The Anglo-American Decision to Divide Germany After the Second World War

Agoston Sikos

Agoston Sikos is a third-year student studying History, Politics and Economics at UCL. He interned at the Special Analyses Department of the State Audit Office of Hungary and in M&A at MBH Bank.

By mid-1946, the Western Allies, the United States of America and Great Britain, pursued a policy that sought to dissociate their zones of occupation from the Soviet Union’s. They fused their zones economically (January 1947), incorporated western Germany in the Marshall Plan (July 1947), implemented a separate currency reform (June 1948), and established a Parliamentary Council for the establishment of a West German state (September 1948). They did this because of one security and two economic arguments for division. First, regarding security, the Western Allies feared that a united Germany may come under the political domination of The Soviet Union. Because neither side possessed the capabilities to dominate Germany through confrontational action, only the division of Germany could provide a mutually high level of security. Second, regarding economics, the Soviet reparations policy and land transfer to Poland and the Soviet Union (USSR) created economic costs for the Western Allies. The Soviet Union disregarded Western economic concerns and refused to alter its position. This left no option for the Western Allies but to dissociate the economies of their zones from the Soviet zone’s economy. This policy of economic, and consequently political division was reinforced by the second economic argument for the rebuilding of the western zones’ economies, which was that German resources and industry were indispensable for the recovery of Western Europe. The policy of dissociation, born out of these three arguments, was accelerated by an ideological schism between the Soviet Union and the Western Allies. The American decision to undertake all the major steps in the process of division was thus logical.

The Western Allies and the Soviet Union mutually feared that a united Germany, with its industrial, military and economic potential, would ally with the other side, and the risk of this security threat was sufficiently great for both sides to pursue a policy of division. This security concern emerged before the defeat of Germany in the Soviet Union, by mid-1945 in Great Britain and by mid-1946 in the United States (Young and Kent, 2020, p.5). Stalin’s behaviour in Eastern European countries left no doubt that the Soviet Union would attempt to gather as much territory under its influence as possible (Maier, 1998, pp.485-486). While the political repression in these countries only reached its zenith in 1948, the installation of a puppet government in Romania on 27 February 1945 and the failure to broaden the Polish ‘Lublin’ government with politicians aligned with the West the following month, in breach of the Yalta agreement, proved the untrustworthiness of the Soviets for the Western Allies (Young and Kent, 2020, p.37). By mid-1945, the British Foreign Office had lost faith in the USSR (Boyle, 1979, p.310), while already in December 1945 the American State Department’s ‘Ethridge’ report, warned against Soviet expansionism by stating that ‘to concede a limited Soviet sphere of influence at the present time would be to invite its extension in the future’ (U.S. Department of Defence, 1945).

 The Soviet Union lacked trust in the non-expansionist nature of Western policy as well. It was central to Soviet leaders’ thinking that cooperation with the Western Allies had no future in the long run (Zubok and Pleshakov, 1996, p.37), only in the short run, as Commissar for Foreign Affairs Vyacheslav Molotov later recalled, ‘it was to our [the Soviet Union’s] benefit to stay allied with America’(Chuev, Molotov and Resis, 1993, p.51), believing that it was key to receive high reparations payments and potentially financial aid (Zubok and Pleshakov, 1996, p.32). Already during the war, the Soviet leadership was convinced that the United States, in Soviet Ambassador Nikolai Novikov’s words, was creating ‘the prerequisites for the revival of an imperialist Germany, which the United States plans to use in a future war on its side’ (1946, cited in Jensen, 1991, p.15). This thinking is well-illustrated by the letter of Ivan Maisky, the Deputy People's Commissar for Foreign Affairs of the USSR, to Molotov on 10 January 1944, in which he confidently states that ‘the US will firmly enter a high stage of dynamic imperialism’, whose ‘weapon will be financial and economic annexation’ (Maisky, 1944, at LSE Home website).

The Soviet Union contributed to the division of Germany by prioritising its reparations policy over the possibility of finding a mutually acceptable agreement with the Western Allies on Germany as a single economic unit.  The sacrifice of the Soviet Union in the Second World War, the death of more than 27 million people and the devastation of its industry, created a sense among Soviet leaders that the Western Allies owed them significantly, which made their reparations policy inflexible and harsh (Zubok and Pleshakov, 1996, p.6). At the  Yalta Conference in February 1945, decisions on reparation payments were postponed to a later date by accepting the Soviet Union’s demands only as a ‘basis for discussion’ (Smyser, 1999, p.15). At the Potsdam Conference in July-August 1945, reparations for the Soviet Union from the western occupation zones were agreed on such as that 15 per cent of ‘usable and complete industrial capital equipment’ that was unnecessary for the German peace economy was agreed to be exchanged for an equivalent value of food, coal, potash, zine and petroleum products and 10 per cent of such industrial capital equipment was to be transferred to the Soviet Government without any exchange obligation (U.S. Department of State, 1945). However, as the effects of the transfer of German territories to Poland and the USSR, including the coalfields of Silesia and one quarter of all agricultural land in Germany, started to materialise, the Western Allies found themselves in a disturbing position. The transfer of the agricultural lands severed food shortages in the western zones, which were further accelerated by a refugee wave of Germans from the lost eastern regions (Fulbrook, 2019, p.210). In the winter of 1946, occupation authorities had to set food rations to barely 1000 calories per day, while other necessities like fuel for stoves were in shortage as well (Smith, 2020, p.416). This burden increased the need to rebuild the western zones’ industries, so they can produce goods that could be traded to cover the costs of the food imports. Even though the scale of these land transfers was decided unilaterally by the Soviets, presenting a fait accompli to the Western Allies to accept at the Potsdam Conference (Turner, Jr., 1992, p.10), the Soviets refused such a solution. They were determined that German industry and coal should be primarily used for reparations. Accepting the Soviet refusal would have meant that the Western Allies had to cover the costs of the land transfer, which they were not ready to do. Although a limited Level-of-Industry Plan was agreed upon in March 1946, the Soviets stalled on an export-import programme, arguing that the emerging costs were a zonal issue (Eisenberg, 1996, p.200). 

The Soviet refusal to allow for a solution to the dire position of the Western Allies prompted the deputy military governor of the American occupation zone, General Lucius Clay, on 3 May 1946, to suspend reparations deliveries to the Soviets and to demand that zonal reparations be linked to a single export-import programme (Davison, 1980, p.11). Once again, the Soviet Union refused to concede, and the Anglo-Americans were left with no choice but to unilaterally revive the industry of their zones, which led to the economic and political disintegration of Germany.

The revival of the economies of Western Europe depended on Western Germany’s industry, and this provided an impetus for the Western Allies to fully rebuild their zones’ economies, which started these zones’ Western integration and their dissociation from Eastern Germany. The devastated Western Europe needed to be rebuilt so that its markets could  generate wealth again for the Western Allies (Fulbrook, 2002, p.129). A swift recovery of  Western economies also popularised capitalism as opposed to communism in France and Italy, where communist political movements were gaining strength (Larres, 2001, p.199). To rebuild these economies, the coal and steel industries, as well as the machine-tool, chemical and electrical sectors of the German Ruhr region were indispensable (Schwarz, 2010, p.136). The desire of the Western Allies to have a reasonable level of industry in their zones, especially as the food shortages worsened, was irreconcilable with the Soviets’ inflexibility on their demands for the internationalisation of the Ruhr and the continued extraction of German industry. The British had already begun to favour division for Western European recovery by May 1946 and by September 1946, the United States too viewed the prospect of reviving Western Germany’s industry as the right policy. Secretary of State Byrnes in his Stuttgart speech, on 6 September 1946, announced that the United States would no longer abide by the Soviet demand to keep German industrial production drastically limited. Knowing that the Soviet Union would not accept this, he effectively proposed the division of Germany (Kitchen, 2006, p.320). At this point, even though in October the Soviets offered an upward revision of the level of industry and the potential drafting of an export-import programme, the Western Allies had already decided on a policy that preferred Western European economic recovery over Germany’s economic unity (Eisenberg, 1996, p.250). Even the French, who had been pursuing independent policies over numerous issues, were forced into cooperation with the Western Allies.

The above security and economic factors made the division of Germany inevitable, but the intensity and speed with which the policies leading to division materialised were accelerated by the ideological schism between the Soviet Union and the Western Allies. The schism had existed ever since the birth of the Bolshevik state in 1917 and disappeared only because of the necessity of cooperation to defeat the common military threat of Germany during the Second World War. With the fall of Nazism, however, the Grand Alliance lost its ideological foundation and the schism reappeared. Already in June 1945, a State Department report concluded that international communism posed a serious challenge to the United States (Leffler, 1996, p.18), and on 9 February 1946, Stalin announced the inevitability of conflict between communism and capitalism in a Moscow speech. The deep ideological antagonism, although did not decide the fate of Germany, reinforced the policies of division. As tensions mounted, the American public’s desire to confront communism increased, which served as a domestic political drive for decision-makers in the United States to prefer confrontation over cooperation (Fulbrook, 2000, p.14). In the Soviet Union, communist ideology played an indispensable part in its leaders’ inability not to regard capitalist states as security threats (Zubok and Pleshakov, 1996, p.15).

The alternative to cooperation, other than division, the domination of Germany solely by either the Western Allies or the Soviet Union, was highly unlikely because neither side possessed the capabilities to overtake the other’s sector. The Western Allies could not politically dominate the Soviet zone because no meaningful political opposition could emerge there without the consent of the occupation authorities. Moreover, domination by military action could not succeed because the military presence of the USSR was overwhelming in Europe, standing at 11.5 million men in 1945 and kept on average at 2.8 million between 1945 and 1948 (Odom, 2017, p.39). Similarly, the Soviet Union could not dominate Western Germany politically because of its unpopularity. The atrocities of the Red Army, including the widespread rape of women (Grossmann, 1995, p.42), the dismantling of German industry, the collection of reparations (by the end of 1947, the Soviet military had confiscated as reparations 3.25 million metric tons of equipment, vehicles, and industrial machinery and 2.05 metric tons of raw materials) (Kramer and Smetana, 2013, p.25) and the transfer of what was considered German land made the Soviets deeply unpopular. This is showcased by the municipal elections of the Soviet zone in October 1946, when the SED, the Soviets’ puppet party, could only win with 47.5 per cent of the vote, even though the election took place under considerable Soviet pressure (Hoffmann, 2011, p.603). Military action on the Soviet Union’s side was equally unlikely because the devastated Soviet economy could not support another military campaign.

In conclusion, the American and British decision to divide Germany after the Second World War was logical because of one security and two economic reasons. First, both the Western Allies and the Soviet Union feared that a united, independent Germany might ally with their Cold War adversary. Second, the Soviet Union’s reparation policy and land transfer created extra economic costs for the Western Allies, and the Soviets’ failure to understand the dire nature of the Western position led the West to pursue a policy of economic recovery in Western Germany. Third, this recovery policy, and thus the dissociation from Eastern Germany, was made necessary by the dire state of the Western European economies, the recovery of whom depended on the revival of German industry. The policy of dissociation, that was born out of these arguments, was accelerated by the ideological schism between the Western Allies and the Soviet Union.