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.