Foreign Relations of the United States, 1948, Germany and Austria, Volume II

501.BC/11–2348: Telegram

The Acting Head of the United States Delegation to the United Nations (Dulles) to the Secretary of State

secret
us urgent

Paris, November 23, 1948—7 p. m.

Delga 890. Text of joint reply by representatives of France, UK, and US to questions asked by Bramuglia follows. This paper being delivered Bramuglia tonight by Cadogan. Further report on developments follows, in separate message.¹

“In the quadripartite discussions on the Berlin currency problem held in August and September, the western powers expressed their willingness to meet the Soviet insistence that the currency which is legal tender in the Soviet zone should also be the sole legal tender currency in Berlin, but only on condition that the military governors could work out satisfactory arrangements to assure the provision of adequate currency and credit in all sectors of Berlin, with effective quadripartite control over the practical implementation of such arrangements. The western powers do not claim any rights of interference in the finances of the Soviet zone and they recognize that if the east mark is introduced as sole currency for the whole of Berlin, financial and currency policy in the city must not be such as to endanger the financial stability of the Soviet zone. On the other hand, the western allies cannot, in any circumstances, agree that the Soviet authorities or the German Bank of Emission of the Soviet zone should exercise sole and unrestricted control over the currency and finances of Berlin.

The technical problems involved are not easy ones. Assuming that the German Bank of Emission is to issue currency for circulation both in Berlin and in the Soviet zone, the arrangements must ensure the provision of adequate currency for Berlin subject to effective four-power control, although in the Soviet zone the bank’s operations would be subject to Soviet control only. The arrangements must also ensure that financial and credit policy in Berlin, which would be under four-power control, could not be such that its repercussions might endanger the stability of the currency in the Soviet zone. Thus, assuming that the problems incident to the initial introduction of the currency are resolved, there would remain at least two basic and continuing problems. First, how should the amount of currency and credit available for all of Berlin from the German Bank of Emission be determined. Second, how should the non-discriminatory provision of currency and credit throughout the city be assured.

It must be pointed out that it will inevitably be difficult in practice to exercise four-power control of currency in a city in which the previous unified municipal administration under four-power supervision is not fully functioning at present and is indeed being rapidly diminished. This difficulty applies as well to the control of trade between Berlin and the western zones in that if the Berlin Magistrat is not functioning in respect of the whole of Berlin there will be no administrative machinery for the issuance of licenses.

The questions and answers below refer specifically to the organization and functions of quadripartite control. The brief description of the basic problems presented above will make it clear that certain technical arrangements and agreements are necessary to provide the specific assurances and safeguards required to protect the interests of the western powers and of the Soviet Union. In their absence, these problems cannot be regarded as solved merely by their assignment to quadripartite agencies. The answers to the questions asked by Dr. Bramuglia are as follows:

Question 1: What organizations will exercise the quadripartite control of the financial arrangements on behalf of the four occupying authorities?

Answer: The quadripartite control of Berlin financial arrangements will be exercised by the financial commission composed of representatives of the four military governors and responsible to them.

Question 2: What will be the functions of these quadripartite control organizations?

Answer: The functions of the quadripartite financial commission would be as follows:

1. To constitute under the military governors the controlling authority in Berlin in respect of money, credit and banking matters.

2. To exercise appropriate control over the Stadtkontor as well as other banking land credit institutions in Berlin in order to assure adequate and uniform banking and credit facilities throughout Berlin, without discrimination among the different sectors.

3. To exercise supervision and control over the activities of the German Bank of Emission of the Soviet zone but only insofar as they relate to the arrangements for the introduction and continued use of the east-mark as the sole currency in the city of Berlin.

4. To supervise and approve the fiscal policies and budgetary arrangements of the government of Berlin.

5. To supervise and control the arrangements for the introduction of the east-mark as the sole currency for Berlin and the withdrawal of the western B-mark from circulation in Berlin.

6. To supervise the issuance by the Berlin Magistrat of licenses for the import and export trade of Berlin.

Question 3: Over what operations and in what area will the quadripartite control be exercised?

Answer: The quadripartite control will he exercised over the various operations in Berlin referred to in the answer to question 2, and also over the operations of the German Bank of Emission but only insofar as they relate to the arrangements for the introduction and continued use of the east mark as the sole currency in the city of Berlin.

Question 4: What is the exact wording of the directive that must be issued to bring the quadripartite control into operation?

Answer: The four military governors will have to issue legislation in Berlin in order to put into effect arrangements for the quadripartite control of the currency there. In the absence of sufficient agreement with the Soviet Government upon the content of this legislation, the western powers have not at this time attempted to draft it in detail.

Question 5: How will trade between Berlin and the western zones and third countries be controlled, including the issuance of import and export licenses?

Answer: On this question the position of the western powers is as follows:

(A) The western powers should be able freely to import food and fuel and power into their sectors of Berlin in fulfillment of their responsibilities for the health and welfare of the population, and should control the proceeds of the sale in Berlin of these imports.

(B) Other trade between Berlin and the western zones and third countries would be conducted in accordance with licenses issued by the Berlin Magistrat under the supervision of the financial commission representing the four military governors. The Soviet authorities would automatically grant transit licenses through the Soviet zone in respect of such trade.

Attention may be called to the fact that in their note of September 25, 1948,² the Soviet Government stated that: ‘The Soviet Government has already expressed its agreement that trade between Berlin, third countries and the western zones of Germany should be placed under the control of the four-power financial commission. The Soviet Government now declares its readiness to agree to the establishment of four-power control likewise over the issuance of import and export licenses, provided agreement is reached on all other questions.’

The representatives of the western powers are anxious to provide all possible assistance in your examination of the Berlin currency problem. They are continuing their study of possible solutions in the light of current developments in Berlin. If you and your colleagues desire to enter into technical discussions on the details to be worked out, our experts will be at your disposal.”³

Sent Department Delga 890, repeated London 1329, Berlin for Murphy 736; Department please pass Moscow as 613.

Dulles

1. Delga 891, November 23, from Paris, not printed, reported the discussions of the various western draft answers to Bramuglia’s five questions eventuating in the joint reply quoted here (501.BC/11–2348).
2. Ante, p. 1181.
3. For the Soviet answers to Dr. Bramuglia’s five questions, see Carlyle, Documents on International Affairs, pp. 612–614, Berlin, Quellen und Dokumente, pp. 1539–1540, or Documents on American Foreign Relations, pp. 103–105.