Department of Defense Files

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

top secret

FMPC 1070. For Dorr and Magruder info CSUSA for Voorhees. This is MFC 7. Quadripartite meeting lasting five hours on trade held at French Hq 1330 hours 30th May. Discussed elimination of reference to East and West marks and rewording of “safeguarding clause” to read “nothing in this agreement, shall be construed as establishing parity or a rate of exchange between East marks and West marks.”1 This wording was agreed by British and US as achieving objective of our instructions while avoiding giving unnecessary offense to Soviets.

Prolonged debate occurred over para 5 clearing agreement (see CC 86942) with Soviets willing accept our rewording “accounting between seller and buyer takes place on the basis of prices, which may be either as previously agreed or as newly agreed, whichever the seller and buyer may determine,” provided, we added “in the case of goods fully or more than fifty percent paid for, there should be no change in the price of the contract.” We were willing to take this as a statement of principle, which we explained we could in no way enforce, minus “or more than fifty percent,” and explained that the conditions governing each contract were so variable that it would be impossible to prejudge, even in principle, whether the old or a new price should apply, if full payment had not been made.

British had been authorized to drop insistence on inclusion of statement that invoicing should be done in West marks, and since we had been informed by Murphy that we might follow British lead, this point was not stressed by either of us.

Soviets then demanded to know whether, if we reconciled our points of view on above differences, we could sign clearing agreement. We reiterated statement made in last meeting that clearing agreement only one part of general problem which must be solved as a whole. Soviets asked what further issues we had in mind, and US Delegate presented [Page 802] following paper which had been agreed with UK and French: “Minutes relating to the removal by the SMA of restrictions on transport, trade and communications.

  • “1. Goods consigned to the Western-sectors of Berlin from the Western zones will require only interzonal trade permits (Warenbegleitscheine) from the appropriate authorities of the Western zones, or in the case of occupation traffic, military warrant or such other documentation as may be established by the Western authorities concerned.
  • “2. Goods consigned to the Western zones from the Western sectors of Berlin will require only an interzonal trade permit (Warenbegleitschein) from the magistrat in the Western sectors, or in case of allied freight, the normal documentation of the allied authorities of the Western sectors.
  • “3. The documentation provided in accordance, with paras 1 and 2 shall be accepted by the competent Soviet zone authorities at all border crossing points between the Soviet zone and the US/UK zones and between the Soviet zone and the Western sectors of Berlin as full authorization for the free passage of the goods so documented.
  • “4. Bail traffic to and from Berlin may pass the Soviet zone border at Helmstedt, Buchen, Oebisfelde, Hof and Probstzella as was the case, before 1st March 48, and at such other points as may become available.
  • “5. In accordance with practice; prevailing before 1st March 48, the number of allied military and Kommandatura trains to Berlin, which may pass daily through the Soviet zone over the above crossing points, shall be not less than 25, of which.5 will be accommodated on passenger schedules. These trains are in addition to normal German commercial rail traffic between the Western zones and Berlin, which is not limited.
  • “6. The Western occupying powers shall be responsible for the provision of locomotives and crews to haul the trains for allied and occupational traffic through the Soviet zone. Locomotives and crews of the Soviet zone will not be used for this purpose.
  • “7. The directions of the Western occupying powers to the Reichsbahn regarding the handling of their rail traffic within the Western sectors shall be given directly to the Reichsbahn and not through intermediaries of the SMA or other authority, and shall be carried out by the Reichsbahn.
  • “8. Railway wagons requested by shippers of Western sectors of Berlin for outgoing shipment of goods to the Western zones shall be provided to the shippers immediately and in any case within 24 hours after submission of request to Reichsbahn.
  • “9. Certificates authorizing the operation in the Soviet zone IWT craft from the Western zones shall be issued on the same basis as on 1st March 48. The submission of crew lists in connection with the issuance of such certificates is therefore not necessary. Applications for such certificates shall be finally acted upon by the Soviet authorities within seven days of their submission to the Soviet authorities. All waterways in the Soviet zone will be open to IWT craft carrying these documents.
  • “10. The above arrangements are subject to modifications arising from decisions of the CFM.”

British asked broadening of para 7 of clearing agreement and after some discussion it was agreed to insert “amended or” before “terminated.”

Soviets were obviously taken aback and argued strongly that we were arbitrarily injecting new points which had nothing to do with interzonal trade, merely to confuse the main issue of restoring trade. UK Delegate then spoke at length including in his remarks substance of following previously prepared statement:

“British representatives wish to make it clear that the removal without conditions of restrictions on transport, trade and communications in accordance with the New York agreement3 is a necessary pre-condition of any agreement relating to the basis of interzonal trade (including interzonal trade settlements), and in particular they consider it necessary to have an assurance in respect of the arrangements provided for in the draft which has been circulated.

Questions of road traffic have been under discussion in correspondence between the British Chief of Staff and Deputy Military Governor and General Dratvin. The British representatives therefore wish it to be recorded that in respect of road traffic, the Autobahn Helmstedt-Berlin and all other highways will be available as before 1st March 1948.”

After more argument, French Delegate stated that New York agreement called for lifting of both blockade and counter-blockade restrictions, that two were inseparable, and that Soviets were ingenuous to believe we would meet all their points unless we were satisfied on our own. Soviet protested that more tonnage than ever before had been moving into Berlin since end of blockade and that we must admit we were better off than before blockade, whereas they were receiving nothing but a trickle in trade from Western zones which proved we had really not lifted restrictions. In any case, points raised by US were for decision by other and higher authority. US, British and French at once stated they were competent to deal with these questions.

Soviets then suggested we skip this list for present and examine our differences on their amended proposals (see CC 85994). It soon developed neither side had changed their attitude as to whether 1948 agreement was still in force, and after hearing anew all the old Soviet contentions we adjourned until noon Thursday at which time Soviets are to be prepared to discuss (1) clearing agreement (2) Soviet amended proposals (3) US ten points on transport.

[Page 804]

Soviets very irritated at inability to argue or force Western powers into giving them immediate satisfaction on interzonal trade. They have so long been used to having their own way by vetoing quadripartite agreements that they seem perplexed at difficulties besetting them when they want something positive and we won’t give way except on terms acceptable to us. Degree of frustration they showed in this meeting would in past usually have resulted in anger and breaking off negotiations, but they quite meekly agreed to continue discussions Thursday.

Reur CFM 38,5 we fully understand instructions not to sign anything until after clearance with and specific authorization from you.

Interesting isolated restriction confirmed today British zone barge, loaded with grain and other cargo, all properly documented with Warenbegleitscheine, was stopped at Soviet zone border and turned back because it had aboard 15 tons of newsprint consigned to British sector newspaper “Teegraf” Soviet zone border guard stated this commodity could not pass without SMA authorization. There seems little doubt this was his own idea, and not an SMA order.

Report on strike situation sent you 30th May by US Political Adviser.6

We are all in Frankfurt for 31st May and 1st June. Request all messages be addressed here, info to Berlin, for these two days.

[ Hays ]
  1. The document under discussion by the four occupying powers is the Soviet proposal of May 14, transmitted in CC 8599, May 14, p. 766.
  2. Ante, p. 793.
  3. For the text of the communiqué” issued at New York on May 5, 1949, see editorial note, p. 750.
  4. Ante, p. 766.
  5. Not printed; in it Magruder reported that both Paris and Berlin felt serious embarrassment over the long suspension of the talks with the Soviet Union because of the internal differences within the British Government over the clearing agreement. Efforts were being made in Paris to get the British to resolve their differences and accept the American and French view with regard to the negotiations. (Department of Defense files)
  6. A reference to telegram 855, May 30, from Berlin, not printed (862.5045/5–3049). For documentation relating to the Berlin railroad strike, see pp. 840 ff.