740:00119 Control (Germany)/8–1048: Telegram

The Secretary of State to the Embassy in the Soviet Union 1

top secret   us urgent

925. For the Ambassador (Eyes Only). We find, as you correctly informed Molotov, the Soviet counterdraft2 unacceptable in its present form. It is apparent from this draft and from the statements of Stalin and Molotov on the subject that the Soviet Govt is seeking to establish its thesis that quadripartite control of Germany and consequently of Berlin as well has lapsed and therefore whatever agreement may be reached in the Moscow discussions will constitute the only Four Power Agreement concerning Berlin. This position is of course completely unacceptable to this Government. We have maintained and will continue to maintain that mere Soviet assertion cannot vitiate the quadripartite agreements, including those defining the rights and duties of the Western Powers in Berlin, We feel it extremely important that this point be covered in order to avoid any misunderstanding in the future as otherwise the Soviet authorities will probably maintain that the Three Western Powers in effect accepted the Soviet thesis that the previous Four Power agreements concerning Germany and Berlin are no longer valid and that failing any Four Power agreements at the Council of Foreign Ministers or elsewhere we have no rights in Berlin other than those accorded by the agreements set forth in the proposed announcement. It therefore seems necessary to us clearly to reaffirm that there has been no derogation of our rights in Berlin by our agreement to a practical solution of the blockade and currency problems. This could be accomplished either by an addition to the communiqué or in a written communication sent by the three Western representatives to the Soviet Government to the effect that the present agreement deals only with the restoration of communications, the introduction of a new currency in Berlin and the resumption of Four Power negotiations and is without prejudice to the rights and obligations of the Four Occupying Powers. If done by written communication, the latter should specify that the agreement is without prejudice to the rights, immunities and obligations defined by prior agreement and should be sent immediately prior to the issue of communiqué.3

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We agree that a further approach to Molotov be made, but failing agreement, the issue should then be taken to Stalin without delay. Before you approach Stalin, however, we shall wish to send you further guidance.

As to the text of the communiqué, we concur fully in Bevin’s observations (re London’s 3602 repeated to you 1794) and have the following suggestions to make concerning the text.

It is clear that the offer to remove restrictions with respect to transport of goods and persons in paragraphs 1 and 2 should not be limited to those “which have been imposed after the announcement of currency reform” and these words should be deleted as many of the restrictions to which we object were imposed before currency reform and this statement appears to be in justification of the Soviet right to impose restrictions. As we recognize that some regulation of movement of goods and persons is probably required, we would be willing; to agree to the following as a substitute “which have been imposed since March 1, 1948,5 including those imposed after the announcement of currency reform”. The words “in accordance with the present agreement” must also be deleted.

In paragraph 8, the proposal that the CFM should negotiate questions relating to Berlin seems a further manifestation of the Soviet desire to reject the principle of quadripartite control through bypassing the established machinery dealing with such questions. We therefore prefer in the first instance that discussions relating to Berlin should be the responsibility of the Four Military Commanders. Our original suggestion for this paragraph therefore seems preferable.

We note strong British opposition to the second part of the third paragraph and can agree, to its omission unless this point alone prevents agreement, in which case we would be ready to urge British to accept the Soviet suggestion provided the last sentence were deleted and language along the lines contained in our 9116 were substituted.

As regards paragraph 4 on currency the absence of guarantees of four-power supervision of its use renders the present text completely [Page 1030] inadequate. Furthermore, the proposal regarding the operation of trade by the German Export-Import Agency of the Soviet Zone would put the Berlin economy completely in Soviet hands. We are asking Clay to give you urgently a suggested rewording of paragraph 4 which will meet our requirements yet retain for tactical reasons if possible as much of the Soviet wording as may be suitable. Please await his comments before taking up matter again with Molotov.

Any redraft should in our opinion contain provision along the lines of our original proposal7 to insure adequate four-power supervision (1) over availability of currency, (2) to prevent discrimination between the sectors in currency and credit matters, and (3) to assure non-discriminatory trade with Western Zones and foreign countries. Assumption of occupation costs in Berlin for Western Allies by Western Zones is illogical and unsound. We are prepared to support Berlin economy by imports not only of food but also raw materials and are entitled to occupation costs from Berlin taxes.

In discussing the question of currency you may wish to make the following clarification, of our position.

It appears from Molotov’s remarks about the alleged intent of the Western nations to “establish control over the currency of the Soviet Zone” that some confusion has arisen concerning our real objective. We do not insist on “control” over the total issuance of Soviet Zone currency. What we are basically seeking is agreement on quadripartite regulation of the use of Soviet Zone currency within Berlin and in trade. The former would provide for non-discrimination as to availability of currency throughout Berlin through equitable budgetary and credit procedures. The latter type of agreement is necessary for the orderly conduct of trade between Berlin on the one hand, the Western and Eastern zones and third countries on the other.

As previously stressed, we cannot recognize Berlin as part of the Soviet Zone and it follows from this that we cannot accept the conduct of Berlin’s external trade through the medium of the Soviet Zone’s trade monopoly. Because of their supplies of food and raw materials to Berlin, the Western nations have a substantial interest in the city, and in seeking agreement on the regulation of trade matters they are asking for no more than an assurance concerning the proper and efficacious use of their contributions. The economic well-being of Berlin depends on the maximum freedom of its trade with the other parts of Germany. In the interest of simplification and in order to obviate a currency war, the Western nations are willing to accept a Soviet zone mark as the sole circulating medium but four-power supervision of its [Page 1031] use in Berlin is essential to establish a satisfactory economic relationship between Berlin and the rest of Germany.8

  1. Repeated to London as 3171, to Paris as 3061, and to Berlin as 1421.
  2. For the text of the “counterdraft” under reference, see The Berlin Crisis, pp. 23–24 or Cmd. 7534, p. 26.
  3. Telegram 931, August 11, to Moscow, not printed, observed that it was doubtful whether a simple, unilateral statement by the three Western Powers to the Soviet Government would be sufficient to protect the Western position in Berlin. Ambassador Smith was therefore instructed not to compromise on the issue but to reserve it for discussion with Stalin. (740.00119 Control (Germany)/8–1148)
  4. Not printed; it contained the text of Foreign Secretary Bevin’s instructions to Roberts regarding the Soviet “counterdraft”. Bevin found the Soviet draft generally unacceptable. He felt that the Western Powers should remain absolutely firm on the fundamental principles of the rights to be in Berlin, the quadripartite control of currency in Berlin, and the need for the removal of the blockade. Bevin feared that prolongation of the discussions might constitute negotiation under duress and might result in fundamental issues being obscured. (740.00119 Control (Germany)/8–1048)
  5. Telegram 3631, August 11, from London, not printed, reported that Bevin favored an earlier date, possibly December 1, 1947 (740.00119 Control (Germany)/8–1148). Telegram 2009, August 12, from Berlin, not printed, reported that General Clay and Ambassador Murphy shared Bevin’s objection to the March 1 date. They suggested there be no qualifying date or time limit at all. (740.00119 Control (Germany) 8/1248)
  6. Not printed; see footnote 7 to telegram 910, August 7, to Moscow, p. 1021.
  7. See telegram 1528, August 5, from Moscow, p. 1016.
  8. In his telegram 3635, August 11, from London, not printed, Ambassador Douglas reported that Bevin was pleased with these instructions to Smith which coincided so closely with his instructions to Roberts. Bevin authorized Roberts to combine his instructions with those of Smith and make a common approach to Molotov (740.00119 Control (Germany)/8–1148). In his telegram 4162, August 11, from Paris, not printed, Ambassador Caffery reported that the French Foreign Ministry had instructed Chataigneau along these same lines and had authorized him to work out an agreed position with Smith and Roberts (740.00119 Control (Germany)/8–1148).