by Benn Steil
Having not been party to the Potsdam accords, the French felt nothing but bitter resentment over their exclusion. Concerned mainly with annexing territory and stripping the remainder for reparations, the French sought to run their occupation zone in splendid isolation. Clay wrote an angry thirty-page memo in April 1946 stressing the grave economic and political consequences of bowing to French demands in Germany. Amputating the heavily industrialized Ruhr region, with its thirteen million inhabitants, would reduce the rest of the country to “a pastoral economy” dependent on American aid. The resulting unemployment and unrest would fuel “Communism and totalitarianism,” thereby undermining the aim of democratizing the country and obliging the United States to increase its armed presence.
The State Department argued that failure to accommodate French concerns would fuel communism in France. French Communists would use the specter of German military revival to stir popular fear and anger toward Washington. Clay, for his part, was disgusted by French security arguments for severing off the Ruhr, insisting they were based on “a prehistoric concept of warfare” that should have been buried with “the overrunning of the Maginot Line.”43 When it came to France, Clay and the State Department could agree on little beyond the belief that the other’s policies would aid communism.
The State Department’s disposition would largely prevail. The French unilaterally declared a customs barrier between the Saar and Germany in December 1946, integrating it economically with France—a first step toward annexation. An angry Clay was dissuaded from resigning only by Byrnes’ sheepish pledges of sympathy with his opposition to the move.44 Yet it had been Byrnes himself who had declared in Stuttgart in September that “The United States does not feel that it can deny to France, which has been invaded three times by Germany in 70 years, its claim to the Saar territory.”45 When it came to Germany, the State Department treated the French as a mere benign tumor and the Soviets, increasingly, a malignant one.
OVER THE COURSE OF 1946, the logical fabric of state department policy toward postwar Europe was being stretched taut. On the one side, there was the first-charge policy on German imports, such as food, which required that they be paid for before reparations were made. Since France and other liberated countries expected reparations, this policy required maximizing German export revenue by selling its output, such as coal, at market prices. The larger the German trade surplus, the more money available for reparations. On the other side, however, it was also policy to put the recovery of the liberated countries ahead of Germany’s. This policy, in contrast to the first-charge policy, encouraged the United States to underprice German exports so as to keep down import costs for its allies.
Underpricing won out, resulting in a substantial German trade deficit that had to be covered by the War Department’s budget, fueling tensions with the State Department. The American taxpayer ultimately bore the cost, as it had in the 1920s: financing German recovery by handing to others the means by which Germany could otherwise finance itself. And “in the mind of the public,” Clay complained to State, the spending in Germany amounted to “feeding the enemy.”46
The most logical way to address the problem would have been to increase German industrial production. But doing so would have contravened U.S. occupation policy, which held that production should be restricted to prevent Germany reemerging as a military power. By the summer of 1946, the administration saw that this policy could only protect Europe from Germany by turning it into a permanent ward of the U.S. military, which it considered unacceptable. It therefore shifted policy toward Germany in a direction Clay had been urging since April—one that would alter American relations with both western Europe and the Soviet Union.
The State Department set out to merge the American, British, and French occupation zones of Germany (see Map 2). The American zone, Kennan noted, “had never been economically self-supporting in modern times.”47 It contained less than a fifth of German manufacturing capacity for domestic production and industrial exports.48 And so on July 30, Byrnes secured Bevin’s agreement to fuse the industrialized British zone with the more pastoral American one. This would give the United States a direct share in control over the Ruhr, a region critical to the future political as well as economic landscape of Europe. For the British, who were spending $80 million a year to support their occupation—$50 million more than they were extracting in reparations, even as they imposed bread rationing at home—the arrangement promised to slow the drain on their dwindling foreign exchange reserves.
In September 1946, having made no progress in advancing interzone cooperation with either the French or the Russians, Byrnes announced in Stuttgart that the Americans would no longer hold German recovery hostage to the “failure of the Allied Control Council” to carry out the Potsdam provisions on economic unity. “Zonal barriers,” he said, “should be completely obliterated so far as the economic life and activity in Germany are concerned.”49
The Anglo-American bizone came into effect on New Year’s Day 1947. In advocating for the fusion, Clay believed that “if the Russians . . . saw that we were successful [in generating] immediate and rapid recovery . . . they would want to become part of it.”50 Yet Stalin saw in Bizonia the embryo of a capitalist, American-dominated West German state over which he would have no control. He would therefore oppose it bitterly. It is ironic that Clay, who at the time of Marshall’s meetings with Molotov was the most powerful advocate of cooperation with Moscow, was also, through his role in suspending reparations and creating Bizonia, the man most responsible for the rupture in U.S.-Soviet relations.
NOW, HERE IN MOSCOW IN march 1947, Marshall was trying to convince Molotov that if Germany could produce more, then everyone, including Russia, would benefit. Molotov could not see it this way.
His view should not have surprised Marshall. After all, FDR and Morgenthau had bludgeoned Churchill into accepting precisely the opposite logic a mere two and a half years prior at a military conference in Quebec—that Germany needed to be stripped of productive capacity to prevent a third world war. Uncomfortably for Marshall, Paris, too, continued to see a revived Germany as an intolerable danger, a stance he disparaged as “outmoded and unrealistic.”51
Bidault, personally, agreed with Marshall. “To keep the German enemy of 1945 helpless and in perpetual subjection was what we had tried to do in 1918,” he observed, “and failed.”52 He and his government were also allied with the United States over the desirability of a decentralized Germany, which would mitigate the country’s threat to French security. But his government was also committed to securing reparations and placing the industrialized Ruhr under international control—a position that allied it with Moscow.53
Particularly given that a third of the French government was Communist, the Soviets expected cooperation from Bidault. French ambassador General Georges Catroux had met privately with Molotov in Moscow on February 19, 1947, stressing the importance of “the Soviet Union and France . . . work[ing] out a common position” on reparations from current production “prior to the Council of Ministers” meeting.54 But the anti-communist Bidault considered it “madness” to allow the Soviets, who were “already draining the resources of Germany’s Eastern Zone . . . to despoil the rest of it as well.”55 As for internationalization of the Ruhr, he felt he could no longer “go on defending it” once it became clear that “Russia [would] use it as an argument for getting even further into Germany.”
Refusing to break with Marshall on Germany, Bidault incurred Russian wrath. Molotov retracted his support for French annexation of the Saar, leaving the proud, urbane Bidault isolated and humiliated. The Russian pointedly excluded him in a dinner toast to his American and British counterparts, before mischievously correcting himself by announcing that “no one should be forgotten.”56 Bidault hit back, toasting “those of us here who love freedom.”57
Divisions within the western camp were still useful in giving Molotov another angle to press his case for reparations: Moscow, he said, mi
ght accept a revival of the Ruhr, contra France, if a portion of its production were allocated to the Soviet Union. Was Molotov hinting that a deal could be done on terms that did not load the bill onto Washington? Contrary to notions that Marshall was by this time locked into a policy of containment that precluded compromise, he worked the cables to persuade Truman to give him room to trade vague language on reparations for Russian cooperation on German economic unification. This seemed to be the diplomatic breakthrough Clay had been hoping for.58
Among Marshall’s team, however, Bohlen, Smith, and Dulles opposed him. In Washington, Acheson did, too; it was “a mistake to believe that you can, at any time, sit down with the Russians and solve questions,” he told the Senate Foreign Relations Committee. None of them believed Stalin would follow through on economic unification. A deal would therefore just make European recovery hostage to further Soviet diplomatic maneuvering.
At Acheson’s urging, Truman initially denied Marshall the “elbow room” he sought on reparations, but the secretary of state pushed back. Truman revised his response to “no objection,” with the proviso that Marshall stick by his proposed conditions—that reparations from current production would not result in a German trade deficit or divert coal or other raw materials from vital uses.
On April 1, Marshall made his boldest attempt to satisfy Molotov, presenting the new American reparations proposal. Unexpectedly, however, he now found himself undercut by his closest ally, Bevin. The British government being under far greater financial strain from occupation than Marshall’s, Bevin wanted Molotov to affirm the British understanding of what “economic unification” would mean if the Soviets committed to it: free movement of goods and people across the occupation zones, and Soviet acknowledgment of shared responsibility for British costs—to date and in the future. For good measure, he argued that reparations from current production might, in any case, be precluded by Potsdam. An exasperated Marshall pressed for a simple agreement on principles, with details to be worked out by experts, but Molotov would neither rebuff him outright nor commit to any terms.59
The wrangles with Molotov had become a psychological endurance test for Marshall—an endless sequence of ponderous, pointless verbal jousts. Marshall sat through the mind-numbing translations stiff, erect, arms folded, peering over tortoiseshell reading glasses perched at the end of his nose. Molotov refused even to cut into the dead time by submitting speeches for translation in advance. Padding out the sessions with barren drone seemed to suit his purposes.
Day after day, week after week, Marshall’s grim diplomatic war of attrition with Molotov ground on. In his downtime, Marshall read Harold Nicolson’s Congress of Vienna for inspiration, yet whatever the issue—German and Austrian peace treaties, occupation force levels, reparations, the German border with Poland—progress seemed forever beyond reach. Still, the Russians continued to lay out elaborate banquets, excursions to the Bolshoi, every manner of trapping to suggest that agreement could be—would be—reached, if only the foreign guests would see fit to reciprocate in substance what they could not in hospitality.
This was not to be. After enduring forty-four fruitless four-hour sessions with Molotov over five weeks, Marshall requested an audience with Stalin himself.
ON THE NIGHT OF APRIL 15, 1947, accompanied by Smith and Bohlen, who would act as translator, Marshall made his way to the Kremlin through what appeared to Smith to be the most heavily policed street on earth. Ushered through a series of antechambers, the Americans arrived in a wood-paneled conference room where the Generalissimo, in his mustard-colored military uniform, stood waiting. Molotov, Novikov, and a translator were present. Portraits of Russian Napoleonic war heroes stared down from the walls.
Bolshevism, Kennan had argued, was just the standard under which the latest Russian autocrats marched. Peter the Great had fathered the strategy of dominating neighbors by “protecting” them. Catherine the Great pushed the empire to the south and west. Czar Alexander I, who witnessed his capital’s desecration by Napoleon’s army, insisted that eastern Europe was to be treated as Russia’s buffer against the West. Sergei Sazonov, Russia’s foreign minister at the outbreak of World War I, determined that they needed to be turned into client states.60 Many of them, however, particularly Poland, Hungary, and Romania, had remained hostile to Russia and its interests during the interwar period. Hitler’s aggression had therefore driven home to Stalin how much remained to be done.
It was 10 p.m. Stalin welcomed Marshall, complimenting him for having aged much better than he had. He, Stalin—at sixty-eight, two years older than Marshall—was now, in contrast, “just an old man.” Bohlen agreed. He was surprised to see how the Soviet leader had aged.61 Five foot five, pock-faced, with a coarse, streaked mustache, yellowed teeth matching his eyes, his physical figure seemed to betray his legend.
Iosif Vissarionovich Dzhugashvili took the revolutionary name Stalin, or “man of steel,” in his early thirties, around 1910, after a decade in and out of prison and labor camps for crimes ranging from organizing mass strikes and bank robbery to racketeering and murder.62 Having in his teens excelled at a Tblisi theological seminary, publishing Georgian-language poetry in his spare time, he might have gone in a different direction had his mother, cut off financially by his violent, drunkard father, been able to continue paying his tuition.
By that time, however, he had already become attracted to forbidden “revolutionary” literature—such as the novels of Victor Hugo, the possession of which got him punished—and Marxist periodicals such as Kvali (“The Furrow”). Still, he had to find employment following his expulsion from the seminary in 1899 for skipping an exam. After a spell of student tutoring, he took a job as an “evaluator-observer” in the Tiflis Observatory, which afforded him the time to cultivate his radical and anti-tsarist passions. He was dismissed in 1901 following a police raid on the facility, in which several of his colleagues were arrested for possessing illegal literature, and would thereafter finance himself entirely through criminal and political activity.
Around that period, he became acquainted with the writings of Vladimir Ilyich Lenin, eight years his elder. Joining the Bolshevik faction of Lenin’s Social Democratic Labor Party in 1903, the young revolutionary met Lenin in 1905. Recognizing his talents and energy, Lenin co-opted Dzhugashvili into serving on the breakaway Bolshevik Party Central Committee in 1912 and designated him to write an important doctrinal piece on managing nationalities within the Russian empire. Having no language or scholarly skills, the author relied on Bolshevik publicist Nikolai Bukharin to complete the assignment in 1913.63
It was from his position as secretary general of the party’s Central Committee, which Stalin assumed in 1922, two years before Lenin’s death, that he began to consolidate power, marginalizing and later killing rivals, such as Bukharin and Trotsky, as well as myriad potential and imagined rivals. Mass purges, show trials, and labor camps became central to his efforts to establish himself as an unassailable dictator in the 1930s, providing a man with paranoid tendencies ever greater cause to fear lurking enemies.
Stalin’s systematic murder of thousands of his own military and intelligence corps in the 1930s and 1940s, a centerpiece of his perpetual “strategy” to eliminate opposition and subversion, would have doomed the Soviet Union had it not been for its capacity to produce weapons and absorb casualties. His nonaggression pact with Hitler in 1939 freed him to annex eastern Poland (then including western Belorussia and Ukraine), Estonia, Latvia, Lithuania, and parts of Romania while leaving Soviet borders unprotected, yet nearly caused his own country’s annihilation after Germany invaded in 1941.
After the war, Stalin’s efforts to extend Soviet power were guided by a crude, unwavering, and empirically false Marxian belief in the inevitability of capitalist intramural conflict and collapse. Confident that time was on his side, however, he was also pragmatic and patient.
As a diplomat, he excelled. Lurking beneath his “unpretentious facade,” Kennan observed aft
er meeting him in 1945, were great “depths of calculation, ambition, love of power, jealousy, cruelty, and sly vindictiveness” as well as “diabolical skill as a tactician.”64 Attlee said of Stalin that he “reminded me of the Renaissance despots—no principles, any methods.” Of his style, there was “no flowery language—always Yes or No, though you could only count on him if it was No.”65
Stalin adapted his demeanor to his opponents’ capacity for resisting his will. With Moscow’s eastern European “allies,” he was typically condescending, offensive, and brutally direct. Tito’s lieutenant Milovan Djilas, who in 1962 published Conversations with Stalin, referred to him as “a monster, who, while adhering to abstract, absolute and fundamentally utopian ideas, in practice had no criterion but success—and this meant violence, and physical and spiritual extermination.”66 With Churchill, he needled and flattered as he saw fit. With Roosevelt, he was almost invariably charming, even when unwilling to concede substance, owing to the paucity of issues on which he could afford a rupture with Washington.
Part of Stalin’s negotiating prowess owed to his choice of deputy. As Smith put it, Stalin cultivated the myth that there were “two schools of thought [in] the Politburo, [a] conciliatory one headed by Stalin and [a] tough one by Molotov. . . . This [was] one of [the] oldest gags on [the] Soviet confusion-propaganda circuit.”67 Molotov so infuriated his counterparts with his sullen stubbornness that they were almost grateful to have their demands denied less unpleasantly by his boss. “Molotov was almost always the same, with hardly a shade of variety, regardless of what or who was under consideration,” Djilas observed68—nothing like the temperamentally dexterous Stalin. “Hooded, calm, never raising his voice, [Stalin] avoided the repeated negatives of Molotov which were so exasperating to listen to,” observed Anthony Eden, reflecting on Yalta. “By more subtle methods he got what he wanted without having to be so obdurate.” Stalin was, for Eden, the best negotiator he ever encountered.69