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

800.515/6–1148

Report by Seymour J. Rubin, Chairman of the United States Delegation to the Conference on Economic Security, Paris, April 26–May 7, 1948¹

secret

[Washington, undated.]

I. Switzerland:

The aide-mémoire handed to the British and French Embassies by the Department on April 7, 1948 served as the basis for discussion at the conference of action to be taken to resolve the impasse with Switzerland on the implementation of the Swiss Allied Accord on German assets in Switzerland. (Copy attached as Annex 1²)

In the first formal meetings with the British and the French at the conference and in a number of informal conversations, the British displayed considerable reluctance to take any action outside the Joint Commission, The British seemed optimistic that the Swiss planned to implement the Accord, their optimism being based on statements of certain Swiss officials, in discussions with Britain on tourist trade, that Britain could permit British tourists larger exchange allowances because of the sums that would be realized from the implementation of the Swiss-Allied Accord. The French member of the Joint Commission, present at the conference, pointed out various reasons to doubt the good intentions of the Swiss. The British thereafter shifted to urge an approach to the Swiss that would neglect technical details and focus on the objectives of the Accord, especially the objective of making available for European rehabilitation the foreign exchange that would result from the liquidation of German assets. This they desired to tie in with present CEEC efforts to marshal all possible resources.

The U.S. Delegate told the British and French, in amplification of a proposition in the aide-mémoire, that the U.S. is willing to consider limiting or abolishing the Joint Commission in Bern if an over-all satisfactory arrangement can be made with the Swiss. Both the British and French were reluctant to contemplate such a limitation or abolition, and extremely reluctant to say anything in the note to the Swiss that would give the Swiss hopes that any such concession might be made. The pertinent portion of the text of the final note represents a concession by the British and the French to the U.S. point of view.

The French suggested that the U.S. adopt sanctions against the Swiss, should the Swiss continue recalcitrant, especially with regard to the certification of blocked assets in the U.S. The U.S. Delegate reminded the British and French that sanctions had been ruled out in the beginning of negotiations two years before and that the U.S. would certainly not take them now unilaterally. The U.S. Delegate suggested that the British, in their tourist trade discussions with the Swiss, might threaten or actually take sanctioning steps, and this suggestion was sufficient to close off discussions of sanctions altogether.

It was finally agreed that a revised note (Annex 2³) would be presented to the Swiss in the three capitals on May 11, and that copies would be presented in Bern by the three Missions on May 13.

The US Delegate told the British and French that should the Swiss reply to the note prove unsatisfactory, the US wishes to report fully to IARA so as, if possible to relieve itself of a task that would then threaten our dignity and promise no success. The French expressed concern lest we take action amounting to a renunciation of the Accord, and the US Delegate assured the conference that we would take no steps in IARA that would embarrass further efforts by the French and British to secure implementation of the Accord, should such further efforts be forthcoming. The US Delegate handed the British and French a memorandum outlining the US position on this question. (Annex 3³)

II. Spain:

By virtue of great efforts made at Brussels and Madrid and at the Department, the need for action at the conference with reference to the German assets in Spain was necessary only in securing coordination among the three governments in the actual signing of the Accord. Apparently French instructions to the Chargé d’Affaires at Madrid had become confused, and the combined efforts of the US and the British delegates and Embassies helped to resolve the procedural problem, and arrangements were made to sign the Accord on May 10.

III. Portugal:

Putting into effect of the Accord on German assets with the Portuguese had been conditioned on reaching a satisfactory agreement with the Portuguese on the restoration of gold looted by Germany and brought under Portuguese control. The British and French emphasized the necessity for an approach some place other than Lisbon to remove the question to as high a level as possible. The French suggested making the representation in Washington and linking the representation with a refusal by the US to unblock Portuguese assets in the United States without a satisfactory solution of the gold question. This was flatly rejected by the US Delegate who recommended that a new approach be made in Lisbon with the British Ambassador (the senior head of missions) taking the lead. Both the British and French continued to maintain their position that the approach should be made outside Lisbon, and the French agreed to make the presentation at Paris, supported by the British and US. The three delegates agreed that timing of the presentation close to that of the presentation of the Swiss note was desirable.

The US Delegate pointed out that if the Portuguese made a completely unreasonable offer of gold, the US feels that we should report the offer to IARA and not take the responsibility of accepting it. This alarmed the French who were concerned lest nations at IARA not particularly interested in gold, but very much interested in the assets, might outvote France who is especially interested in the restoration of looted gold from Portugal. The French went to great lengths to suggest, without an outright statement to that effect, that gold—some gold—should be a primary objective, and that the three governments should be very slow to take any position with the Portuguese that would drive us back to IARA. The French seemed to want to come down to a figure on gold that would justify hopefulness of Portuguese acceptance, and the figure in the final note (Annex 4³) is the result of bolstering by the British and U.S.

(After the termination of the conference, the French Foreign Minister thought better of the undertaking that the note be presented at Paris by the French; and it was subsequently decided that the note would be presented in Lisbon under the leadership of the British Ambassador, and that the importance of the note would be emphasized at the three capitals.)

IV. Non-IARA Countries of Both Hemispheres Involved in the War Against Germany:

The Aide-Mémoire presented to the French and British at Washington on March 25, 1948, (Annex 5⁴) served as the basis of discussion at the conference on German assets in those non-neutral, non-members of IARA of both hemispheres that were involved in the war against Germany.

The U.S. Delegate rehearsed the history of the U.S. efforts toward economic security against Germany in the Western hemisphere and toward obtaining some proceeds of German assets in the Other American Republics for the benefit of IARA. The U.S. Delegate reminded the French and British that we had already pointed out in a previous aide-mémoire and orally, as well as in the reference aide-mémoire that the security goal has been, for the most part, attained but that the U.S. is reconciled to the proposition that there will be no funds from the Other American Republics available for IARA.

With regard to Iceland, Turkey, Lebanon, Syria, Iraq, Iran, Saudi Arabia, Ethiopia, Liberia, Siam and China, the U.S. Delegate emphasized that there is little hope of securing any proceeds for the benefit of IARA and that the three powers are really wasting time in attempting to secure any, and that we should make a final effort to secure liquidation of German assets for security reasons and then terminate our efforts altogether.

Both with regard to the Other American Republics and the named miscellaneous countries, the British stated very strongly that they could not subscribe to a doctrine that the mere declaration of war acts as a release of German assets to the country in which located. The British were particularly exercised about Argentina and Turkey. The U.S. Delegate reminded the British that the U.S. is far from championing any such principle as the British suggested, but that we are anxious to recognize the facts and, since we are not prepared to do anything to change them, make the best of them. Finally the British and the French (who had no particular point of view one way or the other on this subject) accepted the suggestions of the U.S. aide-mémoire except that the question of German assets in Turkey was reserved, and, except further, that all delegates were agreed that the problem of German assets in China should be allowed to “slide” and that no representations should be made or action taken with regard thereto … or, in other words, that the question should simply be forgotten. This was satisfactory to the U.S. Delegate who considered that by concurring in our suggestion for every other country, the French and British had placed themselves in an almost untenable position with regard to Turkey.

It was agreed however that the draft note in the aide-mémoire should be changed from “retain the proceeds of the liquidation of German assets in satisfaction of such claims” to “retain so much of the proceeds of liquidation of German assets as will satisfy its legitimate claims.” No surplus was anticipated by the delegates.

Mr. Dorr, U.S. Delegate to IARA, present at the conference, told the U.S. Delegate that he is embarrassed by repeated requests by IARA to report on the situation in the Other American Republics with regard to German assets, and it was agreed by the three delegates that the U.S. Delegate at IARA would present an informal report on German assets in the Other American Republics, in which the French and British would concur, and the British would present an informal report in IARA on German assets in the miscellaneous named countries in which the US and France would concur, but not including Turkey.

V. Sweden:

The French referred to the fact that the Swedes have failed to distribute gold in keeping with the Accord and asked whether the three governments should not now make still another approach to Sweden. The US Delegate stressed that the Swedish obligation to make this distribution was entirely clear both in the Accord and in statements made by the Swedish and US representatives during the negotiations. The only question that the Swedes could legitimately raise in the opinion of the US Delegate was that of sufficiency of identification, and it was his understanding that all requisite identification had been made. The US Delegate was willing, however, to put the matter before the Department. The French also referred to a newspaper report that proceeds of German assets in Sweden had risen well above the 100,000,000 kronor mark and asked whether the letter annexed to the Accord regarding a possible excess should be invoked. The US Delegate had no objections to putting this matter before the Department although he referred to the improbability of obtaining any such excess and to the unreliability of such newspaper reports.

The British were without instructions but gave the impression that they would go along with the U.S. It was the impression of the US Delegate that the French were raising both questions without any particular enthusiasm and without any intention of urging action thereafter. Certainly it was not the kind of inquiry toward the resolution of which the US should now take any initiative.

VI. Italy:

In opening the conversations the US Delegate explained, and subsequently repeated, that he was not authorized to express any official US reactions to the position taken by the British Cabinet on the liquidation of German assets in Italy; the matter was being carefully studied in Washington, but as the British position had only recently been taken the US Government had not, so far, had an opportunity to consider the problem on so high a level as the British. Consequently, he continued, any remarks made by the US Delegation at this time should be taken as unofficial and intended only to clarify questions which might be raised and invite such explanations as might be offered so that the Delegation would be in a position lucidly to report to the State Department on this subject.

The British said that their government considered the American proposal was essentially a “pre-election move” which, in the opinion of the British was exaggerated, and that although the point is disputable, events have indicated that the British opinion may have been correct. Furthermore, the British believe that a gift to the Italian Government of all the German assets would run counter to the program for European recovery, inasmuch as the interests of the other European countries were not taken into consideration. He agreed that the bulk of the German assets should revert to the Italians in order to assist in alleviating their sufferings and in placing them on as sound as possible economic footing. Nevertheless, it is the British belief that a substantial portion of the assets should be made available to IARA, especially in the light of the fact that the reparation program has been held up. It was also pointed out that the value of German assets in Italy was so high (based on the estimate of the Italian authorities) that as a result of the American proposal the Italians would receive a larger measure of reparation than the countries which had been on the Allied side throughout the war. In summary the British proposal is that:

a) the Italians should continue to liquidate the assets;

b) the libraries be given to the Italians with an endowment of 1 billion lire, the latter to be a first charge on the proceeds from liquidation;

c) the balance of the proceeds from liquidations be divided 60% to Italy, 40% to IARA.

The US Delegate stressed the importance of continuing after the elections our beneficent attitude toward Italy. It was also pointed out that dollars would be drained out of Italy for IARA countries without any US control on their use. He did not believe the US Government would welcome this in general and more particularly if the dollars, (as they would), went to countries behind the iron curtain. He realized that there might be repercussions in IARA to the US suggestion; however, these would probably come mainly from the countries we are not over-anxious to have the money.

The French Delegate explained that the French Government originally expressed scruples with respect to the exclusion of IARA in this case; nevertheless, they had finally concurred. However, he would be happier if some formula such as the British suggested (the precise percentages might be subject to discussion) could be reached. On the other hand the US is financing European recovery and consequently the dollar problem deserves serious consideration. The French Delegate maintained that a distinction should be made between governmental and private assets, and promised to give the US a statement in writing explaining precisely the French position in this regard.

The US Delegation again emphasized the Italian foreign exchange situation, not only from immediate viewpoint where Italy might be required to make convertible lire available to IARA, but also from the future viewpoint when the foreign owners might request the conversion of dividends and profits derived from the interests they had acquired. It was also pointed out that Italy had lost many sources of foreign exchange.

The British admitted that convertible lire would drain dollars from Italy, but believed that many purchases would be made in foreign exchange. If enough foreign exchange were not acquired the balance should be made up in lire—not necessarily convertible. The problem of future pressure on the lire was discounted.

It was generally agreed that the Three Powers legally could do what they wished with the assets. Nevertheless the British felt that “reasonable” action should be taken, as both they and the French did not consider that the Italians should profit to a greater extent, from the German assets, than the countries which were on the Allied side throughout the war.

1. The source text was transmitted by Mr. Rubin to the Secretary of State under cover of a brief letter, dated June 11, which explained that this classified report was a supplement to the official report, supra.
2. The aide-mémoire of April 7 is not printed, but see footnote 2 to Rubin’s reports supra.
3. Not printed.
3. Not printed.
3. Not printed.
4. The substance of the aide-mémoire of March 25 is summarized in paragraphs 3, 4, 5, and 6 of the extract from Current Economic Developments, No. 147, April 19, p. 853.