740.00119 EW/3–1849

Memorandum by Mr. William K. Miller of the Division of German Economic Affairs


Subject: Disposition of Reparation Equipment in Western Germany Earmarked for USSR

The Problem

To determine the disposition of reparation equipment in the three Western Zones of Germany earmarked for possible future delivery to the USSR.


A statement of the background of this problem is given in Attachment 1.1 A brief summary follows.

It was agreed at Potsdam that the USSR should receive twenty-five percent of industrial capital equipment scheduled for removal from the Western Zones. The USSR was to deliver an equivalent value of certain commodities to the Western powers in exchange for three-fifths of this twenty-five percent and was to receive the other two-fifths without payment or exchange of any kind in return. A number of plants were allocated and delivered to the USSR pursuant to this undertaking, but ACA plant allocations were stopped early in 1948 in connection with a general review of the dismantling problem.

The Western Zone Commanders, however, proceeded with separate allocations to the Inter-Allied Reparation Agency as plants were made available, and simultaneously earmarked a quarter share for possible future delivery to the USSR. A total of 217 plants and part plants have been set aside under this arrangement, with a residual value of slightly over $50 million.

The British recently proposed that these earmarked plants should be turned over to IARA as a “sweetener” in connection with the final results of the Humphrey Committee survey. Ambassador Douglas replied that so long as the Berlin problem2 continues under discussion and the U.S. is committed to undertake negotiation of all-German problems if the blockade is lifted, the Department considers it undesirable to dispose of the plants which have been set aside.

Reciprocal deliveries by the USSR have not been substantial. None have been made since August 1948.


It appears unlikely that the Russians will resume reciprocal deliveries in a volume sufficient to merit resumption of plant deliveries. Any move on their part to proceed with deliveries should be encouraged. [Page 587] However, it would be most inadvisable to deliver any further plant equipment unless the Russians actually resume reciprocal deliveries in substantial volume and indicate convincingly that they will continue such deliveries up to a value sufficient to cover their present obligations and obligations incurred as a result of any further plant deliveries.

The Department has already taken the position that the earmarked plants should remain available for possible future delivery to the USSR so long as the Berlin problem continues under discussion and we are committed to undertake negotiation of all-German problems if the blockade is lifted.

There are two basic alternatives for action at a future date, assuming that developments do not dictate a resumption of deliveries to the Soviets or a continuation of the present set aside with a view to possible future deliveries:

The earmarked plants could be turned over to IARA for allocation among the member governments.
They could be retained for eventual use in Germany.

The British have proposed the first alternative, and the Department has agreed that delivery to IARA would be logical if the plants are not disposed of in the relatively near future. Since this view has been communicated to the British, we may be considered committed to some extent to this position.

The allocation of these plants to IARA might do much to make up for the ill-feeling developed through the Humphrey Committee survey and the resultant plant retentions. The turn-over to IARA could be based on the failure of the Soviets to fulfill their obligations in respect to reciprocal deliveries, as well as on the more general grounds that the Soviets had satisfied their reparation claims from the Eastern Zone to a far greater degree than had the Western Powers from their Zones, and had blocked the economic unification of Germany at no little expense to the Western Powers. A further argument for allocation to IARA (as opposed to retention in Germany) is the fact that none of these plants was recommended for retention by the Humphrey Committee.

The exact position of the French is not known. However, it is believed unlikely that they would object to the allocation of the earmarked plants to IARA. Almost certainly they would object vigorously to leaving these plants in Germany.


As long as the present situation vis-à-vis the USSR continues, i.e., so long as the Berlin problem continues under discussion and we are [Page 588] committed to negotiate if the blockade is lifted, the status quo in respect to the Soviet share of Western Zone reparation plants should be maintained. If the British or French press for allocation of these plants to IARA we might reiterate that we are favorably disposed to such action at a later date, provided developments of the situation vis-à-vis the Soviets do not indicate some other course, but we should make no definite commitment as to the timing of this move other than to agree to review the question in the light of developments at any time in the future when the British or French may wish to do so.3


  1. Not printed.
  2. For documentation relating to the Berlin blockade, see pp. 643 ff.
  3. In telegram 968, March 21, to London, repeated to Paris, Berlin and Brussels, not printed, the Department of State advised its representatives that for the reasons stated in this paragraph the turnover of plants set aside for the Soviet Union as reparations would be untimely. (740.00119 EW/3–1749)
  4. The six attachments to this memorandum are not printed. Their content was incorporated into the memorandum by Miller.