The Marshall Plan

by Benn Steil

  Royall led the dovish wing. He demanded that Clay shut his mouth after being quoted in The New York Times saying that Moscow could “not drive us out by any action short of war.”54 What was at stake, Royall told him, was “a minor issue”: Berlin’s currency. In sharp contrast to Clay, who later reflected that there would likely have been no Marshall Plan or NATO if the United States had abandoned Berlin, Royall believed that the United States need not—and indeed, could not—remain in the city. Clay was, he felt, exaggerating the costs of withdrawal to U.S. prestige and influence while underestimating Soviet readiness to use force.

  The Joint Chiefs concluded that the “entry of armed American Forces into the Russian zone would in fact be an aggressive act.” It was therefore too risky. Some Army officials argued that withdrawal would be necessary to avoid a civilian catastrophe; the only question was how to avoid “the appearance of a rout.”55 U.S. forces were “facing a defeat . . . if the war comes,” Leahy said. Yet a retreat, Murphy insisted, “would amount to a public confession of weakness under pressure. It would be the Munich of 1948.”56 (He would sixteen years later say he “should have resigned in public protest against Washington’s [feeble] policy.” Reliance “exclusively upon the Airlift was a surrender of our hard-won rights in Berlin, a surrender which has plagued us ever since.”57) Douglas argued that withdrawal “would probably cause failure of the European Recovery Program,” if not a complete collapse of confidence in American resolve on the part “of Western Germans and the people of Western Europe” generally.58

  Marshall wanted to take the issue to the United Nations, but the French pushed back, fearing it would accomplish nothing except provide Truman with a moral basis for war—the effects of which they would bear. The compromise was a simultaneous written protest delivered to the Soviet embassies in the three western capitals on July 6. The Soviet reply came back eight days later.

  Once again, Moscow blasted Washington and London for violating their commitments at Yalta and Potsdam: to pacify Germany and to extract reparations for its victims. The Allies were now using currency reform and “dismemberment”—creation of a West German state—to undermine Soviet rights in the country. Berlin, Moscow said, was part of the Soviet zone, and the economic threat to the zone from the B-mark’s circulation necessitated the protective measures the western powers were now protesting. “The interests of the Berlin population do not permit the introduction of new currency in the western zones of Germany and special currency in the western sectors of Berlin.”

  Furthermore, it said, the West’s removal of the industrialized Ruhr from four-power control undermined the “demilitarization” and “democratization” of the country. By ignoring their obligations in Germany under earlier agreements, the western powers had forfeited “their right to participation in the administration of Berlin.” Moscow therefore not only rejected a lifting of “the measures for the restriction of transport communications between Berlin and the western zones” as a precondition for discussions over Berlin, but insisted that any talks on the city be conducted within the four-power framework. This demand was code for rolling back currency reform and plans for a West German state.

  Finally, Moscow said it was willing and able to provide adequate supplies for the entire population of “Greater Berlin” on its own. West Berlin’s suffering was the fault of the Allies. Their withdrawal was the surest means of alleviating it.

  In the wake of Moscow’s defiant response, Marshall told the cabinet confidently that the “tension in Berlin” owed to “Russian desperation in the face of success of [the] ERP.”59 The West was winning. And Clay was as upbeat as ever. “The very violence of the Soviet reaction now,” he cabled Army under secretary Draper, “is the proof of the success of our several programs to restore democracy in Europe.”60 His stance is stunning for an American military governor who, until the spring of 1947, had tended to ascribe breakdowns in U.S.-Soviet cooperation not to the triumph of democracy but to failures of unilateralism in Paris and Foggy Bottom, the State Department’s new home.

  Clay continued to press for ground confrontation, proposing that Brigadier General Arthur Trudeau lead an armored convoy of Allied troops through the Soviet zone and into Berlin. LeMay would then bomb every airfield in East Germany if Trudeau met resistance, which he did not expect. Sokolovsky’s troops, however, had been conditioned to believe they were defending “sacred Soviet borders,” and would almost certainly have resisted the invaders. Yet when this possibility was put to Clay, he responded by asserting the futility of concessions: the Russians, if they were bent on war, would just pocket them. Nothing, it seemed, could dissuade Clay: both a weak and a bellicose Russia were reasons for confronting it. Bidault condemned his bluster. The British chiefs of staffs rejected his scheme “under any conditions.”61

  Truman was morose. The Soviet response, he reckoned, had been a “total rejection of everything we had asked for.”62 At Bevin’s urging, he authorized sending sixty B-29 bombers to Britain, together with a public announcement from the Pentagon. B-29s had bombed Hiroshima and Nagasaki, and he wanted Stalin to take note. “Our only advantage,” noted British Air Commodore William Arthur Darville Brook, “is our possession of W.M.D.”

  Still, Brook wanted this only as a bluff—which it was. These particular B-29s could not carry atomic bombs, though Stalin should not have known this fact—that is, he would not have known except for the fact that Donald Maclean, his super-mole in Washington, told him.63

  Continuing to take an upbeat tone with the press, Truman lamented to his sister that the situation was “all so futile.” Every major poll suggested he was headed for defeat in the November election. And “if I win, I’ll probably have a Russian war on my hands.”64

  A TOP SECRET SOVIET INTELLIGENCE report in June 1948, possibly Written by Maclean, suggested the Kremlin was anxious to gauge how far Washington would go to defend its stake in Berlin. Despite French concerns that the U.S. position “seemed dangerous and irresponsible,” the report—clearly translated from a foreign source—said the U.S. military would “resort to force if the Russians at any time make it impossible for Americans to stay in Berlin.” Molotov, who annotated it, would have noted its observation that Truman had not decided “when and under what circumstances force would be employed, if it would be employed at all, to subvert [nonmilitary Soviet] measures.”65 There was thus scope for ratcheting up pressure on the city, short of downing Allied planes.

  Determined to escalate the matter to the U.N. if diplomacy failed, Marshall was willing first to try engaging Stalin directly through an oral approach to Molotov. Bevin thought an oral approach weak, but Marshall insisted it was the only way to break the logjam. Written communications simply hardened Russian intransigence over wording.66 As usual, the American prevailed.

  The Allied governments requested a combined ambassadorial-level meeting with Stalin and Molotov on July 30 to discuss Berlin and “its wider implications.” Molotov agreed only to meet them serially, hoping, in Smith’s estimation, “to maneuver one or the other” into revealing the price the West would pay to end the crisis. In his exchange with Smith, he continued to insist that the Allies could not hope for change in Berlin without engaging on “Germany as a whole.” But he agreed to forward the request for a meeting up to Stalin.67

  Stalin, thinking the endgame he had envisioned in the spring had begun, invited the western emissaries to talks on August 2. Smith was accompanied by French ambassador Yves Chataigneau and British minister Frank Roberts. At nine that night, early by the Generalissimo’s standards, Stalin greeted them in his office. Highlighting the “unusual” nature of the audience he had granted, with three Allied representatives present, he set forth his position.

  Western rights in Berlin, he said, derived from the city’s status as the capital of a unified Germany. Now, with the Allies setting up their own West German state, those rights no longer had a “juridical basis.” This stance was a dramatic hardening of the Soviet diplomatic line—de
nial of all western occupation rights in the city.

  “There would have been no restrictions” in Berlin, he told them pointedly, “had it not been for the London decisions” to divide Germany. “The restrictive measures adopted by the Soviet authorities had been to prevent the invasion of the Soviet zone by the special western currency.”

  Smith replied that his government would do nothing to prevent the formation of a central German government in the future, should the differences between the two sides be breached. But the United States would not negotiate under duress. As for the currency matter, he proposed that the Allies might withdraw the B-mark from Berlin and begin talks on Germany if the Soviets would lift the blockade.

  But Stalin returned again and again to the London Program. “Stop applying the London decisions and withdraw the ‘B’ mark,” he said. Then “there will be no difficulties. It could be done tomorrow. Think about it.”

  Smith said he would report Stalin’s position to his government, but felt “that the implementation of the London decisions had reached a point at which it would be extremely difficult to hold it up.”

  Around 11 p.m., Stalin proposed resuming talks in the morning. But Smith insisted there was no point. Progress had been “quite inadequate.”

  Stalin must have known, given Maclean’s intimate knowledge of Allied deliberations in Washington, that the West put little stock in the airlift beyond September.68 Time was on his side. He therefore needed to string the Americans along, to keep them hoping and talking.

  Stalin lit a cigarette, smiling.

  “Would you like to settle the matter tonight?”

  Yes, Smith assured him; he would like nothing better.

  Stalin made a new proposal. The B-mark and the blockade could be removed simultaneously. As for the London Program, it could be recorded that its postponement was the Soviet Union’s “insistent wish.”

  Smith was taken aback. Was this a climb-down? He could see no diplomatic meaning in an “insistent wish.” It gave the Allies full freedom of maneuver. (He would even suggest that Marshall unilaterally “suspend” parts of the London Program to retain negotiating chits for the future.) The three emissaries agreed to present the proposal to their governments.69

  Both sides now believed the other was anxious for agreement and looking only to save face. But neither was reading the other accurately. Stalin was ready to roll back the blockade, partially, but not as a prelude to restoring Western powers in the city. He intended to use the Soviet mark to push the Allies out.70 For its part, the State Department was ready to abandon the B-mark, but would accept nothing less than a full managing stake in a unified currency regime for the city. There was still no locus of interests.

  On the ground in Berlin, Clay was horrified that Smith did not see the trap that was being set for him. Having through early 1947 condemned anything that interfered with efforts to bring the Soviets into a partnership for unified German government, Clay now argued against efforts that interfered with progress toward splitting Germany.71

  Back on July 30, the Soviets had begun using their control over the city’s central bank to freeze the accounts of the Magistrat and all western sector enterprises. They were asphyxiating the economy of West Berlin and the powers of the non-Communist government. Municipal officials knew that, with Soviet control over Berlin’s money, it was only a matter of time before Moscow and their SED puppets controlled the whole city.72 “Berlin political leaders [are] frightfully upset at [the] rumor of Soviet currency becoming [the] single currency” in the city, Clay cabled Draper on August 7. “If we are voided of all control, they will be at the mercy of [the] Soviet government.”73

  But Marshall was not as naive as Clay feared. With the B-mark gone, he told Smith, four-power control of the city’s currency would be essential and nonnegotiable. Whitehall understood the same.74

  On August 6, the Allies presented Molotov with a draft communiqué calling for “all restrictions” on transport communications into and out of Berlin to be lifted, specifying conditions under which the Soviet mark would circulate in the city, and stating that four-power talks would aim to resolve wider issues related to Germany. Molotov “immediately opened vigorous attack” on western demands to “control” the currency of the Soviet zone, of which Berlin’s economy was an integral part. He further protested that there was “nothing in [the draft] about the insistent desire of Generalissimo Stalin for the postponement of the [London] decisions.”

  Smith called Molotov’s response the “typical Soviet tactic of trying to sell the same horse twice.” Still, he assured Marshall there was “no reason to be either depressed or encouraged.” “The next meeting,” he insisted, “will be more significant.”75 To Bohlen, who had been certain Stalin’s “insistent wish” was a ploy to prevent creation of West Germany or pin the Berlin crisis on the Allies, Smith’s take must have appeared as dangerous wishful thinking, born of a reluctance to admit he had been snookered.

  The British were alarmed. Roberts judged that the Soviets were not optimistic about killing the London Program, but thought they were in a strong position to expel the Allies from Berlin—a good consolation prize. The city’s currency, Bevin said, was now “at the heart of our difference with the Russians.” Robertson agreed, concluding that “if we withdraw our currency . . . without any agreement on quadripartite control, we shall have lost Berlin and the air-lift will have been in vain.”76

  On August 9, Molotov presented the Allies with his own draft, which seemed to confirm British suspicions. Clay condemned it as “disastrous” and “unthinkable.”

  Blockade restrictions imposed prior to June 18, the date of the western currency reform, would stay in place—implying that they were defensive in nature and legitimate. Western access rights would not extend beyond those accorded through the “present agreement”—which were nil, in that none were enumerated. Molotov rejected four-power control of Berlin’s currency. Power was to lie entirely with the Soviet-established Bank of Emission. A Soviet agency would assume control over the city’s exports. This new authority, he argued, was consistent with the Allies having illegally ended quadripartite control over Germany. Finally, Stalin’s “insistent wish” was to be clarified; a statement would be issued that the Allies “did not propose for the time being to deal with the question of the formation of a government for Western Germany.” This clarification meant that dealing with it would signify a change in the western position, giving Moscow a pretext for retaliation.77

  On the ground in Berlin, Soviet officials turned up the pressure. They harassed the Magistrat and nullified its powers in the East. Thousands of SED supporters staged violent demonstrations throughout the summer, disrupting the Assembly. Soviet soldiers ran down an American MP in the Western sector before shooting their way out. Rioters beat up reporters from Radio in the American Sector. The CIA concluded that under present conditions the western position in the city was “untenable in the long run.”78

  Further meetings between Smith and Molotov on August 12 and 16 yielded no movement. “All very hard going,” Smith said, belying his earlier prediction. Molotov “now appear[ed] to be . . . in no hurry about a settlement,” possibly because of “the anticipated effect of winter on our airlift, or hoped for deterioration of economic conditions of the western sectors.” His “attitude being quiet and reasonably pleasant,” the purpose seemed to be to keep talks going “almost indefinitely” to “prevent us from adopting an alternative course of action.” Matters, he told Marshall, were no longer “by any means hopeful.”79

  At a National Security Council meeting on August 19, with Truman presiding, Marshall and Lovett said the Soviets were using power over the city’s currency to expand a “physical blockade” into an “economic” and “financial” one. The CIA pondered Stalin’s intentions, weighing the costs of compromise against the benefits of ending the “dilemma” in Berlin.80

  Marshall concluded that “there is nothing to be gained and much to be lost by any furthe
r attempt to negotiate with [Molotov].”81 He decided to make a final appeal to Stalin before escalating to the United Nations—a move supported by Clay, but still opposed by Schuman, who saw it as a prelude to war.82

  But both sides were feeling time pressure, raising hopes that a deal could still be done. Marshall was concerned about “signs of public restlessness,” given that mere technicalities seemed to be preventing agreement. For his part, Stalin was focused on the September 1 start date for the West German Parliamentary Council—staffed by sixty-four elected representatives, under the CDU’s Konrad Adenauer as president—to begin drafting a constitution in Bonn.83 This was his last chance to stop it.

  Stalin granted a meeting on the evening of August 23, greeting the western emissaries “quite jovially.” Posing once again as the fount of affable reason, he offered broad-brush concessions on the blockade and the currency. He agreed in principle to remove all “recently imposed” communications restrictions on Berlin, no longer just those imposed since June 18. He further agreed that the four-power financial commission would be the “controlling body” for the currency operations of the Soviet bank. It looked like a deal.

  Almost. Stalin continued to insist that “something must be said about the London Conference.” He wanted no further movement toward a West German government before a new meeting of the four-power foreign ministers. He preferred a published statement to this effect, but was willing to consider an exchange of confidential letters.