Foreign Relations of the United States, 1949, Council of Foreign Ministers; Germany and Austria, Volume III

740.00119 Control (Germany)/2–2249: Telegram

The Secretary of State to the Embassy in the United Kingdom

top secret
us urgent

Washington, February 25, 1949—7 p.m.

642. Personal for the Amb. Your analysis and frank comments in Embtel 648¹ have been helpful to me in bringing up for review a number of points which have given us concern. I regret it has been impossible in our brief and urgent telegraphic exchange to outline to you more fully the course of action we have in mind, particularly since the FonOff appears not to be considering any further plans for resolving the Berlin problem. (See however Deptel 536.²)

A number of basic facts have determined our line of thinking. It is clear from the discussions in Moscow, Berlin, and those held by UN experts comite, that Sovs until now have not been willing to accord us equitable control over currency and trade. In fact they have produced a situation in Berlin which leaves us but one choice, namely, that in order to prevent an economic strangulation of the Western sectors we could accept the use of the Sov mark only on the basis of our counter-proposal³ presented at Geneva.

It could be seriously doubted that the neutral SC members themselves, as distinct from their experts at Geneva, could formulate any other acceptable solution for the use of Sov zone mark throughout Berlin. They certainly do not have the technical expertise themselves for attempting the job nor is it even clear that they would have competent technical advisers. We understand that at Geneva the chief initiative was taken by UN Secretariat members of the comite and that neutral experts in large measure had little to do with comite’s work. The chief obstacle was and remains the Sov split of the city, which comite’s preliminary recommendations failed to take into sufficient account. Given the same set of circumstances, it is doubtful whether SC neutrals could formulate any plan which would adequately protect our position other than our counter-proposal which Sovs rejected at Geneva. Hence either they would come up with something which we would again be forced to reject, or they would be placed in what they might regard as the needlessly embarrassing position of having to endorse our proposal in the face of known Sov opposition. Our record of cooperation with the neutrals has been good and it will be recalled that Western powers accepted their SC resolution, which Sovs vetoed. We fully expect to utilize neutral cooperation in the future.

We still agree with Brit that a detailed SC discussion of experts report would yield no positive results. We think we should try to avoid such discussion, although we appreciate we cannot openly frustrate further SC consideration if the neutral members should desire it. Should an early discussion be impossible to avoid, we could revive our Geneva counter-proposal as an interim currency arrangement which would permit a lifting of the blockade and discussions re reunification of the city and broader German questions. We would try to obtain an early answer from Sovs, realizing that they will stall for time before reiterating their rejection and that we may be forced to postpone introduction of Western mark on Mar 10 while awaiting Sov reply. Our objective nevertheless continues to be the establishment of Western mark by Mar 10 if possible. This step, which Brit proposed and which Fr are apparently willing to consider, is designed to alleviate a most serious economic situation which is giving us increasing concern. The Western B mark is already circulating in Berlin and the contemplated changeover would simply place us in an equal position vis-à-vis the Sovs which must be brought about soon in the absence of any likelihood of early Sov acceptance of our essential terms for the use of the Sov mark.

Besides being critically necessary for the economy of Western sectors, establishment of Western mark will place us in a stronger bargaining position in subsequent discussions of a solution. Far from excluding further efforts, we have in mind exploiting UN action to the full once we have obtained a basis of parity in currency matters. We intend to return to SC and invoke its assistance in obtaining a lifting of blockade with such acceptable currency and trade arrangements as may be required for that purpose. Logically, these efforts would be pursued along the lines of a proposal for a third and independent currency under four power control, which we have come to believe is only rational arrangement consistent with rights and interests of all four powers in Berlin and the separate juridical status of the city. Sov polit actions in relation to use of Sov zone mark, as well as de facto presence of two distinct currencies in Berlin, would give cogency for suggested establishment of a separate Berlin currency regime. We could at the same time put forward suggestions for political reunification of the city. In urging that a solution be sought along these lines, we would make plain our willingness to engage in discussions of German problems as a whole in a CFM once the blockade had been lifted.

We are aware of efforts by the Berlin leaders irrevocably to tie Western sectors with Western zones but we have taken no such decision and do not believe this need follow from establishment of Western mark on the basis of a flexible relationship with Western zone banking system. We have also recognized risk of Sov counter-measures, but it is difficult to see what further steps Sovs could take in Berlin which would not redound to the equal disadvantage of the third of the city they control. (See Deptel 4814, Dec 29.⁴)

We are convinced that establishment of Western mark is becoming more necessary as a result of economic pressures which are daily increasing and we do not see much hope of obtaining a currency solution in SC before we have placed ourselves in a position of equality through steps completely justified by latest Sov policy. With ref your 662,⁵ Sovs as result counter-blockade and unfavorable polit position, are probably under just as much, and in some respects perhaps more, pressure than ourselves and once we have firmly secured our currency position in Berlin we intend to seek a reasonable solution through the machinery of UN. Until the steps now urgently necessary have been taken, any other course or delay would risk a serious undermining and wastage of the efforts we have so far put forth to maintain Berlin.

To re-capitulate:

1. We favor publication experts report, accompanied if possible by statement by SC Pres along line Deptel 603,⁶ after circulation and a few days consideration by individual SC members; publication also would be accompanied by parallel releases or statements by Western powers, texts of which already drafted.

2. We would try to arrange avoidance of SC discussion experts report through suggested announcement by SC Pres and by appropriate discussions with neutrals; if this fails we would revive and develop in SC US Geneva counter-proposal as offering fair interim solution.

3. We should aim at earliest disposition experts report in SC so that Western mark may be established Mar 10.

4. Following this step we would invoke neutral assistance with view to achieving removal of blockade, equitable and workable currency solution and polit reunification of Berlin.

5. We would reiterate our willingness to begin discussions with Sovs for resolution of questions affecting Germany as a whole once blockade is lifted.

In your discretion you may talk with FonOff along above lines and ascertain their opinion which if favorable should permit Brit to proceed with action suggested Deptel 603.

Urtel 694⁷ just received and will be replied to in detail later. Entirely agree your emphasis need for satisfactory trade arrangements but idea settle currency issue on basis some quantitative formula has been explored at great length both here and in Geneva without any success. Basic interests and concepts of Western powers and Sovs in currency matters judged here to be too far apart to promise any settlement on basis East mark, at least within a split city, except along lines our counter-proposal. It is for this reason we incline turn toward third currency alternative in next round. Accordingly, suggestions you put forward do not seem to us essentially to change the considerations discussed above.

Acheson

1. Supra.
2. Same as telegram 85, February 15, to New York, p. 673.
3. Regarding this counterproposal, see editorial note, p. 658.
4. Not printed.
5. Not printed; but see footnote 5 to telegram 648, p. 681.
6. Ante, p. 679.
7. Not printed; in it Douglas elaborated on the provisions he felt would insure a satisfactory trade and currency agreement for Berlin. (740.00119 Control (Germany)/2–2449)