740.00119 Control (Germany)/9–148: Telegram
The United States Political Adviser for Germany (Murphy) to the Secretary of State
niact
2212. Personal for the Secretary and Lovett. Eyes Only. Following is Clay’s cable to Army on meeting today of Military Governors:
Today’s meeting of the four Military Governors was preceded by meetings of transport, finance and trade committees which attempted to develop questions for consideration by Military Governors. Only [Page 1101] finance committee was able to reach agreement on questions to be considered.
At meeting of Military Governors first report considered was that of transport committee. Here Russians had insisted on discussing air traffic into Berlin. British, French and American representatives stated that the transport issue was specifically defined in the Moscow directive1 as the removal of restrictions and hence there was nothing to discuss with respect to air transport. Sokolovsky demurred and finally gave as his reasons that air traffic could be used to upset the stability of Soviet currency through importation and exportation of money and also through the removal of goods from Berlin without accounting. Robertson had led the argument against consideration of air transport.
After Sokolovsky’s statement, I reminded Sokolovsky that the Moscow directive was quite specific with respect to the removal of restrictions on transport; however, I was prepared to recognize that Soviets were entitled to some safeguards with respect to movement of money and goods, by air or otherwise. I reminded him that financial agreement would unquestionably develop procedures for movement of money to and from Berlin, and that trade agreement would undoubtedly lay down procedures for movement of goods into and out of Berlin. It seemed to me that if we could reach agreement with respect to finance and trade that there would be very little difficulty in agreeing upon language which would result in removal of transport restrictions. Hence, I suggested that we pass directly to report of Finance Committee. This was agreed to by four Military Governors.
The first question on Finance Committee agenda was issuance of law fixing Soviet currency as sole currency for Berlin. Soviets recognized that laws introducing Western currency in each sector would necessarily have to be rescinded by action of responsible zone Commanders. However, they insisted that with revision of these laws introducing Western currency, their law was immediately effective for all Berlin. Obviously, this would be a recognition of Soviet sovereignty. In addition, it would not be practicable as law withdrawing Western marks must also contain provisions governing exchange. It was finally agreed that final agreement on this question signed by Military Governors would be issued as a joint proclamation of four Military Governors, if and when their Governments had approved it.
We then proceeded to the next question which was the function of the quadripartite Finance Commission. Here we developed what may be a breaking point in the negotiations. In fact, my British colleague immediately after the meeting came to me and asked if Soviets were [Page 1102] attempting to make this issue the breaking point. In this connection, please refer to draft directive. Soviets contend that last sentence of directive establishing the Financial Commission to control the introduction and continued circulation of a single currency in Berlin applies only to Paragraphs (A), (B) and (D) and does not apply to Paragraph (C) nor to the unnumbered paragraph placing the regulation of currency circulation in the German Bank of Emission of Soviet zone. You will remember that at one time the wording in this paragraph provided that this regulation would be under the control of the Financial Commission and that the reference to the Finance Commission was changed from this paragraph to a separate paragraph in last stages of negotiations at Moscow. An examination of paragraphs (A), (B) and (D) will show that the Financial Commission would have no authority other than to secure uniform treatment of all persons in Berlin and that credit and discount rates could be so established as to wreck Berlin economy and to force it into complete dependence on Soviet zone. In this connection, I reminded Marshal Sokolovsky that top Soviet authority had stated that German Bank of Emission controlled all currency through Soviet zone and it was impossible to exclude Berlin. However, if he was asked the question if it did so without being controlled itself, the answer was “no”. He further stated such control would be provided by Financial Commission and by four Commanders in Berlin who had worked out arrangements and would supervise what the bank was doing.
This top authority had further stated that word “control” was satisfactory and that he would not object to its use. This was stated by Generalissimo Stalin at meeting on August 23 (Moscow’s 331, to Berlin2). On August 27, Molotov stated that points (A), (B), (C) and (D) of second paragraph of directive and measures worked out in Berlin were to be placed under control of Commission. It was clear, however, that Molotov in his conference of August 27 (Moscow’s 350, to Berlin3) was hedging and that while he orally reaffirmed Stalin’s categorical statement that Commission shall control, he refused to make it specific in directive. There was no question but that Sokolovsky had firm orders in this respect. General Robertson stated that he could proceed no further on this issue as Soviet interpretation was so different from understanding reached at Moscow that he would have to go to his Government for instructions. I agreed with General Robertson as did General Koenig. Meeting which lasted three hours referred remaining questions back to committees of experts and agreed to meet again at 1500 hours tomorrow.
[Page 1103]It is quite obvious that acceptance of limited control in Financial Commission as now proposed by Soviets would in fact place financial and economic destiny of Berlin in their hands. I do not believe that we should permit it to become a breaking point here but that rather we should attempt to pass it back to Moscow as a disagreed point, in meantime trying to reach agreement on other points in understanding that such agreements are valid [invalid] unless agreement is reached on whole. I would appreciate your thinking on this issue.
Up to date, I had avoided taking initiative as I felt that it would be much better for French or British to take lead. However, after today’s meeting, I asked my British and French colleagues if they would be prepared for our political advisers after each meeting to agree to a common report which we could send to all three governments. Each of us would, of course, be free to comment on the report and to make separate recommendations, but the actual report going to all three governments would be same. We believe this would be helpful to you in Washington.
Moreover, this same report will be sent direct by Murphy to State Department. We have further agreed to meet in my office on hour prior to meeting with Sokolovsky to receive reports of our subcommittees and to coordinate our action as much as appears desirable and possible. This, too, we think will be helpful.
I would like to emphasize that the differences in interpretation of the functions of the Financial Commission does perhaps represent an impasse which cannot be solved here except through acceptance of Soviet viewpoint which, while it might lift the blockade, would make our position in Berlin just as much, if not more, precarious than the blockade now makes it. I am sure that Koenig and Robertson both share my feelings in this respect and that at least Robertson will make strong representations to his Government on this issue.
The atmosphere of meeting continues strained; so much so that Koenig, who was chairman and had refreshments prepared, did not extend invitations until after Russians had left the room. The Russians made this easy by arising from the table immediately the meeting was adjourned without wasting time in saying farewells. At present moment there is not the slightest indication of any “give” in Soviet attitude.
Sent Department, repeated London for Douglas 553, Moscow for Smith 454, Paris for Caffery 567.
- Regarding the Directive, see telegram 1776, August 27, from Moscow, p. 1085, and footnote 3 thereto.↩
- Not printed; for a report on this meeting, see telegram 1729, August 24, from Moscow, p. 1069.↩
- Not printed; regarding the meeting under reference, see telegrams 1776 and 1777, August 27, from Moscow, pp. 1085 and 1088.↩