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

Department of the Army Files

The War Department to the United States Deputy Military Governor for Germany (Clay)

Washington, 20 October 1945—5:56 p.m.

War 77595. Signed Warcad.^68a Subject is determination of reparation removals from 3 western zones and advance reparation deliveries reurads Oct CC 17566⁶⁹ CC 17588.^69a

1. State Dept while adhering to position that no extensive advance deliveries should be made to USSR–Poland until substantial progress is made in resolution of questions mentioned in para 1 of War 73742 Oct [5] agrees that immediate token deliveries of one or two plants of modest size such as BMW Number 1 plant in city of Munich should be made to Russians as evidence of our intention to carry out the program. If such token deliveries are made complete inventory of such equip removed by Russians should be made in agreement with Russians to permit subsequent valuation.

2. Token deliveries to claimants other than USSR–Poland and substantial deliveries to USSR–Poland must await ascertainment of types of plant and equip wanted by all claimants and arrival of United States member of IARA to advise you on advance deliveries. Note sent by US, UK, and French govts inviting reparation claimants to Paris conference 9 Nov to establish inter Allied Reparation Agency—IARA—and determine reparation shares stated that 3 govts were prepared to entertain requests for any type of plants or equip made available for advance delivery and that equip available was likely to consist mainly of plants of metal or chemical industries and of machine tools and similar equipment. State Dept has requested Murphy to transmit to United States diplomatic missions in countries invited to Paris conference on reparation shares lists of plants declared available by the ACC for interim delivery so that such missions can supply govts concerned with more concrete info on reparation availabilities.

3. Control Council should make allocation of plant and equip as between USSR–Poland and other reparation claimants. State Dept has received info UK member CC is being instructed accordingly. State Dept instructing AmEmbassy Paris to urge French Govt that French member CC also be instructed to this effect.

4. State Dept believes functions of proposed mixed commission should be clearly defined. First functions should be to determine where necessary (a) productive capacity in particular industries left in Russian zone, and (b) existing productive capacity of particular industries in three western zones. This function might be discharged both by analysis of existing statistics or data made available by zonal authorities and by investigating individual plants and should have objective of providing factual info, under uniform definitions of capacity, required for determination of difference between actual existing capacity and capacity to be left to Germany for minimum standard. After final determination for reparations removal purposes of amount productive capacity surplus to minimum peacetime needs in each industry, which can only be done by ACC in light of German peace economy envisaged in Berlin Protocol, mixed commission might advise on selection of plants which should make up surplus capacity available for removal. Until final determination of amount and character of industrial equip available for reparation, info on individual plants supplied by zonal authorities should be sufficient for selection of plants available for advance deliveries. State Dept believes mixed commission with functions as defined above should not include representatives of IARA.

5. State Dept believes another mixed commission of different character, consisting of valuation experts and including, if desired, representatives of non-occupying powers represented on IARA, is required for limited technical task of valuing individual plants declared available for delivery in accordance with uniform principles of valuation which should be agreed previously in ACC. State Dept urges you propose in ACC that plant and equip should be valued at 1938 replacement cost in Germany plus 15 percent less depreciation. British member ACR has proposed this as basis and Russians should be agreeable since they are applying same principle in reparation settlements with other countries. State Dept suggests that principle be applied to individual plants to determine (1) removable portions—i.e. in technical sense—of any plant, (2) procurement cost of such equipment in terms of 1938 prices and (3) appropriate discount for depreciation and war damage, if any. Zonal authorities should first set value on plant in accordance with these principles and mixed commission should then review this valuation in order to ensure uniform application of valuation principles in all zones.

6. State Dept agrees with proposal made by British member ACR that Russian reciprocal deliveries should also be valued at 1938 prices in Germany, with 10 percent addition for raw materials and 15 percent addition for manufactured goods, and suggest you propose this in CC. State Dept is taking position Russian reciprocal deliveries should go into reparation available for reparation claimants on three western zones and should therefore be apportioned by IARA. It is expected that United States will claim substantial portion of such deliveries in forthcoming conference on reparation shares and that United States share will be made available to meet import requirements of United States zones in Germany and Austria as well as other supply commitments of United States. State Dept believes Russian reciprocal deliveries should commence as soon as value of interim reparation deliveries to USSR reaches a total agreed upon with USSR. As soon as this agreed total is reached USSR should commence reciprocal deliveries up to 60 percent of value of this total, taking into account that such reciprocal deliveries must be spaced over longer period than reparation deliveries to USSR. Suggest you ascertain character of commodities which USSR is prepared to make available as reciprocal deliveries. United States and British view is that such deliveries should be made from sources outside Russian zone, though as indicated in para 4 of War 73742 it is doubtful USSR can be made to accept this view in entirety.

1. War Department, Civil Affairs Division.
69. Dated October 14, not printed; in this telegram General Clay suggested that some token advance reparations deliveries be made to the Soviet Union as evidence of good faith pending full clarification of details on the agreement that the Control Council allocate industrial equipment between the Soviet Union and Poland on the one hand and other claimants on the other. (Copy obtained from Department of the Army files.)
70. Not printed, but see footnotes 23 and 24, pp. 1330 and 1331, respectively.