On Sept. 20, 1945, three months after the end of World War II, Chaim Weizmann, on behalf of the Jewish Agency, submitted to the governments of the US, USSR, UK, and France, a memorandum demanding reparations, restitution, and indemnification due to the Jewish people from Germany for its involvement in the Holocaust. He appealed to the Allied Powers to include this claim in their own negotiations for reparations with Germany, in view of the "mass murder, the human suffering, the annihilation of spiritual, intellectual, and creative forces, which are without parallel in the history of mankind."
Due to the deadlock, and later interruption of the Allies' negotiations for reparations, no further development in Weizmann's request took place until March 12, 1951, when Israel's foreign minister Moshe Sharett submitted a note to the four Allied governments which claimed global recompense to the State of Israel of $1.5 billion from the German Federal Republic (West Germany). Sharett's claim was based on the financial cost absorbed by Israel for the rehabilitation of those Jews who escaped or survived the Nazi regime and came to the newly created Jewish state. The financial expense incurred by Israel in the absorption of 500,000 Nazi victims could be covered at $3,000 per capita.
As a result of unofficial preliminary contacts, West German Chancellor Konrad Adenauer declared on September 27, 1951, that his government was ready to compensate Israel for material damage and losses and to negotiate with Israel and with representatives of Diaspora Jewry for other reparations. The following month, the Jewish community established the Conference on Jewish Material Claims against Germany (Claims Conference) in New York, presided over by Nahum Goldmann, to help with individual claims.
In Israel, the Knesset fiercely debated whether to accept the reparations from Germany over a three day period in early January 1952. Menachem Begin and the Herut Party were among the most vocal members of the opposition, who considered the reparations offer as blood money. By the end of the debate, a small majority of 61-50 succeeeded in passing the resolution to enter into direct negotiations with West Germany over specific reparations amounts. Outside the Knesset, thousands of Israeli's protested and rioted the decision, at times even pelting the plenum building with stones, leading the police to use tear gas to disperse the crowds.
Following Israel's approval of the resolution, a West German delegation headed by Professor Franz Boehm met with the Israeli delegation led by Giora Josephthal and Felix Eliezer Shinnar at The Hague in March 1952. The delegation of the Claims Conference, headed by Moses Leavitt, was put in charge of negotiations on individual claims for indemnification. At the negotiations, Israel reduced her claim of $1.5 billion against the whole of Germany to $1 billion against West Germany alone while reserving the right to claim the balance from East Germany - which neither attended the negotiations nor ever provided compensation.
On September 10, 1952, after six months of negotiations, an agreement on reparations between Israel and West Germany was signed in Luxembourg by Sharett and Adenauer. The agreement was ratified and came into effect on March 21, 1953, after a delay caused by the Arab states' efforts to prevent ratification.
Under the agreement, West Germany undertook to pay a total of $845 million: $100 million earmarked for allocation by the Claims Conference and the remainder to Israel. Direct compensation would be paid in annual installments over a period of 14 years (between April 1, 1953, and March 31, 1966). The money to Israel was split - 30 percent was to pay for Israel's crude oil purchases in the United Kingdom and with the balance of 70 percent Israel was to buy ferrous and nonferrous metals, steel, chemical, industrial, and agricultural products from Germany.
The agreement was carried out by West Germany government both in letter and in spirit and the goods bought and imported under the agreement represented between 12 and 14 percent of Israel's annual imports over the decade, thus making an important contribution to Israel's growing economy.
In 1988, the German government allocated another $125 million for reparations, enabling remaining Holocaust survivors to receive monthly payments of $290 for the rest of their lives. In February 1990, before its unification with West Germany, East Germany admitted for the first time that it was also responsible for war crimes committed by the German people during World War II and agreed to pay reparations.
In 1999, in response to the filing of numerous class action lawsuits in American courts, the German government and German industry agreed to compensate Jews and non-Jews specifically for slave and forced labor they performed for German industry during the war. Among the German industries that came under the lawsuits were Deutsche Bank AG, Siemens, BMW, Volkswagen, and Opel. In return for the dismissal of all such lawsuits and the guaranteeing German industry "legal peace" from any such further litigation, the German government created a foundation - "Remembrance, Responsibility and the Future" - with assets of approximately $5 billion. Slave and forced laborers still alive at the time of the settlement could apply to receive a lump sum payment of between $2,500 and $7,500 from the foundation; in all, over 140,000 Jewish survivors from more than 25 countries received payments. Final payments from the Foundation were to be made by September 2006.
Israel Ministry of Foreign Affairs, Documents Relating to the Agreement between the Government of Israel and the Federal Republic of Germany, Signed on 10 September 1952 at Luxembourg (1953); N. Robinson, Ten Years Indemnification (1964); F.E. Shinnar, Be-Ol Koraḥu-Regashot bi-Sheliḥut ha-Medinah: Yaḥasei Yisrael-Germanyah 1951 – 1966 (1967); Bank of Israel, Ha-Shillumim ve-Hashpa'atam al ha-Meshek ha-Yisre'eli (1965); The Autobiography of Nahum Goldmann (1969), 249–82; I. Deutschkron, Bonn and Jerusalem (1970).