740.00119 Control (Germany)/8–2448: Telegram

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

top secret
urgent
niact

1729. Eyes Only for the Secretary. Following is original text of draft joint communiqué presented by Stalin.

Begins: “1. On August 25, all restrictions which have been recently imposed on the transport of persons and goods in either direction between the three Western zones of Germany and Berlin shall be removed and freedom of communications shall be maintained.

“2. On August 25, all restrictions which have been recently imposed on the traffic of goods to and from the Soviet zones of Germany shall be removed and freedom of communications shall be maintained.

“3. In addition to meetings of the commanders, meetings among representatives of the four Governments in the form of the Council of Foreign Ministers or other conferences of representatives of the Four Powers shall be held in the near future to discuss:

  • “(a). Any questions which may be outstanding as regards Berlin, and
  • “(b). Any other outstanding problems affecting Germany as a whole.

“4. As from August 25 the German mark of the Soviet zone shall be accepted as the sole currency for Berlin and the Western mark ‘B’ shall be simultaneously withdrawn from circulation in Berlin, the regulation of currency flow in Berlin to be undertaken by the German Bank of Emission of the Soviet zone through the medium of the credit establishments operating at present in Berlin. Prior to that date the four commanders will work out arrangements involved in the introduction of the German mark of the Soviet zone in Berlin and the regulation of its flow in Berlin by the German Bank of Emission.

“These arrangements shall ensure:

“No discrimination or action against holders of German marks ‘B’ so that the exchange of Western marks ‘B’, issued at the time of their introduction, for German marks of the Soviet zone at the rate of one to one is ensured;

“Equal treatment as to currency and provision of fully accessible banking and credit facilities throughout all sectors of Berlin so that this will not lead to disorganizing currency flow or to disturbing the stability of currency in the Soviet zone of occupation;

“A satisfactory basis for trade between Berlin, third countries and the Western zones in conformity with the existing procedure of inter-zonal trade and barter accounting and on condition that any modification of this procedure of trade will be made only by agreement between the four commanders;

“Provision of sufficient currency for budgetary purposes provided that the balance of the Berlin budget is maintained;

“Occupation costs resulting from the presence of forces in Berlin [Page 1070] shall be met from the budgets of the respective zones of occupation of Germany, Berlin being exempted from occupation costs;

“A financial commission of representatives of the four commanders shall be set up to control the practical implementation of financial arrangements involved in the introduction of a single currency in Berlin.

“5. Should the preparation of the arrangements indicated here not be completed prior to August 25, the four commanders shall agree on another date for the simultaneous implementation of the above-mentioned decisions.” Draft ends.

Text of communiqué finally agreed upon with Molotov, to be held in abeyance pending report of Military Governors as result of action on their directive, is identical with that given in my telegram 1716, August 231 with following changes:

Under Paragraph “A” insert words “which have recently been” after “restrictions”.

Under Paragraph “B” substitute for “under quadripartite arrangements already agreed” the words “on the basis agreed between the four Military Governors”.

Last paragraph—remove brackets, and modify subparagraphs (1) and (2): (1) to read “any questions regarding Berlin which have not been settled by the Four Powers”; (2)—“any other problems affecting Germany as a whole which have not been settled by the Four Powers”.

Text of draft directive to Military Governors identical that transmitted my telegram 1716 except as follows:

Paragraph 1 identical with brackets removed from within subparagraph (A) and with words “which have recently been imposed” inserted after the words “Soviet zone of Germany”.

Paragraph 2 identical with insertion of date August 31 and addition of following sentence from the Soviet draft which is largely redundant but to which Molotov seemed to attach importance, “the four commanders will work out arrangements involved in the introduction of the German mark of the Soviet zone in Berlin and the regulation of its circulation in Berlin by the German Bank of Emission”.

Draft then continues as follows:

“The arrangements relating to the currency changeover and to the continued provision and use in Berlin of the German mark of the Soviet zone shall ensure:

  • “(A). No discrimination or action against holders of Western marks ‘B’ in connection with the exchange of those Western marks ‘B’ issued at the time of introduction of that currency into Berlin. These shall be exchanged for German marks of the Soviet zone at the rate of one for one; (note—Molotov justified his insistence on this wording by saying that there might be a flood of real or counterfeit Western notes offered for exchange, over and above the amount originally issued);
  • “(B). Equal treatment as to currency and provision of fully accessible banking and credit facilities throughout all sectors of Berlin on the understanding that this will not lead to disorganizing currency circulation or disrupting the stability of currency in the Soviet zone of occupation;
  • “(C). A satisfactory basis for trade between Berlin and third countries and Western zones, taking into account the existing procedure of inter-zonal trade and clearing accounts. Modification of the existing procedure of inter-zonal trade will be made only by agreement between the four Military Governors; (note—this is the paragraph on which Molotov was so insistent and which worried me because I did not know its implications);
  • “(D). The provision of sufficient currency for budgetary purposes and for occupation costs, reduced to the greatest extent possible, and also the balancing of the Berlin budget;
  • “(E). The regulation of currency circulation in Berlin to be undertaken by the German Bank of Emission of the Soviet zone through the medium of the credit establishments operating at present in Berlin;
  • “(F). A financial commission of representatives of the four Military Governors shall be set up to control the practical implementation of the financial arrangements indicated above, involved in the introduction and the circulation of a single currency in Berlin.”

Request urgently minimum essential changes in wording as close as possible to that given in this draft, and reasons for unacceptability, which I can use in coordinating here and in discussion with Molotov. There are probably some catches which have not been apparent to us. However, if Clay can work under terms given above it would be advisable to take it.

Sent Department, repeated London for Douglas 162, Paris for Caffery 275, Berlin for Clay and Murphy as 330.

Smith
  1. Ante, p. 1061.