A Decade of American Foreign Policy 1941-1949
Fourth Meeting of the Council of Foreign Ministers, Moscow


Report by Secretary Marshall, April 28, 1947

Tonight I hope to make clearly understandable the fundamental nature of the issues discussed at the Moscow Conference of Foreign Ministers.

This Conference dealt with the very heart of the peace for which we are struggling. It dealt with the vital center of Europe-Germany end Austria-an area of large and skilled population, of great resources and industrial plants, an area which has twice in recent times brought the world to the brink of disaster. In the Moscow negotiations all the disagreements which were so evident during the conferences regarding the Italian and Balkan treaties came into sharp focus and remained in effect unsolved.

Problems which bear directly on the future of our civilization cannot be disposed of by general talk or vague formulae-by what Lincoln called "pernicious abstractions". They require concrete solutions for definite and extremely complicated questions-questions which have to do with boundaries, with power to prevent military aggression, with people who have bitter memories, with the production and control of things we high are essential to the lives of millions of people. You have been kept well informed by the press and radio of the daily activities of the Council, and much of what I have so say may seem repetitious. But the extremely complicated nature of the three major issues we considered makes it appear desirable for me to report in some detail the problems as I saw them in my meetings at the Conference table.

There was a reasonable possibility, we had hoped a probability, of completing in Moscow a peace treaty for Austria and a four-power pact to bind together our four governments to guarantee the demilitarization of Germany. As for the German peace treaty and related but more current German problems, we had hoped to reach agreement OI1 a directive for the guidance of our deputies in their work preparatory to the next conference.

In a statement such as this, it is not practicable to discuss the numerous issues which continued in disagreement at the Conference. It will suffice, I think. to call attention to the fundamental problems whose solution would probably lead to the quick adjustment of many other differences.


It is important to an understanding of the Conference that the complex character of the problems should be understood, together with their immediate effect on the people of Europe in the coming months. To cite a single example, more coal is most urgently needed throughout Europe for factories, for utilities for railroads, and for the people in their homes. More coal for Allied countries cannot be mined and delivered until the damaged mines, mine machinery, railroad communications and like facilities are rehabilitated. This rehabilitation, however, depends on more steel, and more steel depends on turn on more coal for steel making. Therefore, and this is the point to be kept in mind, while the necessary rehabilitation is in progress, less coal would be available in the immediate future for the neighboring Allied states

But less coal means less employment for labor and a consequent delay in the production of goods for export to bring money for the purchase of food and necessities. Therefore, the delay necessary to permit rehabilitation of the mines so vitally affects France that the settlement of this matter has become for her a critical issue. All neighboring states and Great Britain and the Soviet Union are directly affected in various ways since coal is required for German production of goods for export sufficient to enable her to buy the necessary imports of foods, et cetera, for much of which the United States is now providing the funds.

Moreover, in the background of this coal issue, which is directly related to steel production, is the important consideration of the buildup of heavy industry in Germany, which could later again become a threat to the peace of the world. I cite this single example to illustrate: the complications which are involved in these negotiations.


The Allied Control Council in Berlin presented a detailed report of the many problems concerned with the political, military, economic, and financial situation under the present military government of Germany. In connection with these matters, the Ministers considered the form and scope of the provisional political organization for Germany and the procedure to be followed in the preparation of the German peace treaty.

The German negotiations involved not only the security of Europe and the world but the prosperity of all of Europe. While our mission was to consider the terms of a treaty to operate over a long term of years, we were faced with immediate issues which vitally concerned the impoverished and suffering people of Europe who are crying for help, for coal, for food, and for most of the necessities of life, and the majority of whom are bitterly disposed towards the Germany that brought about this disastrous situation. The issues also vitally concern the people of Britain and the United States who cannot continue to pour out hundreds of millions of dollars for Germany because current measures were not being taken to terminate expeditiously the necessity for such appropriations.

The critical and fundamental German problems to which I shall: confine myself are: (a) the limits to the powers of the central government; (I) the character of the economic system and its relation to all of Europe; (c) the character and extent of reparations; (d) the boundaries for the German state; and (e) the manner in which all Allied states at war with Germany are represented in the drafting and confirmation of the treaty.

All the members of the Council of Foreign Ministers are in apparent agreement as to the establishment of a German state on a self-supporting, democratic basis, with limitations imposed to prevent the reestablishment of military power.


This issue of the degree of centralization of the future German state is of greatest importance. Excessive concentration of power is peculiarly dangerous in a country like Germany which has no strong traditions regarding the rights of the individual and the rights of the community to control the exercise of governmental power. The Soviet Union appears to favor a strong central government. The United States and United Kingdom are opposed to such a government' because they think it could be too readily converted to the domination of a regime similar to the Nazis. They favor a central government of carefully limited powers, all other powers being reserved to the states, or lander as they are called in Germany. The French are willing to agree only to very limited responsibilities for the central government. They fear a repetition of the seizure of power over the whole of Germany carried out by the Hitler regime in 1933.

Under ordinary circumstances there are always strong and differing points of view regarding the character of a governmental reorganization. In this case there are great and justifiable fears regarding the resurrection of German military power, and concern over expressed or concealed desires for quite other reasons.


Regarding the character of the German economic system and its relation to all of Europe, the disagreements are even more serious and difficult of adjustment. German economy at the present time is crippled by the fact that there is no unity of action, and the rehabilitation of Germany to the point where she is self-supporting demands immediate decision.

There is a declared agreement in the desire for economic unity in Germany, but when it comes to the actual terms to regulate such unity there are wide and critical differences. One of the most serious difficulties encountered in the effort to secure economic unity has been the fact that the Soviet-occupied zone has operated practically without regard to the other zones and has made few if any reports of what has been occurring in that zone. There has been little or no disposition to proceed on a basis of reciprocity, and there has been a refusal to disclose the availability of foodstuffs and the degree or character of reparations taken out of this zone.

This unwillingness of the Soviet authorities to cooperate in establishing a balanced economy for Germany as agreed upon at Potsdam has been the most serious check on the development of a self-supporting Germany and a Germany capable of providing coal and other necessities for the neighboring states who have always been dependent on Germany for these items. After long and futile efforts to secure a working accord in this matter, the British and American zones were combined for the improvement of the economic situation, meaning the free movement of excess supplies or produce available in one zone to another where there is a shortage. Our continuing invitation to the French and Soviets to join in the arrangement still exists. This merger is bitterly attacked by the Soviet authorities as a breach of the Potsdam Agreement and as a first step toward the dismemberment of Germany, ignoring the plain fact that their refusal to carry out that agreement was the sole cause of the merger. It is difficult to regard their attacks as anything but propaganda designed to divert attention from the Soviet failure to implement the economic unity agreed at Potsdam. Certainly some progress towards economic unity in Germany is better than none.

The character of the control over the Ruhr industrial center, the greatest concentration of coal and of heavy industries in Europe, continues a matter of debate. It cannot be decided merely for the purpose of reaching an agreement. Vitally important considerations and for consequences are involved.


The question of reparations is of critical importance as it affects almost every other question under discussion. This issue naturally makes a tremendous appeal to the people of the Allied states who suffered the terrors of German military occupation and the destruction of their cities and villages.

The results of the Versailles Treaty of 1919 regarding payment of reparations on a basis of dollars, and the difficulties encountered by the Reparations Commission appointed after Yalta in agreeing upon the dollar evaluation of reparations in kind convinced President Truman and his advisers considering the question at Potsdam that some other basis for determining reparations should be adopted if endless friction and bitterness were to be avoided in future years. They succeeded in getting agreement to the principle of reparations to be rendered out of capital assets-that is, the transfer of German plants, machinery, et cetera, to the Allied powers concerned.

It developed at the Moscow Conference that the Soviet officials flatly disagreed with President Truman's and Mr. Byrnes' understanding of the written terms of this agreement. The British have much the same view of this matter as the United States.

We believe that no reparations from current production were contemplated by the Potsdam Agreement. The Soviets strongly oppose this view. They hold that the previous discussions and agreements at Yalta authorize the taking of billions of dollars in reparations out of current production. This would mean that a substantial portion of the daily production of German factories would be levied on for reparation payments, which in turn would mean that the recovery of Germany sufficiently to be self-supporting would be long delayed. It would also mean that the plan and the hope of our Government, that Germany's economic recovery by the end of three years would permit the termination of American appropriations for the support of the German inhabitants of our zone, could not be realized.

The issue is one of great complications, for which agreement must be found in order to administer Germany as an economic whole as the four powers claim that they wish to do.

There is, however, general agreement among the Allies that the matter of the factories and equipment to be removed from Germany as reparations should be reexamined. They recognize the fact that a too drastic reduction in Germany's industrial set-up will not only make it difficult for Germany to become self-supporting but will retard the economic recovery of Europe. The United States has indicated that it would be willing to study the possibility of a limited amount of reparations from current production to compensate for plants, previously scheduled to he removed as reparations to various Allied countries, which it now appears should be left in Germany; it being understood that deliveries from current production are not to increase tile financial burden of the occupying powers or to retard the repayment to them of the advances they have made to keep the German economy from collapsing. The Soviet Government has made no response to this suggestion.


The issue regarding boundaries to be established for Germany presents a serious disagreement and another example of complete disagreement as to the meaning of the pronouncement on this subject by the heads of the three powers. In the rapid advance of the Soviet armies in the final phase of the war, millions of Germans in eastern Germany fled to the west of the Oder River. The Soviet armies, prior to Potsdam, had placed Poles in charge of this area largely evacuated by the German population. That was the situation that confronted President Truman at Potsdam. Under the existing circumstances, the President accepted the situation for the time being with the agreed three-power statement, "The three heads of government reaffirm their opinion that the final delimitation of the western frontier of Poland should await the peace settlement."

The Soviet Foreign Minister now states that a final agreement on the frontier between Germany and Poland was reached at Potsdam, and the expression I have just quoted merely referred to the formal confirmation of the already agreed upon frontier at the peace settlement, thus leaving only technical delimitation to be considered.

The United States Government recognized the commitment made at Yalta to give fair compensation to Poland in the west for the territory east of the Curzon Line incorporated into the Soviet Union. But the perpetuation of the present temporary line between Germany and Poland would deprive Germany of territory which before the war provided more than a fifth of the foodstuffs on which the German population depended. It is clear that in any event Germany will be obliged to support, within much restricted boundaries, not only her pre-war population but a considerable number of Germans from eastern Europe. To a certain extent this situation is unavoidable, but we must not agree to its aggravation. We do not want Poland to be left with less resources than she had before the war. She is entitled to more, but it will not help Poland to give her frontiers which will probably create difficulties for her in the future. Wherever the frontiers are drawn, they should not constitute barriers to trade and commerce upon which the well-being of Europe is dependent. We must look toward a future where a democratic Poland and a democratic Germany will be good neighbors.


There is disagreement regarding the manner in which the Allied powers at war with Germany are to participate in the drafting and confirmation of the German peace treaty. There are 51 states involved. Of these, in addition to the four principal Allied powers, 18 were directly engaged in the fighting, some of course to a much greater extent than others. It is the position of the United States that all Allied states at war with Germany should be given an opportunity to participate to some degree in the drafting and in the making of the peace treaty, but we recognize that there would be very practical difficulties if not impossibilities in attempting to draft a treaty with 51 nations participating equally at all stages. Therefore, the United States Government has endeavored to secure agreement on a method which involves two different procedures, depending on whether or not the state concerned actually participated in the fighting. But all would have an opportunity to present their views, and rebut other views, and all would sit in the peace conference to adopt a treaty.

It is difficult to get the agreement of the countries that have suffered the horrors of German occupation and were involved in heavy losses in hard fighting to accept participation in the determination of the treaty terms by countries who suffered no losses in men or material and were remote from the fighting. The United States, however, regards it as imperative that all the states who were at war with Germany should have some voice in the settlement imposed on Germany.


The proposal for the Four Power Pact was advanced by the United States Government a year ago. It was our hope that the prompt acceptance of this simple pact ensuring in advance of the detailed German peace settlement that the United States would actively cooperate to prevent the rearmament of Germany would eliminate fears as to the future and would facilitate the making of a peace suitable to Europe's present and future needs. It was our hope that such a commitment by the United States would relieve the fear of the other European powers that the United States would repeat its actions following the first World War, insisting on various terms for the peace settlement and then withdrawing from a position of any responsibility for their enforcement. It was thought that the compact of the four powers to guarantee the continued demilitarization of Germany would reassure the world that we were in complete accord in our intention to secure the peace of Europe.

However, the Soviet Government met our proposition with a series of amendments which would have completely changed the character of the pact, making it in effect a complicated peace treaty, and including in the amendments most of the points regarding the German problem concerning which there was, as I have pointed outs serious disagreement. I was forced to the conclusion by this procedure that the Soviet Government either did not desire such a pact or was following a course calculated to delay any immediate prospect of its adoption. Whether or not an agreement can finally be reached remains to be seen, but the United States, I think, should adhere to its present position and insist that the pact be kept simple and confined to its one basic purpose-to keep Germany incapable of waging war.


The negotiations regarding the Austrian treaty resulted in agreement on a l but a few points, but these were basic and of fundamental importance. The Soviet Union favors and the other governments oppose the payment of reparations and the cession of Carinthia to Yugoslavia.

But the Soviet Government attached much more importance to its demand that the German assets in Austria which are to be hers by the terms of the Potsdam Agreement should include those assets which the other three powers consider to have been taken from Austria and the citizens of the United Nations by force or duress by Hitler and his Nazi government following the taking over of Austria by military force in March 1938. The Soviet Government refused to consider the word duress, which in the opinion of the other three powers would be the critical basis for determining what property, that is, business, factories, land, forests, et cetera, was truly German property and not the result of seizures by terroristic procedure, intimidation, fake business acquisition, and so forth. The Soviet Union also refused to consider any process of mediation to settle the disputes that are bound to arise in such circumstances, nor would they clearly agree to have such property as they receive as German assets subject to Austrian law in the same manner as other foreign investments are subject to Austrian law.

The acceptance of the Soviet position would mean that such a large portion of Austrian economy would be removed from her legal control that Austrian chances of surviving as an independent self-supporting state would be dubious. She would in effect be but a puppet state.

All efforts to find a compromise solution were unavailing. The United States, in my opinion, could not commit itself to a treaty which involved such manifest injustices and, what is equally important, would create an Austria so weak and helpless as to be the source of great danger in the future. In the final session of the Conference, it was agreed to appoint a Commission to meet in Vienna May 12th to reconsider our disagreements and to have a Committee of Experts examine into the question of the German assets in Austria. Certainly prompt action on the Austrian treaty is necessary to fulfill our commitment to recognize Austria as a free and independent state and to relieve her from the burdens of occupation.


Complicated as these issues are, there runs through them a pattern as to the character and control of central Europe to be established. The Foreign Ministers agreed that their task was to lay the foundations of a central government for Germany, to bring about the economic unity of Germany essential for its own existence as well as for European recovery, to establish workable boundaries, and to set up a guaranteed control through a four-power treaty. Austria was to be promptly relieved of occupation burdens and treated as a liberated and independent country.

Agreement was made impossible at Moscow because, in our view, the Soviet Union insisted upon proposals which would have established in Germany a centralized government, adapted to the seizure of absolute control of a country which would be doomed economically through inadequate area and excessive population, and would be mortgaged to turn over a large part of its production as reparations, principally to the Soviet Union. In another form the same mortgage upon Austria was claimed by the Soviet Delegation.

Such a plan, in the opinion of the United States Delegation, not only involved indefinite American subsidy, but could result only in a deteriorating economic life in Germany and Europe and the inevitable emergence of dictatorship and strife.

Freedom of information for which our Government stands inevitably involves appeals to public opinion. But at Moscow propaganda appeals to passion and prejudice appeared to take the place of appeals to reason and understanding. Charges were made by the Soviet Delegation and interpretation given the Potsdam and other agreements, which varied completely from the facts as understood or as factually known by the American Delegation.

There was naturally much uncertainty regarding the real intention or motives of the various proposals submitted or of the objections taken to the proposals. This is inevitable in any international negotiation.

However, despite the disagreements referred to and the difficulties encountered, possibly greater progress towards final settlement was made than is realized.

The critical differences were for the first time brought into the light and now stand clearly defined so that future negotiations can start with a knowledge of exactly what the issues are that must be settled. The Deputies now understand the precise views of each government on the various issues discussed. With that they can possibly resolve some differences and surely can further clarify the problems by a studied presentation of the state of agreement and disagreement. That is the best that can be hoped for in the next few months. It marks some progress, however painfully slow. These issues are matters of vast importance to the lives of the people of Europe and to the future course of world history.. We must not compromise on great principles in order to achieve agreement for agreement's sake. Also, we must sincerely try to understand the point of view of those with whom we differ.

In this connection, I think it proper to refer to a portion of a statement made to me by Generalissimo Stalin. He said with reference to the (conference, that these were only the first skirmishes and brushes of reconnaissance forces on this question. Differences had occurred in the past on other questions, and as a rule, after people had exhausted themselves in dispute, they then recognized the necessity of compromise. It was possible that no great success would be achieved at this session, but he thought that compromises were possible on all the main questions, including demilitarization, political structure of Germany, reparations and economic unity. It was necessary to have patience and not become pessimistic.

I sincerely hope that the Generalissimo is correct in the view he expressed and that it implies a greater spirit of cooperation by the Soviet Delegation in future conferences. But we cannot ignore the factor of time involved here. The recovery of Europe has been far slower than had been expected. Disintegrating forces are becoming evident. The patient is sinking while the doctors deliberate. So I believe that action cannot await compromise through exhaustion. New issues arise daily. Whatever action is possible to meet these pressing problems must be taken without delay.

Finally, I should comment on one aspect of the matter which is of transcendent importance to all our people. While I did not have the benefit, as did Mr. Byrnes, of the presence of the two leading members of the Senate Foreign Relations Committee, I did have the invaluable assistance of Mr. Dulles, a distinguished representative of the Republican party as well as a recognized specialist in foreign relations and in the processes of international negotiations and treaty-making. As a matter of fact, the bipartisan character of the American attitude in the present conduct of foreign affairs was clearly indicated by the strong and successful leadership displayed in the Senate during the period of this Conference by Senators Vandenberg and Connally in the debate over a development of our foreign policy of momentous importance to the American people. The fact that there was such evident unity of purpose in Washington was of incalculable assistance to me in Moscow. The state of the world today and the position of the United States make mandatory, in my opinion, a unity of action -on the part of the American people. It is for that reason that I have gone into such lengthy detail in reporting my views on the conference.

127 Wall Street, New Haven, CT 06511.