740.00119 Control (Germany)/8–1748: Telegram

The Ambassador in the Soviet Union ( Smith ) to the Secretary of State

top secret   us urgent

1648. Eyes Only for the Secretary. We saw Molotov at 6 o’clock and the conference lasted slightly less than 4 hours, all very hard going.1 I began by stating that at our previous meeting we had each agreed to consider the other’s comments and asked him if he had any remarks to make. As he was reluctant to begin, I presented him with a Russian translation of the draft text sent you in my 1635 August 16,2 explaining that this represented our effort to reconcile our own and the Soviet positions, and that we had gone as far as possible to meet Mr. Molotov’s requirements, specifically having inserted a definite date in Paragraphs 1, 2, and 5 as he had seemed insistent on this point at our previous meeting. Molotov studied our draft very carefully and then said his first objection was that our Paragraph 5 was conditional, whereas Paragraphs 1 and 2 were not. This, he said, violated the Soviet requirement of simultaneous action with respect to removing traffic restrictions and making the currency change in Berlin. He repeated that this was an essential point which had been emphasized by Generalissimo Stalin at the very beginning of our discussions.

Returning to Paragraph 1, he argued that as June 18 was the date of western currency reform it should be specified rather than March 1 as governing the restrictions which were to be removed. I replied that March 1 was a neutral date. If the date March 20 had been used, it would have pointed a finger at the Soviet Union; if the date June 18 had been used it would point a finger at the western governments. March 1 was innocuous in that respect. Molotov replied that after all it might be better to leave out any mention of a date on the understanding, [Page 1043] however, that the Soviet authorities would remove restrictions which had been imposed after the currency reform. He said that while this should be clear in our own minds, it need not be specifically mentioned in the text. Then much to our surprise, since he had been so insistent in our previous conference on including a definite date for removal of traffic restrictions and currency change provided for in Paragraphs 1, 2 and 4, he suggested that this might also be omitted, unless all dates were unconditional including that in Paragraph 5. If there was any qualification he thought it would be better to omit the mention of any dates in the communiqué.

He raised no specific objection our new Paragraph 3 which I explained as intended to balance our addition to Paragraph 5. He did not make any reference whatever to Paragraph 4 and did not even mention London decisions, passing on rapidly to Paragraph 5 with which we were occupied during the greater part of the meeting. After I had explained, apparently to his satisfaction, our intention in including the various requirements such as non-discrimination, equal treatment, etc., Molotov suddenly suggested that the basis for any agreement should be Generalissimo Stalin’s proposal of August 2, which was for simultaneous withdrawal of traffic restrictions and the currency change in Berlin.3 He again attacked our draft vigorously on the issue of simultaneity repeating his previous statement that we had imposed a condition to the currency change whereas no such condition was implied in Paragraphs 1 and 2, which provided for removal of traffic restrictions. He suggested that if we could revert to the first simple proposal of Stalin, the four military governors might be charged with working out practical arrangements on that basis. This was a surprising change in the Soviet position, as so far Molotov had always rejected any idea of referring any part of the problem for solution to the military governors in Berlin. After further lengthy discussion of Paragraph 5 on the issue of simultaneity, during which we were unable to make any impression on Molotov that our draft met Soviet requirements, he suddenly announced that he thought he could provide us with a simple formula which would deal with Paragraphs 1, 2 and 5. The other Paragraphs, he said, could be left for subsequent discussions as relatively unimportant. He then wrote out in longhand and read to us the following proposed directive to the military governors in Berlin:

Begin directive: “The Governments of France, Great Britain, US and USSR have agreed that the following steps should be taken simultaneously:

Restrictions recently imposed on both sides on communications between Berlin and the western zones shall be lifted;
The German mark of the Soviet zone shall be introduced as the sole currency for Berlin, and the western mark ‘B’ shall be withdrawn from circulation in Berlin.

“In connection with the above you are instructed to examine, together with your colleagues, within the shortest time possible and if possible before August 25, the detailed arrangements necessary for the implementation of this agreement and to inform your government of the exact date on which provisions under ‘a’ and ‘b’ above can be brought into effect.” End directive.

As we had already talked for more than two hours and Molotov showed no disposition whatever even to give serious consideration to acception our proposed draft, we stated that we would be willing to submit his new proposal to our governments but that it would serve no useful purpose whatever to do so unless the directive he suggested were completed by adding an additional paragraph covering all the points in the second part of our Paragraph 5 which our governments considered the absolute minimum that could be accepted in the way of a directive to the four military governors. Molotov argued against this, taking a line which he had in the past always rejected vigorously, that the military governors in Berlin might very well be able to work out practical solutions of our technical problems without specific instructions. This we declined to accept and suggested that we go over points of our minimum requirements. He was reluctant even to do this, arguing that each government should give whatever instructions it considered necessary to its own military governor, and moved from this to the proposal that the western military governors should receive instructions based on our draft and Soviet military governors should receive instructions based on Soviet draft. We rejected this, pointing out that such proposal meant merely transferring our unsolved problems to Berlin, with far less hope of a solution in the absence of agreement here on the two or three basic issues which still remained unsettled. He then agreed to go through our draft together with the Soviet draft to see whether we could bring them into conformity and set down agreed principles under which the four military governors could work.

We consumed about three-quarters of an hour discussing the first and relatively minor requirements providing that there should be no discrimination or action against holders of the western “B” mark, and at the end of this lengthy discussion he finally accepted this on the condition that it be redrafted to read as follows:

“In connection with the substitution of the German mark of the Soviet zone for the western ‘B’ mark in Berlin at the rate of one for one, there shall be no discrimination against holders of the western ‘B’ mark or the German mark of the Soviet zone”.

[Page 1045]

This wording was quite different from that which I understood him to agree to in the course of our conversation. However, we moved on to the second proviso which covers equal treatment for currency and banking and credit facilities. On this point he refused to give an inch, at first objecting that Soviet wording of a somewhat similar paragraph was absolutely essential to safeguard the economy and currency of Soviet zone. He insisted on reference to German bank of emission as having control of issue of German currency in Berlin and declined to consider a suggestion that a sentence be added to our own wording to cover the principle of safeguarding of Soviet currency through the action of the four military governors in Berlin.

Some further discussion developed the fact that we were again up against the fundamental question of quadripartite authority in Berlin. When he realized that he could not continue to evade this issue, Molotov stated rather bluntly that while he could not concede quadripartite authority over control of Soviet currency, nevertheless Soviet Government did not exclude possibility of four military governors working out a quadripartite modus vivendi in Berlin on various questions to the extent compatible with maintaining the stability and prestige of Soviet currency. However, he would not accept any written formula embodying this general statement, and kept on insisting that we should accept Soviet wording regarding the German bank of emission. This subject was argued backward and forward during the remainder of the conference, and although Molotov insisted that he was not prejudicing our juridical position with regard to quadripartite control in Berlin, he did not budge an inch from the position he took.

There is no doubt but that the Soviet Government is genuinely anxious about the economy of the Soviet zone, but Molotov’s completely intransigent attitude suggested to us that more than this was behind his reluctance to move in the slightest degree toward meeting us on this point. We reiterated the fundamental nature of the principle involved, and again emphatically stated for the record the position of the three governments with respect to Berlin. Molotov said he understood this thoroughly, as we understood the position of the Soviet Government.

In order to more accurately develop his position, we then passed on to the third point, but Molotov simply argued that reference to the German export-import agency of the Soviet zone was reasonable and essential, that there was a similar agency in the western zones but that as Berlin and its economy were inseparably linked to Soviet zone, it was not consistent that other than Soviet agencies should be employed in handling the export-import trade of Berlin. This again brought us face to face with a point of principle, and we had to repeat our position, reminding Molotov that while we were willing to accept Soviet [Page 1046] currency as sole currency in Berlin and were anxious to avoid a currency war in Berlin, it would be extremely foolish on our part to pay such a price for the lifting of traffic restrictions that we find ourselves in much more serious financial and economic difficulties in Berlin. I repeated that it was quite useless to send any directive to the military governors unless there was agreement in Moscow on the basic issues, the importance of which had again been demonstrated this evening. It would be equally useless to propose such a vague and undefined directive to our governments, which latter would simply direct us to obtain an answer with respect to the basic requirements already stated and which were considered the minimum that our governments could accept. We repeated there was no point in simply transferring to Berlin problems which we had been unable to solve by direct contact with Mr. Molotov in Moscow.

We finally adjourned with statement recording our disappointment with the lack of progress which had been made. Molotov said that he had done his best to propose solutions and had, he felt, gone a long way to meet our position, but that it required two sides to make an agreement. I suggested that we go over the records of the meeting, consider them carefully and report to our governments, in the possibility that they might have some final instructions or additional guidance; then I said we would ask for a final conference.

The conversation, which was considerably longer than usual and much longer than we had expected, was not in any way acrimonious, and Molotov’s attitude was quiet and reasonably pleasant. Our impression is that he thought, because of our previous insistence on the importance of solving technical problems in Berlin, we might snap at his proposal to refer there the unsettled questions under Paragraph 5. He clearly had no intention of accepting our main points of principle for the directive, and his refusal to accept any agreed terms of reference suggests quite clearly that his proposal with regard to Berlin was merely a tactical maneuver and was not designed to reach an early settlement, unless of course we are foolish enough to give the Russians everything they want in Berlin in return for vague promises.

It seems to us that there has been a change in the Kremlin attitude, which would now appear to be that there is no hurry about a settlement, and that while Molotov does not wish to take the responsibility for breaking off these conversations, he would be quite willing to drag them out indefinitely either in Moscow or Berlin. It is possible that these dilatory tactics are prompted by the approaching General Assembly, the anticipated effect of winter on our airlift, or hoped-for deterioration of economic conditions of the western sectors.

It was particularly noteworthy that Molotov made no reference at all tonight to the London decisions or to future CFM or other meetings in connection with the general problems of Germany. He passed these [Page 1047] by with seeming indifference. It may be that Soviets are now convinced they will not get from us any worthwhile concessions with respect to developments in western Germany, and have determined to hold fast in Berlin and see who will wear down first in an economic war of attrition. There was no hope at any time during tonight’s conversation of getting an agreement to our draft. Molotov showed comparatively little interest in it and was more rigid than at previous meetings. Although I thought differently before the conference, I realize now that, even had we approached Molotov on different lines, the result would have been the same, as inevitably we would have come up squarely against the fundamental issues which faced us again tonight and which still would have to be reconciled before anything like a satisfactory agreement could be reached.

We are inclined to think that we should now ask for a final interview with Stalin, at which we can make our position perfectly clear. Perhaps there is still a bare chance that Stalin will himself make the basic concession on quadripartite control in Berlin if he realizes we have said our last word, but none of us think that the outlook after tonight’s meeting is by any means hopeful. Please give me your advice and guidance and any suggestions which may occur to you for use at a final Stalin interview, if you agree that time for this has now come.4

Sent Department 1648, repeated London Eyes Only for Douglas 144, Paris Eyes Only for Caffery 255, Berlin Eyes Only for Clay and Murphy 312.

  1. Participating in this meeting at the Kremlin were Smith (U.S.), Roberts and Lunghi (U.K.), Chataigneau and Boyer de Fonscolombe (France), and Molotov, Smirnov, Pavlov, and Yerofeyev (U.S.S.R.).
  2. Supra.
  3. See telegram 1508, August 3, from Moscow, p. 999.
  4. In telegram 3720, August 17, from London, not printed, Douglas reported that Bevin’s initial response to the conversation with Molotov had been a desire to seek an interview with Stalin. Bevin felt the proposal to remove the restrictions imposed since June 18 was unsatisfactory and that reference of the currency question to Berlin without an agreed directive for the military governors would be useless. (740.00119 Control (Germany)/8–1748)