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U.S. and Allied Efforts To Recover and Restore Gold and Other Assets Stolen or Hidden by Germany During World War II

II. The Safe­haven Pro­gram

A. Ori­gins of the Safe­haven Pro­gram

As the tide of bat­tle shift­ed in favor of the Allies in 1943, eco­nom­ic war­fare goals began to take into account the con­cern that Ger­many would try to hide gold and oth­er assets abroad so they would not be includ­ed in war repa­ra­tions and could be used to re-build Axis strength in the post-war peri­od. The spe­cif­ic goals of Safe­haven, as they came to be for­mu­lat­ed in spring 1944, were to restrict and pre­vent Ger­man eco­nom­ic pen­e­tra­tion beyond Ger­many, to block Ger­many from trans­fer­ring assets to neu­tral coun­tries, to ensure that Ger­man wealth would be acces­si­ble for war repa­ra­tions and for the reha­bil­i­ta­tion of Europe, to make pos­si­ble the return to legal own­ers of prop­er­ties loot­ed from coun­tries once occu­pied by the Ger­mans, and to pre­vent the escape of strate­gic Ger­man per­son­nel to neu­tral havens. The over­all pur­pose was to make it impos­si­ble for Ger­many to start anoth­er war.

The need to orga­nize a Safe­haven pro­gram appears to have been first brought up in let­ters from Leo T. Crow­ley, Direc­tor of the For­eign Eco­nom­ic Admin­is­tra­tion (FEA), to the Sec­re­tary of the Trea­sury on May 5, 1944, and from William T. Stone, Direc­tor of FEA’s Spe­cial Areas Branch, to Liv­ingston T. Mer­chant in the State Depart­ment, on May 15, 1944. Stone’s let­ter sug­gest­ed that the British be con­sult­ed, as well as oth­er inter­est­ed U.S. Gov­ern­ment agen­cies. The State Depart­ment had already sought British coop­er­a­tion in sys­tem­at­i­cal­ly gath­er­ing data on Ger­man efforts to secret assets in neu­tral coun­tries inside Europe, and a vague British reply sug­gest­ed that steps be tak­en to oblige the neu­trals to ful­fill cer­tain eco­nom­ic war­fare require­ments by offer­ing to pro­vide sup­plies to Swe­den and Switzer­land. The offi­cial British his­to­ry of the World War II eco­nom­ic block­ade of Ger­many sum­ma­rizes U.S.-British dif­fer­ences over the imple­men­ta­tion of Safe­haven objec­tives soon after this exchange as fol­lows:

“This led to the last of the long series of Anglo-Amer­i­can dif­fer­ences over tac­tics, and it arose, as so often before, through the Amer­i­can ten­den­cy to con­cen­trate on a sin­gle objec­tive to the exclu­sion of sup­ply and oth­er inter­ests which the British could not so read­i­ly ignore.”

In May 1944 Spe­cial Assis­tant to the Gen­er­al Coun­sel of the Trea­sury Depart­ment Samuel Klaus pro­posed a plan for a fact-find­ing sur­vey of the sit­u­a­tion in neu­tral coun­tries, and of the plans oth­er nations might have for deal­ing with the prob­lem of hid­den Ger­man assets abroad. The plan­ning for this trip revealed the con­tin­u­ing ten­sions between FEA offi­cials and those in oth­er agen­cies. The Safe­haven pro­gram was plagued from the start by inter-agency and intra-agency rival­ries. Ini­tial plan­ning for the trip called for Klaus to be accom­pa­nied only by a State Depart­ment offi­cial, Her­bert J. Cum­mings. In brief­ing offi­cials in the Embassy in Madrid on the back­ground of the trip, Klaus indi­cat­ed that he had nei­ther informed nor sought the approval of Trea­sury for the trip. When they learned about the pro­posed trip only sev­er­al days before it was due to begin, Trea­sury offi­cials took a direct hand in set­ting forth the pur­pos­es of the trip, as well as insist­ing that Trea­sury offi­cials be includ­ed on the del­e­ga­tion. After these Trea­sury offi­cials caught up with the Mis­sion in Lon­don, and accom­pa­nied it to Stock­holm, Klaus refused to per­mit them to con­tin­ue on his del­e­ga­tion, and they made sep­a­rate vis­its to Spain. The Mis­sion can­celed its plans to vis­it Switzer­land and Por­tu­gal.

From August 16 to Octo­ber 10, 1944, Klaus and his par­ty vis­it­ed Lon­don, Stock­holm, Lis­bon, Madrid, Barcelona, and Bil­bao to encour­age the imple­men­ta­tion of the Safe­haven pro­gram. The ini­tial suc­cess was lim­it­ed. It took anoth­er two months for the Safe­haven pro­gram to emerge as America’s response to the poten­tial use of Nazi finan­cial and eco­nom­ic influ­ence in the neu­tral coun­tries to pre­pare for a third world war.

In his final report of Octo­ber 21, 1944, Klaus observed that the pur­pose of the trip was pri­mar­i­ly to bring about an increased flow of infor­ma­tion to Wash­ing­ton con­cern­ing Ger­man efforts to find safe havens in the neu­tral coun­tries. He also sketched out the cur­rent think­ing about the broad range of activ­i­ties being pur­sued by the Safe­haven Pro­gram:

“It [Safe­haven] is only in its nar­row­est, and rel­a­tive­ly less impor­tant, aspects flight of ene­my cap­i­tal. In its most impor­tant aspects it is the use of neu­tral coun­tries as bases for main­tain­ing the assets, skills and research nec­es­sary for the con­ver­sion of Ger­many to a war basis at an appro­pri­ate future date. The hid­ing out of stolen jew­els or pic­tures, even if it exists, is tru­ly impor­tant from the point of view of war crimes ret­ri­bu­tion. But the pres­ence of I.G. Far­ben per­son­nel in Spain, the expan­sion of Siemens pro­duc­tion in Swe­den or the pres­ence of Ger­man mil­i­tary tech­ni­cians in Argenti­na are of more far-reach­ing sig­nif­i­cance, and con­sti­tute as well the most dif­fi­cult Safe­haven activ­i­ties.”

Klaus found the sit­u­a­tion in Spain the most dis­cour­ag­ing and the most dif­fi­cult. He found the U.S. Mis­sion in Spain, and par­tic­u­lar­ly the Ambas­sador, Carl­ton Hayes, to be entire­ly unsym­pa­thet­ic with the Safe­haven program’s inves­ti­ga­tions although Spain was “beyond ques­tion the coun­try in which the most dam­ag­ing Safe Haven activ­i­ties are going on and may be expect­ed.”

The Trea­sury Depart­ment felt that the Klaus Mis­sion was weak­ened by a lack of knowl­edge of the report­ing on ene­my assets already being done by U.S. mis­sions in neu­tral coun­tries, and by lack of under­stand­ing of the polit­i­cal sit­u­a­tion in these coun­tries; for exam­ple, Klaus showed lit­tle under­stand­ing of the con­se­quences of Spain’s recent civ­il war. In dis­cussing the col­lec­tion of infor­ma­tion on ene­my assets in Madrid with Coun­selor of Embassy W. Wal­ton But­ter­worth and oth­er Embassy offi­cers, he sug­gest­ed that the Embassy could prob­a­bly expect con­sid­er­able coop­er­a­tion from dis­si­dent and labor groups. But­ter­worth had to explain that labor syn­di­cates in Spain were con­trolled by the Falange, and that it would not be pru­dent for the Embassy to seek help from the out­lawed Com­mu­nist Par­ty.

The con­fu­sion with­in FEA con­cern­ing respon­si­bil­i­ty for Safe­haven pro­grams was not resolved until Decem­ber 1944, when FEA set up a new Ger­man and Aus­tri­an Branch, which short­ly became the Ene­my Branch. This branch was assigned respon­si­bil­i­ty for Safe­haven pro­grams, and its direc­tor, Hen­ry H. Fowler, was per­mit­ted to coor­di­nate the Safe­haven efforts which had been scat­tered through­out the agency. Through­out the often com­pli­cat­ed imple­men­ta­tion of the Safe­haven pro­gram, the U.S. Gov­ern­ment main­tained a tough and unequiv­o­cal stance where­by no con­ces­sions would be grant­ed that would com­pro­mise America’s com­mit­ment to iden­ti­fy and liq­ui­date Nazi assets.

B. Build­ing a Legal Base for Safe­haven Pro­grams: Bret­ton Woods Res­o­lu­tion VI

The dis­cus­sions with the Unit­ed King­dom in spring 1944 and the Klaus Mission’s meet­ings in Lon­don, Stock­holm, and Madrid revealed the lack of con­sen­sus on how to pro­ceed in pre­vent­ing the flow of Ger­man assets to neu­tral coun­tries. The pur­pose of the Klaus Mis­sion had been lim­it­ed to fact-find­ing. Scant progress had been made in deter­min­ing what pol­i­cy mea­sures need­ed to be tak­en, or how to per­suade Britain and oth­er coun­tries to sup­port the Safe­haven pro­gram. Just as the Klaus Mis­sion was get­ting under­way, help arrived from an unex­pect­ed quar­ter, the Unit­ed Nations Mon­e­tary and Finan­cial Con­fer­ence then under­way in Bret­ton Woods, New Hamp­shire.

The work of the Bret­ton Woods Con­fer­ence was divid­ed among three com­mis­sions, the first two deal­ing with what were the pri­ma­ry inter­ests of the Trea­sury and State Depart­ments, the pro­posed World Bank, and the Sta­bi­liza­tion Fund. Com­mis­sion III, chaired by Egypt, was charged with respon­si­bil­i­ty for “Oth­er Mea­sures for Inter­na­tion­al Mon­e­tary and Finan­cial Coop­er­a­tion.” On Ju
ly 10, 1944, Com­mis­sion III set up three ad hoc com­mit­tees, includ­ing a com­mit­tee deal­ing with “Ene­my Assets, Loot­ed Prop­er­ty, and Relat­ed Mat­ters.” This com­mit­tee, in which the Unit­ed States was not rep­re­sent­ed, received a pro­pos­al from the Pol­ish del­e­ga­tion to seek coop­er­a­tion from the neu­tral coun­tries in block­ing and liq­ui­dat­ing Axis assets in neu­tral ter­ri­to­ry, and a pro­pos­al from the French del­e­ga­tion con­cern­ing steps to pre­vent the ene­my from suc­cess­ful­ly secret­ing funds in neu­tral or UN ter­ri­to­ries under assumed names. Accord­ing to the French pro­pos­al, these mea­sures should apply to ben­e­fi­cia­ries of prop­er­ty loot­ed by the ene­my, whether such ben­e­fi­cia­ries be ene­my nation­als or their asso­ciates of what­ev­er nation­al­i­ty. These mea­sures should be direct­ed in par­tic­u­lar against Axis lead­ers and their col­lab­o­ra­tors in occu­pied coun­tries, who might attempt to per­pet­u­ate their influ­ence, pow­er, and abil­i­ty to plan future aggran­dize­ment and dom­i­na­tion in the post-war peri­od.

Both the U.S. and the U.K. del­e­ga­tions react­ed quick­ly to these pro­posed drafts. The Unit­ed States sub­mit­ted an alter­na­tive draft embody­ing fea­tures of the Pol­ish and French pro­pos­als, which were then with­drawn. This draft built upon the Pol­ish pro­pos­al in call­ing for action by neu­tral coun­tries to take imme­di­ate mea­sures to pre­vent any dis­po­si­tion or trans­fer with­in their juris­dic­tion of assets belong­ing to gov­ern­ments, indi­vid­u­als, or insti­tu­tions in occu­pied coun­tries, as well as loot­ed gold or oth­er assets. The neu­trals were also called upon to pre­vent the con­ceal­ment of such assets. Unlike the French pro­pos­al, which would have applied to the ben­e­fi­cia­ries of all prop­er­ty loot­ed by the ene­my, includ­ing ben­e­fi­cia­ries who were ene­my nation­als, the scope of the U.S. draft was restrict­ed to assets locat­ed in ene­my-occu­pied ter­ri­to­ries.

The U.K. del­e­ga­tion ini­tial­ly opposed this effort, on the grounds that the sub­ject mat­ter had very indi­rect bear­ing on the plans for estab­lish­ing a Fund and Bank, which were the pur­pos­es of the Bret­ton Woods Con­fer­ence. The Unit­ed King­dom also insist­ed that the action called for in these draft pro­pos­als was already being tak­en in oth­er places, notably the Inter-Allied Com­mit­tee on Acts of Dis­pos­ses­sion. No oth­er coun­try joined the Unit­ed King­dom in oppos­ing the draft res­o­lu­tion, and the U.K. even­tu­al­ly with­drew its objec­tions. After the Sovi­et Union pro­posed some lan­guage changes, the Unit­ed King­dom joined the Unit­ed States and the Sovi­et Union in a draft­ing com­mit­tee to work out the final text of the res­o­lu­tion. This text was pre­sent­ed to the Ple­nary Ses­sion of the Con­fer­ence for approval as Res­o­lu­tion VI.

The State and Trea­sury Depart­ments quick­ly rec­og­nized the val­ue of Res­o­lu­tion VI in terms of the pur­suit of Safe­haven objec­tives. On August 19 the text of the res­o­lu­tion was sent by air­gram to all diplo­mat­ic mis­sions, and on Sep­tem­ber 29 instruc­tions were sent to mis­sions in the Euro­pean neu­tral coun­tries as well as to mis­sions to coun­tries which had par­tic­i­pat­ed in the Bret­ton Woods Con­fer­ence, to impress upon their host gov­ern­ments the impor­tance of insti­tut­ing such mea­sures as would ful­fill the aims of Res­o­lu­tion VI.

New and vig­or­ous U.S.-British action result­ed from the Bret­ton Woods agree­ment. A Safe­haven depart­ment was estab­lished in the British Min­istry of Eco­nom­ic War­fare, and there began more for­mal pool­ing of infor­ma­tion with Amer­i­can Safe­haven offi­cials. In April British and U.S. offi­cials had met with Swiss bank­ing offi­cials in Lis­bon and sought, with­out suc­cess, to per­suade Switzer­land from allow­ing its facil­i­ties to be used to finance Axis trade. In August 1944 the British joined the Unit­ed States in a joint request of the Swiss to halt the acqui­si­tion of gold from Ger­many or any of its occu­pied ter­ri­to­ries and to pre­vent such acqui­si­tion by any bank or per­son under Swiss juris­dic­tion. The British object­ed to the Amer­i­can pro­pos­al to present such requests to the oth­er neu­tral states on grounds that they might well prove to be incon­ve­nient for the Allies after the war.

In sep­a­rate notes of Octo­ber 2, 1944, the U.S. and U.K. Gov­ern­ments instruct­ed their Embassies in neu­tral coun­tries to request that the coun­try to which they were accred­it­ed adhere to Res­o­lu­tion VI passed at the Bret­ton Woods Con­fer­ence and take nec­es­sary mea­sures to enforce it on their ter­ri­to­ry. The note asked the coun­tries to thwart Axis moves to find “Safe­haven” for their loot in neu­tral coun­tries and observed that these activ­i­ties were increas­ing as the ene­my antic­i­pat­ed defeat. To pro­vide Embassies with exper­tise in Safe­haven-relat­ed issues, on Octo­ber 31, 1944, Trea­sury Sec­re­tary Mor­gen­thau agreed with Trea­sury Gen­er­al Coun­sel Joseph O’Connell and Har­ry Dex­ter White, Direc­tor of Mon­e­tary Research for the Trea­sury Depart­ment, that Trea­sury-trained finan­cial intel­li­gence offi­cers should be dis­patched to sup­ple­ment the staff of Embassies in response to the increased out­flow of Axis cap­i­tal and goods from the Ger­man Reich to neu­tral havens.

C. Imple­men­ta­tion of Safe­haven

As orig­i­nal­ly con­ceived by FEA, Safe­haven was to be entire­ly oper­at­ed by FEA, with Trea­sury guid­ing on the finan­cial and infor­ma­tion­al side, and State mak­ing the pol­i­cy. How­ev­er, FEA’s role was weak­ened from the start by its fail­ure to estab­lish clear lines of respon­si­bil­i­ty with­in its own orga­ni­za­tion. The con­tro­ver­sy sur­round­ing the Klaus Mis­sion did not help. Dif­fer­ences on both pol­i­cy and oper­a­tions sprang up almost at once, at times becom­ing acute. Diplo­mat­ic activ­i­ty relat­ed to per­suad­ing the neu­tral coun­tries to imple­ment Res­o­lu­tion VI pro­pelled the State Depart­ment into an active role in Safe­haven oper­a­tions. Accord­ing to one observ­er, by ear­ly 1945 the State Depart­ment had for all prac­ti­cal pur­pos­es assumed respon­si­bil­i­ty for the Safe­haven pro­gram. This trans­fer of respon­si­bil­i­ty may have tak­en place ear­li­er, for on Decem­ber 24, 1944, the State Depart­ment sent a Depart­ment-only air­gram to mis­sions in the Amer­i­can Republics, stress­ing the impor­tance of Safe­haven and request­ing the mis­sions to begin as soon as pos­si­ble a flow of cur­rent infor­ma­tion regard­ing sus­pect enti­ties and trans­ac­tions and to pre­pare for a long-range report­ing task. A com­pre­hen­sive mes­sage to oth­er diplo­mat­ic mis­sions fol­lowed on Jan­u­ary 16, 1945. This mes­sage referred to Res­o­lu­tion VI and the sub­se­quent instruc­tions to mis­sions in neu­tral coun­tries to inves­ti­gate and report any evi­dence of ene­my cap­i­tal flight. The pri­ma­ry pur­pose of the mes­sage was to direct the Mis­sions’ atten­tion to the impor­tance of Safe­haven as a phase of post-hos­til­i­ties eco­nom­ic secu­ri­ty, to sug­gest a long-range report­ing task, and to begin at once a flow of cur­rent infor­ma­tion con­cern­ing sus­pect per­sons, enti­ties and trans­ac­tions.

Begin­ning in fall 1944, FEA and the State Depart­ment engaged in a long-stand­ing debate over treat­ment of the Euro­pean neu­trals after the end of hos­til­i­ties. MEW and oth­er British agen­cies also joined in this debate. In Sep­tem­ber 1944 FEA’s Exec­u­tive Pol­i­cy Com­mit­tee con­sid­ered a pro­posed state­ment of Allied pol­i­cy toward the neu­trals that would con­tin­ue trade con­trols into the post­war peri­od. Cor­re­spon­dence in August between Sir Ronald Ian Camp­bell, the British Min­is­ter in Wash­ing­ton, and Assis­tant Sec­re­tary of State Ache­son had revealed that the Unit­ed King­dom had agreed on con­tin­u­ing con­trols, although only on items in short sup­ply. The Com­mit­tee agreed that Lauch­lin Cur­rie from the FEA should dis­cuss this pro­posed pol­i­cy state­ment with Ache­son.

In a sub­se­quent meet­ing on Novem­ber 2, the Exec­u­tive Pol­i­cy Com­mit­tee dis­cussed the State Department’s stance that con­tin­u­a­tion of the eco­nom­ic block­ade against the neu­trals would not be war­rant­ed, and that reliance should instead be placed on obtain­ing the coop­er­a­tion of the neu­trals. The FEA offi­cials doubt­ed that this approach would be effec­tive, and believed that con­trols should be kept in place until the pol­i­cy objec­tives were attained. They pro­posed draft­ing a revised pol­i­cy state­ment on keep­ing con­trols, to
be tak­en up at the inter-agency Exec­u­tive Com­mit­tee on Eco­nom­ic For­eign Pol­i­cy, where pol­i­cy toward the neu­trals was to be con­sid­ered.

Trea­sury, State, and FEA exchanged pro­pos­als on divid­ing and shar­ing respon­si­bil­i­ties in the orga­ni­za­tion and enforce­ment of Safe­haven, and at a meet­ing on Decem­ber 2, 1944, agreed on the roles of the par­tic­i­pat­ing agen­cies, which gave each a mea­sure of oper­a­tional free­dom. They also agreed to cen­tral­ize all intel­li­gence and data relat­ed to Safe­haven and Axis assets in neu­tral coun­tries at the Embassy in Lon­don. Aside from rely­ing heav­i­ly on British eco­nom­ic and finan­cial intel­li­gence, the Amer­i­cans viewed this choice as an inex­pen­sive way of rec­og­niz­ing the British con­tri­bu­tion as part­ners, albeit reluc­tant, in Safe­haven.

The State Depart­ment released on Decem­ber 6, 1944, its long-await­ed Cir­cu­lar Instruc­tion to U.S. Mis­sions con­cern­ing Safe­haven mat­ters. This ini­tia­tive launched the polit­i­cal and diplo­mat­ic phase of Safe­haven under the lead­er­ship of the Depart­ment of State, and sig­naled the begin­ning of the demise of FEA as the per­ceived lead agency in the for­mu­la­tion of Safe­haven poli­cies.

Con­tin­ued fear in Allied cir­cles that after Hitler’s demise Nazi diehards would try to tap into Ger­man exter­nal assets helps to account for the Allied lead­ers’ eager­ness to reach a set­tle­ment on these issues very soon after the end of the war. As late as April 22, 1945, the Sec­re­tary of State not­ed in a telegram to Ambas­sador John Winant in Lon­don that “the Unit­ed Nations have per­ceived cause for anx­i­ety in the pos­si­ble flight of Axis cap­i­tal for the use of war crim­i­nals and oth­er dan­ger­ous per­sons and oth­er Axis manip­u­la­tion of assets locat­ed abroad to the detri­ment of both the peace and secu­ri­ty of the post-war world and the wel­fare of the coun­try in which such assets were locat­ed.”

As the end of hos­til­i­ties neared, the Unit­ed States main­tained a firm stance toward the neu­trals. Reports of move­ments of Ger­man-ori­gin gold were still reach­ing Wash­ing­ton, and Switzer­land as well as oth­er neu­trals were resist­ing U.S. pres­sure to adopt a gold pol­i­cy in line with Res­o­lu­tion VI. On Decem­ber 8, 1944, the Exec­u­tive Com­mit­tee on Eco­nom­ic For­eign Pol­i­cy approved a pol­i­cy state­ment con­cern­ing Allied eco­nom­ic pol­i­cy toward neu­tral coun­tries, which close­ly reflect­ed the tough stance being tak­en by FEA. This posi­tion paper not­ed that the neu­tral coun­tries had prof­it­ed by main­tain­ing their com­mer­cial and oth­er rela­tions with Ger­many, that they were not com­mit­ted to assume any respon­si­bil­i­ty for post­war reha­bil­i­ta­tion, and that as a result of their col­lab­o­ra­tion with the ene­my they were in many cas­es stronger eco­nom­i­cal­ly than neigh­bor­ing coun­tries which had coop­er­at­ed with the Allies. This pol­i­cy state­ment called for a con­tin­u­a­tion of trade con­trols, exchange con­trols, and freez­ing reg­u­la­tions into the post­war peri­od, as lever­age in obtain­ing assis­tance from the neu­trals in attain­ing Safe­haven and oth­er eco­nom­ic defense objec­tives.

Even though it received Pres­i­dent Roosevelt’s approval, this pol­i­cy state­ment did not put an end to dif­fer­ences among U.S. agen­cies, par­tic­u­lar­ly with respect to con­tin­u­a­tion of con­trols after the end of hos­til­i­ties. Word reached offi­cials in the Embassy in Lon­don in March 1945 that the pol­i­cy state­ment was still under review and was being revised. The orga­ni­za­tion­al aspects of han­dling future eco­nom­ic rela­tions with the neu­trals were sort­ed out more read­i­ly. The State Depart­ment orga­nized, with FEA and the British Embassy, a sin­gle com­mit­tee to coor­di­nate the pol­i­cy aspects involved in obtain­ing “our remain­ing eco­nom­ic war­fare desider­a­ta in each of the neu­tral coun­tries,” as well as secur­ing agree­ment from the neu­trals to coop­er­ate in post­war pro­cure­ment and sup­ply. The Trea­sury Depart­ment appeared to be exclud­ed.

Sec­re­tary of the Trea­sury Mor­gen­thau in Sep­tem­ber 1944 put for­ward his plan for the polit­i­cal reform of a defeat­ed Ger­many through pun­ish­ment, par­ti­tion, and pas­tor­al­iza­tion. The rad­i­cal down-scal­ing of Ger­man econ­o­my envis­aged under the Mor­gen­thau Plan would rule out any sub­stan­tial repa­ra­tions to the vic­tors, except what might be obtained from the dis­man­tle­ment of what remained of Ger­man indus­try at the end of the war. While Pres­i­dent Roo­sevelt appeared at first to approve of the Trea­sury plan for a puni­tive peace for Ger­many, and he and Prime Min­is­ter Churchill went some dis­tance in adopt­ing some of its ele­ments dur­ing their wartime meet­ing at Que­bec in Sep­tem­ber 1944, oppo­si­tion devel­oped from Sec­re­tary of War Hen­ry Stim­son who feared it would fos­ter resent­ment in Ger­many and give rise to anoth­er war with Ger­many. The State Depart­ment also opposed the pas­tor­al­iza­tion of the Ger­many econ­o­my called for in the Trea­sury plan and favored a sys­tem of con­trols that would bring Ger­many into the fam­i­ly of nations. The State Depart­ment opposed the dein­dus­tri­al­iza­tion of Ger­many, believ­ing rather that Ger­many should have a pos­i­tive role to play in the post­war inter­na­tion­al econ­o­my. The British also opposed the harsh peace plan advo­cat­ed by Mor­gen­thau. By the time of the Heads of Gov­ern­ment Con­fer­ence at Yal­ta in Feb­ru­ary 1945, high-lev­el sup­port for Morgenthau’s Plan had dis­ap­peared, the direc­tives pre­pared to guide the U.S. occu­pa­tion of Ger­many ruled out key ele­ments of the Mor­gen­thau Plan, and Roo­sevelt, Prime Min­is­ter Churchill, and Sovi­et Mar­shal Stal­in ten­ta­tive­ly agreed upon plans for the occu­pa­tion and con­trol of Ger­many that envis­aged sub­stan­tial repa­ra­tions from a revived Ger­many econ­o­my.

D. War Trade Nego­ti­a­tions

Safe­haven objec­tives of find­ing and restor­ing loot­ed assets, pre­vent­ing the escape into the neu­tral nations of Ger­man assets, and pre­vent­ing the resur­gence of Nazi Ger­many became min­gled, in the wartime Allied eco­nom­ic war­fare diplo­ma­cy, with the pro­tract­ed efforts to halt the trade of the neu­trals with Nazi Ger­many. Germany’s war effort depend­ed sig­nif­i­cant­ly upon its imports of raw mate­ri­als and goods from the neu­tral nations. Switzer­land pro­vid­ed Ger­many with arms, ammu­ni­tion, and machin­ery, includ­ing loco­mo­tives as well as agri­cul­tur­al prod­ucts. The wartime Allied bomb­ing cam­paign even­tu­al­ly forced Ger­many to move some of its arms fac­to­ries to the safe­ty of Swiss ter­ri­to­ry. Sweden’s exports of ball-bear­ings to Ger­many were vital­ly impor­tant. but were even over­shad­owed dur­ing the ear­ly years of the war when Swe­den sup­plied Ger­many with 40 per­cent of its iron ore before imports of iron ore from oth­er Euro­pean coun­tries reduced this depen­den­cy. Por­tu­gal and Spain pro­vid­ed Ger­many with invalu­able sup­plies of wol­fram ore which Ger­many refined into tung­sten and used in the steel-hard­en­ing process. Spain also pro­vid­ed iron ore, mer­cury, and zinc. Turkey was Germany’s source of the very scarce cobalt ore.

In the ear­ly years of the war, the eco­nom­ic block­ade efforts had lit­tle or no sup­port from the neu­tral nations. The post­war analy­sis of the block­ade by British experts con­clud­ed: “At no stage of the war was Ger­many deci­sive­ly weak­ened by short­ages due to the block­ade alone.” The study observes that mas­sive bomb­ing and great mil­i­tary loss­es in bat­tle had by 1944 made Ger­man defeat inevitable and unmis­tak­able even to objec­tive observers with­in Ger­many. Only as the mil­i­tary bal­ance passed per­ma­nent­ly to the Allied side, and rec­og­niz­ably so to the neu­trals, did the eco­nom­ic block­ade and with it the Safe­haven pro­gram, begin to show results.

The chief tool in the Allied eco­nom­ic war­fare pro­gram to pre­vent Ger­man imports from the neu­trals was, ear­ly in the war, bar­gain­ing over Allied trade with the neu­trals. Such bar­gain­ing with neu­trals who sup­plied impor­tant mate­ri­als to Ger­many was high­ly unpop­u­lar in the Unit­ed States. As Dean Ache­son, who served dur­ing the war years as Assis­tant Sec­re­tary of State in charge of eco­nom­ic war­fare efforts, recalled: “At home the pub­lic, almost to a man, regard­ed arrange­ments to sup­ply the neu­trals as trai­tor­ous con­nivance at trad­ing with the ene­my, and that some high offi­cials like Under Sec
retary of War Robert Pat­ter­son were of this opin­ion.” In pass­ing along to Sec­re­tary of State Hull one of Under Sec­re­tary Patterson’s mem­o­ran­da about neu­tral trade, Sec­re­tary of War Hen­ry Stim­son observed on June 22, 1944, that “the pol­i­cy of gen­tle appease­ment” to the neu­trals had end­ed only as Allied armies closed in on Ger­many.

FEA experts esti­mat­ed in mid-1944 that Ger­many had increased its trade with the neu­tral nations and, with the excep­tion of Por­tu­gal, which had major trade ties with Britain, became the major trad­ing part­ner of all of them. Switzer­land, entire­ly sur­round­ed by Ger­many, had been drawn even more com­plete­ly into Germany’s trade orbit than the oth­er neu­trals, and by 1943 Ger­many absorbed near­ly a third of all Swiss exports� pri­mar­i­ly man­u­fac­tured items that required small amounts of raw mate­ri­als, large amounts of cap­i­tal, and high­ly skilled labor. The FEA experts not­ed that the most impor­tant prod­ucts export­ed to Ger­many required the excep­tion­al­ly high degree of skill and pre­ci­sion for which Swiss watch and machine tool indus­tries were famous, and, in fact, some of the prod­ucts could not be pro­duced at all in Ger­many or not in suf­fi­cient quan­ti­ties to meet wartime needs. In addi­tion, Switzer­land annu­al­ly export­ed to Ger­many one-half bil­lion kilo­watts of elec­tric­i­ty, or about 40 per­cent of the total pow­er sup­ply of south­ern Ger­many, and Swiss hydro­elec­tric pow­er annu­al­ly pro­duced 16,000 tons of alu­minum and alu­minum prod­ucts for Ger­many dur­ing the war. More­over, the unprece­dent­ed use by Ger­many of the Swiss rail­way to trans­port goods to and from Italy (apart from the tran­sit of actu­al mate­ri­als which Switzer­land banned) allowed large quan­ti­ties of raw mate­ri­als, food­stuffs, chem­i­cals, and oth­er mate­ri­als to trans­port­ed to Italy and per­mit­ted Ger­many to mit­i­gate some of the effects of the Allied con­trol of the Mediter­ranean Sea.

The Lon­don Dec­la­ra­tion of Jan­u­ary 1943 and the Gold Dec­la­ra­tion of Feb­ru­ary 1944 were part of the joint U.S.-British effort to per­suade the neu­trals to reduce their exports to Ger­many. As Allied mil­i­tary pow­er grew, Sec­re­tary of State Hull sound­ed the tough­en­ing of Amer­i­can eco­nom­ic war­fare tac­tics against the neu­trals. On April 9, 1944, he includ­ed, in what turned out to be his last major for­eign pol­i­cy address (draft­ed by Ache­son and approved by the major Depart­ment divi­sions) a warn­ing to the neu­trals. After point­ing out that the lim­its of Amer­i­can pow­er in the first two years of the war had forced the Unit­ed States to make com­pro­mis­es with the neu­trals, he point­ed out that that peri­od was draw­ing to a close:

“We can no longer acqui­esce in these nations draw­ing upon the resources of the allied world when they at the same time con­tribute to the death of troops whose sac­ri­fice con­tributes to their sal­va­tion as well as ours. We have scrupu­lous­ly respect­ed the sov­er­eign­ty of these nations, and we have not coerced, nor shall we coerce, any nation to join us in the fight. We have said to these coun­tries that it is no longer nec­es­sary for them to pur­chase pro­tec­tion against aggres­sion by nour­ish­ing aid to our ene­my.� We ask them only, but with insis­tence, to cease aid­ing our ene­my.”

Hull engaged in oth­er ways to sup­port the Allied efforts to break the dead­lock on the attempts to halt neu­tral com­merce with Ger­many. William Dono­van, head of the Office of Strate­gic Ser­vices, had informed Pres­i­dent Roo­sevelt on July 10, 1944, that the Swiss, rather than restrict­ing their bank deal­ings with Ger­many had agreed to buy $7–10 mil­lion in gold from Ger­many every month. After Pres­i­dent Roo­sevelt urged Dono­van to take up the mat­ter with Sec­re­tary Hull and “block the Swiss par­tic­i­pa­tion in sav­ing the skins of rich or promi­nent Ger­mans,” Hull called in Swiss Min­is­ter Charles Brug­gmann on July 14, 1944. He reviewed the loss of Amer­i­can lives on the bat­tle fronts and the expen­di­ture of $200 bil­lion and added:

“It is not unnat­ur­al that Swiss busi­ness­men should ask the inter­ces­sion of their Gov­ern­ment with ours so as to retain as much trade with the Axis as pos­si­ble.� When the Unit­ed States is los­ing lives right and left and is spend­ing enor­mous sums of mon­ey because of neu­tral aid to the ene­my pri­mar­i­ly in order to grat­i­fy some busi­ness­men, the ques­tion becomes mores seri­ous to this coun­try.”

Hull con­clud­ed by warn­ing the Min­is­ter: “One of these days the stand of some of the Swiss busi­ness­men in ques­tion would be uncov­ered as in the cas­es of cer­tain peo­ple in Swe­den, result­ing in inevitable fric­tion between our coun­tries.”

In August 1944 the State Depart­ment instruct­ed the Lega­tion in Bern that the mil­i­tary devel­op­ments that brought Allied forces ever clos­er to the Swiss fron­tier made it time to begin infor­mal dis­cus­sions with the Swiss regard­ing the sus­pen­sion of all exports to Ger­many and the pro­hi­bi­tion of Ger­man tran­sit traf­fic across Switzer­land. Although the British even­tu­al­ly joined with the Amer­i­cans in late August in approach­ing the Swiss Gov­ern­ment, British For­eign Sec­re­tary Antho­ny Eden wrote to U.S. Ambas­sador John Winant in late August 1944 indi­cat­ing a pref­er­ence for seek­ing at first only a pro­hi­bi­tion of high pri­or­i­ty exports to Ger­many:

“We attach very high impor­tance to avoid­ing forc­ing the Swiss to take action which would result in a rup­ture of Swiss diplo­mat­ic rela­tions with Ger­many. This would nec­es­sar­i­ly mean that Switzer­land would cease to act as pro­tect­ing pow­er at a moment when this may be more nec­es­sary than ever before. After the recent mur­der of our air­men in Ger­many we are gen­uine­ly alarmed at the pos­si­bil­i­ty that the last moment before total defeat the Gestapo might run amok and com­mit whole­sale mur­der of British and Amer­i­can pris­on­ers of war. Obvi­ous­ly this is more like­ly to hap­pen if the restrain­ing influ­ence of the pro­tec­tive pow­er is removed.”

The Swiss response to the Amer­i­can request came in late August in an aide‑m�moire that betrayed Swiss recog­ni­tion that approach­ing Allied mil­i­tary vic­to­ry made nec­es­sary the adap­ta­tion of the pol­i­cy of neu­tral­i­ty:

“It goes with­out say­ing that the war as it nears the Alps changes aspect of tran­sit prob­lem and has a bear­ing on its solu­tion. For this rea­son Fed­er­al author­i­ties keep this prob­lem under con­stant and care­ful watch. They have thus been able to observe that traf­fic in both direc­tions has in gen­er­al decreased and not increas­ing since spring. In spir­it of true neu­tral­i­ty which guides them will see to it that it fol­lows the trend cir­cum­stances demand.”

As a result of U.S‑U.K nego­ti­a­tions with the Swiss in August 1944, Switzer­land dras­ti­cal­ly reduced its exports of strate­gic items such as ammu­ni­tion, loco­mo­tives, auto­mo­biles, diesel engines, and machin­ery to Ger­many. Nego­ti­a­tions in the autumn moved Switzer­land toward a total ban on such exports. The Swiss also agreed to a ban on the tran­sit of all war mate­ri­als between Italy and Ger­many includ­ing var­i­ous cat­e­gories of loot. The State Depart­ment, the U.S. and British Lega­tions in Bern, and the British Embassy in Wash­ing­ton urged that the Swiss be allowed some sup­plies from the Allies in order to encour­age fur­ther con­ces­sions, but the For­eign Eco­nom­ic Admin­is­tra­tion advo­cat­ed that the strongest meth­ods be used to achieve eco­nom­ic war­fare objec­tives against Switzer­land, includ­ing the with­hold­ing of raw mate­ri­als, food, and fod­der pre­vi­ous­ly promised by the Allies. The U.S. Joint Chiefs of Staff also favored with­hold­ing sup­plies to Switzer­land in order to elim­i­nate Swiss exports to Ger­many, but the British Chiefs of Staff con­tin­ued nego­ti­a­tions in order to accom­plish fur­ther reduc­tions. In a mem­o­ran­dum to the War Depart­ment Gen­er­al Staff in late Octo­ber 1944, Under Sec­re­tary of War Pat­ter­son indi­cat­ed that Swiss con­voys car­ry­ing ship­ments of goods from Spain across France to Switzer­land had resumed in late Sep­tem­ber 1944, and he argued that such ship­ments across to France not be under­tak­en until Switzer­land had stopped all ship­ments to Ger­many of goods use­ful for war which he esti­mat­ed at $30 mil­lion for the sec­ond half of 1944.

The State Depart­ment cir­cu­lar instruc­tion of Decem­ber 6, 1944, required U.S. and U.S. mis­sions to dis­cuss ways of pre­sent­ing the issues of loot­ed gold and ene­my prop­er­ty to the neu­trals with­out jeop­ar­diz­ing the nego­ti­a­tion of war trade agree­ments. How­ev­er, dis­agree­ments erupt­ed over how to bal­ance the war trade agree­ments with the basic require­ments of the Safe­haven pro­gram. For instance, in Lon­don, Trea­sury object­ed to com­min­gling Safe­haven mat­ters and war trade nego­ti­a­tions with the Swedes. As long as State was luke­warm about mak­ing straight­for­ward over­tures to the neu­trals about Safe­haven, part­ly in response to British reluc­tance in that area, Trea­sury argued that it was best to work toward rat­i­fi­ca­tion of a war trade agree­ment with Swe­den and uti­lize the next avail­able oppor­tu­ni­ty to press for its accep­tance of basic Safe­haven objec­tives, name­ly, adher­ence to Bret­ton Woods Res­o­lu­tion VI and to the Gold Dec­la­ra­tion.

Dif­fer­ences among Amer­i­can pol­i­cy offi­cers per­sist­ed in the con­duct of the Safe­haven pro­grams. Trea­sury offi­cials felt that their “hard” approach in the nego­ti­a­tions with the neu­tral coun­tries dif­fered from the “soft” under­tak­ings they ascribed to the State Depart­ment and their British coun­ter­parts. The same could be said about Allied plans for post­war Ger­many. Dean Ache­son lat­er looked back on these wartime nego­ti­a­tions with the neu­trals as “worth doing,” but esti­mat­ed that the efforts, aimed at deny­ing Ger­many mate­ri­als for its war pro­duc­tion, were not par­tic­u­lar­ly suc­cess­ful until the lat­ter half of 1944:

“A good case can be made for the argu­ment that eco­nom­ic mea­sures result­ed in stop­ping impor­tant exports for mil­i­tary needs from Swe­den to Ger­many for six months before mil­i­tary mea­sures would have done so. Exports from Switzer­land and the Iber­ian Penin­su­la prob­a­bly moved in min­i­mum nec­es­sary quan­ti­ties until mil­i­tary mea­sures stopped them.”

E. Evolv­ing Pol­i­cy Toward Switzer­land; the Cur­rie Mis­sion and Its After­math

In Decem­ber 1944 the State Department’s West­ern Euro­pean experts pre­pared a Depart­ment pol­i­cy paper on cur­rent pol­i­cy toward Switzer­land. On the eve of the semi-annu­al revi­sions of the wartime U.S‑U.K.-Swiss War Trade Agree­ment, the Depart­ment pro­posed a revi­sion of pol­i­cy toward Switzer­land. The object of the change was to fur­ther reduce Swiss exports to Ger­many and the vol­ume and com­po­si­tion of the tran­sit traf­fic across Switzer­land between Ger­many and Italy. The Office of Euro­pean Affairs pol­i­cy paper rec­om­mend­ed the fol­low­ing:

“For polit­i­cal rea­sons and for rea­sons aris­ing out of the ben­e­fits to us of Switzerland’s neu­tral posi­tion and her future poten­tial use­ful­ness in the econ­o­my of Europe it was inad­vis­able to place too great pres­sure upon the Swiss Gov­ern­ment at this time in order to attain pure eco­nom­ic war­fare objec­tives.

“The change of tac­tics sug­gest­ed by the Lega­tion at Bern and ful­ly sup­port­ed by the British Gov­ern­ment should be adopt­ed.

“The Swiss should be told that as the mil­i­tary sit­u­a­tion changed, our eco­nom­ic war­fare objec­tives like­wise would change and increase; that they had not ful­ly met our Sep­tem­ber demands, and that in the Jan­u­ary nego­ti­a­tions we would have fur­ther requests to make, par­tic­u­lar­ly with respect to the North-South tran­sit traf­fic; that it was the Unit­ed States inten­tion to deal gen­er­ous­ly with the Swiss in sup­ply and oth­er eco­nom­ic mat­ters to the full extent of their will­ing­ness and abil­i­ty to meet our requests; and that as an earnest of our good-will and in reflec­tion of the par­tial way they had already come, we were plan­ning to make imme­di­ate­ly avail­able to them a sub­stan­tial pro­por­tion of the raw mate­ri­als offered them in Sep­tem­ber.”

The Depart­ment pol­i­cy paper argued that eco­nom­ic war­fare con­sid­er­a­tions were impor­tant but should be placed in the per­spec­tive of the whole range of rela­tions with Switzer­land which it pre­sent­ed as fol­lows:

“Switzer­land dif­fers from oth­er neu­trals in that her neu­tral­i­ty is not uni­lat­er­al. It is a neu­tral­i­ty which has been guar­an­teed for many years by the major pow­ers. As a result of this neu­tral­i­ty Switzer­land per­forms cer­tain indis­pens­able ser­vices for all the bel­liger­ents and claims in return the right to trade with such of them as will help main­tain its essen­tial econ­o­my and inter­nal sta­bil­i­ty. As far as the Unit­ed States is con­cerned Switzer­land serves as the pro­tect­ing pow­er for our gen­er­al inter­ests and in par­tic­u­lar for our pris­on­ers of war in Ger­many and Japan. It is the agreed pol­i­cy of the British and U.S. Gov­ern­ments to avoid forc­ing Switzer­land to a break with Ger­many. Such a break would make it impos­si­ble for the Swiss to con­tin­ue to rep­re­sent British and U.S. inter­ests in Ger­many and might like­wise affect their posi­tion in so far as Japan is con­cerned. It is essen­tial as the sit­u­a­tion in Ger­many becomes more and more dis­turbed that we endeav­or to obtain their great­est degree of pro­tec­tion not only for U.S. gen­er­al inter­ests but espe­cial­ly in regard to mat­ters relat­ing to pris­on­ers of war. But it should be remem­bered that the effec­tive­ness of Switzerland’s pro­tec­tion can be much altered by a severe dete­ri­o­ra­tion of its rela­tions with Ger­many short of com­plete rup­ture.

“Relat­ed to but not direct­ly con­nect­ed with the pro­tec­tion of U.S. inter­ests by Switzer­land are her human­i­tar­i­an efforts, under­tak­en at the request of the U.S. Gov­ern­ment, on behalf of the Jews in Cen­tral Europe. At our request, she has recent­ly agreed to admit some 15,000 addi­tion­al Hun­gar­i­an Jews in spite of the increased strain on her gen­er­al food prob­lem.

“Last­ly, it must be remem­bered that no peo­ple in Europe are more pro­found­ly attached to demo­c­ra­t­ic prin­ci­ples than the Swiss. Con­tin­ued mod­er­ate pros­per­i­ty will ensure the main­te­nance of the present eco­nom­ic and polit­i­cal sys­tems which is so close to our own.”

In a let­ter of Decem­ber 29, 1944, to the Sec­re­tary of State, FEA Admin­is­tra­tor Leo Crow­ley sum­ma­rized his agency’s argu­ments against a soft pol­i­cy toward Switzer­land and for the imme­di­ate with­draw­al of the offer of sup­plies to the Swiss, a com­plete halt in mil­i­tary sup­plies from Switzer­land to Ger­many and the dras­tic reduc­tion of oth­er exports, and the stop­page of south­bound Ger­man train tran­sit across Switzer­land. Crow­ley told Stet­tinius that “the time has come when, for the sake of both present and future objec­tives, we must take imme­di­ate mea­sures to con­vince the Swiss not only that we means busi­ness , but also that to con­tin­ue their present eco­nom­ic pol­i­cy vis-�-vis the Ger­mans would be dis­as­trous to their own inter­ests.”

The Depart­ment pol­i­cy paper on Switzer­land was tak­en up by the Sec­re­tary of State’s Staff Com­mit­tee at its meet­ing on Jan­u­ary 3, 1945. The meet­ing, which was large­ly giv­en over to a dis­cus­sion of post­war Euro­pean eco­nom­ic plan­ning and the pos­si­ble loan to the British, was presided over by Sec­re­tary of State Edward Stet­tinius and includ­ed all his prin­ci­pal offi­cers. James C. Dunn, Direc­tor of the Office of Euro­pean Affairs, made the case for the pol­i­cy paper, explain­ing that the War and Navy Depart­ments pre­ferred a much hard­er pol­i­cy toward Switzer­land in order to com­plete­ly halt Swiss exports to Ger­many and remind­ing the Com­mit­tee of the oppo­si­tion as well from the For­eign Eco­nom­ic Admin­is­tra­tion. Dunn felt that the pol­i­cy paper had made the polit­i­cal case for not press­ing Switzer­land hard­er. Under Sec­re­tary Joseph C. Grew empha­sized the impor­tance of the pro­tec­tion of Amer­i­can pris­on­ers of war in the Far East. Assis­tant Sec­re­tary William Clay­ton felt that Switzer­land had met most Amer­i­can demands and that no extreme action should be tak­en against them. After Sec­re­tary Stet­tinius indi­cat­ed that he opposed severe mea­sures against the Swiss, the Com­mit­tee approved the pol­i­cy paper’s rec­om­men­da­tions.

Act­ing Sec­re­tary of State Joseph Grew replied on Jan­u­ary 15, 1945, in a let­ter restat­ing the pol­i­cy con­clu­sions of the approved Depart­ment of State paper described above.

On behalf of the Jo
int Chiefs of Staff, War Depart­ment Sec­re­tary Hen­ry L. Stim­son wrote to Sec­re­tary of State Stet­tinius on Jan­u­ary 25 argu­ing for the stop­page of all Swiss tran­sit traf­fic at the ear­li­est pos­si­ble date, but he added that “deci­sion on the line of diplo­mat­ic pro­ce­dure best cal­cu­lat­ed to achieve this desired result is a mat­ter which does not con­cern them,” except inso­far as it might have mil­i­tary con­se­quences.

British Ambas­sador Lord Hal­i­fax called on Under Sec­re­tary Grew on Jan­u­ary 16, 1945, and reviewed the British atti­tude on eco­nom­ic rela­tions with Switzer­land and the British feel­ing that, “since stern tac­tics” had failed to achieve results, it would be the “bet­ter part of wis­dom to allow a rea­son­able amount of com­modi­ties to reach Switzer­land from France in the belief that this would cause the Swiss still fur­ther to meet our wish­es in cut­ting off their sup­plies to Ger­many.” The fol­low­ing day Swiss Min­is­ter Charles Brug­gmann called on James C. Dunn at the State Depart­ment to try to explain why his gov­ern­ment could not halt tran­sit train traf­fic com­plete­ly and remind­ing Dunn that the Swiss posi­tion of neu­tral­i­ty in the war allowed Swiss assis­tance for the inspec­tion and care of Allied war pris­on­ers in Ger­many and Japan. Final­ly on Jan­u­ary 20 the Depart­ment of State informed its Mis­sions in Lon­don and Bern that a U.S.-British del­e­ga­tion would pro­ceed to Bern imme­di­ate­ly to nego­ti­ate the ces­sa­tion of Swiss trade with Ger­many. In the days imme­di­ate­ly fol­low­ing, Lauch­lin Cur­rie, Assis­tant to Pres­i­dent Roo­sevelt, was named to head the U.S. team, and Din­gle M. Foot, the British Par­lia­men­tary Sec­re­tary for the Min­istry of Eco­nom­ic War­fare, head­ed the British team. The State Depart­ment also con­clud­ed that although France had not been a par­ty to wartime Safe­haven nego­ti­a­tions, French rep­re­sen­ta­tion (sub­se­quent­ly Paul Char­guer­aud was named to head the French team) would also be indis­pens­able because of France’s geo­graph­ic posi­tion.

In prepar­ing for the nego­ti­a­tions with the Swiss, the U.S. del­e­ga­tion grap­pled with rec­on­cil­ing two dif­fer­ent approach­es to the nego­ti­a­tions: should the Allies press for both the war trade agree­ment and Safe­haven objec­tives or rel­e­gate the lat­ter to the back­ground in order to obtain some mea­sure of sat­is­fac­tion with the for­mer? The Trea­sury Depart­ment and FEA agreed to make the accep­tance of Safe­haven require­ments a sine qua non before any talk of war trade nego­ti­a­tions could begin. The State Depart­ment opposed this on grounds that there was no coor­di­nat­ed approach with the French and the British on Safe­haven mat­ters, and that Cur­rie had only been briefed about war trade and not Safe­haven mat­ters. In the end, Cur­rie returned to Wash­ing­ton with a basic agree­ment on how to iden­ti­fy ene­my prop­er­ty in Switzer­land that gave the Allies a bench­mark by which to approach the oth­er neu­tral coun­tries on the sub­ject of Safe­haven.

The arrival of the Cur­rie Mis­sion in Bern in Feb­ru­ary 1945 rep­re­sent­ed both a sub­stan­tive and psy­cho­log­i­cal water­shed for the Swiss. Since the Allied land­ings in June 1944, the Ger­man Army had steadi­ly retreat­ed, and for the first time in over four years Switzer­land was not sur­round­ed by the Ger­man Army, open­ing the pos­si­bil­i­ty to expand trade and com­mu­ni­ca­tion with the non-Axis world. The U.S. Lega­tion in Bern judged that pub­lic expec­ta­tions cen­ter­ing on Currie’s vis­it were bor­der­ing on the fever­ish. The Lega­tion expressed con­cern that if the out­come of the Cur­rie mis­sion did not ben­e­fit the Swiss (pre­sum­ably through increased ship­ments of coal and oth­er essen­tial raw mate­ri­als), the pub­lic would be “pro­por­tion­ate­ly dis­ap­point­ed” with neg­a­tive con­se­quences for U.S.-Swiss rela­tions. The same report sug­gest­ed that Swiss offi­cials who had ear­li­er dealt with the Allies on finan­cial mat­ters were far less san­guine over Currie’s immi­nent arrival.

The Swiss del­e­ga­tion was led by Dr. William Rap­pard (an aca­d­e­m­ic from Gene­va), but, accord­ing to the Lega­tion, the num­ber two at the For­eign Office, Wal­ter Stuc­ki, was the “man pulling the strings.” Stuc­ki appeared to be mov­ing in all direc­tions, intrud­ing into a num­ber of eco­nom­ic areas not nor­mal­ly with­in the purview of the For­eign Office. The Lega­tion also not­ed that Stuc­ki had held a rank­ing posi­tion in the Depart­ment of Pub­lic Econ­o­my but, accord­ing to local reports, his head­strong dis­po­si­tion result­ed in his ulti­mate removal. Stuc­ki lat­er became head of the Swiss del­e­ga­tion to the 1946 Wash­ing­ton nego­ti­a­tions on Ger­man assets.

Despite offi­cial Swiss con­cern about his Mis­sion, Cur­rie was impressed with the pop­u­lar enthu­si­asm that greet­ed his arrival on the first train to Bern from a recent­ly lib­er­at­ed Paris. Through­out his stay, in fact, Cur­rie received red car­pet treat­ment, the details of which appeared in much of his cor­re­spon­dence about the Mis­sion. It is like­ly that the lav­ish Swiss hos­pi­tal­i­ty afford­ed Cur­rie and his col­leagues con­tributed, to some degree, to the opti­mistic inter­pre­ta­tion of the mission’s out­come.

Cur­rie was not unmind­ful of the real needs of Switzer­land. With the lib­er­a­tion of France, the sup­ply sys­tem the Ger­mans had estab­lished to main­tain its con­quered west­ern ter­ri­to­ries col­lapsed and coal ship­ments to Switzer­land declined pre­cip­i­tous­ly. Accord­ing to Swiss sources, coal stocks were at dan­ger­ous­ly low lev­els and unless the Allies rapid­ly estab­lished new chan­nels of sup­ply through France, Switzer­land faced coal short­ages in late win­ter as well as a decline in coal-depen­dent man­u­fac­tur­ing. Short­ly after his arrival Cur­rie became aware of Swiss con­cerns and sent a first per­son com­mu­ni­ca­tion to Pres­i­dent Roo­sevelt seek­ing a deci­sion to increase coal ship­ments to France as soon as pos­si­ble. The State Department’s response to Cur­rie sug­gest­ed that the Swiss were unlike­ly to see any improve­ment in coal ship­ments in the imme­di­ate future.

A month of dif­fi­cult nego­ti­a­tions cul­mi­nat­ed in an exchange of let­ters between the Allied del­e­ga­tion and Rap­pard set­ting out a list of block­ing mea­sures the Swiss had tak­en or would take against Ger­many and its allies. In March Cur­rie report­ed a degree of suc­cess in try­ing to get the Swiss to meet Allied require­ments for the block­ade of Ger­many. The Swiss Gov­ern­ment agreed to freeze all Ger­man assets in Switzer­land, includ­ing those held through Swiss nation­als; pro­hib­it the impor­ta­tion, expor­ta­tion, and deal­ing in all for­eign cur­ren­cies; and restrict Swiss pur­chas­es of gold from Ger­many. The Swiss also under­took to pre­vent their ter­ri­to­ry from being used for the dis­pos­al or con­ceal­ment of assets tak­en ille­gal­ly or under duress dur­ing the war. Fur­ther, the Swiss affirmed that, with­in the frame­work of Swiss law (present and future), every facil­i­ty would be accord­ed to dis­pos­sessed own­ers to claim their assets found in Switzer­land.

The Swiss Fed­er­al Coun­cil agreed on Feb­ru­ary 16, 1945, to block Ger­man assets in Switzer­land with cer­tain con­di­tions. How­ev­er, Trea­sury offi­cials were well aware that this ini­tial step fell far short of a con­crete guar­an­tee to freeze Ger­man assets in Switzer­land. In the words of Trea­sury offi­cial Frank Coe, “They must do much more, how­ev­er, before we can feel that they are giv­ing us real coop­er­a­tion.” The final agree­ment with the Allies on March 8, 1945, stip­u­lat­ed that Switzer­land would block the assets of all Euro­pean coun­tries, except the neu­trals, and of Japan; pre­vent cloak­ing of ene­my assets; inter­rupt all pur­chas­es of gold from Ger­many except for the expens­es of the Ger­man Lega­tion, the Red Cross, and pris­on­ers of war; assist in restora­tion of loot­ed prop­er­ty; and con­duct a cen­sus of Ger­man assets in Switzer­land.

U.S. offi­cials ini­tial­ly felt that the Cur­rie Mis­sion and the U.S.-Swiss agree­ment of March 8, 1945, had suc­cess­ful­ly advanced Safe­haven objec­tives and deci­sive­ly redi­rect­ed Allied-Swiss rela­tions. Some anx­i­ety about this appar­ent change seemed to cause Sovi­et Ambas­sador Andrey Gromyko to address a note to Sec­re­tary of State Stet­tinius on March 19 ask­ing for infor­ma­tion about the agree­ment and assur­ances that Swiss goods would not fall into Ger­man hands and pre­sum­abl
y be used against Sovi­et forces fight­ing their way into Ger­many from the east. Trea­sury Sec­re­tary Mor­gen­thau con­grat­u­lat­ed Cur­rie and informed him that he had paved the way “for Allied Mil­i­tary Gov­ern­ment in Ger­many to take con­trol of Ger­man assets in Switzer­land.” Ten­sions over the inter­pre­ta­tion and ful­fill­ment of that agree­ment soon emerged and con­tin­ued through the remain­der of 1945. The U.S. Lega­tion in Bern report­ed in May 1945 that sub­se­quent to the Cur­rie Mis­sion, the Swiss pur­chased 3,000 kilo­grams gold from Ger­many for pur­pos­es specif­i­cal­ly exclud­ed by the March 1945 agree­ment. Worse still for Amer­i­can author­i­ties was the Swiss asser­tion that the pur­chase was not loot­ed gold, despite the clear Allied pol­i­cy since Feb­ru­ary 1944 to regard all gold com­ing from Ger­many as loot­ed gold.

In June 1945 Sen­a­tor Harley Kil­go­re chaired hear­ings of his War Mobi­liza­tion Sub­com­mit­tee of the Sen­ate Mil­i­tary Affairs Com­mit­tee. The hear­ings were aimed at deter­min­ing whether a defeat­ed Ger­many retained the capac­i­ty, includ­ing its resources hid­den abroad, to con­duct war­fare again in the near future. Sen­a­tor Kil­go­re used the hear­ings to warn that the Swiss were prac­tic­ing a dou­ble stan­dard in deal­ing with the Allies. He intro­duced copies of cor­re­spon­dence from the spring of 1945, then recent­ly dis­cov­ered by Allied inves­ti­ga­tors, between Ger­man Reichs­bank Vice Pres­i­dent Emil Puhl and the Ger­man Min­is­ter of Eco­nom­ic Affairs Wal­ter Funk regard­ing Ger­man-Swiss com­mer­cial dis­cus­sions that were con­duct­ed at the same time as the Cur­rie Mis­sion. Amer­i­can news­pa­pers gave con­sid­er­able cov­er­age to the cor­re­spon­dence includ­ing its recount­ing of Swiss Gov­ern­ment assur­ances to the Ger­man nego­tia­tors of Switzerland’s con­tin­u­ing con­cern to Germany’s inter­ests.

Wide pub­lic­i­ty was giv­en in the Amer­i­can press to the tes­ti­mo­ny before the Kil­go­re Sub­com­mit­tee by Orvis A. Schmidt, Direc­tor of For­eign Funds Con­trol for the Trea­sury Depart­ment and a mem­ber of the Cur­rie Mis­sion to Bern. Schmidt stat­ed:

“Even at this late date, the Swiss Gov­ern­ment is loath to take the nec­es­sary steps to force banks and oth­er cloak­ing insti­tu­tions to dis­close the own­ers of assets held in or through Switzer­land. This means that Ger­man assets held in or through Switzer­land will not be iden­ti­fied. Thus, the true pic­ture of Ger­man finan­cial and indus­tri­al pen­e­tra­tion through­out the world will be kept a secret. By the same token, Swiss banks will con­tin­ue to prof­it by pro­tect­ing, through their secre­cy laws, German’s war poten­tial� the hid­den assets of it financiers and indus­tri­al­ists.”

By August 1945, U.S. Trea­sury lead­er­ship was becom­ing increas­ing­ly con­cerned with the defects of Swiss con­trols over Ger­man assets and the gen­er­al reluc­tance of Switzer­land to coop­er­ate ful­ly on Allied Safe­haven efforts. The Trea­sury Rep­re­sen­ta­tive at the U.S. Embassy in Lon­don was instruct­ed to seek British reten­tion of con­trols over Swiss accounts in the Unit­ed King­dom and work with the Unit­ed States in obtain­ing greater Swiss coop­er­a­tion before relax­ing con­trols. The instruc­tions con­clud­ed: “Allied con­trol of Swiss assets is the most potent weapon we have with which to obtain Swiss com­pli­ance with Safe­haven.”

The fol­low­ing month, the U.S. Min­is­ter in Switzer­land, Leland Har­ri­son, warned the Swiss Min­is­ter for For­eign Affairs, Max Petit­pierre, of U.S. dis­sat­is­fac­tion with Swiss efforts to com­plete a cen­sus of Ger­man assets and of the gen­er­al non-coop­er­a­tion of Switzer­land. Min­is­ter Har­ri­son repeat­ed these com­plaints to Petit­pierre a month lat­er, after con­cert­ing with his British and French col­leagues in Bern. Har­ri­son observed the appar­ent Swiss fail­ure to imple­ment the March 1945 agree­ment and, in par­tic­u­lar, the unsat­is­fac­to­ry coop­er­a­tion of the Swiss in Allied attempts to iden­ti­fy Ger­man assets in Switzer­land. Har­ri­son gave Petit­pierre an aide‑m�moire that list­ed nine sug­ges­tions for Swiss action to assist the search for Ger­man assets.

Some Swiss banks devel­oped a press cam­paign designed to arouse pub­lic sup­port for a posi­tion that Ger­man assets in Switzer­land should be used for the sat­is­fac­tion of Swiss claims. Swiss labor and lib­er­al ele­ments were told that Swiss com­pli­ance with Allied demands would be ille­gal and would jeop­ar­dize Switzerland’s posi­tion as a neu­tral; and it would throw Swiss indus­try out of bal­ance and endan­ger the jobs of many Swiss nation­als. A few months lat­er, the social­ist press in Switzer­land was said to have demand­ed the ouster of those respon­si­ble for giv­ing Switzer­land a black mark in the Puhl- Funk let­ters inci­dent. Even the right-wing papers, while gen­er­al­ly deny­ing Swiss col­lab­o­ra­tion with the Nazis, report­ed­ly indi­cat­ed that Switzer­land could not afford anoth­er cri­sis like that cre­at­ed by Sen­a­tor Kilgore’s accu­sa­tion. These papers sug­gest­ed that Switzer­land send its most capa­ble diplo­mats to see U.S. author­i­ties “espe­cial­ly Mr. Vin­son, Sec­re­tary of the Trea­sury, and if pos­si­ble the Pres­i­dent,” in order to dis­cuss the entire ques­tion of Swiss col­lab­o­ra­tion with the Nazis.

Amer­i­can intel­li­gence learned in Novem­ber 1945 of Swiss anx­i­ety as a result of the Puhl-Funk cor­re­spon­dence. The Swiss Gov­ern­ment explained to the press and its mis­sions abroad that the Ger­man-Swiss agree­ment of April 1945 pro­vid­ed for pur­chas­es oth­er than Ger­man war pur­chas­es. The Swiss Lega­tion in Wash­ing­ton warned its gov­ern­ment the crit­i­cisms and sus­pi­cion of Switzer­land by the Unit­ed States could not be con­tained while the Ger­man assets prob­lem remained unre­solved and while Trea­sury offi­cials, espe­cial­ly For­eign Funds Con­trol, sought to gain com­plete con­trol over these assets for fear they would be used to finance a Ger­man fifth col­umn or atom­ic research.

F. Safe­haven After the End of the War

The end of the war did not end the need to pur­sue Safe­haven progress. The main task at hand, how­ev­er, was to dis­cov­er Nazi eco­nom­ic and finan­cial inter­ests in the neu­tral coun­tries. Much of the evi­dence lay in cor­po­rate and bank­ing records cap­tured by Allied forces in Ger­many. For­eign Funds Con­trol Direc­tor Orvis Schmidt led a team of 30 Trea­sury offi­cials to Ger­many in May and June 1945 to assist the U.S. Army in the con­duct of finan­cial inves­ti­ga­tions into the wartime activ­i­ties of Ger­man com­pa­nies and banks. While in Ger­many, they also drew up plans for finan­cial con­trols over the col­lapsed eco­nom­ic infra­struc­ture of the for­mer Ger­man Reich.

When Trea­sury inves­ti­ga­tors uncov­ered link­ages between Ger­man par­ent com­pa­nies and their neu­tral sub­sidiaries, that infor­ma­tion was for­ward­ed to the Allied Embassies in the neu­tral coun­tries as fur­ther evi­dence of ene­my prop­er­ty to be liq­ui­dat­ed for repa­ra­tions pur­pos­es. The more dif­fi­cult inquiries, how­ev­er, con­cerned the prove­nance of gold deposits in Ger­man and neu­tral banks. The agen­cies of the new Allied Con­trol Author­i­ty for defeat­ed Ger­many became impor­tant agen­cies in these and oth­er Safe­haven efforts.

Spain afford­ed the Allies a spe­cial wartime prob­lem. It main­tained its pro-Axis lean­ings but was will­ing to pla­cate the Allies’ eco­nom­ic war­fare objec­tives as long as they did not inter­fere with Spain’s neu­tral­i­ty. The Trea­sury Depart­ment and FEA agreed to try to blend war trade nego­ti­a­tions and Safe­haven objec­tives, hop­ing that the Span­ish could be con­vinced that, unless they sub­scribed to the lat­ter, they would not ben­e­fit from the for­mer. To some Trea­sury offi­cials, the State Depart­ment, wor­ried over seem­ing British reluc­tance toward Safe­haven, appeared to stress the unique­ness of the Span­ish case, argu­ing that the Allies, and espe­cial­ly the Unit­ed States, had lit­tle influ­ence over Span­ish pol­i­cy and it was best to push for war trade con­ces­sions until the time was ripe to press for the sat­is­fac­tion of Safe­haven objec­tives.

The Allies had devised the so-called Axis Replace­ment Pro­gram to elim­i­nate what remained of Axis eco­nom­ic and finan­cial influ­ence in the West­ern Hemi­sphere. Under this Replace­ment pro­gram, the Unit­ed States sought to work with the gov­ern­ments of the var­i­ou
s Amer­i­can Republics to build up busi­ness enter­pris­es to sub­sti­tute for those enter­pris­es elim­i­nat­ed because of the Axis influ­ence or involve­ment in them. U.S. offi­cials were divid­ed over whether the reach of the Allied Con­trol Coun­cil for Ger­many, which assumed author­i­ty over defeat­ed Ger­many in the sum­mer of 1945, should extend to Latin Amer­i­ca, par­tic­u­lar­ly Argenti­na.

Dur­ing the June 1945 War Mobi­liza­tion Sub­com­mit­tee hear­ings chaired by Sen­a­tor Kil­go­re, Hen­ry Fowler, Chief of the Ene­mies Branch of the FEA, gave evi­dence of Ger­man wartime pen­e­tra­tion into the bank­ing, indus­try, and com­merce of the neu­tral nations, par­tic­u­lar­ly Swe­den, Spain, Switzer­land, and Por­tu­gal. In reply to ques­tions from Sen­a­tor Kil­go­re, Assis­tant Sec­re­tary of State William Clay­ton pro­vid­ed a detail account­ing of the government’s Axis Replace­ment and Pro­claimed List Pro­grams in Latin Amer­i­ca and the gen­er­al Safe­haven pro­gram. Clayton’s tes­ti­mo­ny made clear that the Safe­haven pro­gram remained unfin­ished, and that the State Depart­ment and oth­er agen­cies were press­ing for­ward to attain basic eco­nom­ic secu­ri­ty objec­tives and to ensure that Ger­man prop­er­ty out­side of Ger­many was sub­ject­ed to just claims against it. Clay­ton sum­ma­rized the Safe­haven pro­gram as fol­lows:

“The Safe­haven Pro­gram con­cerns itself with deny­ing to Ger­many, in the inter­est of jus­tice and future secu­ri­ty, the eco­nom­ic pow­er aris­ing from (a) the orga­nized loot­ing of occu­pied coun­tries, (b) the flight of Ger­man cap­i­tal in antic­i­pa­tion of defeat, and © the Ger­man cap­i­tal invest­ment already locat­ed abroad when the war began. Our chief efforts in this con­nec­tion are direct­ed against areas which have not coop­er­at­ed in the extir­pa­tion of pre-war, and the pre­ven­tion of wartime, Axis eco­nom­ic pen­e­tra­tion.”

Clay­ton reviewed the var­i­ous mea­sures used by Ger­many to mask its inter­ests in neu­tral coun­tries and its resort to loot­ing to acquire wealth cheap­ly for con­ceal­ment abroad. He observed that the “loot­ing reached its nadir when gold was picked from the teeth of gas-cham­ber vic­tims.” Clay­ton told the Kil­go­re Sub­com­mit­tee that the aggres­sive Safe­haven pro­gram was made nec­es­sary because the neu­tral nations had resist­ed through­out the war the Allied calls for ade­quate local con­trols over Ger­man schemes, but the decline of Ger­man mil­i­tary pow­er and the rise of Allied eco­nom­ic bar­gain­ing pow­er had con­vinced the neu­trals to become more accom­mo­dat­ing. Much had been accom­plished but a great deal more remained to be done.

The Safe­haven objec­tives of the Allies were fur­ther defined at the major post­war con­fer­ences.

G. The Office of Strate­gic Ser­vices and Project Safe­haven

The role of the Office of Strate­gic Ser­vices (OSS) in Project Safe­haven was large­ly con­fined to the col­lec­tion and eval­u­a­tion of infor­ma­tion from the clan­des­tine sources under its con­trol. The Safe­haven project thus fell large­ly under the aegis of the Secret Intel­li­gence (SI) Branch, respon­si­ble for the gath­er­ing of intel­li­gence from clan­des­tine sources inside neu­tral and Ger­man-occu­pied Europe. How­ev­er, the unique char­ac­ter of the Safe­haven pro­gram, which was both an attempt to pre­vent the post­war Ger­man eco­nom­ic pen­e­tra­tion of for­eign economies and an intel­li­gence gath­er­ing oper­a­tion, meant that the OSS counter-intel­li­gence branch, X‑2, also had an impor­tant role. Safe­haven thus emerged as a joint SI/X‑2 oper­a­tion short­ly after its incep­tion, espe­cial­ly in the key OSS out­posts in Switzer­land, Spain, and Por­tu­gal, with X‑2 fre­quent­ly play­ing the dom­i­nant role. X‑2 was par­tic­u­lar­ly active in report­ing on clan­des­tine Ger­man projects to acquire impor­tant eco­nom­ic and indus­tri­al assets in neu­tral coun­tries. These efforts inten­si­fied as Germany’s mil­i­tary for­tunes waned, espe­cial­ly from Sep­tem­ber 1944 onwards, as the advance of Allied armies threat­ened to sev­er Germany’s land com­mu­ni­ca­tions with impor­tant sources of strate­gic mate­ri­als in South­east­ern Europe and the Iber­ian penin­su­la.

In fact, the incep­tion of the Safe­haven pro­gram meant lit­tle more than a redi­rec­tion of intel­li­gence assets already ded­i­cat­ed to the col­lec­tion of eco­nom­ic intel­li­gence. The OSS had been col­lect­ing eco­nom­ic intel­li­gence sim­i­lar to that required by the Safe­haven pro­gram since 1942 as a part of the gen­er­al effort to under­stand the func­tion­ing of the Ger­man war econ­o­my. Gold trans­fers in par­tic­u­lar were a key part of that econ­o­my. Ger­many suf­fered from an acute short­age of cer­tain strate­gic resources after 1936, and its arma­ments indus­try had increas­ing­ly resort­ed to specie pay­ments to pay for imports of these mate­ri­als since before the out­break of the war. Con­quest of Europe had done lit­tle to alle­vi­ate most of these short­ages. More­over, due to the inef­fi­cien­cy of the Nazi regime, full mobi­liza­tion for war pro­duc­tion had not been achieved until 1944. There­fore, the Ger­man appetite for oil, high-grade iron ore, wol­fram, and oth­er strate­gic mate­ri­als grew even as Ger­man indus­try suf­fered from the Allied strate­gic bomb­ing cam­paign and the ter­ri­to­ry under Ger­man con­trol shrank. Always heav­i­ly depen­dent upon pay­ment in com­modi­ties and gold, Ger­man imports became even more so as the ulti­mate defeat of the Nazi regime became obvi­ous and neu­trals grew more wary of coop­er­at­ing with the Axis bel­liger­ents. The chan­nels for the trans­fer of for­eign cur­ren­cies and the exploita­tion of Ger­man war loot remained those estab­lished dur­ing the years of Ger­man vic­to­ry.

These efforts were the des­per­ate attempts of the Nazi lead­er­ship to pre­serve access to vital sources of raw mate­ri­als as much as they rep­re­sent­ed visions of a resur­gent Ger­man Fourth Reich. Indi­vid­ual Ger­mans and Ger­man cor­po­ra­tions were also tak­ing steps to con­ceal assets in for­eign coun­tries to pro­tect them against destruc­tion or seizure by the vic­to­ri­ous Allied armies. Although, from the per­spec­tive of 50 years, the real moti­va­tions behind such efforts seem obvi­ous, to Safe­haven plan­ners (and to X‑2) they were evi­dence of a grand con­spir­a­cy, one that encom­passed the trans­fer of mil­lions of Reichs­marks worth of gold as well as the pur­chase of indi­vid­ual auto­mo­biles in Stock­holm and hotels and bank accounts in Por­tu­gal.

Because the August and Sep­tem­ber direc­tives imple­ment­ing Project Safe­haven treat­ed it as a depart­men­tal pro­gram� and, to some extent, an inter-gov­ern­ment mat­ter� coop­er­a­tion on the part of the OSS at first was on an infor­mal basis. Not until Novem­ber 30, 1944, were instruc­tions sent out to OSS sta­tions alert­ing them to the kind of intel­li­gence require­ment expect­ed to be gen­er­at­ed by the Safe­haven pro­gram. To a large extent, there­fore, the col­lec­tion of Safe­haven mate­r­i­al sim­ply pig­gy-backed on to oth­er pro­grams for the col­lec­tion and pro­cess­ing of raw eco­nom­ic intel­li­gence from sources already in place.

Under these cir­cum­stances, it is scarce­ly sur­pris­ing that imple­men­ta­tion of Safe­haven mea­sures depend­ed large­ly on the per­son­al­i­ties of the OSS Chiefs of Sta­tion and the con­di­tions under which they oper­at­ed. In Bern, the heart of the Swiss bank­ing and Ger­man gold trans­fer activ­i­ty, the OSS chief was Allen W. Dulles, lat­er to become Direc­tor of Cen­tral Intel­li­gence from 1953 to 1962. An East Coast Brah­min with exten­sive pre­war ties to Euro­pean bank­ing cir­cles, Dulles spent his tenure in Bern con­struct­ing an “Old-Boy” net­work of sources that extend­ed through­out neu­tral and Axis-occu­pied Europe. It was an aston­ish­ing­ly suc­cess­ful sys­tem, ide­al­ly suit­ed to his sit­u­a­tion in neu­tral Switzer­land and well-con­ceived to gain access to Euro­pean gov­ern­ment and busi­ness cir­cles. For exam­ple, Dulles count­ed among his close per­son­al friends no less than Thomas B. McKit­trick, Pres­i­dent of the Bank for Inter­na­tion­al Set­tle­ments (BIS) in Basel. McKit­trick also was an OSS source who pro­vid­ed Dulles with “com­fort­able access” to the think­ing of the bankers most respon­si­ble for mov­ing Ger­man assets through­out Europe.

Among oth­er kinds of infor­ma­tion, McKit­trick kept Dulles informed of the com­ings and goings of Reichs­bank Vice Pres­i­dent Emil Puhl, the arc
hitect of the Ger­man gold trans­fer arrange­ments. Oth­er well-placed sources avail­able to Dulles in high Euro­pean finan­cial cir­cles includ­ed: Dr. Eduard Waet­jen, Abwehr agent, mem­ber of the Ger­man resis­tance, and com­mer­cial advis­er to the Ger­man Con­sul-Gen­er­al from Feb­ru­ary 15, 1945; Mau­rice Vil­lars, Gen­er­al Direc­tor of the Z�rich Elec­tro-Bank; and Swedish econ­o­mist and Eco­nom­ic Advis­er to the BIS, Dr. Per Jacob­s­son, who was close to the exten­sive Japan­ese diplo­mat­ic and busi­ness cir­cles in Switzer­land. In 1945, Jacob­s­son pro­vid­ed infor­ma­tion that helped to scut­tle a Japan­ese attempt to buy vital­ly need­ed ball-bear­ings in Swe­den and lat­er served with Mau­rice Vil­lars as a medi­a­tor in Japan­ese peace feel­ers put for­ward in Switzer­land.

Although such con­tacts were clear­ly impor­tant, it also seems clear that the high val­ue Dulles gave them made him wary of intel­li­gence activ­i­ties such as Safe­haven. More­over, Dulles looked for­ward to a post­war set­tle­ment that envi­sioned the Unit­ed States work­ing close­ly with Euro­pean busi­ness and bank­ing cir­cles to reshape West­ern and Cen­tral Europe accord­ing to Amer­i­can inter­ests. Final­ly, Dulles could legit­i­mate­ly claim that his staff was already over­bur­dened by the col­lec­tion of strate­gic and mil­i­tary intel­li­gence. On Decem­ber 28, 1944, fol­low­ing receipt of the OSS mem­o­ran­dum regard­ing coop­er­a­tion with State’s Safe­haven project, he cabled Wash­ing­ton:

“Work on this project requires care­ful plan­ning as it might defeat direct intel­li­gence activ­i­ties and close impor­tant chan­nels for Ger­man SI� Today we must fish in trou­bled waters and main­tain con­tacts with per­sons sus­pect­ed of work­ing with Nazis on such mat­ters. For exam­ple,� both 496 and X‑2 here can be use­ful under cov­er but believe idea of work­ing prac­ti­cal­ly as agents of Com­mer­cial Attach� and Con­sul Gen­er­al Z�rich, on this project would be unwise. Fur­ther, to deal effec­tive­ly with mat­ter, it would require spe­cial staff with new cov­er.� At present we do not have ade­quate per­son­nel to do effec­tive job in this field and meet oth­er demands.”

In part because Dulles was already ful­ly occu­pied with his exist­ing require­ments for strate­gic intel­li­gence report­ing and in part, no doubt, because of his unwill­ing­ness to give Safe­haven mate­r­i­al the atten­tion Wash­ing­ton believed it deserved, respon­si­bil­i­ty for this task in Bern was del­e­gat­ed to X‑2. For­tu­itous­ly, the restora­tion of access to Switzer­land through France in Novem­ber 1944 made it pos­si­ble for the first X‑2 oper­a­tive in Switzer­land to enter the coun­try by the end of the year. By Jan­u­ary 1945 X‑2 was up and run­ning in Switzer­land, and by April they were able to pro­vide OSS Wash­ing­ton with an exten­sive sum­ma­ry of Nazi gold and cur­ren­cy trans­fers arranged via Switzer­land through­out most of the war. Accord­ing to X‑2, these includ­ed:

Apart from the obvi­ous offi­cial trans­ac­tions, these sums were brought in by Ger­man and Swiss banks and busi­ness orga­ni­za­tions. X‑2 report­ed only a few cas­es where pri­vate indi­vid­u­als, some of which were believed to be with Ger­man intel­li­gence orga­ni­za­tions, par­tic­i­pat­ed. Meth­ods used includ­ed smug­gling, diplo­mat­ic pouch­es, under­cov­er exchange of for­eign cur­ren­cies, bank accounts and trusts, the sale of paint­ings and oth­er valu­ables, and the black mar­ket.

From the end of 1944, X‑2-orig­i­nat­ed Safe­haven report­ing appeared along­side oth­er report­ing pro­vid­ed by Dulles’ SI oper­a­tion in Bern. Although Dulles’ SI orga­ni­za­tion pro­vid­ed sub­stan­tial Safe­haven intel­li­gence mate­r­i­al, it was buried in a sea of oth­er report­ing on strate­gic and mil­i­tary top­ics, includ­ing war dam­age to Ger­man indus­try and rail ser­vices, the sta­tus of Ger­man syn­thet­ic oil refin­ing oper­a­tions, order of bat­tle and oper­a­tional intel­li­gence on Ger­man forces in Italy and on the West­ern Front (for which Bern was the prin­ci­pal source), polit­i­cal intel­li­gence on the Fas­cist Ital­ian Social Repub­lic, con­tacts with the Ger­man resis­tance, and the nego­ti­a­tions lead­ing to the sur­ren­der of Axis forces in Italy.

By the end of 1944 report­ing on the Reich from OSS Bern was being aug­ment­ed by mate­r­i­al from SI Lon­don. Depen­dent on agent report­ing from with­in Ger­many itself, the intel­li­gence col­lec­tion by the sources avail­able to SI Lon­don of neces­si­ty was some­what prob­lem­at­ic until the mid­dle of Sep­tem­ber 1944, when the lib­er­a­tion of Paris and much of France pro­vid­ed new avenues for attack­ing the Ger­man tar­get. SI Lon­don moved to Paris, where it was des­ig­nat­ed SI Euro­pean The­ater of Oper­a­tions (ETO). Its chief was the then-Naval Lieu­tenant William J. Casey. The son of a Tam­many Hall politi­cian, Casey lacked the fam­i­ly con­nec­tions of his coun­ter­part in Bern. Casey’s vision of the post­war world saw the Unit­ed States play­ing busi­ness inter­ests in Ger­many against each oth­er and against Com­mu­nist- and Social­ist-led labor unions. He wel­comed an oppor­tu­ni­ty to col­lect intel­li­gence show­ing Nazi con­nec­tions to sup­pos­ed­ly neu­tral busi­ness cir­cles as a means of influ­enc­ing these same cir­cles in the post­war world. As a result, Casey launched into Safe­haven with such enthu­si­asm that he had to be restrained by Wash­ing­ton, in a cable dis­patched on Jan­u­ary 18, 1945:

“[W]hile Safe­haven Project has cer­tain present and poten­tial­ly greater future val­ue, no SI per­son­nel which can pos­si­bly be used in con­nec­tion agent pen­e­tra­tion Ger­many� should be used for any Safe­haven pur­pose. For this project we can be one of many sup­port­ing agen­cies Depart­ment State which has assumed con­trol and direc­tion.

“For agent pen­e­tra­tion Ger­many for strate­gic infor­ma­tion and for prop­er brief­ing such agents US Gov­ern­ment can look to OSS SI only to accom­plish its char­ac­ter­is­tic mis­sion.”

This meant that OSS oper­a­tions in Europe (SI ETO) would large­ly con­fine its Safe­haven activ­i­ties to the areas already under Allied con­trol� the most fruit­ful area any­way, since Project Safe­haven involved assets out­side of Ger­many. By the end of the month, Casey was able to report that the “gold project” was under­way in Paris, with oth­er plans for Safe­haven work in France, Bel­gium, and the Nether­lands. How­ev­er, since these areas were already occu­pied by Allied forces, the spe­cial intel­li­gence tech­niques that dis­tin­guished OSS oper­a­tions proved unnec­es­sary. Casey did not give up, how­ev­er, and, two months lat­er report­ed that “Safe­haven work with State has shown area to be a valu­able field of endeav­or, espe­cial­ly because of the poten­tial for lever­age with Ger­man finan­cial cir­cles, etc., in the future,” and “Fagan Safe­haven man for embassy� feels us absolute­ly nec­es­sary to his work.” Nev­er­the­less, SI activ­i­ty in this area remained a foot­note to the efforts of State Depart­ment and oth­er War Depart­ment per­son­nel already on the ground. An X‑2 “Art Loot­ing Inves­ti­ga­tion Unit” pro­duced sim­i­lar results.

Although Switzer­land remained the finan­cial heart of Ger­man gold and cur­ren­cy trans­ac­tions, with­out ques­tion for OSS the most pro­duc­tive areas of Safe­haven activ­i­ty were the oth­er neu­tral cen­ters of Ger­man com­mer­cial activ­i­ty� Swe­den and the Iber­ian Penin­su­la. Madrid Sta­tion in par­tic­u­lar had had eco­nom­ic intel­li­gence as a prin­ci­pal func­tion since its cre­ation in April 1942, despite being “very con­sid­er­ably ham­pered” until short­ly after V‑E Day by an ambas­sador and diplo­mat­ic staff hos­tile to OSS activ­i­ties. OSS Madrid nonethe­less man­aged to pro­vide exten­sive doc­u­men­ta­tion of Ger­man com­mer­cial trans­ac­tions through­out the war. Bills of lad­ing or man­i­fests cov­er­ing all mer­chan­dise shipped to France (and thence to Ger­ma
ny) were pro­vid­ed week­ly, includ­ing every­thing from orange juice to wol­fram (tung­sten ore) and steel rails. Equal­ly impor­tant was doc­u­men­ta­tion of the fla­grant coop­er­a­tion giv­en the Ger­man war effort by Span­ish author­i­ties, includ­ing the use of Span­ish air­fields by Ger­man air­craft, the covert sup­ply of Ger­man sub­marines in Span­ish har­bors (Oper­a­tion Moro), and in mat­ters of espi­onage and coun­teres­pi­onage by all grades of Span­ish offi­cials. From 1945 X‑2 Madrid was able to doc­u­ment Ger­man eco­nom­ic pen­e­tra­tion in Spain, includ­ing ille­gal cur­ren­cy trans­fers and smug­gled works of art; plans by French col­lab­o­ra­tors, Nazi indi­vid­u­als, and covert orga­ni­za­tions to use Spain as a post­war hide­out; and the inte­gra­tion of Ger­man tech­ni­cians into the Span­ish mil­i­tary. Near­ly 50 Span­ish firms were iden­ti­fied by X‑2 as hav­ing been used by Ger­many for espi­onage pur­pos­es. By V‑E Day, X‑2 had iden­ti­fied some 3,000 ene­my agents in Spain and more than 400 mem­bers of ene­my clan­des­tine ser­vices.

Oper­a­tions in Por­tu­gal were made eas­i­er by that country’s tra­di­tion­al pro-British stance (despite hav­ing an author­i­tar­i­an regime on good terms with Fran­co). The local author­i­ties pro­vid­ed OSS Lis­bon with access to ene­my safe deposit box­es held in every bank in Por­tu­gal except four (which were cov­ered by the British). In Jan­u­ary 1945 the Research and Analy­sis Branch (R&A) of the OSS used this mate­r­i­al to doc­u­ment Ger­man gold and for­eign cur­ren­cy trans­ac­tions from Jan­u­ary 1943 to Decem­ber 1944. The Por­tuguese author­i­ties were will­ing to extend coop­er­a­tion to direct action as well. Act­ing on infor­ma­tion large­ly pro­vid­ed by X‑2, at the end of the war the Por­tuguese Gov­ern­ment sealed up the Ger­man Embassy and with­drew recog­ni­tion from Ger­man diplo­mat­ic and con­sular rep­re­sen­ta­tion. By war’s end, X‑2 files in Lis­bon list­ed 1,900 ene­my agents and 200 ene­my offi­cials.

Much as in Spain and Por­tu­gal, eco­nom­ic report­ing was a sta­ple of intel­li­gence activ­i­ties in Swe­den from the out­set of Amer­i­can involve­ment in the war. Despite its lib­er­al demo­c­ra­t­ic tra­di­tions, Swe­den was Nazi Germany’s largest trad­ing part­ner dur­ing the war and almost the sole source of high-grade iron ore and pre­ci­sion ball-bear­ings for the Ger­man war machine. Imports of the lat­ter from Swe­den were espe­cial­ly impor­tant fol­low­ing the destruc­tion of the VKF ball-bear­ing plant (itself a Swedish-owned com­pa­ny) at Schwe­in­furt by the U.S. Eighth Air Force in August and Octo­ber 1943. OSS oper­a­tives in Swedish south­ern and east coast ports mon­i­tored the Swedish ore traf­fic and were able to pro­vide exten­sive report­ing on the rate and size of Swedish ship­ments to Ger­many. From Decem­ber 1943 until his arrest in May 1944, an OSS agent work­ing in the ship­ping office of the SKF ball-bear­ing plant in G�teborg sup­plied reports on ball-bear­ing ship­ments to Ger­many, includ­ing ser­i­al num­bers and quan­ti­ties. Using this infor­ma­tion, the U.S. Eco­nom­ic War­fare Mis­sion was able to con­clude an agree­ment with the Swedish Gov­ern­ment that final­ly halt­ed ship­ments of ball-bear­ings to Ger­many in Jan­u­ary 1945. Intel­li­gence data col­lect­ed on iron ore ship­ments and exports of ball-bear­ings were not, of course, direct­ly relat­ed to the Safe­haven pro­gram; but, by account­ing for much of Germany’s for­eign trade with Swe­den, they pro­vid­ed impor­tant indices that could be used to cal­cu­late specie and cur­ren­cy trans­fers.

By late 1944 Ger­man eco­nom­ic plan­ners were des­per­ate enough to try export­ing crude petro­le­um (itself in short sup­ply) to Swe­den as a sub­sti­tute for the mon­e­tary gold that had fund­ed the iron ore and ball-bear­ing trans­ac­tions. Eric Erick­son, an Amer­i­can-born Swede work­ing for the OSS, pen­e­trat­ed the Ger­man syn­thet­ic oil indus­try and, in addi­tion to report­ing exten­sive­ly on the Ger­man oil indus­try, was able to pro­vide infor­ma­tion on Ger­man gold and cur­ren­cy trans­ac­tions� per­haps the best exam­ple of how it was pos­si­ble to derive Safe­haven mate­r­i­al from exist­ing OSS sources of eco­nom­ic and indus­tri­al intel­li­gence.

By April 1945 X‑2, using SI sources as well as its own, was able to doc­u­ment Ger­man trans­ac­tions con­vert­ing 100 mil­lion Swedish kro­ner (about $25 mil­lion) in gold and cur­ren­cy into Ger­man goods (chiefly chem­i­cals, drugs, and tex­tiles) stored in Swedish ware­hous­es. From at least August 1944, low-grade report­ing depict­ed the Ger­man Lega­tion in Stock­holm sell­ing dia­monds loot­ed from the Dutch State Bank on orders from the Ger­man Reichs­bank. Addi­tion­al activ­i­ty, prob­a­bly involv­ing indi­vid­u­als and pri­vate firms, was doc­u­ment­ed where­by Ger­man gold was either smug­gled into Swe­den or con­vert­ed to gaso­line or sal­able goods. This lat­ter activ­i­ty was dis­count­ed� prob­a­bly cor­rect­ly� in a post­war mes­sage that doc­u­ment­ed Ger­man wartime gold trans­fers to Swe­den with offi­cial data from the Swedish Riks­bank. More dif­fi­cult to doc­u­ment was the role of Stock­holms Enskil­da Bank, owned by the pow­er­ful Wal­len­berg fam­i­ly, which received more than $4.5 mil­lion from the Reichs­bank between May 1940 and June 1941 and was sus­pect­ed of hav­ing act­ed as a pur­chas­ing agent (through inter­me­di­aries) for the Ger­man Gov­ern­ment in buy­ing up Ger­man bonds and secu­ri­ties held in New York.

By the Spring of 1945 OSS col­lec­tion on the Safe­haven project was exten­sive enough to war­rant a more for­mal treat­ment in the OSS hier­ar­chy. The March 30, 1945, State Depart­ment warn­ing issued to neu­tral gov­ern­ments prompt­ed a resur­gence of effort on the part of the OSS in the col­lec­tion of Safe­haven. A cir­cu­lar mem­o­ran­dum from the Act­ing Direc­tor of Strate­gic Ser­vices, Edward Bux­ton, called upon OSS to “make a sub­stan­tial con­tri­bu­tion to this pro­gram,” albeit with the caveat that “the col­lec­tion of mil­i­tary, polit­i­cal, and oth­er types of intel­li­gence will con­tin­ue to be an impor­tant func­tion of this agency.” In ful­fill­ment of this goal, Sta­tion Chiefs were instruct­ed to report on the sta­tus of Safe­haven oper­a­tions in their area. To bet­ter direct OSS par­tic­i­pa­tion in the pro­gram, an Eco­nom­ic Intel­li­gence Col­lec­tion Unit (Econ­ic) was cre­at­ed in Wash­ing­ton under John A. Mow­inck­el, report­ing direct­ly to the Director’s office. Econ­ic mon­i­tored and, on occa­sion, syn­the­sized Safe­haven report­ing into detailed reports on spe­cif­ic top­ics� for exam­ple, a mas­sive report at the request of the State Depart­ment on the activ­i­ties of the Swiss firm Johann Wehrli & Co., A.G. (Wehrlibank), a pri­vate Swiss bank­ing house with glob­al inter­ests then under inves­ti­ga­tion by the Jus­tice Depart­ment for its role in trans­fer­ring pri­vate Ger­man assets over­seas.

It is doubt­ful that this move on the part of OSS Wash­ing­ton had much impact on the Safe­haven intel­li­gence effort in the field, which had been up and run­ning by this point for a good three months. Rather, it should be seen as a part of the effort by the Direc­tor of Strate­gic Ser­vices, Brigadier Gen­er­al William J. Dono­van, to carve out a place for the agency in the post­war world. Two reports were filed in the Director’s office at this time that were rel­e­vant to Project Safe­haven, both of which were crit­i­cal (at least by impli­ca­tion) of the State Department’s efforts in this area. One, writ­ten by the Research and Analy­sis Branch (R&A), cor­rect­ly placed Ger­man import and trans­fer activ­i­ty in con­text with the devel­op­ment of the Ger­man war econ­o­my since 1933, in effect dis­cred­it­ing the whole notion of a con­cert­ed pro­gram to fund a resur­gent Fourth Reich using assets con­cealed in neu­tral coun­tries. The oth­er, pre­pared by X‑2, launched a direct attack on Safe­haven. Not­ing that “there are many prob­lems in the Safe­haven pro­gram, main­ly due to the inex­pe­ri­ence and gen­er­al lack of com­pre­hen­sion on the part of State Depart­ment per­son­nel,” the report argued that the project con­sumed per­son­nel and resources that might bet­ter be used else­where. The basic flaw in the pro­gram was that it failed to dis­tin­guish between trans­ac­tions that were part of “Ger­man pow­er pol­i­tics” and those that occurred in anoth­er, albeit relat­ed con­text, e.g., the actions of indi­vid­u­als and indi­vid­ual cor­po­ra­tions. Assert­ing that “the defeat of the Axis will not end the game of pow­er pol­i­tics between nat
ions,” the report pro­ject­ed that “Safe­haven may turn out to be less impor­tant than the col­lec­tion of eco­nom­ic, polit­i­cal, and social intel­li­gence in con­nec­tion with oth­er prob­lems and oth­er for­eign coun­tries. � Safe­haven should be the start­ing point for large-scale and per­ma­nent eco­nom­ic intel­li­gence for the pro­tec­tion and pro­mo­tion of our eco­nom­ic and polit­i­cal inter­ests abroad.”

In the intel­li­gence require­ments gen­er­at­ed by the Safe­haven pro­gram, Dono­van clear­ly saw an argu­ment for the exis­tence of a cen­tral intel­li­gence orga­ni­za­tion like the OSS after the end of the war. It was no doubt with this in mind that he passed the reports along to Sen­a­tor Harley Kil­go­re, then head­ing a Sen­a­to­r­i­al inves­ti­ga­tion of the elim­i­na­tion of Ger­man war resources. Such action could hard­ly over­come the oppo­si­tion that had been build­ing to Donovan’s idea of a post­war cen­tral intel­li­gence orga­ni­za­tion since his first pro­pos­al in Sep­tem­ber 1943.

On Sep­tem­ber 20, 1945, the OSS was abol­ished by exec­u­tive order and its com­po­nent parts absorbed by dif­fer­ent var­i­ous agen­cies in the Wash­ing­ton bureau­cra­cy. Research and Analy­sis Branch (R&A) was absorbed by the State Department’s Inter­im Research and Intel­li­gence Ser­vice. SI and X‑2 were moved into the War Depart­ment as the Strate­gic Ser­vices Unit (SSU). On Jan­u­ary 22, 1946, Pres­i­dent Tru­man cre­at­ed a tem­po­rary Cen­tral Intel­li­gence Group (CIG) as a body for the coor­di­na­tion of intel­li­gence activ­i­ties on the nation­al lev­el. Clan­des­tine human source col­lec­tion remained in the War Depart­ment until the cre­ation of the Cen­tral Intel­li­gence Agency in 1947.

From the sum­mer of 1945, OSS and SSU col­lec­tion in sup­port of the Safe­haven pro­gram took place under the rubric of Project Jet­sam. How­ev­er, with the end of the war in Europe, first the OSS and then the SSU began to shift resources into oth­er areas, espe­cial­ly col­lec­tion against the Sovi­et Union. Efforts by the For­eign Eco­nom­ic Admin­is­tra­tion and State Depart­ment rep­re­sen­ta­tives in Europe to re-vital­ize the Safe­haven pro­gram ran up against the stone wall of bud­getary lim­i­ta­tions. On July 20, 1945, SI Paris cabled OSS Wash­ing­ton:

“Orig­i­nal def­i­n­i­tion of Safe Haven, name­ly track­ing down Ger­man cap­i­tal and assets abroad, has been very sub­stan­tial­ly broad­ened by (Klaus) of FEA now in Wash­ing­ton and Fagen of Embassy, they claim under instruc­tions of Wash­ing­ton. They have asked that under Safe Haven we should now gath­er intel­li­gence on ‘exter­nal secu­ri­ty’ name­ly, all Ger­man activ­i­ties abroad, cul­tur­al and polit­i­cal as well as eco­nom­ic and finan­cial, in short, the entire non-mil­i­tary SI field of activity....We point­ed out that we were present­ly con­tract­ing, not expand­ing, our activ­i­ties and that his wish­es and the par­tic­u­lar tar­gets he was sug­gest­ing required sub­stan­tial addi­tion­al per­son­nel.”

Not­ing that “We would be hap­py to under­take intel­li­gence oper­a­tion [of this kind] and are phys­i­cal­ly equipped to do so,” Wash­ing­ton replied that “no funds [are] avail­able,” and rec­om­mend­ed that State “offi­cial­ly urge OSS to pro­cure addi­tion­al funds for such pur­pos­es.” No such pres­sure was forth­com­ing; to the con­trary, although Safe­haven remained impor­tant, with the end of the war in Europe the role of intel­li­gence report­ing in the project began to dimin­ish. That same month, lack of Trea­sury and State inter­est prompt­ed the OSS to begin rolling up eco­nom­ic report­ing net­works in the Iber­ian Penin­su­la.

From: http://www.ess.uwe.ac.uk/documents/two.htm [1]