Marshal Stalin then said that he would like to discuss the question of German reparations.
The President said that in regard to reparations there was first of all the question of the desires and needs of principal allies and then subsequently that of the smaller countries, such as Belgium, Holland, Norway, etc. He said he would like to bring up the question of the Russian desires in regard to the utilization of German manpower.
Marshal Stalin replied that they had a plan for reparations in kind but were not ready yet to present any plan in regard to German manpower. He then said that Mr. Maisky would present the Soviet plan.
Mr. Maisky then outlined the Soviet plan for reparations for Germany. He said that the Soviet plan for reparations in kind envisaged two categories: (1) the removal from the national wealth of Germany of plants, machine tools, rolling stock, etc. to be completed within a period of two years after the end of hostilities, (2) yearly payments in kind to last for ten years. He said that in order to restore Soviet economy which had suffered so much from German aggression, and to safeguard the future security of Europe, it would be necessary to reduce German heavy industry by 80%. By heavy industry he meant iron and steel, electrical power and chemical industries. Specialized industry useful only for military purposes should be 100% removed. In this category would fall all aviation factories, synthetic oil refineries, etc. He said that the Soviet Government felt that with 20% of her heavy industry Germany would be in position to cover the economic needs of the country. He said the list of goods to be delivered during the 10-year period could be definitely fixed later on. He further proposed that in the interests of the orderly execution of the reparations plan and for the security of Europe there should be an Anglo-Soviet-American control over German economy which would last beyond the period of the reparations payment. All German enterprises which could be utilized for war purposes should be placed under international control with representatives of the Three Powers sitting on the boards of such enterprises. Mr. Maisky went on to say that in the calculation of losses as a result of German aggression the figures had been so astronomical that a selection and the establishment of a system of priorities for compensation had been necessary. He said that even direct material losses, such as public and private property, factories, plants, railroads, houses, institutions, confiscation of materials, etc. had been so large that no reparations could cover their loss. For this reason, priorities had been established according to indices, (1) the proportional contribution of any one nation to the winning of the war, (2) the material losses suffered by each nation. He said that those countries which had made the highest contribution to the war and had suffered the highest material losses would come into the first category and all others would fall into the second. Mr. Maisky proposed that there should be set up a special reparations committee of the three governments to sit in Moscow. He concluded that the total reparations shown in withdrawals and yearly payments in kind which the Soviets required would reach a total of ten billion dollars.
The Prime Minister stated that he recalled very well the end of the last war and that although he did not participate in the peace settlement he had been very fully informed of the discussions. He remembered well that there had been only two billion pounds extracted from Germany in the form of reparations by the Allies after the last war and that even this would not have been possible had not the United States given Germany credits. He said, for example, that they had taken some old Atlantic liners from the Germans, who had immediately proceeded on credit to build new and better ships. He recognized that the suffering which the Soviet Union had undergone in this war had been greater than any other power, but he felt that the Soviet Union would get nowhere near the sum which Mr. Maisky had mentioned from Germany. He said that at the end of the last war the Allies had also indulged themselves with fantastic figures of reparations but that these had turned out to be a myth. He said that the British Isles had also suffered in this war and that the British Government had disposed of the bulk of its assets abroad despite the generous help of Lend-Lease. He said that the British Isles had to export goods in order to import food, since they were dependent on imports for one-half of their food supply. He said that there would be no victorious country so burdened in an economic sense as Great Britain and that, therefore, if he could see any benefit to Great Britain in large reparations from Germany he would favor such a course but he very much doubted whether this was feasible. He added that other countries, such as Belgium, Holland and Norway also had claims against Germany. He said he was haunted by the specter of a starving Germany which would present a serious problem for the Allies since we could either say “It serves them right” or endeavor to help them. In the latter case, who would pay for the help. The Prime Minister concluded that if you wished a horse to pull a wagon that you would at least have to give it fodder.
Marshal Stalin observed that that was right, but care should be taken to see that the horse did not turn around and kick you.
The President remarked that he had also been through the last war and that he remembered very vividly that the United States had lost a great deal of money. He said that we had lent over ten billion dollars to Germany and that this time we would not repeat our past mistakes. He said that in the United States after the last war the German property that had been sequestered during the war had been turned back to the German owners, but that this time he would seek the necessary legislation to retain for the United States all German property in America. He said that the Germans had no capital, factories, or other equipment that the United States needed but that he did not wish to have to contemplate the necessity of helping the Germans to keep from starving. He said, however, that he would willingly support any claims for Soviet reparations since he felt that the German standard of living should not be higher than that of the Soviet Union. He added that just as we expected to help Great Britain expand her export trade, we would also help the Soviet Union retain the reparations in kind which she required, as well as German manpower to reconstruct the devastated regions, but he felt that the Germans should be allowed to live in order that they might not become a burden on the world. The President concluded, however, that despite his desire to see the devastated areas in all countries, in the Soviet Union, in Great Britain, in France, and elsewhere, restored, he felt that reparations could not possibly cover the needs. He concluded that he was in favor of extracting the maximum in reparations from Germany but not to the extent that the people would starve.
Mr. Maisky then stated that while he appreciated the Prime Minister’s points concerning the experiences after the last war in the matter of reparations, he felt that the failure in this respect had been due not to the fact that the reparations had been too heavy but to the transfer problem which was the rock on which the reparations policy was founded. He said that he must add that the financial policies of the United States and Great Britain contributed to the German refusal to pay. He said that the Germans had never paid more than one-quarter of the total reparations figure and had received a great deal more in credits and loans. Mr. Maisky stated that the purpose of reparations in kind was to avoid the problem of transfer. He pointed out that the amount desired by the Soviet Union was equal only to 10% of the present United States budget and equal to about six months’ of the British expenditures in the war. The Soviet demands for German reparations equaled about 1 times the United States budget in peace and about 2½ times the British budget. He said, of course, there was no intention to force Germany into starvation but he pointed out that he did not feel that the Germans had a right to a higher standard of living than that of Central Europe. He said Germany can develop her light industry and agriculture and that since the Germans would have no military expenditures there was no reason why Germany could not give a modest but decent standard of living to her people.
The Prime Minister said that the question of reparations should be examined by a sub-commission and that this commission should consider the claims of other countries who bore the facts of Nazi aggression as well.
The President said that in his opinion the commission should be confined to the representatives of the Three Powers, to which Stalin agreed.
The Prime Minister said that he was in agreement, that in the first instance the representatives of the three major powers should consider the question.
Marshal Stalin said he felt that the commission could accomplish nothing unless it was given general directives from this Conference. He said he felt that the commission composed of the representatives of the three principal Allies must work on the basis that these Powers had contributed most to the common victory and should be given priority in the matter of reparations. He said that although the United States did not need machine tools, she might well need raw materials which she could receive from Germany. He mentioned that the United States would take over German property in the United States as a part of her share.
The President expressed agreement with this view.
Marshal Stalin continued that in calculating German capabilities, Germany’s post-war resources should be also taken into consideration. Then all factories and farms would work not for war but for peace. He repeated that the Three Powers who had made the most sacrifices and had been the organizers of victory should have first claim on reparations. He stated that he did not include France among these powers since she had suffered less than Belgium, Yugoslavia, or Poland.
The Prime Minister pointed out that the Allies had done a great deal of the damage in France.
Marshal Stalin replied that France could not expect to get reparations from the Allies. He said that he respected France but that he could not ignore the truth and that at the present moment France only had eight divisions in the war, Yugoslavia twelve and the Lublin Government of the Poles thirteen.
It was then agreed that the question of the main directives to a commission on reparations which would sit in Moscow would be referred to the Foreign Ministers who would report back to the Conference. It was agreed that the next meeting would be 4:00 p.m. tomorrow, February 6, and that the questions of Dumbarton Oaks and Poland would be considered.