Foreign Relations of the United States: Diplomatic Papers, The Conference of Berlin (The Potsdam Conference), 1945, Volume I

740.00119 Potsdam/7–745

No. 384
The Acting Chief of the Division of Economic Security Controls (Oliver) to the Director of the Office of Financial and Development Policy (Collado) and the Adviser on German Economic Affairs (Despres)

[Washington,] July 7, 1945.

Subject: The necessity of agreement among the occupying powers regarding the control of German external assets.

It is the policy of the United States as reflected in IPCOG ¼¹ to control German external assets. It is the policy of the Department that this control be a joint one heading up to the Allied Control Council. It would be decidedly unfortunate from an economic security standpoint should control over German external assets be the exclusive province of the zone commanders in which the parent concerns or indicia of ownership have their situs. It is necessary, therefore, to press for a common policy. There are in this connection three [four] problems:

1. The problem of obtaining agreement that external assets should be controlled. All indications are that France and the Soviet Union will agree with the principle. Until recently it had been thought that the British would also. Probably as a result of unfortunate lack of coordination within this government, the British have reacted negatively to the general principle.² It is believed that this attitude can be changed by: (a) adopting a firm tone with the British in the interests of economic security, (b) pointing out that the EAC draft general directive³ clearly contemplates control of German external assets, and (c) by disabusing the British of any incorrect inferences they may have drawn from Ambassador Pauley’s presentation at Moscow of an unauthorized proposal for a vesting decree. The Department’s 5499 of July 6 to London⁴ attempts to do these three things. It is predicted that the British will agree to the policy already adopted by the United States on more mature reflection.

2. The problem of the interim situation in the neutral countries. Some way must be found to prevent the neutral countries from developing proprietary interest in the German external assets pending the time when the ACC can act to assume control over them. The Department’s proposal is for the occupying powers to join in warning the neutrals to refrain from action inconsistent with the superior rights to be asserted by the Allied Control Council. Once there is agreement as to the general policy of seeking to control German external assets, there should be no difficulty about obtaining agreement to warn the neutrals. That the British have refused to join with us in this is attributable to the unfortunate misconceptions resulting from discussion of the unauthorized proposal for a vesting decree.

3. The problem of agreeing upon a vesting decree. This will be covered in a separate memorandum.⁵ It is clear, however, at this stage and in view of the developments regarding the British, that the terms of the decree will be drawn into any discussion of problems 1 and 2. Problems 1 and 2 should be disassociated from 3 to the extent possible. In discussing a vesting decree with the British it must be kept in mind that the British have voiced three fears regarding such a decree: (a) A fear that the decree will not be accorded full faith and credit by the neutral countries. It is obvious that a decree which purports to vest all German assets will be more difficult for Switzerland and Sweden to recognize than one confining itself to those properties ostensibly private but in reality used as part of the German war machine. Switzerland has a consistent record of refusing to recognize as to property within its borders the extra-territorial effect of foreign nationalizing and other control decrees. Moreover, principles of national self-interest will incline the Swiss to resist such legislation. To a lesser extent the same is true of Sweden. Less difficulty is anticipated in Spain and Portugal, because of the political situation, particularly in Spain. Some degree of pressure must be exercised on the neutrals. The question is whether we should not assist the neutrals to distinguish the previous decisions of then courts refusing to recognize extra-territorial decrees, (b) The fear that personnel demands impossible of fulfillment will be made. The British point out that the administration of all German external assets would be a tremendous drain upon skilled personnel. Thought should be given as to whether this fear might not be met by pointing out to the British that the primary objective is the economic security one of eliminating the German spearheads in the neutral European countries, Turkey and, perhaps, such American republics as have not made satisfactory progress under the replacement program. It may be that the ACC decree should assume jurisdiction (power of control) over all German external assets. This need not necessarily mean that all of such assets would be actually subjected to Allied managerial control. In other words, actual administration should be selective in order that the most dangerous elements receive full attention, (c) The fear that the Reparation Commission is to undertake the administration of the external assets program. The British fear in this connection seems to be based upon a belief that the Reparation Commission would not have sufficient jurisdictional status to command full faith and credit in the neutral countries. This is correct, and the United States should continue to maintain that the ACC is the appropriate body.

4. The problem of whether the ACC should have its own foreign service. The United States should take the position that the administrative work regarding the control of German external assets should be done abroad by the regular missions of the occupying powers. To the extent that those powers are not represented in all countries, the missions of those powers which are represented should act for the whole.

C[ovey] T. O[liver]

1. This paper circulated the text (approved by Truman on May 11, 1945) of a “Directive to Commander in Chief of U.S. Forces of Occupation Regarding the Military Government of Germany”. A slightly modified version of this text is printed in Department of State Bulletin, vol. xiii, p. 596.
2. See document No. 382.
3. See the accompaniment to document No. 1038 (paragraphs 12, 14), printed in vol. ii .
4. Document No. 383.
5. Not printed. For the draft vesting decree transmitted to Clay on August 1, see the attachment to document No. 1003, printed in vol. ii .