Foreign Relations of the United States, 1964–1968, Volume XV, Germany and Berlin

5. Telegram From the Embassy in Germany to the Department of State¹

Bonn, January 21, 1964, 8 p.m.

2571. Ref: Embtel 1650; Moscow’s 2221.² For the Secretary and Under Secretary and Ambassador Kohler from the Ambassador.

1. Our last conversation,³ reflecting both your and the President’s deep desire to achieve a break-through in East-West relations, has preoccupied me since my return to Bonn. My reflections have understandably focused on the German problem, which remains the principal obstacle to any lasting Central European settlement.

It seems clear that the German proposal just tabled in the Ambassadorial Group is a non-starter,⁴ intended essentially for domestic political purposes. Negotiations with the Soviets on partial aspects of disarmament, or aimed at limited relaxation of tensions, are but way stations toward the goal we seek. I have, accordingly, been giving thought as to whether some really new approach to a settlement is not possible.

The odds of success of any overall approach to the basic conflict between the West and the Soviets are undoubtedly slight. However the reward could be correspondingly great. I would, therefore, like to offer for your consideration the following analysis and proposal. While admittedly a long shot, its possibilities are believed to be enhanced by the present conjunction of three independent but supporting circumstances:

(A) Present Soviet economic weakness;

(B) Pressure in the West to exploit the Soviet market;

(C) Possible German willingness to make financial sacrifices for reunification.

2. I will deal with each in turn:

(A) Soviet economic weakness: The CIA report on the state of the Soviet economy⁵ seems to indicate a far greater degree of structural weakness, particularly in agriculture, than we have heretofore suspected. The effect of this weakness on Soviet policy is obviously accentuated by their current difficulties with Communist China. We are in no position here fully to evaluate the significance of current Soviet economic difficulties. Moscow 2221 indicates, however, that the policy implications may be “profound.” Even a partial revision of Soviet economic philosophy could entail political changes—including revision of their doctrine on relations with the capitalist states. This could hardly take place overnight, but might over a period of a decade or more. I would suggest that a National Intelligence Estimate be prepared, with the assistance of Embassy Moscow, assessing the possibilities and probabilities of such a change and what we may realistically expect its effects to be, given the existing conflict between dogma and fact.⁶

(B) Western pressure to “exploit” this weakness: The United Kingdom’s determination to grant long-term credits to the Soviets is symptomatic of commercial restlessness and incipient pressure throughout Western Europe to exploit Soviet economic needs. As Ambassador Finletter has pointed out (Polto 118),⁷ the British action may signal the start of an uncoordinated credit race among the Western nations for an imagined trade plum. France has already indicated it will follow England’s lead. Chancellor Erhard has indicated to me that, were this to happen, he would find it very difficult to restrain German industry (Embtel 2383).⁸

(C) German payment for reunification: I consider the fact that Chancellor Erhard raised with the President in their private meeting his idea of granting economic assistance to the Soviets as a means towards reunification,⁹ which he had expressed to us before very cautiously, as probably the one most significant feature of the Texas talks. The Chancellor obviously continues to be bemused with the hope that he can “buy” a solution to the German problem [garble]through some further economic “sacrifice” by the German people. He keeps returning to it despite the domestic political and budgetary difficulties it would involve, and an agreed policy with us against the extension of long-term credits to the Soviets.

3. Any initiative of the kind envisaged by Erhard could be frustrated from the outset if it seemed to be merely a large-scale German involvement in the credit race for commercial objectives. Any Western plan for economic assistance to the Soviets must, if it is to succeed, be related to the more commercially based desires of the British and French, so as to provide a basis for unity rather than competition. I would suggest, therefore, that we seriously examine how we can achieve, within the framework of the proposal made in this telegram, a unified and broadly based Western position on trade and credits to the Soviet Union, including a more positive position for the US than we have thus far taken.

4. Under the assumption that there is a possibility, over a period of years, to influence Soviet readjustment, and that a unified Western position in the economic sphere is possible (and I realize what considerable assumptions these are), I propose consideration of a plan along the following lines:

(A) A unified Western program of grants and credits to the Soviet Union and European satellites would be secretly agreed, which would take place over, say, a 10-year time period, if certain conditions were met. This program would start out modestly, but might reach $5 billion per annum, with a total up to, say, $40 billion. The focus of the plan would be on the furnishing of industrial plants for the production of fertilizers, synthetic materials and products for consumer use. The Europeans would, basically because of the greater incentive of the Germans, be expected to finance the bulk, say 80 percent of the plan. We would agree to finance the remaining 20 percent. Of the European contribution, the German share might be as much as 60 percent, or about 50 percent of the total. State Secretary Westrick has spoken in terms of a possible German contribution of this magnitude.

(B) Major changes in the status quo have usually seemed to hinge on someone’s ability and willingness to pay the bill. In the case of the Marshall Plan it was our willingness to pay $17 billion. The possible German willingness to pay a large amount is the very core of this plan. Much as in the Marshall Plan days, the utilization of these funds could be worked out by agreement between the grantors and the recipients. Some mechanism similar to the OEEC might be established to provide the framework.

(C) The trick, of course, would be to obtain from the Soviets political benefits of a magnitude sufficient to justify such an initiative and assure its execution. Experience would indicate that the Soviets will not make any formal exchange of political for economic benefits. Instead of spelling out concrete desiderata in advance, therefore, I would think it preferable to talk initially in terms of a gradual easing of tensions in Central Europe, under circumstances which would be tolerable to both Western and Soviet security. This would have to include, at least implicitly, an understanding that German reunification would occur at some point, on terms acceptable to the West but with some concession having been made by the West. There would also have to be some assurance of progress on disarmament, since large-scale economic assistance would lessen pressure on the Soviets to disarm.

(D) This plan could be carried out by a series of reciprocal but unilateral actions, not necessarily directly related to each other. Each stage would have to be synchronized, to assure that the benefits to the East are in some way compensated by comparable benefits to the West. The expectation of German reunification would have to become increasingly explicit as the plan was implemented.

(E) Economic assistance can be halted at any time. Once the Soviets had made plans based on the expected assistance, however, there would be a strong incentive on their part to assure its fulfillment. The whole endeavor would be under the continuing control of both sides, and could be halted by either at any time if performance were unsatisfactory. The plan would not depend upon the element of trust on either side.

5. This plan is believed to offer major advantages in achieving a break-through in the East-West stalemate. The idea exploits the Soviets’ most obvious weakness. It could also provide a vehicle by which, over a long period of time, the Germans would have an opportunity to demonstrate by their actions that the Soviets’ traditional distrust of them is no longer well founded. The fact that Germans were in Russia helping to carry out the program, and plants for Russia were being built in Germany, would, in a sense, provide the Russians with some assurance of Germany’s peaceful intentions. Finally, it might provide a framework for Western unity on credit and trade policy towards the Soviet Union and satellites—a prospect we do not otherwise have. A potential liability could be converted into an asset.

6. I am aware too that there are serious disadvantages in a proposal along these lines. My telegram 1650 of last November points out, for example, that Erhard may not be able to develop support for his plan in the Federal Republic, as well as the adverse implications for German defense spending and NATO strategy. There are other questions as well. The German position is still inchoate. The Chancellor has been thinking largely in terms of achieving German reunification. It is not known how he would react to an organized Western effort in which this objective was less clearly defined and guaranteed. We do not know if the Germans would be prepared to pay anything like the amounts they have indicated.

7. I realize that it is not possible to make any immediate decision on this proposal as a whole. We can, however, undertake immediately the two studies I have proposed. I believe, moreover, that we could make two moves in low key:

(A) I could inquire of Chancellor Erhard whether he had further developed his thinking on assistance to the Soviets. Depending on his answer, I could inquire further whether he would be agreeable to a discreet United States approach in Moscow suggesting that, if the Soviet Union were prepared to consider what action it might take to remove the causes of tension in Central Europe, the Western powers, for their part, would be prepared to consider a possible major initiative in the trade and credit field;

(B) If Erhard were agreeable to this, and after consultations and agreement with the British, which should not be difficult, Ambassador Kohler could make a discreet approach in Moscow, on a highly tentative basis, to test Khrushchev’s reaction.

I would appreciate your comments, as well as Foy Kohler’s in Moscow.

McGhee

1. Source: Department of State, Central Files,POL 32–1 GER. Secret; Limdis. Repeated to Moscow.
2. Telegram 1650 from Bonn, November 11, 1963, is ibid., POL 32–4 GER. Telegram 2221 from Moscow, January 17, 1964, is ibid., E 8 USSR.
3. According to Secretary Rusk’s Appointment Book, he and McGhee met on January 2. (Johnson Library) No record of their conversation was found.
4. Document 2. The Embassy provided its analysis of the proposal in telegram 2513 from Bonn, January 17. (Department of State, Central Files, POL 32–4 GER)
5. Reference is to SNIE 11–5–64, “Soviet Economic Problems and Outlook,” January 8, 1964, scheduled for publication in Foreign Relations, 1964–1968, volume XIV. A copy is in NARA, RG 263, National Intelligence Estimates.
6. NIE 11–5–65, “Soviet Economic Problems and Prospects,” January 22, 1965. (Ibid.)
7. Not found.
8. Dated January 8. (Department of State, Central Files, FIN 11–1 COMBLOC–GER)
9. See Foreign Relations, 1961–1963, vol. XV, Document 250.