167. Paper Prepared by the Operations Coordinating Board1


(Policy Approved by the President—January 25, 1954)

(Period of Report: From December 1, 1954 through July 31, 1955)

Paragraph 8c: “Support all feasible measures, including limited economic aid, to bolster morale and economy of the city and reduce unemployment.”

ICA. Negotiations between the Embassy in Bonn and the Federal Republic with regard to the $23.7 million appropriated for Berlin (FY 1955) under the Mutual Security Act of 1954 were completed in March 1955, with the result that DM 89 million was obligated to the General Capital Development Program (regular long-term investment loans, risk investment, and loan guarantees), and DM 50 million was assigned to the Joint Reconstruction Program (mostly from counterpart repayments). In addition, a $200,000 technical exchange program, [Page 391] to increase productivity and including projects looking to establishment of a business school in Berlin, was authorized. For its part, the Federal Republic agreed to undertake certain additional measures of support for Berlin. Thus, during FY 1955 there were available for allocation to projects or end-users about DM 340 million, consisting of about DM 202 million of the funds of previous years and about DM 139 million of new aid and post-Zablocki re-flows. During this period about DM 140 million will have been allocated to projects or end-users in conjunction with the long-term loan, risk investment, working capital loan, orders financing, and reconstruction programs.

By the end of June 1955 unemployment in West Berlin had declined to about 140,000 out of a working force of nearly 1 million. This figure can be compared with 194,000 unemployed at the end of June 1954. The index of industrial production was 92 (1936=100) by the end of June 1955, a level 16 points above June 1954.

It is estimated that only about 60–90,000 of those unemployed are, in fact, employable under present conditions and that approximately half of the employables are unskilled and older white collar workers. Since unemployment is still a problem in West Berlin, it is becoming increasingly evident that strenuous efforts will need to be made to attract entrepreneurs with associated management and technical personnel to West Berlin, which combined with relatively abundant supplies of capital can bring about desired increases in employment opportunities.

In order to maintain the current rate of economic recovery in Berlin, the Executive Branch requested $21 million in new funds under Mutual Security funds for FY 1956. Of this total, $15 million would be earmarked for private and public investment programs and reconstruction projects; $5 million for East Zone projects; and $1 million for technical exchange for Berlin–FedRep, and Austria.

Paragraph 8d: “Continue to provide funds for special projects designed to influence the people of the Soviet Zone and Sector, such as the food program in the summer of 1953.”

1) Youth rallies, scholarships, and interzonal travel.

State: [less than 1 line of source text not declassified] State arranged with German agencies to apply small unutilized balances of the 1953 food and medical relief program for the support of youth rallies, scholarships, promotion of interzonal travel, etc. This was in accord with and supplementary to the $3 million program of this nature approved in June 1954. While the U.S. contribution to the food-package program ended in January, with the exception of packets for the families of the politically persecuted, the remaining funds from the original $15 million food program authorization are providing medical assistance [Page 392] for needy East Zoners. (The OCB has also authorized alternative use of these funds for the June 1954 projects.) Procedural problems under the $3 million program authorized June 1954 were fully worked out with the Kaiser Ministry3 in Bonn early in 1955, and a wide variety of action is now underway. Some phases of the program have moved faster than others, for example, funds for the youth and adult contact programs were completely exhausted at the outset of June, while return travel funds have moved somewhat slower than anticipated. The Executive Branch has not requested a sum of $5 million for further assistance to projects during FY 1956 to continue youth and adult programs and return travel. It is anticipated that new programs for the support of church activities and sponsoring the procurement of publications for the East Zone will be established.

[3 paragraphs (6 lines of source text) not declassified]

2) West Berlin community reconstruction “Spring Plan” project.

State and ICA—Agreed to allocate DM 25 million to help the FedRep finance during the next two fiscal years the West Berlin Spring Plan, an extensive DM 75 million community reconstruction project to be located near the Soviet Sector border. The project will provide three thousand additional dwelling units and related facilities to meet the city’s critical housing needs for both bombed-out and refugee families.

3) Berlin Conference Hall (participation in West Berlin Building Exhibition in 1957).

State—Developed the program for construction of a Conference Hall in connection with the International Building Exhibition in Berlin in 1957. This project was approved by the OCB on May 25, 1955, and the building when completed will stand as a permanent contribution to the life of Berlin.

ICA—After OCB agreed to the allocation of $1 million from the Berlin aid appropriation for 1956, arrangements were made for the allocation by the FedRep of DM 9 million from counterpart repayments, thereby meeting the estimated $3 million cost of the project.

Paragraph 8e: “Review the present stockpile program in the light of the likelihood that, in the event of a new blockade, the Allies would resort to an airlift only as a supplement to other more positive measures.”

(See Paragraph “8i–(4)”.)

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Paragraph 8f: “Continue to exploit the unrivaled propaganda advantages.”

USIA. During the reporting period the falsity of the Soviet claims to a free election in their zone were pointed out. Before the West Berlin elections on December 5th, United States information media stressed the freedom of elections and the multiplicity of candidates in West Berlin as opposed to tactics followed in the East Zone. It was pointed out that the Communist Party was allowed freely to participate in the elections, that the Communist Party had all the privileges of the Western Parties, free to hold meetings, distribute pamphlets, etc., and that police protection was provided. The Communist vote was 2.7% of over a million ballots.

In order to overcome the depressing effects of the Albion Ross story in the New York Times on the morale of West Berliners, United States information media made available to the domestic and international press factual information on the economic recovery of West Berlin, thereby alleviating the bad effect of the story.

[2 paragraphs (2 lines of source text) not declassified]

Paragraph 8h: “Seek to persuade the UK and France to adopt the U.S. policy on Berlin and seek to widen the areas of agreement with regard to future plans and emergency measures.”

State. Discussions with the British and French to persuade them to agree with our Berlin policy were first postponed pending ratification of the EDC and again pending negotiation and ratification of the Paris Agreements. An approach was approved following the deposit of ratification of the Paris Agreements.

On May 11 and May 12, 1955 this question was discussed with representatives of the British and French Embassies respectively.4 The question of the current autobahn tolls was used as a point of departure. It was explained that it was possible that Soviet harassment of Berlin might continue with the eventual initiation of a second blockade and it appeared prudent that consideration now be given to what action the Allies would have to take in the event that all retaliatory measures and diplomatic recourses produce no results. It was explained that in such a situation we felt that we would have to indicate to the Soviets our determination to remain in Berlin even if this should require possible use of some military force to test Soviet intentions. Consequently the Department considered that advance planning is in order.

The Embassy representatives were asked to refer the matter to their governments and if the governments agreed in principle we [Page 394] would then suggest that planning be initiated among the three Ambassadors and the three military Commanders in West Germany and the Commandants in Berlin.

The French and British representatives inquired whether we had any specific plans for military action in mind to which we responded that we had no specific ideas but wanted agreement in principle to planning such action.

The French and British Governments agreed to discussions in Bonn. They also asked for more information as to what we had in mind in reference to possible limited use of force.

The U.S. Ambassador (Bonn) was instructed on May 27, 19555 to initiate conversations with British and French Ambassadors, and that the three Allied Commanders in Germany and the Berlin Commandants should be included in the conversations when the Ambassadors deemed it appropriate. In preparation for such conversations the Embassy submitted to State for clearance a modified version of the “Statement of Policy” section of NSC 5404/1.6 The most important modification was the deletion of reference to possibility of unilateral U.S. action.

Defense. A definition of “limited military force,”7 as envisaged in pertinent sections of NSC 5404, was furnished by the Deaprtment of Defense and has been transmitted to the Embassy at Bonn for its use during the discussion. However, the paper is not to be given the British and French. Defense instructed USCINCEUR on May 26, 1955 to proceed with tripartite military planning in accordance with JCS directive, which precluded raising with the British and French proposals calling for use of limited military force in response to Soviet provocation short of armed attack.

Paragraph 8i: “Perfect plans and practicable preparatory measures for future contingencies.”

“(1) Possible retaliatory measures and the means of quickly concerting action against specific local harassments.”

(See paragraph 9 below.)

“(2) Conditions affecting security and necessary remedial measures.”

Defense—Unilateral plans have been prepared in support of the military aspects of NSC 5404/1.

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“(3) German Federal Republic financial and other support for Berlin.”

ICA. The increased FedRep aid to Berlin reflected State and ICA negotiations with the FedRep through the Embassy. Net FedRep support to West Berlin has been given at the rate of about DM 1,200 million ($300 million). In addition the FedRep has formally ratified an agreement which will reduce corporate and personal income taxes in West Berlin by about 20% below the levels prevailing in West Germany. During a visit to West Berlin in June 1955, the German Chancellor, Dr. Adenauer, reiterated his Government’s position that it would continue to provide generous support to West Berlin to cover its requirements for continuing economic growth and development.

“(4) Condition of the stockpile and equipment held in reserve for emergencies.”

State—In connection with the most recent stockpile review, State and ICA concurred in the recommendation of the U.S. Embassy in Bonn that the Berlin Senat’s proposal that certain raw material shopping lists be reduced by DM 13.4 million and that an increase in other sectors of the raw materials shopping lists amounting to about DM 6 million be approved. This action was requested to take into account changes in consumption patterns since establishment of the original targets and in recognition of the difficulties in storing and maintaining certain commodities. The stockpile was maintained at levels averaging seven to twelve months’ supply for different categories. Funds held in liquid form in the stockpile account amount to approximately DM 53 million.

“(5) Plans for increased use of air transport in case of partial blockade.”

No developments.

“(6) Improvement of relations with the local authorities, in keeping with the new relationship to the Federal Government which the Allies will have under the Bonn Conventions subject to essential Allied security requirements.”

State—The Department of State approved the action on May 5, 1955 of the Allied Kommandatura in putting into effect, as an interim measure, the old declaration on Allied–Berlin relationship, drawn up in 1952,8 pending receipt of Berlin views on the new Allied-Berlin relationship called for by the Three Foreign Ministers in October 1954.9 Berlin authorities concurred on the understanding that [Page 396] this would in no way prejudice consultations for a revision of relationships.

Paragraph 9: “If the Soviets or East Germans impose, or threaten imminently to impose, a blockade, or increase harassment to the point of seriously impeding Western access to Berlin, the United States should consult with its Allies and be prepared to:

  • “a. Make a determined effort in Berlin to end the restrictions by vigorous protests from Allied Commanders to the Soviet Commander.
  • “b. Instruct the U.S. Ambassador in Moscow to join with the U.K. and France in presenting an agreed declaration stating their intention to use force if necessary and the risk to world peace occasioned by the Soviet action in Berlin. If the U.K. and France cannot agree to such a declaration, the U.S. should then consider making a unilateral declaration.
  • “c. Continue to hold the Soviet Union responsible for any Communist action against the Western position in Berlin whether the action is taken by the Soviets or by East Germans or other satellites.
  • “d. In the meantime, make use at an accelerated rate of the means of access remaining open, in order to provide an opportunity to gain support of our Allies and world opinion… .”10

[Here follows a detailed review of the Berlin Autobahn situation starting in April.]

  1. Source: Department of State, OCB Files: Lot 61 D 385, Germany. Top Secret. Attached to the source text was a covering memorandum, dated August 26, which stated that the paper had been prepared in connection with a progress report by the Operations Coordinating Board from reports submitted by the Departments of State and Defense, the CIA, USIA, and ICA. A copy of the progress report, dated September 14, which is less detailed than this paper, is ibid.,S/SNSC Files: Lot 63 D 351, NSC 5404 Series.
  2. See Foreign Relations,, 1952–1954, vol. VII, Part 2, p. 1390.
  3. Ministry for Matters Concerning Germany As a Whole.
  4. No record of these meetings has been found in Department of State files.
  5. Transmitted in telegram 3336 to Bonn, April 27. (Department of State, Central Files, 762.0221/5–2755)
  6. Not found in Department of State files.
  7. See Document 163.
  8. See Document 154.
  9. For text of the Allied statement, dated October 23, 1954, see Foreign Relations,, 1952–1954, vol. V, p. 1539.
  10. Ellipsis in the source text.