Department of Defense Files

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

top secret

CC 8824. From Wilkinson for Magruder and Dorr. Info Dept of the Army for Voorhees. This is MFC 14. Seven and one half hour quadripartite meeting held at Karlshorst, discussing transport matters, with much spirited argument, general good will, and no progress whatever.

[Page 805]

Soviets displayed attitude of high school debaters, who found argument intellectually stimulating but had no interest whatever in reconciling opposed points of view.

First point discussed was our No. 9, dealing with documents of IWT craft.1 Soviets insist that present procedures, which require submission of full crew list before issuance of certificate to barge, are same as prevailed on 1 March 48. Actually, on 1 March 48, they issued barge certificates on submission of crew list, which showed only name of captain, and permitted Western zones to fill in names of crew when recruited. Soviets claim that as special favor they had allowed documentation of some 50 barges to be approved prior to 1 March 48 without presentation of full crew list, but that accepted and normal procedure required SMA approval of complete crew list before issuance of barge certificate. Soviets argued that we were laboring an invalid technicality and that actually we had no right to claim that any restrictions had been imposed, since they had already issued new certificates for 373 barges with capacity of 151, 000 tons, and that barge traffic was now moving at greater rate than before blockade.

We insisted that Soviet requirements that (a) New certificates be obtained, (b) Complete crew list be submitted, and (c) Delay in issuing new certificates, all constituted new restrictions on transport between Western zones and Berlin.

Having reached no meeting of the minds on this point, we reverted to paragraphs 1, 2, and 3 of our demands, dealing with documentation of shipments to and from Berlin. Soviet Transport Chief obviously had very close instructions on these issues and stated that, by Soviet Commander-in-Chief’s instructions, all restrictions imposed since 1 March 48 had been lifted, that this obviously meant that restrictions on documentation had been lifted, and that as far as transport was concerned, he could certify that all goods documented as of 1 March 48 were being permitted to cross the interzonal frontier. Soviet representative therefore saw no need of including our stipulations in any current agreement. We stated that we needed assurance as to terms on which documentation would be handled and goods allowed to cross the interzonal border in the future, that we had foreseen lack of competence of transport expert to give us assurances on these points, and that we would therefore raise them again in course of next discussions with Soviet Interzonal Trade Officials.

Soviets then insisted upon discussing transport problems which they claimed constituted restrictions imposed by Western powers, and made [Page 806] particular reference to need for uniform shipping documents, uniform rates, and method of settling transport accounts. They took position that 40 C/O [%?] increase in freight rates in Western zones in itself constituted a restriction on interzonal trade, since it increased cost of Western zone goods to Eastern zone buyer and made it impossible for buyer to calculate true freight rate applicable to goods passing from Western to Eastern zone. We pointed out that all of problems cited arose from existence of two currencies and that it had been understood in the course of New York conversations2 that commitments to lift restrictions would naturally have to take into account necessity of making arrangement to deal with dual currency situation.

We emphasized that in interzonal trade talks, Soviets had readily accepted fact that Western zone prices were higher and would have to be met, due to increases in cost of raw materials, labor, plant maintenance, etc. It therefore did not seem reasonable to claim that increase in cost of Western zone goods caused by higher freight rates should be considered a restriction, when it was recognized that higher costs generally were to be expected and were not objectionable. Soviets responded that they were transport people and could only consider the transport angle, and that from their standpoint we had imposed new restrictions.

On uniform documentations which Soviets intended to mean uniform tariffs applied to through shipments from point in Western zones to point in Eastern zone, we stated that it was not possible to apply a single rate when two currencies were involved. They then accused us of charging high short-haul rate on portion of travel within Western zones instead of low long-haul rate which had previously applied to shipments from point of origin in Western zones to point of destination in Eastern zone. We immediately stated we were prepared to apply low long-haul charge for movement within our own zones, i.e., on shipments from Hamburg through border crossing point to Buchen to Leipzig, we would take distance from Hamburg to Leipzig, determine what rate for such length haul in Western zones would be, and apply such rate to distance between Hamburg and Buchen. Soviets did not consider that this gave them satisfaction and demanded that pre-blockade rates be applied for all interzonal shipments.

Soviets then raised point of real substance, which we must deal with. They stated that quite apart from interzonal shipments, they must be paid for shipments from Western zones to Berlin and that no provision [Page 807] had been made for such payment. Since there is no offsetting movement of goods to be paid by Soviets in Western marks, we must find some means of giving them satisfaction. We are considering this point and would welcome any suggestions from you.

We suggested joint meeting of transport and economic experts at any convenient time in next few days, to attempt to bring all competent authorities into same room, but Soviets insisted that transport problems were separate and could not advantageously be discussed with economic problems. We will write Soviet economic experts tomorrow, stating that transport meetings have been concluded without reaching any satisfactory decisions and that we will await notification from Soviets as to where and when they would like to have further meetings on points still undecided.

Judging from atmosphere in recent meetings, Soviets may be content to sit back and wait. Early eagerness to obtain agreement on interzonal trade seems to have faded. Prospects for agreement here on terms acceptable to us appear dim.

Following special intelligence report is considered sound and of value in appraising Soviets blockade intentions:

“On 30 April, reports indicated that the Russians were making the necessary organizational and railroad traffic arrangements to maintain control of the movement of goods into the Western sectors of Berlin, and that the Soviets would continue to be as adamant in regard to the inaccessibility of the Eastern zone to Western Germany as they had been in the past. Since then additional reports have been received that tend to confirm our original estimate of the Soviet’s intentions.

“Major General Tulpanov, Chief of the Information Division of the SMA, at a meeting of East Zone Land Ministers President in Dresden on 6 May, stressed the need of taking the utmost advantage of the lifting of the counter-blockade in case of re-imposition later if the Foreign Ministers’ conference took an unfavorable turn. Maximum road and rail transport were to be ready by May 12, and lists of urgent demands of materials wanted from the West were to be in the hands of Rau, First Chairman of the German Economic Commission, by May 9. Heavy industries, particularly mining, were to have precedence.

“A meeting of the department heads in the German Economic Commission and German Trade Company (Deutsche Handelsgesellschaft) held on May 15 was told by Makower, Deputy Head of the Department of Interzonal and Foreign Trade, that the blockade was being raised largely because of bottle-necks in the Eastern zone economy. The Eastern zone intended to contract for imports on both a barter and purchase basis from the Western zones and Western countries, which would be designed to cover speedily not only shortages of the Eastern zone but also certain priority requirements of Poland and Czechoslovakia. Makower is further reported to have stated that when the deficiencies have been overcome the blockade would be re-imposed, provided that Berlin has not entirely fallen by the autumn.”

[Page 808]

Negative report on new restrictions and strike.

Last of this material this date.

[ Hays ]
  1. The reference here is to point nine of the agreed Western paper on the removal by the Soviet Military Administration of restrictions on transport, trade, and communications, transmitted in FMPC 1070, supra. The numbered paragraph references elsewhere in this cable also refer to this paper.
  2. For documentation relating to the conversations in New York between Ambassador Jessup and the Soviet representative to the United Nations, Yakov Malik, during the spring of 1949, see pp. 694 ff.