Foreign Relations of the United States: Diplomatic Papers, 1945, European Advisory Commission, Austria, Germany, Volume III

740.00119 EW/11–2345: Telegram

The Secretary of State to the Ambassador in France (Caffery)

Washington, November 27, 1945—7 p.m.

5534. For Angell No. 54.

1. Dept approves your proposals re separate percentage shares for industrial capital equipment and remainder reparation category and re procedure on presentation to heads of delegations.

2. Reference allocation of merchant ships,⁵⁹ War Shipping Administration, acting on assumption ships were regarded war booty, previously unwilling to turn over to other Allies more than about 38 percent of its one third share in German merchant marine which, if British surrendered same percentage, would have given other Allies 25 percent share in total German fleet. If British agree to consider ships reparation, WSA now prepared to surrender claim to about 60 percent of U.S. share since this action would entitle U.S. to larger share in other reparation assets. While still insisting that British surrender some part of their one third share to other claimants WSA believes U.S. willingness to forego large proportion of its share would reduce size of contribution British would need to make to pool for other claimants and facilitate British acceptance of U.S. view ships should be considered reparation. WSA apprising British Ministry of Transport of these views. According to present plan WSA will reach agreement with British regarding percentage of U.S. and U.K. shares of merchant marine to be turned over to IARA for allocation. Understood that while IARA would not decide on portion German merchant marine to be retained by U.K. and U.S., value of ships so retained would be included in IARA reparation accounting.

3. Re valuation of ships for reparation, Tripartite Merchant Marine Commission in Berlin has adopted somewhat arbitrary method of valuation for purposes of three-way division on which Dept will supply information if desired. Dept believes this method of valuation may require modification for purposes of reparation accounting to ensure that ships are valued in same way as industrial capital equipment. Please discuss this point with Waley.

4. Reurtel 87, Nov. 25⁶⁰ and Dept’s 47, Nov. 27 [26],⁶¹ on labor reparation Dept fails to appreciate reasons for position that taking into account PW labor services would not necessitate change in French share. Question is one of equity as between reparation claimants enjoying fruits of PW rehabilitation labor and these claimants not enjoying such economic benefits. Fact that PW’s were not allocated to France on explicit understanding their services would be valued therefore regarded irrelevant. Contention PW labor should not be valued because surplus to needs of economy might be applied also to industrial capital equipment. Fact that you already made some reduction in French statistical share regarded irrelevant since statistical calculations could yield widely varying shares depending on weight given to each factor entering into calculation. Rough estimates made in Dept indicate French reaping benefits in form PW labor services out of all proportion to other claimants. If PW services are valued for one-half year at only one-third of gross annual wage for unskilled labor on basis 8-hour day, value of PW’s to France (800,000 PW’s) would be 230 million Reichsmarks, to U.S. (350,000 PW’s) 100 million, to U.K. (250,000 PW’s) 72 million and to all others (35,000 PW’s) 10 million. If France obtains additional PW allocations bringing total to 1,770,000 value of all PW services to France on above basis would reach 500 million Reichsmarks. Dept, while appreciating difficulty of your position, believes these or similar calculations would easily justify reduction of several percentage points in French share of remainder category and allocation of this to claimants other than three big powers. If you cannot get such reduction in French share of remainder category, Dept suggests you follow instructions in Dept’s 47. If French prove unyielding you may point out that they are dependent on U.S. authorities for additional PW allocations.

5. Impossible for you to enter into any agreement regarding terminal date for employment of PW’s. U.S. position must be agreed upon by State and War and then negotiated on quadripartite basis either in ACC or at intergovernmental level.

6. Regarding your proposal on restitution of rolling stock, Dept assumes your suggestion is that rolling stock declared by ACC surplus to needs of Germany’s minimum peacetime economy should be put in restitution pool like gold and distributed as restitution rather than reparation among claimant countries in accordance with their established losses of rolling stock. This proposal runs counter to instructions on which U.S. authorities in Germany are now acting and if approved by conference should be regarded as purely advisory to occupying powers.

7. With reference to war material susceptible of civilian use turned over to liberated countries under war booty agreements, Dept understands your experts are now in touch with CALA⁶² regarding accounting problems involved. Dept suggests you propose that value put on such material by IARA be included with value of German assets in countries in question, thus avoiding problems involved in establishing new subclass of reparation. If, however, you have already acted on proposal made by Dept in teletype conversation Nov. 24,⁶³ you may proceed on that basis.

8. Reurtel 73, Nov. 23,⁶⁴ following comment re draft on German external assets is in confirmation Surrey’s⁶⁵ teletype conversation:

“Pgh 1. and 2. Satisfactory.

“Pgh 3. Recommend inclusion words ‘subject to any agreements to be made between such countries or between IARA and such countries’ be placed after words ‘external assets within their respective jurisdictions’. Arrangements are being made for reparation discussions in Inter-American Economic and Social Council⁶⁶ now convened in Washington, which discussions will look toward possible pooling of external assets in other Am republics and use as a common fund for benefit of other Am republics, with possible surplus to be turned over to IARA (latter contingency not considered likely). Chief purpose is to put pressure of other Am republics on Argentina to yield German external assets. Consequently your draft pgh 3 should be revised as suggested above to make possible such arrangement with Inter-American Economic and Social Council.

“Pgh 4. If phrase ‘net proceeds of liquidation or disposition made available to the Inter-Allied Separations Agency’ permits some payment of external assets to neutrals to satisfy their pre-war claims this pgh is satisfactory. Thus net proceeds might be proceeds after deduction amount to go to neutrals. At this time we do not wish neutrals to be advised that they may receive such satisfaction since they will then in course of proposed negotiations claim this as matter of right. We wish to reserve this inducement for negotiations to be used only if necessary to obtain agreement on our over-all objectives.

“Pgh 5. This is considered most desirable as providing basis to request other countries to go along with Great Britain, France and US in granting inducements and imposing sanctions in order to achieve our objectives vis-à-vis neutrals in proposed negotiations. As stated by teletype, Dept expects to transmit cable on inducements and sanctions this week.”

9. Dept’s comments on proposed conference recommendations on monetary gold (urtel 74, Nov. 23⁶⁷) follow:

• “a. Dept assumes that gold coins to be included in pot will not include gold coins of historical value (Deptel 5427 Nov. 21 No. 18 for Angell). Words ‘or Austria’ should be inserted after ‘found in Germany’ in para 1 since Hungarian and other gold found in Austria should be included in pot. Phrase ‘to which restitution claims could be asserted’ should be omitted since otherwise recommendation would appear to exclude from pot bona fide German gold not subject so restitution claim.
• “b. Words ‘to Germany’ at end of para 2 should be deleted and following substituted ‘by way of looting by Germany or removal to Germany or Austria during the period of German occupation’. This change will permit inclusion in pot of gold which former Hungarian Govt removed to Germany and which was not lost to Germany.
• “c. There should be inserted after words ‘the Powers occupying Germany’ in both paras 4 and 5 words ‘and which under the Potsdam Agreements are concerned with gold found in Germany’. This would preclude Soviet participation in implementation of gold pot agreement since Soviet Union in Potsdam Protocol renounced claims to gold uncovered by Allied forces in Germany and presumably will not contribute any gold uncovered by it to gold pot.
• “Words ‘through German acts of spoliation’ should be deleted and words ‘by way of looting by Germany or removal to Germany or Austria’.
• “d. Text of recommendation contains no reference to gold looted by Germany and subsequent[ly] transferred to third countries. Dept believes reference to such gold desirable together with indication that any such gold subsequently recovered from third countries will be included in gold pot. You may also wish to consider proposing to conference that declaration concerning such gold be issued by conference to back up any three power approach that may be made to countries known to have received looted gold from Germany.”

10. Content of urtel 75, Nov. 23⁶⁸ approved.

11. Content of urtel 76, Nov. 23⁶⁹ approved, though you may point out that in view of extremely limited postwar economic resources of Germany little likelihood of satisfaction of prewar claims exists.

Byrnes

59. For documentation on disposition of the German Navy and Merchant Marine, see pp. 1506 ff.
60. See telegram 6805, November 25, 9 p.m., from Paris, p. 1414.
61. See telegram 5494, November 26, noon, to Paris, p. 1415.
62. Reference is to the Combined Administrative Liquidating Agency set up to accomplish the dissolution of any joint combined machinery that might remain after the dissolution of combined command.
63. No record found in Department files.
64. See telegram 6754, November 23, 1 p.m., from Paris, p. 1404.
65. Walter S. Surrey, Acting Chief, Division of Economic Security Controls.
66. For documentation, see vol. ix .
67. See telegram 6755, November 23, 2 p.m., from Paris, p. 1405.
68. See telegram 6756, November 23, 2 p.m., from Paris, p. 1406.
69. See telegram 6757, November 23, 3 p.m., from Paris, p. 1406.