740.00119 Control (Germany)/8–1148: Telegram

The United States Political Adviser for Germany ( Murphy ) to the Embassy in the Soviet Union

top secret   us urgent

879. Eyes Only for Smith.1 Department’s 1421 to Berlin.2 Following from General Glay:

State has asked me to wire you direct a possible version of paragraph 4 of Molotov’s draft,3 sticking as closely to his words as possible. I suggest the following:

In the sentence which begins “the regulation of currency, et cetera” these words would be changed to read “the regulation of currency and credit in Berlin shall be undertaken by the Stadt Kontor under the general supervision of the Four Power Kommandatura and shall be [Page 1033] gradually extended, et cetera”. The remainder of this sentence would remain unchanged until the words “through the German export-import agency of the Soviet Zone” are reached. I suggest the substitution for these words of the following: “Under trade agreements to be worked out promptly between the export-import agencies of the western zones and of the Soviet Zone”.

I would suggest the following change for the last phrase in this sentence which begins with “occupation cost” so that it will word as follows: “Occupation costs resulting from the presence of forces in Berlin shall be met from taxes collected in Berlin, provided these occupation costs do not exceed the trade deficit between Berlin and the occupation zones, with such occupation costs as are in excess of trade deficits being met by the respective zones of occupation.”

The reasoning behind these changes lies in maintaining at least a semblance of quadripartite control and responsibility and to prevent our own forces and the western sectors from being completely in the hands of the Soviet Zone economy. The Stadt Kontor is a city-wide bank of Berlin, organized originally by the Soviet military administration. It is competent to control currency regulation and credit within Berlin, obtaining its funds from the so-called German bank of emission of the Soviet Zone. If this city-wide bank with branches throughout Berlin is supervised by the Kommandatura or by representatives of the four powers, it could satisfactorily be charged with the responsibilities which Mr. Molotov proposes to place in the German bank of emission which is not a Berlin bank.

Obviously if we placed all exports from Berlin under the control of the German export-import agency of the Soviet Zone, that agency would have complete hold of the Berlin economy. On the other hand, there is no reason why a satisfactory trade relationship could not be worked out between the export-import agencies of the western zones and of the Soviet Zone, with the exports from Berlin to be based upon a requirement to meet certain import obligations to include raw materials.

Certainly during the period in which the western zones are providing at least one-half of the food for two million Germans, with the remaining half being provided by the western occupying powers, it is too much to expect the western zones to also absorb occupation costs. Our willingness to bring in food and raw materials with the blockade lifted will provide an active Berlin economy which can well afford to pay the taxes necessary to meet the relatively minor occupation costs of the western powers.

Sent Moscow as 379, repeated to Department Eyes Only for the Secretary as 2006, to London Eyes Only for Douglas as 458, Paris Eyes Only for Caffery as 464.

Murphy
  1. The source text used here is a copy from the Department of State files.
  2. Same as telegram 925, August 10, to Moscow, p. 1028.
  3. Not printed, but see footnote 2, p. 1024.