Memorandum from Lieutenant General Hoyt Vandenberg to President Harry S. Truman

SECHEL ML CENTRAL INTELLIGENCE GROUP NEW WAR DEPARTMENT BUILDING 21st and VIRGINIA AVENUE, N. W. WASHINGTON, D. C. P- WAL 4 October 1946 MEMORANDUM FOR THE PRESIDENT SSU has secured information from a high German official in the Administratior of the Soviet zone in Germany, which bears on the following two subjects: (a) Soviet objectives in seizing key German industries The source reports that the formation of the mammoth trust known as Sowjetische Industrie, A.G., has been much discussed in the Central Administra- tion where it is thought that the Soviets have two principal objectives: (1) to circumvent that clause of the Potsdam Agreement, providing that "the proceeds of exports from current product- ion and stocks shall be made available in s. TRUMAN the first place" for payment of German imports; is ARCHIVES SERVICE", RECORDS NATIONAL AND (2) to make possible the continued production of war materials in Germany without Allied interference on the justifi- cation that the Potsdam Agreement contains no prohibition against military production in Soviet-owned plants, even though located in Germany. The reasons advanced above for the formation of the Soviet trust embracing the key industries of the USSR zone appear to be valid in the light of other available informa- tion. In the reparations controversy the USSR has endeavored in vain to obtain Western approval for taking reparations from current German production without reference to Germany's need for imports. Large-scale production of war material in the USSR zone has been reported from many roliable sources and it appears that such production, if carried out in Soviet- owned plants, could be justified by the legalistic argument that the Potsdam Agreement does not prohibit such manufacture in Germany or even by Germans, as long as it does not con- tribute to "Germany's war potential". DECLASSIFIED Authorily NLT- 76-15 By He NLT Date 10-4-77