic Affairs Files: Lot 54 D 361

Current Economic Developments¹

[Extract]

secret

[Washington,] April 19, 1948.

No. 147

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US, UK and France To Discuss. German Assets Issues in Paris

The British and French have agreed to a tripartite meeting in Paris on April 27 to discuss all outstanding issues on German assets in non-IARA countries of the western and eastern hemisphere and in the neutral countries of Spain, Portugal, Sweden and Switzerland. It is also expected that informal conversations will be held on the question of German assets in Italy.

On March 25 we presented an aide-mémoire jointly to British and French representatives in Washington proposing certain concluding steps with regard to German assets in all countries except the neutrals and IARA member nations.²

Other American Republics. In line with the resolution for the elimination of Axis economic influence from the western hemisphere adopted in Rio in 1942 and reaffirmed at the Mexico City Conference in March, 1945, all of the American Republics except Uruguay and Bolivia have undertaken the liquidation of German assets.³ We propose that in all except these two countries the German external assets program be considered as satisfactory or adequately accomplished and that no further representations be made in this regard.

Both Bolivia and Uruguay have placed German assets under government supervision. Bolivia has enacted but has not implemented legislation for the liquidation of the assets; Uruguay does not even have such legislation. The Department has many times requested both of these ‘Countries to institute programs comparable to those executed by other of the republics. Recently we have concentrated our efforts on securing the vesting or liquidation of only those assets owned directly from Germany. Since the amount of the assets involved is so small, we are proposing to instruct our (missions in these two countries to make no further representation with respect to this matter.

Iraq, Iran, Lebanon, Syria, Saudi Arabia, Ethiopia, Iceland, Liberia, China and Siam. None of these countries, with the exception of China, has officially embarked on a program for the liquidation of German assets, and we recommend to the UK and France continuation of our efforts to achieve the security objective. However, we do suggest that consideration be given to a change in views on the disposition of the proceeds of liquidation. In all of these countries the amount of German assets is small, and it may be assumed that all have some legitimate war claims against Germany. Since it is unlikely that any assets can be obtained for distribution to IARA countries, we suggest that the three Allied Missions to Iraq, Iran, Lebanon, Syria, Saudi Arabia and Ethiopia present final notes urging the liquidation of German assets and reminding the governments that their claims against Germany arising out of the war can be compensated only from German assets in their countries and suggesting that the proceeds of the liquidation be retained in satisfaction of such claims. In the case of Ethiopia, we would further turn over to that government the keys to the German Legation of which the Ethiopians have physical control. Similar notes would be sent to the governments of Iceland, Liberia, China and Siam even though previous specific communications on this matter have not been sent them.

Turkey. In the case of Turkey, we suggest to the British and French that the Turkish offer of December 30, 1947 be accepted. At that time the Turks agreed to place at the disposition of the three Allied governments any balance of sums realized from German assets after all types of claims against the Turkish Government and Turkish nationals against Germany have been satisfied from the German assets subject to Turkish jurisdiction. However, the Department recommends that the Turkish Government not be informed of our acceptance of their offer at this time. Rather we should leave the timing of such notification to the discretion of the three Allied Missions at Ankara as of possible utility in arriving at a satisfactory settlement on the question of looted gold.

Switzerland. Although agreement was reached with the Swiss in May 1946⁴ for the liquidation of German external assets in that country and distribution of 50 percent of the proceeds to IARA, the Swisshave not executed that part of the agreement which secures part of the proceeds of liquidation for IARA countries. The Swiss have taken the position that they are not obligated to execute the agreement until a rate of exchange is established between the Swiss franc and the German reichsmark so that compensation in reichsmarks can be paid to the German owners of property in Switzerland. The US, UK and France—the governments concerned in the first instance—have always rejected this Swiss contention. The Department’s most recent proposal made in a note to the French and British⁵ is to accept an offer made by the Swiss in October 1947 to accelerate liquidation of German assets and place the proceeds in blocked account pending establishment of a satisfactory rate of exchange with Germany. The Department would make its acceptance of this offer conditional upon agreement with the Swiss as to types of assets which would be liquidated. We would not be satisfied with an acceleration of liquidation of real estate and other comparatively insignificant property but would insist that the Swiss liquidate the important German investments. If these negotiations fail, we have proposed to the British and French that a report be filed with IARA outlining the status of the situation under the Accord of 1946 and that, under the circumstances, the three countries consider their obligations under the Accord discharged. At the meeting in Paris this month, the US proposal and any other proposal which may be offered by the British and French will be discussed.

In this connection, the Department has again indicated to the British its preparedness to abolish the Joint Commission which has been handling liquidation and leave the liquidation program entirely in the hands of the Swiss, providing the Swiss will make a lump sum settlement by paying 250 million Swiss francs to IARA countries.

Sweden. The agreement with Sweden on German external assets was reached in July 1946,⁶ and the Swedish Government has paid the US, UK and France their share of German assets in Sweden. However, they have not paid the other IARA countries, and numerous attempts to persuade Sweden to make an allocation to the other IARA countries in accordance with their percentage shares in German external assets under the Paris Reparation Agreement have been futile. The General Assembly of IARA has passed a resolution calling upon the Swedish Government to make such an allocation, and has also recommended that the resolution be presented by all IARA countries and particularly that the three Allies exert their efforts toward inducing the Swedish Government to accept it. Although we doubt the effectiveness of such a move, we instructed Embassy Stockholm to present this resolution to the Swedes. Our future course of action will also be discussed with the other powers at the Paris meeting.

Spain. The negotiations with Spain, which have been going on intermittently for almost 18 months, are nearing conclusion. The major unsolved issue at this time is the percentage-wise distribution of the proceeds to be made to the IARA countries. Otherwise, the Accord is ready for signature except for minor details.⁷

Portugal. In February of 1947 Portugal reached agreement with the three Allies on the liquidation of German assets and for allocation of the majority of the proceeds to IARA.⁸ However, it was stipulated in that agreement that the effective date would be contingent on reaching a settlement on looted gold. The Allies have evidence that Portugal acquired at least 38 tons of looted gold from Germany, but the Portuguese have refused to make restitution of any of this gold unless full compensation is paid them by the Allies. At the meeting in Paris the three Allies will discuss various courses of action aimed at arriving at a final statement on the gold question.

Italy. More than a year ago, the British and French advised the Department of their agreement to our proposal that all of the proceeds of liquidation be given the Italian Government. The French have not wavered from their agreement. The British, however, have shown some reluctance to carry through on their original agreement and, when in early March we proposed that we announce immediately a policy of turning over to the Italian Government unconditionally the proceeds of German assets in Italy as they become available, the British demurred. Bevin stated that it would be of doubtful wisdom to deal with the matter prior to the elections. He suggested instead that the question be discussed during the tripartite talks on Germany.⁹

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1. This weekly classified publication, prepared by the Policy Information Committee of the Department of State, was designed to highlight developments in the economic divisions of the Department and to indicate the economic problems which were currently receiving attention in the Department. It was circulated within the Department of State and to missions abroad.
2. Copies of the aide-mémoire summarized here are included in the Department files under 800.515/3–2548.
3. The reference here is to the Final Act of the Meeting of the Foreign Ministers of the American Republics, held at Rio de Janeiro, January 15–28, 1942. For the text of the Act, see Department of State Bulletin, February 7, 1942, p. 117. For documentation on the meeting, see Foreign Relations, 1942, vol. v, pp. 6–47. Documentation on the Inter-American Conference on Problems of War and Peace, held at Mexico City, February 21–March 8, 1945, is included in Foreign Relations, 1945, volume ix .
4. For the text of the so-called Washington Accord with Switzerland on German External Assets, May 25, 1946, see Department of State Bulletin, June 30, 1946, p. 1121 or Inter-Allied Reparation Agency, Report of the Secretary General for the Year 1948 (Brussels: Inter-Allied Reparation Agency, 1949), p. 75.
5. Department of State aide-mémoire, dated April 7, 1948, not printed (800.515/4–748).
6. For the text of the agreement, dated July 18, 1946, see Department of State, Treaties and Other International Acts Series (TIAS) No. 1657 or 61 Stat. (pt. 3) 3191. For a summary of the agreement, see Department of State Bulletin, July 28, 1946, p. 174.
7. Further documentation on the question of the disposition of German external assets in Spain is included among the materials on the interest of the United States in the liberalization of the Spanish regime in volume iii .
8. A copy of the agreement with Portugal, signed February 21, 1947, in Lisbon, was transmitted to the Department in despatch 1363, February 22, 1947, from Lisbon, not printed (800.515/2–2247). Additional documentation on the question of assets in Portugal is included among the materials on United States relations with Portugal appearing in volume iii .
9. The matter of German assets in Italy was not taken up at the London Conference on Germany. Other documentation on Italy is included in volume iii .