740.00119 Control (Germany)/9–248
Memorandum by the Counselor of the Department of State (Bohlen)1
Brief for the President
Subject: Difficulties Encountered in Technical Discussions by the Military Governors in Berlin
The Military Governors who are attempting to work out the practical arrangements under the directive sent them by the four governments have run into difficulties concerning the relationship of the proposed quadripartite financial commission and the German Bank of Emission of the Soviet Zone. Our interpretation of the directive is that the financial commission will have powers of supervision over that portion of the Bank’s operation dealing with the issue and circulation of currency in the city of Berlin through the Stadtkontor and the various credit institutions. This interpretation has been specifically confirmed by Stalin and Molotov. Sokolovsky, however, professes ignorance of any such confirmation by Stalin and Molotov and contends that the directive does not expressly state this power of the financial commission. The issue is complicated by the fact that the German Bank of Emission of the Soviet Zone would issue currency for the whole Soviet Zone as well as for Berlin under the proposed arrangement. We have not contended that the financial commission for Berlin should have control powers over the bank in so far as currency for the Soviet Zone is concerned but only over the handling of the Soviet mark in the city of Berlin.
Sokolovsky’s attitude is characteristic of Soviet tactics, which were fully anticipated during the Moscow discussions. We were strongly in favor of a definite reference, in the directive itself, to the powers of the financial commission over the German bank, but we could not get the British to go along with us. They seemed to feel, together with the French, that the definite statements of interpretation by Molotov and Stalin were adequate. The matter is of central importance and may prove to be the breaking point of the discussions. We have, however, instructed Clay, with his full agreement, to leave this point aside and to continue discussions with the other military governors in an attempt to reach agreement on the other parts of the communiqué. If agreement is reached on the other points and the military governors are still unable to agree on the relationship of the financial commission and the German bank, the matter will then be referred back to Moscow for [Page 1109] discussion with Molotov or Stalin. We feel that these negotiations should not break down in Berlin on what would appear to be a technical point but rather in Moscow on the basic issue reflected in this technical point. The reason that the powers of the financial commission are so important is that unless it is given supervisory powers over the operation of the German bank in the city of Berlin, the entire financial life of the city would pass to unilateral Soviet control, since the bank could go right ahead and handle the currency, credit and other financial arrangements without any degree whatsoever of four-power control.
- It has not been ascertained whether this paper or its substance was communicated to the President. It is possible that this paper was prepared for the use of the Secretary of State in orally briefing the President on the Berlin situation.↩