384 Embassy in Washington to Department of External Affairs

Cablegram 525 WASHINGTON, 19 April 1947, 4.16 p.m.

IMMEDIATE

FEC.105.

REPARATIONS 1. Following are some comments by Plimsoll. [1] The Ambassador has been unable to consider them owing to his absence in New York.

2. Reference my FEC.101. [2] American figures seem vulnerable on two grounds:

A. American figure for U.S.S.R. is too small. Russia is unlikely to accept less than 5 per cent. Russia's claim would be based on her contribution to war in maintaining large Army in Siberia and in holding Germans in the west. Against this are- (a) Russian European losses were met by reparations from Germany, (b) Russia removed substantial assets from Manchuria, claiming it was 'war booty', (c) Yalta Agreement allowed Russia to obtain such territories as Sakhalin.

In discussion, Soviet will doubtless attempt to exclude these three matters from consideration on the ground that they lie outside the terms of reference of F.E.C. In private talks, State Department officials concede that Russia will probably, in the end, be awarded more than the American figure of 2 per cent, but consider that for internal political reasons, United States of America could not take the initiative in proposing higher U.S.S.R.

share.

B. American figures for devastated countries like the Netherlands and India are too small. These countries will certainly seek considerably more and United States of America and Australian shares would be the chief targets of attack. United Kingdom will probably think that 8 per cent is not sufficient for Britain as well as Burma, Malaya, etc. American proposal will be subject to widespread criticism on the ground that it does not give enough weight to devastation.

3. Preliminary Canadian views on reparations shares at official level are-China 35 per cent, U.S.A.20,United Kingdom 12, Netherlands 6, India and Australia 5 or 6 each, New Zealand and Canada 1 per cent each, U.S.S.R. 3 (confidential). Manila wireless report states Philippines will claim 11 per cent. New Zealand is claiming 2 per cent.

4. Official United Kingdom views not known in Washington, but- (A) Indications are that United Kingdom does not wish to give China more than 15 per cent or 20 per cent because of large quantities of Japanese external assets such as textile mills acquired by China. This attitude on China seems unrealistic, unlikely to prevail, and likely to incur uselessly Chinese hostility.

(B) Foreign Office in personal unofficial letter to Sansom [3] has also indicated opposition to United States proposal in C1-211 that a recipient be able to give its share away to other countries.

This United Kingdom view is completely unrealistic. United States of America intends to claim big share for prestige reasons, and to distribute assets so received to Korea, China and Philippines. Two other veto powers, China and Russia are likely to support United States of America.

(C) United Kingdom does not seem inclined to give Russia more than 3 per cent.

5. Australia's interests seem to require the following- (A) Maximum support for and co-ordination with United States of America. I am convinced that no country except United States of America is prepared to award Australia as much as 8 per cent.

Except when our vital interests are affected, we should offer general support of United States of America and not raise technical objections. We should therefore support them on disposal of shares (Paragraph 4(B) above) and submission of lists (Paragraph 6(B) below).

(B) Australia should not lead or participate in any drive against Russia. If, as seems probable, most countries try to keep Russian share very low, Australia should refrain from joining this movement. We should consider giving Russia 5 per cent, she will probably claim at least 10 per cent. If Australia adopts reasonable position towards Russia on reparations, chances may increase of Russian support for full participation by Australia in peace settlement.

(C) On political grounds Australia should support Indian claims for higher share. However this support must be given in such a way as not to be at the expense of Australia's share. India appears to be obtaining remarkably little support so far from other countries for a substantial share.

(D) Australia should support a reasonable figure for France, say 3 per cent. United States of America is hostile to French record in Indo-China, which is regarded as reactionary, and to French role in the war. However, French have constantly supported Australia at F.E.C. since its inception and their support at peace settlement would be useful. French friendliness here to Australia has been based partly on warm regard for Dr. Evatt personally, because of his earlier assistance to French interests in the Pacific, particularly in New Caledonia. This cordiality should be maintained for the Peace Conference.

(E) Australia should attempt to mobilize British Commonwealth support for her own claim.

6. United States of America strongly desires other countries to submit lists of eleven percentages on 28th April. Feels that United States of America would be inviting hostility if only list tabled were by them since dissatisfied claimants would concentrate their animosity on United States of America. If no other major country is willing to table list, United States of America might refuse to do so. (You know from my FEC.101 that Australia is only country which knows United States percentages). I strongly recommend that Australia announce that it is prepared to table list if United States of America does so. This will offer two advantages- (A) Maintain prestige of Australia as one of the leaders in F.E.C.

and Pacific generally, (B) Demonstrate our willingness to offer practical assistance to United States of America in present very difficult situation, thus helping to stiffen United States willingness to give Australia a share of reparations second only to United States of America itself and China.

7. Following is submitted as sort of allocation that might be proposed. United States of America 27, China 25, Asian-Pacific Group of British Commonwealth (Australia, United Kingdom, India and New Zealand) 25, all others 23. The last group might be divided into U.S.S.R.

5, Philippines 8, Netherlands 5 1/2, France 3, Canada 1, Non- F.E.C. Members 1/2. This allocation might meet criticism within British Commonwealth on the ground that 25 per cent is not enough, but it is unlikely that more can be obtained so long as United States of America desires big allocation for itself. Any increase in United Kingdom or Indian share in United States of America figures would be partly at expense of Australia's share.

8. Co-operation within F.E.C. would of course be without prejudice to our view that Reparations settlement would be better at Peace Conference. But every other country desires a further attempt within F.E.C., and it is in our interests to co-operate. It may well be that F.E.C. will fail to secure agreement, and that Peace Conference will be final recourse. However, even in that case settlement will have been shaped to some degree by discussions within F.E.C., and we should take full part. We are in peculiarly good position to influence this discussion by virtue of our Chairmanship of Reparations Committee and our intimate contacts with Americans working here on reparations. Moreover, if United States of America feels obliged later to issue further interim directives on shares, it is to our advantage that United States of America remain of the opinion that Australia is entitled to a big share.

9. Would appreciate your preliminary reactions to the foregoing and your final view on tabling of shares by the end of the coming week.

1 The comments followed a decision by the Reparations Committee of the FEC that each member country should submit the percentage share of Japanese industrial assets it desired as reparations. The Embassy in Washington had advised, on 14 April, that Australia was not likely to obtain more than 7%, 'but should probably claim more at start'.

2 Cablegram 518, FEC 101, of 15 April, gave the following official US percentages for reparations shares of industrial men in Japan:

Australia, 8%; Canada, 1 1/2% China, 27%; France, 1%; India, 4%;

Netherlands, 4%; New Zealand, 1 1/2%; Philippines, 8%; United Kingdom, 8%; United States, 34%; the Soviet Union, 2% and all others 1%. These figures were to be used as the basis of discussion with other claimants, but were not to be disclosed.

They had been obtained by the Embassy in Washington in terms of strictest confidence.

3 Sir George Sansom, UK Minister to the United States.

[AA : A1838, 479/10, ii]