A constructed Peace The Making of the European Settlement, 1945-1963

It was in the context of what was going on in Iran and Turkey that Truman now reinterpreted what had happened the previous year in eastern Europe. Everything, it seemed, was part of the same pattern. The Russians had been "high handed" and "arbitrary" in Poland and elsewhere in the region; their basic tactic was to confront the West with the fait accompli. Soviet policy in Poland, Rumania and Bulgaria now became the first count in Truman's indictment of the USSR. Truman's attitude had shifted. At Potsdam, he had not liked the way Poland, with Soviet backing, had extended her frontier west to the Oder-Neisse line, but given what the Poles had suffered at the hands of Germany during the war, he could understand why they had annexed that territory. But now, in January 1946, the seizure of that part of Germany was a "high handed outrage," pure and simple.¹²³

By early 1946, Byrnes had also turned against the Soviets. Was this simply because the political climate within the United States had shifted radically, and that Byrnes, who was personally inclined to pursue a policy of accommodation, had been forced by a sharp presidential intervention to change course and take a much tougher line? After the Moscow foreign ministers' meeting in December, where Byrnes had agreed to recognize the Communist governments in Bulgaria and Rumania, Truman in fact did write a letter to his Secretary of State demanding that America stop "babying the Russians." America, he wrote, should not "play compromise any longer." In particular--and this was a direct slap at the policy Byrnes had pursued at Moscow in December--the U.S. government "should refuse to recognize Rumania and Bulgaria until they comply with our requirements."¹²⁴

This letter was never sent, and it is highly unlikely that it was even read to Byrnes when he met with Truman on January 5.¹²⁵ Truman, as was his custom, was almost certainly just blowing off steam.¹²⁶ He was upset with Byrnes for not keeping him informed and for not respecting his authority as president. But their policy differences were not nearly as great as this letter might suggest. Truman had not been deeply involved with foreign policy in 1945, and had more or less let Byrnes run things. And Byrnes had not gone out of his way to consult with Truman. As a result, the president perhaps did not fully understand what Byrnes had been up to--that the recognition of Communist regimes in eastern Europe was not a simple act of appeasement, but was rather part of a policy of drawing a clear line between east and west. Byrnes was perhaps able to explain things to Truman, because the president soon reversed himself on the question of recognizing the Communist regimes in the Balkans; Rumania was recognized the very next month.

Byrnes, in fact, had never taken what could be called a pro-Soviet line in late 1945. At that time, well before American opinion as a whole had shifted, the Secretary of State had taken a tougher line on a number of key issues than various individuals who would later become leading Cold Warriors. Dean Acheson, for example, then Under Secretary of State, was in favor of sharing America's nuclear secrets with the USSR. Acheson could not "conceive of a world," he said at a high level meeting on September 21, "in which we were hoarders of military secrets from our Allies, particularly this great Ally upon our cooperation with whom rests the future peace of the world." But Byrnes was dead set against the idea.¹²⁷

In early 1946, Byrnes certainly did not give the impression of a man who had adopted the new line reluctantly, solely for domestic political reasons. When Churchill came over in March to deliver his famous "Iron Curtain" speech, one of the opening shots in the Cold War, he showed Byrnes the text in advance. The Secretary was pleased and "excited," and the two men had a long talk. Churchill for his part was delighted by what he had learned. There was "no doubt," he wrote Attlee, that the people at the top of the American government were "deeply distressed by the way they are being treated by Russia."¹²⁸

The very same day that Churchill wrote that letter, Byrnes was up in arms over Soviet actions in Iran. After receiving some alarming reports about what the Soviets were doing there, Byrnes pounded one fist into the other and declared: "Now we'll give it to them with both barrels."¹²⁹ Truman at this point seemed ready to contemplate war over Iran.¹³⁰ But the USSR drew back and the crisis soon passed.

The Soviets also began to draw in their horns in the conflict with Turkey--again, as America deepened her involvement in that dispute. The Turkish affair climaxed in August 1946. Once again it was clear--indeed, even clearer than in March--that Truman was ultimately willing to risk war with Russia.¹³¹ In January 1945, the U.S. Joint Chiefs of Staff had thought that it was "in the highest degree unlikely" that the United States and the Soviet Union would ever be aligned against each other.¹³² Now war was accepted as a real possibility. America had come a long way in little more than a year.

The immediate effect of the Iranian and Turkish crises was to sharpen the line of demarcation between east and west. Each side had tested and was coming to terms with a new status quo. The western powers had written off eastern Europe. The Russians, for their part, withdrew from Iran, and their pressure on Turkey gradually subsided. Their less serious claims--about a trusteeship in Libya, for example, and a zone of occupation in Japan--were also dropped.

But if this was a spheres of influence settlement, it was very different from the sort of arrangement Byrnes and Stalin had contemplated in 1945. There was still no wish to commit American power in any serious way to the rolling back of Soviet influence over eastern Europe. America would never risk war, for example, to prevent the Communists from getting control over Czechoslovakia; even the threat of an American intervention would never be used to neutralize the threat of a Soviet intervention there. But the line would be drawn around the periphery of the area that had been consigned to the Soviets, and there was a growing willingness to defend that line if necessary with military force.¹³³

This policy of containment, as it came to be called, was adopted at the beginning of 1946. It was adopted even before the term was coined, certainly well before the rationale for the policy was developed by its chief theoretician, George Kennan.¹³⁴ This was a policy which rested on military power--on, as Kennan was to put it in a famous article, the "adroit and vigilant application of counter-force at a series of constantly shifting geographical and political points."¹³⁵ The Soviet Union was an expansionist power, and it was coming to be taken as axiomatic that only countervailing power could keep her in line. The world was obviously going to be divided. But that had been the assumption in late 1945 as well. The difference now was that this division was no longer seen as resting on mutual consent; it was no longer regarded as something both sides could accept in a relatively relaxed way. The Soviet Union posed a military threat, and only the power of the West kept her at bay. Power--the balance of power between east and west--was no longer something that loomed vaguely in the background of international politics. If force was the only language the Soviets understood, then the West had to be able to speak that same language and make it clear that it could only be pushed so far.

These new attitudes were to lead to a major shift in America's German policy in 1946.

At Potsdam, Byrnes had based his policy on the premise that Germany was going to be divided between east and west. But Byrnes's Potsdam policy was never actually implemented. Even during the period immediately after the conference, when U.S.-Soviet relations were relatively good, the United States did not press for the sort of zonally-oriented policy Byrnes had had in mind. Instead, most American officials were not privy to the records of the top-level discussions at which the real Potsdam understandings were reached and took the Potsdam Protocol at face value. That formal agreement had specifically stated that Germany was to be "treated as an economic unit," and had called for "common policies" in seven specified areas including reparation and "import and export programs for Germany as a whole."

Thus the basic idea of the Byrnes plan was to put reparation squarely on a zonal basis. But as soon as the Potsdam conference was over, American officials took exactly the opposite line. Edwin Pauley, the top U.S. reparation official, for example, explained the meaning of the Potsdam reparation settlement to the American military authorities in Germany on August 11, 1945. The Allied Control Council, he said, was to "make every attempt to arrange for reparation removals throughout Germany on a uniform basis as to type, kind, and extent of such removals."¹³⁶ And the State Department in mid-August endorsed the "principle that proceeds of exports from all zones should be pooled to pay for imports"--even though the paragraph in the Potsdam Protocol it cited was one which Byrnes had wanted to drop entirely and which American representatives at Potsdam had succeeded in watering down precisely in order to avoid giving it this meaning.¹³⁷

And then there was the question of whether there was to be any limit to what the Soviets could extract from their zone. It was obvious that if there were no ceiling, Germany could not be dealt with as a single economic area. At Potsdam, when Molotov had raised the point, Byrnes had answered that the Soviets could do as they pleased in eastern Germany. The clear implication then was that Germany would not be run as a unit, that each side would run things in its part of Germany and would not get involved in managing the economy of the other part. In early 1946, the basic point was the same, but the logic was rearranged: if there were no limit, Germany could not be run as a unit; the Potsdam agreement, however, provided that Germany was to be administered on a unitary basis; therefore, given the American insistence on minimizing the all-German deficit, a ceiling had to be placed on what the Soviets could take from their zone.¹³⁸ This amounted to a complete reversal of Byrnes's policy at Potsdam. American representatives even tried to back out of the arrangement dividing up Germany's foreign assets on an east-west basis. This idea, in fact, came from President Truman himself, which is another piece of evidence showing that he had not been very directly involved with what Byrnes had been doing at Potsdam. Even though the provision in the Protocol was unambiguous on this point, the U.S. government now wanted to vest "title to all German assets abroad in a quadripartite commission."¹³⁹

Why did Byrnes allow this sort of thing to go on?¹⁴⁰ His basic views had obviously not changed overnight as a result of anything that the Soviets were doing. There had not been enough time for that. So if his thinking on the substantive issues had not changed, the main considerations shaping his policy after Potsdam must have been tactical in nature. And indeed it is not hard to imagine how the problem must have looked to Byrnes at the time. There were many people who disliked the idea of a spheres of influence policy. The right objected to a policy that would consign millions of people to Communist rule. Maybe nothing could be done about it, but Soviet control of half of Europe should in its view never be accepted as legitimate. The left objected to a policy of giving up on four-power rule in Germany, which meant giving up on U.S.-Soviet cooperation in general, and perhaps also giving up on the one thing that might keep the Germans under control. And then there was the Wilsonian tradition, with its vision of a world made up of unified nation-states and its distaste for the very idea of the big powers dividing up not just individual countries but even whole regions of the world in private deals.

So all sorts of arguments were mingled together. The "anti-Soviet" argument about the need to avoid an extension of Soviet power into the heart of Europe and the "pro-Soviet" argument that America should try hard to work together with the USSR both pointed toward the unitary policy. The "anti-German" argument about the need for a four-power regime to keep the Germans in line and the "pro-German" argument about the need to respect German national rights also pointed in that same direction. But the fact that the unitary policy was supported by such a hodgepodge of arguments meant that the forces arrayed behind that policy were an unstable mix. Every argument was balanced by a counter-argument that pointed in the opposite direction. Yes, it was unfortunate that millions of east Germans were subjected to Soviet rule, but western Germany at least should not be allowed to fall into Communist hands. Yes, cooperation with the Russians might in theory be the ideal solution, but in practice the best way to get along with them might be to divide Germany and let each side run things in its part of the country. And of course, while it was important to keep Germany in line, four-power unity might not be the only way to achieve this goal. A divided Germany could pose no threat to world peace. A truncated Germany, in fact, could be treated gently: it would be easier to restore political rights to a western Germany threatened by Russia and thus dependent on the western powers for protection than to a unified German state, free of foreign military forces. But this situation, where every argument was balanced by a counter-argument, meant that the unitary policy was built on sand and that in the long run it would probably collapse of its own weight.

For the time being, however, there was bound to be a good deal of opposition, from a wide variety of quarters, to a policy that explicitly looked toward a division of Germany. From Byrnes's point of view, the problems were obvious. Why confront all this opposition head on? Why run the risk of being blamed for a "defeatist" policy, for having given up on allied cooperation before he absolutely had to? As a skilled politician, Byrnes's instinct was to finesse the issue. The four-power rhetoric would not be abandoned, and the U.S. government would officially back the policy of running Germany on a unitary basis. The very realities that had convinced him that this was impractical would bring the others around soon enough, but in the meantime, as far as the world was concerned, the unitary policy would get its chance. American policy had earlier had a pronounced zonal emphasis, but from mid-August on, U.S. officials began to press very strongly--again, more strongly than anyone else--for a unitary solution to the German problem.

This certainly was the policy that General Clay now sought to implement. Clay was in charge of the American military government in Germany and he took the Potsdam Protocol as his charter. Germany, he thought, had to be run as a unit. Four power cooperation was essential. To Clay, Germany was a kind of "laboratory": what was at stake here was the ability of the allies to work together in running world affairs in general.¹⁴¹ He pushed hard in late 1945 for the establishment of centralized administrative machinery through which Germany could be run. Clay understood that the creation of an all-German administrative apparatus in such areas as transportation and finance was just a first step, and that the real test of "our ability to work effectively with the USSR" would only come later, when common policies had to be worked out for this machinery to implement.¹⁴² But it was an essential first step, and he pressed energetically for the establishment of the central administrations.

The Control Council, however, was not able to move ahead in this area. Action required unanimity, and the French said they would not agree to the creation of the central administrations until they got their way on another issue: they wanted to split the Rhineland and the Ruhr off from the rest of Germany. But this the Americans would not accept. Clay then sought to go ahead without the French and set up the administrations in the American, British and Soviet zones. But the Russians were not willing to go along with this idea. Even the British were cool to the plan. By late November 1945 it became clear that nothing would come of it.¹⁴³

So at the beginning of 1946 Clay took another tack. The reparation arrangements worked out at Potsdam would provide him with the leverage he needed to press for an all-German solution. At Potsdam, the original Byrnes reparation plan had been changed a bit to give the Russians somewhat more than what they would have gotten under Byrnes's original scheme. Not only would the Soviets be able to extract reparation from their own zone, but they were also entitled to a quarter of the industrial equipment, judged unnecessary for the German peace economy, which could be removed from the western zones. Three-fifths of those deliveries--fifteen percent of the total earmarked for reparation from western Germany--were to be exchanged for food and raw materials from the east. The rest, amounting to ten percent of the total, was to be given to the Soviets free and clear.

To determine what was available for reparation deliveries from western Germany, the level of Germany's peacetime economy therefore had to be set. A level of industry plan was thus linked to the 15/10 reparation arrangement; in order to determine how much surplus plant and equipment there was in western Germany, a plan for the German peacetime economy had to be worked out. Strictly speaking, for this purpose a level of industry plan needed to be worked out only for western Germany. If there was a political need for an all-German plan, it could have been a simple cobbling together of plans for western and eastern Germany, with only the first meant to be taken seriously. An arrangement of that sort would have been in keeping with the spirit of the Byrnes Plan. And in fact this kind of procedure was evidently considered, but ruled out, probably because of the implications about how Germany as a whole would be run.¹⁴⁴ So instead, and in a totally non-scientific way, the Control Council on March 26 reached agreement on a plan for Germany as a whole.¹⁴⁵

Clay now argued that this plan for the overall German economy presupposed that Germany would be run as a unit, and that in particular there would have to be a "common import-export program" for the country as a whole. Officially, the Soviets, like everyone else, were in favor of treating Germany as a unit, but they were now taking "a very strong position against a common import-export program"--they had in fact opposed the idea from Potsdam on--and U.S. officials wondered what their attitude really was.¹⁴⁶ What would they do if the Americans held their feet to the fire?

Clay proposed to "smoke out" the Soviet position by threatening to cut off reparations, from the American zone at least, if they did not agree to a common policy on foreign trade. The Americans made what was to become their standard argument. The amount of reparation was determined by the level of industry plan; that plan presupposed that Germany would be treated as an economic unit, and that in particular a common program on exports and imports would be worked out. If the foreign trade program was blocked, the level of industry plan was therefore no longer meaningful, and so the reparation agreements were no longer binding. And on April 8, Clay informed the other occupying powers that unless a common import-export policy was worked out, the United States would "insist" on a revision of the reparation plan. The threat was soon carried out. At a four power meeting on April 26, Clay insisted that Potsdam had to be taken as a whole. "A common import-export program," he said, "pooling all indigenous resources and the proceeds from all exports, was an essential part of Potsdam." The reparation program was "based on a common import-export program," so the failure of the Control Council to adopt a common program for German foreign trade meant that the Americans would have to suspend reparation deliveries.¹⁴⁷

The State Department took the same basic line. The suspension of reparation deliveries was to be used as a lever. The aim was to get the other occupying powers to agree to run Germany as a unit. The point of proceeding along these lines was "above all, to put Soviet protestations of loyalty to Potsdam to [a] final test."¹⁴⁸ And indeed the decision to suspend reparations had been made at the top political level for reasons of high policy: this was not a case, as is often claimed, of Clay proceeding on his own, driven by essentially local considerations. The action, it is important to note, had been authorized in advance by Secretary Byrnes himself: Byrnes had just explained to Bevin why he was allowing Clay to suspend reparations "until the problem of Germany as a whole was settled." America, he told his British counterpart, was "going to have a show-down" with the Russians over the issue.¹⁴⁹

So the Soviet Union was the primary target of the American action, and not France, as a number of scholars have alleged. Indeed, the French representatives supported Clay at the crucial April 26 meeting. The three western powers backed a paper calling for foreign trade to be managed on an all-German basis. Only the Soviets were opposed. So Russian policy had been "flushed out": the USSR was not willing, it seemed, to honor the Potsdam agreement.¹⁵⁰

This "fact" had major implications. If the Soviets would not permit foreign trade to be run on an all-German basis, that meant that the "Potsdam" policy of running Germany as a unit could not be effectively implemented. America could therefore no longer allow her hands to be tied by the Potsdam Protocol. If her partners were not living up to the agreement, then the United States should also have the right to a free hand in Germany.

This was the real meaning of the reparation stop. America was now reclaiming her freedom of action. The United States, American officials now felt, could no longer allow herself to be straitjacketed by arrangements which her partners were not respecting. If Germany was not to be run as a unit, then the U.S. government was therefore free to push ahead and get things moving in its own zone, together with any other zone that was willing to join up with it. In practice, this meant linking up with the British. The French, many U.S. officials hoped, might be brought in a bit later.

Clay, of course, would have liked to run Germany on a four power basis. But he understood from the outset that if this were not possible, then alternative arrangements, perhaps leading to a merger of the three western zones, would have to be worked out.¹⁵¹ He wanted a unified Germany, but even more than that, he wanted the situation to be clear, so that he could move ahead and put the area he was responsible for back on its feet. Things certainly could not be allowed to go on as they were. Germany was in very bad shape. Her cities were in ruins, her industries were operating at just a fraction of the prewar level. Millions of refugees from the east had moved into the western zones and needed to be taken care of. It was obvious that in one way or another, the Germans had to be led out of economic limbo and put back to work. American and British taxpayers could not be expected to go on subsidizing their zones indefinitely. The U.S. Congress certainly would not stand for it, and Clay did not want the military government to be blamed for failing to put things on the right track.¹⁵² The Germans would therefore soon have to pay their own way. Democracy, furthermore, could not take root in Germany unless the path to economic recovery was opened.¹⁵³ If this could not be done on an all-German basis--if "Potsdam," for one reason or another, was unimplementable--then America and her friends would have to proceed on a west-only basis.¹⁵⁴