Foreign Relations of the United States, 1950, Central and Eastern Europe; The Soviet Union, Volume IV

462A.62B31/2–2350: Telegram

The Secretary of State to the Office of the United States High Commissioner for Germany, at Frankfort

top secret

Washington, February 23, 1950—7 p. m.

1206. Urtel 1376 Feb 15 rptd Berlin 73¹ Pleased to learn of establishment PEP. This group shld be of great assistance in according Berlin Sov Zone and Sov relations in Ger continuing attention at high level which they deserve. Also welcome it as forum within which urgent questions in these fields can be discussed and conclusions formulated with minimum of delay. Latter point is particularly important in view necessity for flexibility and speedy counter action to Sov moves.

Appreciate your analysis and recommendations re traffic slowdown. We are however increasingly concerned at seriousness Berlin situation as result effects of transport restrictions which have been continuing for over a month. It seems clear that these have had effect we anticipated of weakening already precarious confidence of Berlin and particularly West Ger businessmen, with regard to investment and placing orders in Berlin. Without adequate investment and current sales to West virtually all our previous efforts to save Berlin and raise its economic level will be wasted. US has great deal committed in Berlin and cannot afford to see it slip away as result present Sov methods after our successful combatting of 1948–49 blockade. Gers can not be expected regain confidence unless they see that Western Powers and above all US act strongly to counter Sov actions. There seems to be much Ger and substantial American domestic criticism of our failure to do so.

At same time reports received here indicate that West Ger steel embargo is only partial, that Ruhr industrialists are applying pressure to have even limited embargo lifted and that it is already being stated that embargo will be lifted by Mar 15. Yet Sovs have done practically nothing to make up their trade deficit or lift their transport restrictions.

In reviewing this whole problem, it seemed to us that we had not, as yet, embarked on a course of action that will have effect of quickly bringing pressure on the Soviets which might force them to give up their present harassing tactics. We have set forth below some suggestions to enable us to apply pressure. In our review it seemed to us that we should not attempt to dramatize whatever action we take so that it immediately takes on the character of specific retaliation for each move the Soviets might make. Rather, we have felt that we are in a position this time to use an old Soviet tactic of pointing to a specific agreement or document as the reason behind our moves, but we feel these moves should be taken as matter of course. To a large measure we have used the interzonal trade agreement² as a pivot on which to swing our entire plan of action, but our course of action, based solely on the interzonal trade agreement, can have no effect unless we provide for a physical action that will make trade agreement a useful point of departure. By this we mean that unless we can physically control the movement of goods to Sov zone, our efforts within the trade agreement will be largely ineffective. We feel that requiring the Soviets to keep within swings provided in trade agreement will, in view of present trade unbalance, justify an immediate embargo. This embargo, together with other points suggested below in our opinion will have effect of quietly drawing noose around Soviets in such manner as will make them hard put to find any basis for their usual statements of illegal action on our part. Within this framework we believe you should in agreement with your British and French colleagues pursue following course:

1. Upon further consideration we do not believe selective embargo covering broad categories of industrial and raw materials is desirable policy inasmuch as trade agreement obligates us to permit movement of specified quantities of such materials. On other hand agreement permits us to impose embargo on all exports when balance of trade exceeds stipulated swing. It also permits us to put embargoes on specific categories of goods if exports of such categories exceed quotas provided in trade agreement. If our understanding of present status of the trade agreement is correct, this would require general embargo on all goods immediately, i.e. complete cessation of issuance of Warenbegleitscheine

2. In line with our general concept outlined above of strictly adhering to trade agreement in order to prevent unbalance of trade or exceeding of swing arrangements we suggest that new procedure should be established immediately which would assure that export merchandise does not cross frontier to East unless, in addition to shipping note, exporter shows that BDL has earmarked funds necessary for payment of specific invoice. We believe this could be achieved by requiring exporter submit shipping note for registration with BDL after receiving approval of German Administration but before actually dispatching merchandise. BDL would certify funds earmarked if adequate balance available in trade account. This additional certification would not in our opinion constitute new restriction since trade agreement specifically stipulates that all commodity shipments go through clearing. Proposed procedure seems in line ideas expressed urtel Bonn 22 Feb 2.

3. Re controls on road and barge traffic, outlined reftel paras a, b, and c, recommend you set up appropriate machinery including border check points at once and bring implementation of controls and imposing of embargo in line with trade agreement. System of E–W trade controls which we understand Fed Govt is about to put into effect, shld be integrated into your check point control system.

4. We concur in plan to check arrival of cargoes in West Berlin.

In your approaches to Brit and Fr Hicoms it is recommended that you concentrate purely on trade agreement and necessity of living up to its terms. You can stress that this Govt cannot go on pouring money into West Ger while valuable goods are leaking out to the East without payment. Moreover West Ger economy itself is suffering though extent of damage has thus far been largely concealed through failure to adopt proper control, checking of shipments and adequate accounting procedures. Measures outlined above will simply bring all trade under trade agreement and enable West Ger to be constantly aware of where it stands. At present its losses appear to have been so great that complete moratorium on deliveries is only means of recouping. This is merely sound business practice when there is no other way to compel payment by a consignee. Brit and Fr cannot legitimately object to enforcement trade agreement which they have approved.

We are prepared to approach Brit and Fr govts to press for agreement on these policies if required.³

Acheson

1. Not printed, but see footnote 3, p. 825.
2. Presumably this reference is to the 1948 Trade Agreement between Bizone and the Soviet Zone, dated November 25, 1947, which was abrogated by the Berlin blockade and subsequently revived in the Berlin negotiations following the lifting of the blockade in May 1949. An extract from the agreement is printed in Germany, 1947–1949: The Story in Documents (Washington, Government Printing Office, 1950), pp. 483 ff.
3. The source text was initialed by Secretary Acheson.