Foreign Relations of the United States, 1947, Council of Foreign Ministers; Germany and Austria, Volume II

862.60/8–647

Memorandum by the Deputy Director of the Office of European Affairs (Hickerson) for the Secretary of State⁵⁷

confidential

[Washington,] August 11, 1947.

Subject: French Request to Begin Transfer of Saar Coal Resources to France

Discussion:

1. The French Government has requested the United States and British Governments to agree that, as of 1 October 1947, the Saar should be considered as economically attached to France in so far as coal distribution is concerned and that the European Coal Organization be so informed. The French request presumably is based on the expressions of agreement to the economic incorporation of the Saar with France made by Mr. Byrnes,⁵⁸ your statement to Mr. Bidault at Moscow⁵⁹ and the similar position of Mr. Bevin. Although your statement did not commit us in the absence of Russian agreement to economic integration, it is not believed that the United States should continue indefinitely to consider that lack of quadripartite agreement on this matter is a bar. The great importance to France of resolving this issue and of being given every practicable opportunity of increasing her coal availabilities, makes favorable consideration of her proposals desirable.

2. The French have asked us to discuss with them and the British, as a matter of urgency, the measures necessary to accomplish their objectives in this field. The specific measures proposed by the French would result in a reduction of the supply of coal available for use inside Germany, a reduction of coal exports from Germany, with a consequent loss by the bizonal authorities of export proceeds, and an increase of the French coal supply. While there is no necessity for accepting the French proposal as made, it is believed that the agreement eventually to detach Saar coal from the rest of Germany must necessarily have contemplated a decrease at that time in the total German coal supply and therefore either a decrease in use inside Germany or a decrease in exports to other countries and a loss of export proceeds. The only questions therefore relate to when the detaching of Saar coal will take place and the conditions under which it will take place.

3. As to timing, it is believed that the latest time will be at or immediately after the November CFM meeting. If then the U.S.S.R. agrees to economic incorporation of the Saar into France, there will be quadripartite agreement. If Soviet agreement is not obtained, it is to be anticipated that no general agreement on German economic unity will have been reached and the French have indicated that they will then agree to fusion of their zone with the U.S.-U.K. zones. This would necessarily require a solution of the Saar question. The French would like an earlier agreement on the Saar. It is not believed that an immediate agreement is possible for the following reasons:

(a) Any agreement with the French which shifted the burden of decreased German coal supply on the other countries importing coal from Germany could not be reached during the current Paris Conference without seriously prejudicing the conference. Coal is basic to the plans of the conferring countries and any action outside the conference to decrease the coal supply of the countries other than France would necessarily be unfortunate.

(b) Any agreement which decreased German coal exports would reduce the dollar proceeds of the U.S. and U.K. in equal shares under the present bizonal agreement. Such a reduction in British dollar receipts could not be agreed to without a more general agreement on the British financial responsibilities in Germany.

Therefore, it seems that final agreement on the Saar should not be sought pending further developments at the Paris Conference⁶⁰ and in the U.S.-U.K. financial talks.⁶¹ We should be prepared, however, to reach final agreement by November at the latest.

4. As to the substance of the eventual agreement on the Saar, the general characteristics should be as follows:

(a) The level of coal availability inside Germany should be sufficient to meet essential increases of German production. This can be achieved by relating the shift of Saar coal to France to increases in production in the Saar and in the bizonal area. Agreement to treat Saar coal as French need not preclude the Saar from continuing to contribute to the supply of the French zone, or if there is tri-zonal fusion, the western fused zones. The current French proposals recognize this.

(b) Any reduction in the amount of coal exported from the Ruhr Aachen area to countries other than France should be minimized to the greatest extent possible. The U.S. has reserved the right in participating in the allocation of German coal in ECO to support rearrangement of the shares of German coal so that the French will not get undue advantage from the incorporation of the Saar.

(c) The loss of coal export proceeds which would result from the Saar detachment from Germany will create a dollar deficit which will have to be made up by outside financing of essential imports. In view of the British inability to increase its expenditures in Germany, it will be necessary for the U.S. to increase its financing of German imports to cover this deficit. This deficit might amount to $20,000,000. a year, according to OMGUS estimates. Other estimates have put the possible deficit at about twice that amount. This is small in relation to the expenditures we have made and will make for European recovery and what is lost on German dollar income will be offset by a corresponding help to the French dollar position.

Recommendations:

I. That you discuss this situation as a matter of urgency with the Secretary of War in order to obtain his concurrence in the proposal that we tell the French, confidentially, that we will agree to the economic integration of the Saar into France at or immediately after the CFM meeting in November at the latest, and irrespective of whether quadripartite agreement on Germany is then achieved. This advice to the French should be given in connection with the level of industry talks in such a manner as to obtain the greatest bargaining value.

II. That, subject to such concurrence:

(a) You approve immediate informal conversations with the British and French to reach an understanding on the terms upon which such economic incorporation will take place;

(b) That you approve the objectives set forth in paragraph 4 (a), (b) and (c) above as guidance to the U.S. negotiators.

Concurrences:

A–H (Saltzman); A–T (Wood).

57. The source text is endorsed “L” in Under Secretary Lovett’s hand.
58. See the letter of September 25, 1946, from Secretary of State Byrnes to Foreign Minister Bidault, Foreign Relations, 1946, vol. v, p. 610.
59. The reference here is presumably to the statement on the Saar made by Secretary Marshall at the meeting of the Council of Foreign Ministers in Moscow, April 10, 1947; see telegram 1297, Delsec 1414, April 10, from Moscow, p. 323.
60. The Conference of European Economic Cooperation, held in Paris, July 12–September 22, 1947; for documentation, see volume iii .
61. For documentation regarding the British dollar crisis and the revision of the Anglo-American Financial Agreement of 1945, see volume iii .