740.00119 Control (Germany)/9–248: Telegram
The United States Political Adviser for Germany (Murphy) to the Secretary of State
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2222. Personal for the Secretary Eyes Only. Following is agreed joint report of the third meeting of military governors on 2 September. The report of the Trade Committee1 was first considered in an atmosphere of greater relaxation than that which had previously prevailed. The Trade Committee had presented two separate proposals, one by US expert, and other by Soviet expert, which listed the questions thought pertinent for consideration. The proposals showed two principal diferences in that the US draft made reference to the importation of food, power and fuel into Berlin as well as means of payment. The Soviet draft made reference to the question of interzonal trade as distinct from trade between Berlin and the rest of Germany, and to the lifting of restrictions of trade between Berlin and the Soviet zone of occupation.
General Clay addressed himself to the report of the committee and particularly to the two questions just mentioned. He thought that all questions in both papers should be discussed and pointed out that if the East mark is accepted, obviously, payment for food, power and fuel for Berlin would have to be made in East marks. Speaking for himself, he would be willing to have this question of payment submitted to the financial experts. He continued in stating that insofar as the Western zones are concerned, if traffic is opened, more food and coal could be shipped in if sufficient trains were available. This would obviously result in larger production of finished products in Berlin. Normally these products would have a far higher value than the imports from which they are made. This we should be able to take into account in effecting fair division. General Clay thought it would be possible to make an agreement which would take account of the costs involved, and therefore a policy agreement would be required for the allocation of such exports which in turn might lead to the establishment of some sort of licensing system under Four Power supervision. With respect to the question of resumption of trade relations between the Soviet and Western zones, it was clear that some sort of clearing accounts would be required in view of the different currencies. He then proposed that the question of accounting for food and coal imports should be transferred to the finance experts.
General Robertson remarked that he found the two proposals of the trade experts similar with the two exceptions described above. [Page 1106] He was in general agreement with General Clay’s remarks and would agree to the reference of the question of the payment of food, fuel and power to the finance experts. General Robertson doubted if the economy of Berlin could be quickly developed to pay for all the imports necessary of food, fuel and power. He remarked that what the country imports in the way of food and fuel it normally regarded as part of its trade, unless it be decided to treat it otherwise. Apart from the question of payment, we must decide what food and fuel must be brought in, by whom, and for whom. He had no objection to interzonal trade being discussed, but he would prefer to defer comment on General Clay’s remarks about its organization.
General Koenig stated that he was in general agreement with Robertson and Clay, but pointed out that the financial experts had already agreed to include accounting for food and coal in their report.
Marshal Sokolovsky agreed that the items in the Soviet and US papers should be discussed by the trade experts. Clay had raised the question of payment by Berlin for imports of food, power and fuel and he had no objection to the discussion of this question by the finance experts. He wished, however, to make certain general observations as follows:
- (1)
- The present condition of the Berlin economy does not allow the city to pay in full for its imports from the respective zones of occupation;
- (2)
- The supply to Berlin of food, fuel and power was not conditioned by anything and no agreement had ever been made that such imports should be paid for immediately or in full. He added that as is known when the Soviet Government offered to feed Berlin it did not demand any payment for the supplies from the resources of Berlin only.
- (3)
- In 1945, the Kommandatura reached agreement on imports into Berlin to supply the population with food, power and fuel and no indication was given that such imports would be considered as trade transactions. He was certain, however, that the experts could come to a reasonable agreement and make proposals on this.
- (4)
- With respect to trade for Berlin, he would agree to Clay’s proposal that trade should be regulated by a system of licenses.
- (5)
- As to payments for such trade, he would agree that it could be based on a clearing system which in turn would be considered by the experts who would present their proposals. He observed that the trade of Berlin with the Western zones and other countries must be based on a “netto balance,” which we assume means a commodity balance. He thought the trade of Berlin with the East zone would be much simpler if agreement should be reached on a single currency.
- (6)
- As to interzonal trade, Sokolovsky considered that the trade experts should examine the question in the sense indicated in the directive, i.e., repeal of restriction on interzonal trade and resumption on basis formerly agreed to between East and West zones.
It was then agreed that the trade experts would study all questions in both papers except that of payment for food, power and fuel imports [Page 1107] which would be dealt with by the finance experts. General Clay said that the development of Berlin’s economy would involve the import of more coal and more materials than in the past. It was essential for the Soviet authorities to advise us of the number of trains which would be available. Sokolovsky proposed that the Transport Committee should examine the question of available transport facilities in both directions. General Koenig pointed out that the Committee was no longer working and suggested that it should continue its work on those points on their agenda on which there is no disagreement. This was agreed.
It was then agreed to hear a progress report from the chairman of the Finance Committee in which it was stated that the Committee had discussed the following items: (a) exchange of cash, (b) exchange of bank accounts, (c) exchange of accounts which appeared prior to the capitulation of Germany (blocked accounts), (d) question of settlement of private debts. The chairman of the Finance Committee stated agreement had been reached in principle on the removal of Western marks from Berlin on the basis of Soviet Law No. 111.2 The committee had exchanged opinions and information on the volume of Western marks to be exchanged for Soviet marks and was tentatively informed that approximately 326 to 360 million West marks had been issued in Berlin. However, it was not believed that all of this amount would be offered for exchange as part would be hoarded and part transferred to the Western zones. After considering this information the finance experts can agree to consider tomorrow more accurately figures and to prepare a report for the military governors respecting the withdrawal of Western marks and the introduction of Eastern marks into Berlin. It does not follow that this report will be unanimous, but it is hoped to present a paper on which agreement can be reached.
Sokolovsky then suggested that the finance experts be instructed to present their report tomorrow at which time Clay pointed out that only one of the five items have been considered by the finance experts. Clay suggested that the finance experts be instructed to go to work at once with a view of presenting a report on as many items as possible tomorrow. The military governors then agreed to meet at 5 p. m. tomorrow to give more time to the committees. It was further agreed that the finance experts will confirm their readiness to report prior to the meeting tomorrow.
Sent Department 2222; repeated London 558; Paris 571; Moscow 468 for Ambassador’s Eyes Only.