740.00119 Control (Germany)/12–2245: Telegram
The United States Political Adviser for Germany (Murphy) to the Secretary of State
[Received December 22—7 a.m.]
1323. 1. The Coordinating Committee yesterday at its 28th meeting, US member presiding, initiated an important discussion regarding [Page 1485] the level of German industry. Since no agreement was reached a special meeting will be called on December 29 to consider the question.
2. Paper which provoked discussion was a report from the Economics Directorate on the level of the German electric power industry. Since it was soon realized that no progress could be made without taking up the level of the German industry and in particular that of heavy industry, the Coordinating Committee immediately entered upon consideration of this subject. Discussion was lead by Sokolovsky and Clay, the latter insisting that an immediate decision was necessary in order to permit the establishment of a reparations program by the set date of February 1. The two points of view of the Russian and US Delegations were expressed essentially as follows:
Russian statement. Sokolovsky pointed out there was no disagreement on the German living standard as envisaged at Potsdam on German agriculture, light industry or method of calculating electric power. Main divergence was on the relation of the latter question to heavy industry, excepting mining. Russian standpoint was that heavy industry should be strictly limited to what is necessary for minimum living standard decided at Potsdam; quantities beyond these needs would constitute war potential. As regards exports for needed imports, these should be covered by the production of German light industry and mining. A capacity of 11,000,000 tons steel would be double of what is needed for peacetime economy and would consume a disproportionate amount of electric power. Soviet Delegation favored the export of German coal, potassium, and zinc, but not the export of German steel or machinery. The capacity suggested by the US would leave Germany with a production in excess of that of other European countries, such as Poland and France.
US statement. In an able presentation of the American case, General Clay pointed out that the German peacetime steel capacity was 25,000,000 tons and that the highest current proposal (British) would take away 15,000,000 tons. US suggested average was 7.8 million tons and with the resultant reduction of over 18,000,000 tons, the German steel industry could hardly be in a position to make war. The US position was based on the knowledge that the US Govt will not continue to finance German food imports much longer, and that for this purpose a German export level was essential. The Soviet view did not take account of the increased density of population in Germany nor of the intention in all events to control the types of steel produced, to limit the size of forges, plate rolling mills, and to prohibit certain kinds of alloy steel essential for war purposes. General Clay pointed to the relatively small divergence between the US and Soviet figures on allowable steel exports, represented respectively by 1, 100,000 tons and 600,000 tons. With regard to Sokolovsky’s claim [Page 1486] that German steel production would exceed the level of other European countries, General Clay emphasized that the delivery of steel mills on reparations account from Germany will increase production in other European countries.
An interchange then took place during which Sokolovsky maintained that Germany would still be capable of making war, to which General Clay replied that it could not be a very big war. With respect to controls, Sokolovsky pointed out the failure of these methods following Versailles, to which General Clay replied that Russian participation in such controls was then lacking. Sokolovsky then said he was willing to make a compromise along the following lines: The Economics Directorate would be instructed to work out a German level of industry taking into account the average level of production and consumption in central Europe. After an overall balance had been established, production of certain branches of German industry could be increased to cover exports. At the same time the capacity of all branches of heavy industry, excluding mining, should not exceed the average European level and should in no event be allowed to constitute a war potential. General Clay regarded this formula as an extension of the Potsdam principles which he could not discuss and he said he was primarily interested in figures.
British statement was limited to reference to their figure of 10.5 million tons and to the remark that their position had been fully explained in the Economics Directorate. French Delegation, whose figure of 7,000,000 tons was very close to US proposal of 7.8 million tons, stated it would like an opportunity to consider the question further before continuing the debate. (In informal conversation later, members of the French Delegation claimed the conclusions of the discussion reinforced the French position for the internationalization of the Ruhr and Rhineland heavy industry.)
General Clay stated the American Delegation would not accept responsibility for failing to reach fundamental decisions necessary to meet the deadline of February 1 for a reparations program, and at his suggestion a special meeting of the Coordinating Committee was called for December 29.95
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Mr. Murphy summarized the content of this cable in his telegram 109 to Moscow, suggesting also that informal discussions of the level of industry question by the Foreign Ministers might be helpful in arriving at a compromise solution. He concluded by saying: “I am convinced that the United States and French position on steel tonnage is sound and also that the United States, French and British position on electric power is also justified, especially when one considers the question of payment for United States food imports into Germany and the other considerations with which you are familiar. I have urged that Allied decision and unity in this field are far more important than the figures themselves.”
Mr. Murphy’s telegram, however, arrived in Moscow after the departure of Secretary Byrnes’ party, according to telegram 4309, December 28, 7 p.m., from Moscow. (740.00119 Control (Germany)/12–2845)
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