Foreign Relations of the United States, 1948, Germany and Austria, Volume II

501.BC/10–2248: Telegram

The Acting Secretary of State to the Embassy in France ¹

top secret   us urgent

Washington, October 22, 1948—1 p. m.

4124. For Bohlen. We have developed our thinking on the idea of appointing a neutral commission of reps of central banks and we would like to check our views with yours. (See Gadel 229.²) The timing and manner of presentation of any such proposal is hypothetical at present but it might possibly be used in some form should the Mil Govs again run up against insuperable obstacles in a renewed discussion of the currency problem which might take place under para (2) (b) of proposed SC resolution.³ If you consider it appropriate, you might wish to discuss the subject most discreetly with Brit. Following are the conditions we envisage in the formulation of proposal. It will be noted that the suggestion was written and approved before the current proposed resolution was received. It therefore may require some amendment to take care of changing conditions.

1. The Terms of Reference of the commission should be sufficiently broad to enable them to consider any appropriate and adequate solution of the problems of Berlin currency and trade. The mandate of the commission should be to devise a plan for the introduction of a uniform currency into Berlin under quadripartite control, which fairly protects both sides, and to determine the extent to which the quadripartite control of trade is necessary.

2. Within such a frame of reference, each of the powers could present a brief in support of its position. In our brief we would emphasize the fundamental difficulties of satisfying both the need for Four-Power control of the currency of Berlin, and the desire of the Russians to safeguard the currency of their zone of Germany. We could further point out that on the disagreed financial issues a solution which would adequately protect the interests of the Western Powers can be found through the use of a special currency for Berlin, under quadripartite control, which could properly be under full quadripartite control and could not be considered a threat to the Soviet zone currency.

3. On the question of the trade of Berlin, we would expect to demonstrate the necessity for preserving the right of each of the occupying powers to import into Berlin food and fuel in fulfillment of its responsibilities for maintaining the economic life of its respective sector, and to retain the proceeds therefrom for appropriate purposes including occupation costs as agreed by Molotov on Sep 18.

4. It is important that the Terms of Reference be made as broad as this, since a plausible case can be made for certain elements of the Sov position on the currency question under the Aug 30 directive if the commission should be required to proceed on the assumption that the currency of the Sov zone must become the sole currency for Berlin as well. To some considerable degree our technical objections to the principle involved in the Sov interpretation of the directive reflect our lack of confidence that they would act in good faith in operations under that interpretation. It is difficult for a neutral body to take this consideration into account. The further objections of the Western Powers reflect the conflicting financial interests of the Western sectors of Berlin with those of the Sov sector and the Sov zone, and it is unlikely that a neutral group confined strictly to the Aug 30 directive could reconcile these interests.

5. It would be most undesirable for this plan to be presented in such manner that prolonged argument could result over choice of experts.

6. We would be prepared to state to the six neutrals our willingness to bind ourselves to accept the decisions of the experts commission provided that the Russians also do so and provided there is a firm prior commitment to lift the blockade upon announcement of the agreement to accept the commission’s recommendations. We should consider, but probably not propose initially whether, as a final position, we would be willing to accept a firm prior commitment that the blockade would be lifted simultaneously with the entry into effect of the decisions of the experts commission.

7. If the experts commission does not arrive at a decision by the specified time limit, the blockade would possibly be reimposed if already lifted or would, if commitment was for simultaneous lifting, not be lifted regardless of any commitment in this regard. Therefore decision in the commission should be by majority vote.

8. The commission should be allowed a maximum of say, two weeks in which to report.⁵

Lovett

1. Repeated to Moscow as 1244, Berlin as 1750.
2. Not printed; for a summary of this telegram, see footnote 4 to Delga 361, October 16, from Paris, p. 1225.
3. The draft resolution under reference here was transmitted in a telecon between Washington and Paris October 20, not printed. Paragraph 2B set forth the steps which the military governors were to take for the introduction, circulation and use of the Soviet currency in Berlin (800.515/10–2048).
5. Telegram 2405, October 22, from Moscow, not printed, reported that Smith felt the idea of a neutral commission was by far the best line of action if the Security Council would consider it favorably (740.00119 Control (Germany)/10–2248). Murphy, after consulting the OMGUS financial adviser, Bennett, agreed that there was much to recommend in such a formula, but thought the Russians would not accept the idea of a commission since it offered them less than the proposed Security Council resolution. Telegram 2603, October 25, from Berlin, not printed (740.00119 Control (Germany)/10–2548).