740.00119 Control (Germany)/8–2448: Telegram

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

top secret
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1728. For the Secretary Eyes Only. Our conference tonight lasted almost five hours, the first two with Stalin and the remainder with Molotov as a drafting committee.1 After all of our careful rehearsals of procedure Stalin met us quite jovially with the remark, “well, I have a new draft”.2 To this we replied that Generalissimo Stalin was always the accomplished strategist but we also had a new draft3 and we would like him to examine ours while we examined his. Stalin’s draft was a proposed new communiqué covering all points but it conformed generally to our draft directive to military commanders. During the discussion of the respective drafts we were able to insert piecemeal our prepared opening statement4 and to reaffirm in strongest possible way our right to be in Berlin. Stalin’s explanation of various points in his draft and particularly his concern over maintaining the value of the Soviet zone mark and the connection therewith of the question of occupation costs were restrained and logical. He placed [Page 1066] emphasis on use of Soviet Bank of Emission which he maintained was the source of currency for the Soviet zone and consequently must inevitably be the source of currency for Berlin. He explained that the functions of the Soviet Bank of Emission in connection with regulation of currency in Berlin would be subject to control of a financial commission of representatives of the four commanders which he proposed should be set up to govern the practical implementation of financial arrangements involved in the introduction and circulation of a single currency in Berlin. He was quite categorical that this commission would be the controlling body and said he did not mind using the word control.

He then said that assuming we could reach agreement on the two drafts (which he did not anticipate would be difficult) he felt something must be said about the London Conference. If it was inconvenient for prestige reasons, a confidential exchange of letters might be acceptable but he would prefer a published statement.

He then went on to the question of occupation costs. After saying that he would insist upon Berlin being exempted from occupation costs because otherwise the currency of Berlin (and therefore that of the Soviet zone) might be put to great strain, he later suggested that a relatively small sum, say 20,000,000 marks, be drawn from Berlin as “token” occupation costs and that the remainder be found from our respective zones. We were, of course, unable to agree but said the question would be carefully considered.

He agreed that unless proper arrangements could be made in Berlin for implementing currency change the entire plan would fall down and accepted the idea of a directive to the Military Governors, proposing that they be allowed a week to arrive at a solution. He stated he believed that this solution sound [could] and must be reached, reaffirming again that the financial commission which he proposed should control the economic arrangements in Berlin would be continuing in its function. He accepted several suggestions made by us including the important one that transport restrictions to be lifted would include those imposed before June 18 and agreed to a meeting within a week to confirm or complete the arrangements made in Berlin. He then suggested that we adjourn with Molotov and coordinate our respective drafts. Just before we left he reverted to the question of the London decisions with so much insistence that we felt it necessary to state that while our Governments would not agree to any lengthy published formula or even to the publication of what had been stated orally it was possible that they would accept a published announcement along the lines indicated in my telegram 1716, August 23, which we said we had tried our hands at here. After reading this he said “it suited the Soviet Union very little”. We explained the difference between a published [Page 1067] document and a confidential statement. He suggested a statement to the general effect: “The question of the London decisions and of the formation of a West German Government was also discussed in an atmosphere of mutual understanding. The adoption of any decision on this subject was, however, deferred until the next meeting of the Council of Foreign Ministers.” We said we felt that a statement of this sort would only be provocative, causing far more uncertainty and comment than was justified by the situation. We were prepared to suggest to our Governments a statement to the effect that the subject had been discussed in an atmosphere of mutual understanding but no decision had been reached. Stalin also disliked this and to terminate the discussion we agreed to refer his proposal to our Governments, remarking, however, that we felt sure nothing beyond the suggestion we had already made would be found acceptable and that it was better to say nothing than to say too little. It was agreed with Stalin that if the directive were approved by our Governments or if they had any comments we would inform Molotov. It might be possible to receive word by tomorrow night, August 24.

We then adjourned with Molotov and began work on our drafts. In our immediately following message5 is the original Soviet draft and the final draft directive and draft communiqué as agreed upon with Molotov, subject to reference to our Governments.

The high points of our discussion with Molotov were:

(A)
His apparently very real concern over the stability of Soviet currency. He visualizes the possibility of heavy demands on Soviet currency as the result of our occupation of Berlin and the costs resulting therefrom and seems to feel this will have inflationary effect which he is determined to prevent. His comments on this and on the other matters discussed were unusually frank.
(B)
Reduction of occupation costs for Berlin. Both Stalin and Molotov apparently consider that it is essential for reasons given above to reduce the occupation costs of Berlin and to balance the Berlin budget. He implied that the food, coal, et cetera we were putting into Berlin should not be part of the current budget, but should be recoverable separately as a “debt” or “charge” against the city. I am not sure whether he meant this to be on a commercial basis or how he intended it to be handled. Most of our discussion hinged on these subjects.
(C)
Molotov’s unwillingness to use in any part of the text the terms “quadripartite control” or “quadripartite arrangements”. He finally admitted openly that this was due to the Soviet juridical position in Berlin and their official denial of our right to be there. His apparent feeling is that the open use of the word “quadripartite” implies a tacit recognition of our claim. He pointed out that provision had been made for control by the Military Governors or their representatives and that the word “control” had actually been used without apprehension on Stalin’s part, but he would not accept the term quadripartite. He proposed [Page 1068] instead of “quadripartite” in (B) of the communiqué the phrase “on the basis agreed between the four Military Governors”.

As you will note from the two drafts in our next telegram, practically every safeguard on which we have insisted has been included in the final draft. One paragraph on which we are uncertain, and on which Molotov stood his ground with the greatest determination is the paragraph relating to basis of trade. He insisted on including a provision for retaining “existing procedure for inter-zonal trade and clearing accounts” although agreeing to modification of existing procedure by agreement between the four commanders. Unfortunately the full significance of the proposed wording of this paragraph is not apparent to us although we suspect it and stated to Molotov that it was one item which we felt might be questioned by our Governments. Possibly I am unduly suspicious, as I was not sure just what his wording meant. We were able to get it watered down a little.

By comparison, things went so smoothly that I was a little worried, and remembered Stalin’s proverb, “an amiable bear is more dangerous than a hostile one”. However, we have obtained a draft directive which gives a better chance for agreement in Berlin under conditions satisfactory to us than I thought likely, provided always the Kremlin intends to reach an agreement. It is possible Stalin and Molotov realized that we had reached our minimum position and that they really do not at this time want a break. I am sure that it all goes back to the London Conference. This to them is the vital question and Molotov reverted to it again during our discussion with him and pressed us for a commitment finally accepting with reluctance our statement that we would refer Stalin’s proposal to our Governments. We have not heard the last of this by any means.

We agreed to announce tonight simply that we had met but we suggested that when the directive was approved and ready to be transmitted it would be necessary to make some public announcement on the lines mentioned my telegram 1716. Stalin accepted this. We said we hoped to be able to let him know your decision tomorrow, in which case, if it were favorable, the interim communiqué could be released at a time agreed by our Governments. It is understood that the final communiqué will be held in abeyance, even though agreed upon, and that it has no effect unless an agreed solution is produced in Berlin.

My final comment is that it seems to me this is an impossible job to give to the Military Governors, but on the other hand, I don’t see how we can spare more time.

Sent Department, repeated Berlin for Clay and Murphy 329, Paris for Caffery 274, London for Douglas 161.

Smith
  1. Participating in this conference, held at the Kremlin beginning at 9 p. m., were Smith (U.S.), Roberts and Lunghi (U.K.), Chataigneau and Boyer de Fonscolombe (France), and Stalin, Molotov, Smirnov, Pavlov, and Yerofeyev. In telegrams 1731 and 1732, August 24, from Moscow, neither printed, Ambassador Smith transmitted detailed accounts of the sessions with Stalin and Molotov (740.00119 Control (Germany)/8–2448). Extracts from these detailed accounts appear in The Berlin Crisis, pp. 37–38. For Smith’s personal recollection of the meeting with Stalin, see Smith, Moscow Mission, pp. 239–242.
  2. For the text of Stalin’s draft, see telegram 1729, August 24, from Moscow, infra.
  3. The draft under reference here was transmitted in telegram 1716, August 23, from Moscow, supra.
  4. The text of the statement under reference was transmitted in telegram 1716, supra.
  5. Telegram 1729, infra.