740.00119 Control (Germany)/10–2648: Telegram
The Ambassador in the United Kingdom (Douglas) to the Acting Secretary of State
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4622. 1. Although I fully concur in the thought that a neutral commission might serve a useful purpose should, as indicated in paragraph three below, the military governors again meet and again be unable to reach an agreement, (Deptel 4124, October 22 to Paris, repeated Moscow 1244, Berlin 1750 and relayed from Paris to London1), I should like to offer the following comments in respect to its proposed terms of reference and procedure:
- (a)
- If it were difficult for the commission to take into consideration the factor of possible Soviet bad faith, might it not also be difficult for it to appreciate this as a reason for the desirability for establishing a special currency for Berlin? If the commission could not reconcile conflicting financial interests between Eastern sector and Western sectors, how could the introduction of a special currency be agreed to by Soviets as a device for reconciling these conflicting interests? It therefore seems to me that the commission might well decide to follow the August 30 directive2 that the Soviet zone currency should be the sole currency for Berlin and make its recommendation on that basis. Moreover, it appears to me that a withdrawal from the directive would give Soviets an opportunity to charge us with repudiation. Notwithstanding its defects, therefore, I think we should abide by it rather than recommend the introduction of a wholly new device in the form of special currency for Berlin.
- (b)
- Without questioning the energy and ability of the members of the commission, they would presumably be ignorant of Berlin’s budgetary position and occupational costs and balance of payments matters. I therefore fail to see how within a period of two weeks it would be possible for the commission to acquaint itself sufficiently with these intricate and complicated questions to enable it to evolve an acceptable and practicable solution to these phases of the currency problem.
- (c)
- I question the desirability of making the commission’s terms of reference so broad as to permit it to determine the extent to which quadripartite control of trade is necessary. There are, as I see it, two vital matters which we must safeguard: Our right to participate on a quadripartite basis in the control of all trade including the issuance of licenses, and the right of each of the four occupying powers to import fuel and foodstuffs into its sector. By granting such extensive terms to the commission envisaged in reftel, might we not run the risk of having these rights impaired?
- (d)
- I would appreciate your views on the manner in which the proposed commission would be formed, whether by appointment by the SC, designation by the Secretary-General of the UN or some other method, and how the Soviets can be persuaded to agree to the decisions of a majority of the commission.
2. The important thing, I believe, is to get the blockade lifted with a good agreement to cover trade and an arrangement with regard to currency which will give some assurance that we can remain in Berlin with a minimum amount of inconvenience no matter what sort of currency offensive the Soviets may launch. I read in the early ’30s much of the Soviet literature on the manipulation of currency and the way in which it was effectively used during the Russian revolution. I am, therefore, not unaware of the ingenuity of the Soviets in this respect. In the case of Berlin, however, if a reasonable currency arrangement is made the Soviets would find it difficult to use currency as an offensive weapon against the Western sectors without using it in the same way to produce much the same results in the Eastern sector and the Soviet zone.
3. The foregoing is based on the assumption that despite Soviet veto of neutral’s resolution, SC may evolve a substitute formula which would be satisfactory to Soviets as well as Western Powers. Such a formula might call for:
- (a)
- Lifting of all blockade measures within a 10-day period;
- (b)
- Simultaneous resumption of negotiations by military governors to agree on permanent arrangements in accordance with August 30 directive as interpreted; and
- (c)
- Appointment by one method or another of commission, possibly by SC which would formulate during 10-day period referred to in (a) above, interim measures designed to protect Soviet interests against any adverse results from lifting of blockade during period in which military governors are meeting and to supervise them during same period. This commission might subsequently be empowered to decide the currency and trade questions in the event that the military governors are unable to come to agreement among themselves. This suggestion or some modification of it would on the one hand relieve me of the onus of negotiating under duress, and on the other, give Soviets assurances of protection during period following the lifting of the blockade while the military governors are negotiating.
4. The above suggestion might be construed as a retreat on our part and therefore be taken as a sign of weakness. But if the neutrals were to ask us if we would accept something along these lines, this objection might be met at least in part.
Sent Paris for the Secretary and Jessup 790; repeated Department for Lovett 4622, Berlin for Murphy and Clay 564. Department pass Moscow for Smith 273.