Reparations and Oil in the Cold War: British Perspectives on the Luxembourg Agreement of 1952

Abstract

This article analyses the British perspectives on the Luxembourg Reparations Agreement between Israel and the Federal Republic of Germany from 1952. Short-term economic interests were of central importance when it came to assessing the consequences of this deal for the United Kingdom. Her Majesty's Government welcomed West German reparations as a means of securing Israel's ability to pay for oil supplied by British companies, but at the same time saw them as a threat to its economic and political interests in the Middle East. British diplomats underestimated the long-term political value of the Luxembourg Agreement precisely because they read it verbatim. They recognized the reservations on both sides but did not expect that working relations between Israel and the Federal Republic would improve rapidly after the Agreement was ratified, limiting in turn the UK's political and economic room for manoeuvre in the region. By examining a hitherto little-noticed chapter of British foreign policy in the postwar years, the article foregrounds the commercial aspects of diplomacy in the early 1950s and contributes to a better understanding of international relations in the Cold War.