Department of Defense Files

The Acing United States Military Governor for Germany (Hays) to the Military Attaché in France (O’Hare)

top secret
operational immediate

CC 8694. For Dorr and Magruder info Dept of Army for Voorhees Washington D.C. from Wilkinson. Quadripartite meeting held at OMGUS 1500 hours 24th May to discuss tentatively agreed clearing account arrangement prepared at 20th May meeting. British had received instructions to stall because of London’s fear that clearing arrangement proposed would constitute de facto recognition of principle of parity between East and West marks. OMGUS was sent instructions in WX 890771 (info to you) to support British to extent feasible.

This poses difficult problem since we had been in such good general agreement on 20th May that there could be no very good reason for stalling. On other hand, to come out flatly for recognition of Deutsche mark as currency to be used for all accounting and invoicing purposes would be entirely unacceptable to Soviets and if insisted upon would break up meeting with charges of bad faith directed at us. We finally agreed British would be called on to speak first; since they had expressed “reserve” at last meeting. British opened by pointing out that at previous meetings all delegations had agreed no rate of exchange could be established since this would prejudice CFM consideration. They felt draft of 20th May was ingenious effort evade this problem, but that it had not succeeded, and that 1-to-1 rate of exchange was inherent in language of draft. They had therefore studied minimum modifications required in 20th May draft to eliminate implicit rate of exchange. Problem revolved about level of prices, which it was understood would be that of West zones; and therefore to get away from rate of exchange, they, considered, all invoices should be expressed not merely in West zone prices but in actual West mark.

Russian immediately answered that this entirely unacceptable. They have always insisted that both East and West currencies are equal. We have 2 currencies, therefore any agreement must take account of these 2 currencies. He did not agree that the 20th May draft established a rate of exchange, but merely a balance of goods and considered that it offered real chance to get trade moving.

[Page 794]

French said they had considered draft acceptable, and that it did not prejudice decisions of CFM. Suggested possibility of special account in neutral money of account. US recognized logic of British argument, and asked whether others prepared explore possibility of using third currency. British willing to consider, and reverted to possibility of accounting in “marks” without East or West designation. (This had been our original concept from which finance experts deviated in completing 20th May draft.)

Soviet argued this would merely confuse the issue and was unnecessary. It should be clearly apparent to everyone that the settlement was essentially in goods, priced at West zone levels, and that no rate of exchange was involved. They agreed to include statement that “nothing in this agreement shall be construed as establishing a rate of exchange between East marks and West marks,” and this was accepted by all. Finally, British and Soviets undertook to review their positions Overnight to see whether one could accept “mark” accounting or other could drop objection to accounts being kept in 2 currencies.

US objected to wording of Paragraph 5 on grounds it might imply MG was agreeing that it would be obligatory to fulfill old contracts at old prices. Soviets stated there was no such intent, but agreed to consider new wording which would make it clear that decision as to whether old or new prices were to be used was to be made by Germans.

Soviets then asked whether if we met tomorrow we would bring up new points, and we all agreed that if we could find satisfactory answer to points discussed today, the clearing account was in order. Soviets then asked if we would be prepared sign clearing agreement tomorrow. British and US replied that clearing agreement was only 1 of several points still outstanding in connection restoration of trade, and could not be approved except as part of general agreement. We still had to resolve the dispute over the continued validity of the 48 trade agreement, the language of Paragraph 5 of the Soviet proposal (see CC 85992), and a satisfactory method of handling the documentation of goods into and out of Berlin must be found. We therefore urged Soviets to come to tomorrow’s meeting prepared to deal finally with these open problems.

British stated that if all round agreement reached, it would be signed in form of agreed minutes and sent to German trade authorities of both East and West zones as basis on which interzonal trade would be re-established. Soviets concurred.

We meet tomorrow at French Headquarters at 1530.

My personal impression is that British have gone considerably beyond the instructions given them by London, but I feel they are [Page 795] quite right in their views and that if they obtain the points they have asked, there need be no fear that a rate of exchange has been established by implication.

Following is text of draft clearing agreement of 20th May:

“Interim agreement regarding method of settlement for trading Operations between Western and Eastern zones of Germany, including special conditions for Berlin.

For the settlement of accounts with respect to the trade between the Western and Eastern zones of Germany, 2 accounts shall be opened, namely, an account of the Deutsche Noten Bank with the Bank Deutscher Laender in Deutsche marks, and an account of the Bank Deutscher Laender with the Deutsche Noten Bank in East marks.
The bank of the exporting zone will charge the account of the bank of the importing zone on the basis of evidence that the goods have passed the border and on the basis of invoices accompanying the goods.
Payments by the bank in the exporting zone will take place on receipt of confirmation from the bank of the importing zone that the importer has accepted the goods. Any necessary adjustment in the amount originally entered to the account will be effected by mutual agreement.
The balance of an account shall not exceed 10 million marks. Balancing of the liabilities of the 2 banks will be made at the end of each calendar month or at any time when the balance of either account reaches the limit of 10 million marks.
Accounting between seller and buyer takes place on the basis of prices, which may be either previously agreed or will be newly agreed between the seller and the buyer.
Special accounting conditions for Berlin:
  • Settlement of accounts for trade between the Western sectors and the East Sector, between the Western sectors and the East Zone, and between the East Sector and the Western zone will take place on the basis of accounts to be opened, i.e., (1) an account of the Berlin Stadtkontor (Kurstrasse) with the Berliner Zentral Bank (Charlottenburg), and (2) an account of the Berliner Zentral Bank (Charlottenburg) with the Berlin Stadtkontor (Kurstrasse).
  • Accounting for shipments to the West Sectors from the East Sector and East Zone, and to the Western Zones from the East Sector, will take place over the account of the Berliner Zentral Bank (Charlottenburg) with the Berlin Stadtkontor (Kurstrasse), and accounting for shipments to the East Sector from the Western Sectors and Western Zones, and to the East Zone from the West Sectors, will take place over the account of the Berlin Stadtkontor (Kurstrasse) with the Berliner Zentral Bank (Charlottenburg) in the manner already set forth above.
  • Balancing of the liabilities on these two accounts will be made on the 25th day of each calendar month, or at any time when such a balancing is made necessary by the limit to which reference [Page 796] is made above. The resulting net liability, if any, coming from this balancing, if the liability is that of the Berliner Zentral Bank (Charlottenburg), will be transferred to the account of the Bank Deutscher Laender with the Deutsche Noten Bank, or if the liability is that of the Berlin Stadtkontor (Kurstrasse), will be transferred to the account of the Deutsche Noten Bank with the Bank Deutscher Laender.
This interim agreement will remain in force for six months, unless sooner terminated as a result of decisions of CFM.
If this agreement terminates without being replaced by any other agreement, a net balance due shall be established, and this net balance shall be covered within a period of 30 days by shipment of goods.”

[ Hays ]
  1. Not printed.
  2. Ante, p. 766.