Foreign Relations of the United States, 1951, European Security and the German Question, Volume III, Part 1

740.5/9–2451: Telegram

The Acting United States Deputy Representative on the North Atlantic Council (Van Dusen) to the Secretary of State ¹

secret
priority

London, September 24, 1951—11 a. m.

Depto 374. 1. To implement Ottawa agreement on sharing cost of second-slice infrastructure (D–D(51)248),² USDep urgently requires instrs concerning payments procedures acceptable to US.

2. Procedure which seemed to us simplest and best suited to US objectives was to determine payments due from each participant by applying agreed percentage shares of each participant to appropriately certified bills presented by each host government as work progresses. This procedure could include a stipulation that once the respective payment due from each participant to each host government had been determined in this way, the actual form of compensation shld be agreed bilaterally between the claimant and contributing govts. If necessary, the arrangement might make provision not only for certification of bills by the host govt, but also for gen review of progress and investigation of unduly high costs by SHAPE.

3. Procedure outlined para 2 above wld permit host govts to continue infrastructure work without requiring immed establishment of new fiscal arrangements for SHAPE budgeting, auditing, or disbursement of infrastructure funds or direct supervision of execution of contracts. Para 2 arrangement also adaptable to our instructions that actual form of compensation shld be left open for bilateral agreement between host and contributing govts. Realize latter consideration may not be meaningful in practice, however, since we believe ail host govts will insist that payments from US be in dollars.

4. From Washington conversations with Def Dept reps we judge para 2 procedure will not meet US fiscal necessities and that payment into fund to be administered by SHAPE or other NATO agency will be necessary. As a basis for formulating US position for infrastructure committee, we have urgent need of instructions for US proposal. Principal questions relate to SHAPE’s or other agency’s responsibilities. Shld these include:

(a) Direct supervision of execution of contracts;

(b) Budgeting of infrastructure funds;

(c) Auditing and certification of bills; and

(d) Custody of infrastructure funds and disbursement to agencies executing infrastructure work (whether these be contractors or executing govts). In general, we are inclined to favor confining SHAPE (or other agency) functions to (b), (c), and (d) at most. We believe even these would probably involve need for immediate substantial increase in SHAPE budget and fiscal staff since even present estimate of second-slice infrastructure program ($224 million ex land and utilities) more than ten times present SHAPE budget.

5. Suggest Defense Dept consider sending here expert versed in fiscal procedures to assist in negotiations.³

Van Dusen

1. Repeated to Paris for OSR, MacArthur, and Schuyler.
2. The text of this document, which was approved by the Council Deputies at Ottawa, is contained in telegram 1713 to Paris, September 20, p. 281.
3. In telegram Todep 214 to London, October 4, the Department of State advised Spofford that this telegram was receiving urgent consideration and that he would be informed of its position as soon as possible (740.5/10–451).