740.00119 Control (Germany)/5–1749: Telegram

The Secretary of State to the Acting United States Political Adviser for Germany (Riddleberger)

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581.1 From Murphy to Riddleberger. For your information subsequently the following message was transmitted today by Army to OMGUS for Wilkinson:

“Reference your CC 85992 for Voorhees from OMGUS signed Hays. Following are additional comments and questions which occur to State for your consideration and on which they would like your views.


We would expect that any solution to currency problem that might be worked out at CFM would at best take many months to implement. We are therefore distrustful of Soviet proposition for trading on “open account” during interim period and believe it necessary to establish for this period a clearing and payments arrangement which would adequately protect the economy of the Trizone against uncompensated drains to the Soviet Zone. German proposals contained in USPolAd telegram No. 709 of May 12 to State Department3 very close to our thinking here except that (1) Soviet sector and zone blocked accounts in West Berlin and West Germany should not be unblocked (purpose is to prevent uncompensated drains but excuse might be unsolved problems of blocked Western accounts in Soviet sector and zone); and (2) it should be specifically stated that A and B accounts could not be replenished from deposits of West Mark currency not representing proceeds of Eastern deliveries to West Berlin and Western Zones. We would regard it as reasonable for initial “pump priming” clearing credits to be extended on both A and B accounts.

In view proposed absence border controls between Western Berlin and Eastern Berlin and Eastern Zone, would call your attention to fact that uncompensated drain from Western Berlin paid for e.g. with existing Soviet West Mark holdings could be held in check only by such administrative controls as direct distribution of rationed goods and allocation of manufactured goods at the source (i.e., supervision of deliveries by individual factories).

We are also concerned that the military government authorities retain adequate de facto control over the volume and nature of trade taking place not only to protect against undesirable exports (list 1A and 1B) but also to ensure that trade aids and does not inhibit Trizone recovery and Trizone contribution to European recovery. It appears to us that these objectives should be kept in mind in establishing trade arrangements (refer WARX 886494). Some central supervision will [Page 776] be needed with respect to the type and quantity of goods exported. This would be presumably coordinated with payment procedure perhaps as outlined by the Germans (USPolAd tel 709 May 12).
It is assumed that you have reexamined the Soviet’s proposal as amended in discussions in light of WARX 88649. Following comments on these proposals may be of assistance to you in further clarification of our thinking. Numbers referred to paras. amended proposal refer CC 8599.
Is it not dangerous to agree to bring into force again any portion of the 1948 agreement? See WARX 88649.
Unless payment already made to West suppliers new sales and payment conditions will have to be agreed in view of currency changeover and very much changed circumstances.
Would it not be better to invite the German economic authorities to authorize German organizations and firms, etc., rather than to invite them to give instructions. We have no desire to enter into commitments on deliveries to Soviet Zone. In addition, don’t we need confirmation that supplier on our side still desires to supply as well as confirmation that Soviet Zone buyer still wishes to buy?
We assume in case of restitution this covers only adjudicated Soviet claims from which 1A and 1B items, Baltic property, etc., have been excluded.
This para seems to us dangerous from a number of viewpoints and inconsistent with our position on payments. Can it not be dropped?
Would be unnecessary if Berlin Agreement is not brought into force again, even partially.”

  1. Repeated to Paris for Jessup and Caffery as 1643, to London for Douglas as 1703.
  2. Ante, p. 766.
  3. Ante, p. 754.
  4. Ante, p. 769.