Foreign Relations of the United States: Diplomatic Papers, 1945, European Advisory Commission, Austria, Germany, Volume III

462.00R/11–2945: Telegram

The Secretary of State to the Ambassador in the United Kingdom (Winant)³²

Washington, November 29, 1945—8 p.m.

10380. Would you communicate following to government to which you are attached as United States view on appropriate interpretation and execution of Potsdam provisions with respect to reparation claims against German assets in Austria. It is the U.S. view that, since an interpretation of the Potsdam provisions is involved, that this matter must initially be discussed at a governmental level. The U.S. advocates, however, that the Allied Council Austria be designated the forum for the working out of this problem, to avoid divided responsibility in its administration. You should indicate that the U.S. regards the settlement of the German reparations issue in Austria as urgent, since it will continue to interfere with the unified operation of the Austrian economy, and with its rehabilitation.

• “1. Agreed Basis for the Reparation Claim. The Allied reparation claim against German assets in Austria must be established and interpreted in terms of the Potsdam Protocol, as defined and amplified by relevant parts of other agreements between the major Powers, which concern Austria. The principles outlined and the procedures recommended here apply to all Allied reparation claims against German assets in Austria.

  a. The Potsdam Protocol of August 1945³³ establishes the following policy with respect to reparation claims against German assets in Austria:… Paragraph IV, 1. ‘Reparation claims of the USSR shall be met by removals from the zone of Germany occupied by the USSR and from appropriate German external assets.’ Paragraph IV. 3. ‘The reparation claims of the United States, the United Kingdom and other countries entitled to reparations shall be met from the western zones and from appropriate German external assets.’ Paragraph IV. 8. ‘The Soviet Government renounces all claims in respect of reparations to shares of German enterprises which are located in the western zones of occupation in Germany, as well as to German foreign assets in all countries, except those specified in Paragraph 9 below.’ Paragraph IV, 9. ‘The Governments of the United Kingdom and the United States of America renounce their claims in respect of reparations to shares of German enterprises which are located in the Eastern zone of occupation in Germany, as well as to German foreign assets in Bulgaria, Finland, Hungary, Rumania and eastern Austria.’

  b. The Moscow Declaration on Austria of November 1943, signed by the United States, Britain and the USSR, lays down the following agreed policy towards Austria:

  ‘The governments of the United Kingdom, the Soviet Union and the United States of America are agreed that Austria, the first free country to fall a victim of Hitlerite aggression, shall be liberated from German domination. They regard the annexation imposed on Austria by Germany on March 15, 1938, as null and void. They consider themselves as in no way bound by any changes effected in Austria since that date. They declare that they wish to see reestablished a free and independent Austria and thereby to open the way for the Austrian people themselves, as well as neighboring States which will be faced with similar problems, to find that political and economic security which is the only basis for lasting peace. Austria is reminded, however, that she has a responsibility, which she cannot evade, for the participation in the war at the side of Hitlerite Germany, and that in the final settlement account will inevitably be taken of her own contribution to her liberation.’

  c. The United Nations Declaration Regarding Forced Transfers of Property in Enemy-Controlled Territory of January 1943, signed by the U.S., U.K., and U.S.S.R., as well as by most of the other United Nations, contains the following statement on property rights:³⁴

  ‘Accordingly the Governments making this Declaration and the French National Committee reserve all their rights to declare invalid any transfers of, or dealings with, property, rights and interests of any description whatsoever, which are, or have been, situated in the territories which have come under the occupation or control, direct or indirect of the Governments with which they are at war or which belong or have belonged, to persons, including juridicial persons resident in such territories. This warning applies whether such transfers or dealings have taken the form of open looting or plunder, or of transactions apparently legal in form, even when they purport to be voluntarily effected. The Governments making this declaration and the French National Committee record their solidarity in this matter.’

  d. The Agreement on Four-Power Occupation Plans for Austria between Britain, the United States, the USSR and France of August 1945 sets down the following duties and rights for the Allied Commission in Austria:³⁶

  ‘The primary tasks of the Allied Commission for Austria will be:

  To achieve the separation of Austria from Germany;

  To secure the establishment, as soon as possible, of a central Austrian Administrative machine;

  To prepare the way for the establishment of a freely elected Austrian government;

  Meanwhile, to provide for the administration of Austria to be carried on satisfactorily.’

• 2. Determination of German Assets Appropriate for Reparation. It is the U.S. view that the extent and character of German reparations from Austria should be compatible with the agreed Allied aim to reestablish a free and independent Austria and to assure its political and economic security; that the word ‘appropriate,’ used in the Potsdam Protocol, Paras. IV, 1 and 3, should be defined in reference to this aim; and that the disposal of German assets in Austria should be so carried out as not to violate, in fact, the agreement at Potsdam that reparations should not be exacted from Austria.

  a. In the case of removals from Germany which, in contrast to Austria, is judged an enemy liable for reparations, removals are related explicitly to a peacetime economy capable of supporting the German population without external assistance. It is evident that removals from Austria, a liberated area, must be related to a higher standard of post-war welfare than Germany. It is suggested by the US that the transfer of German assets from Austria and the conditions surrounding the substitution of Allied for German property interests within Austria should leave capacity, and conditions for its operation, capable under full utilization of yielding in the immediate post-war years a standard of living at least equal to the Austrian standard of 1938. To achieve this aim it is evident that removals must be limited in amount and selective in character.

  b. It is the U.S. view that the Forced Transfer clause (see 3, below) should be applied to transfers from Austrian, Allied and Neutral ownership to German ownership after 15 March 1938.

  c. It is the U.S. view that the determination of the amount and character of removals from Austria should be the function of the Occupying Authorities, jointly, in view of their joint aim and responsibilities with respect to the future of the Austrian economy.

• 3. No Acknowledgment of Forced Transfers of Property from Allied or Austrian to German Ownership. The determination of German ownership of assets in Austria must be based on the Moscow Declaration, which regards the annexation imposed on Austria on 15 March 1938 as null and void, and which states that the signatory powers are in no way bound by any changes effected in Austria since that date. In accordance with this declaration, the United Nations Declaration on Forced Transfer of Property in Enemy-Controlled Territory is applicable to transfers of property from Allied or Austrian ownership to German ownership after 15 March 1938. Accordingly, any transfer of property in Austria owned by nationals of the United Nations or Austria to German interests, by unilateral action of the German government, on request or at the instigation of the German government, including ‘transactions apparently legal in form, even when they purport to be voluntarily effected,’ can be declared invalid by the governments concerned, if the element of duress can be proved to the satisfaction of the Commission, established in Para. 6, below. Such property would then revert to Allied or Austrian ownership and not be subject to reparation claims by the occupying authority; however, compensation received from the Germans must be returned to a fund, which like other such assets discussed in 5 b, below, would be available, for the most part, in settlement of Austrian claims against Germany.
• 4. Separation of Allied, Neutral and Austrian Property Interests from German Foreign Assets. Taking into account 3 above, Allied, Neutral and Austrian property interest should be defined so as to include movable and immovable properties owned by Allied or Austrian governments or by Allied Neutral or Austrian nationals, individually or through participation in partnerships and other unincorporated associations, and assets of corporations in which Allied Neutral or Austrian nationals have shares or other rights of ownership, directly or through intermediate corporations, including German corporations. Similarly, taking into account 3 above, German foreign assets under Paragraph IV 8–9, of the Potsdam Protocol should be defined so as to include movable and immovable properties owned by the German government or by German nationals, individually or through participation in partnerships and other unincorporated associations, and assets of corporations in which German nationals have shares or other rights of ownership, directly or through intermediate corporations.
• 5. Allocation of German Assets in Austria by Physical Location.

  a. The USSR reparation claim in Austria should be limited to German assets, as determined in accordance with 2 and 3 above, physically located within the Russian zone of Occupation in Eastern Austria, including the Russian zone of Vienna, and should not include liens on, claims to, shares in, or any kind of title to any German assets, the physical location of which is outside the area of Russian occupation. Similarly, the fact that entitling legal documents representing German liens on, claims to, shares in, or any kind of title to physical property situated in the Russian zone are located in the US (French, or British) zone of occupation does not entitle any power other than the USSR to claim such physical assets for its reparation share. Subject to the qualifications of 2 and 3 above, the extent of German interest in any physical property located in the Russian zone is to be determined by the extent to which Germans or the German government owned the stocks or held an equity interest in the company which holds that physical property. Thus, if a company in which Germans have a fifty percent interest owns a plant in the U.S. zone and other plants in the U.S.S.R. zone of Austria, the western powers as a whole would be entitled to claim a half interest in the plant in the American zone, and the U.S.S.R. would be entitled to claim a half interest in plants in the Russian zone.

  b. Because the allocation of reparations to claimants is determined by the physical location of German assets in the various zones of Occupation (see 5a, above), German-owned banks, insurance companies and similar financial institutions cannot be treated on a zonal basis. Acquisition of German-owned stock of such enterprises would carry with it ownership interests in various zones, and would violate the principle set forth in 5a, above. A large part of the assets held by such enterprises constitute security against deposits and other liabilities held by nationals of Austria and of Allied and Neutral nations. Such assets are, therefore, not available for reparations (see 3 above). Procedures for the transfer of shares and management of enterprises from German ownership to a new control and the disposition of German claims against such enterprises (or that of German claims against any Austrian company, other Austrian assets or individuals) should be settled by the Board described in 6, below.

  It is the U.S. view that German claims and non-physical assets of this type be transferred to the Austrian Government, to be applied towards Austrian claims against the German Government or German companies or individuals. The period of German occupation of Austria was marked by extraordinary financial penetration of its economy. The operation of the Potsdam reparations agreement with respect to German assets in Austria should not be such as to effect a substitution of Allied for German penetration.

• 6. Board for Establishing German Foreign Assets in Austria Appropriate for Reparations. The U.S. Government proposes that a Board shall be established within the Allied Commission, Austria, representing the Four Occupying Powers with the Austrian Government participating as observer, to make the following determinations, in the light of Paras. 2,3,4, and 5a, above:

  a. Census of physical property located in Austria, by zones, wholly owned by German nationals, German government, or its agencies;

  b. Census of physical property located in Austria, by zones, owned wholly or in part by companies domiciled in Austria and/or Germany which are in turn owned in whole or in part by German nationals or the German government or any subsidiary or agency thereof; and determination of the extent of such German ownership of each of these companies and the physical properties owned by such company;

  c. Census of physical property located in Austria in which nationals or corporations of the United Nations have an ownership interest as defined in paragraph 3 and 4 above.

  d. The appropriateness for reparation purposes under Para. 2 above, of such assets as are deemed to be German;

  e. Decision on the disposition of German property and claims not subject to reparation under 5b, above.

• 7. Disposition of Reparations from Austria. In accordance with the determinations as defined under 6 above, the following types of disposition of appropriate reparation assets may be chosen:

  a. Removal of the physical property if completely German owned. Compensation for Austrian Allied or neutral claims against such property must be granted in accordance with 6d above.

  b. Retention of the property in Austria with the claimant power assuming for itself or its nationals the German interest in such property. In cases where mixed German and Allied (Austrian or neutral) ownership interests exist, it is evident that the substitution for German ownership will involve adjustments in the terms of property ownership, management, and production. It is the U.S. position that, in cases where the Allied (Austrian or neutral) interest is ‘substantial,’ as defined below, removal might, if permitted under 6d, above, take place only with the approval of the Allied (Austrian or neutral) owners. Lacking such approval the interest of the reparation claimant should be exercised through agreed compensation or through exercise of continuing minority interest.

  Where German interest is ‘substantial’, and if permitted under 6d, above, removal by the reparation claimant might be effected, if so desired, and in such cases the Allied (Austrian or neutral) interest would be exercised through agreed compensation or by continuing minority interest, as is agreed in each case.

  In cases where compensation is agreed in the course of settlement, such compensation must be paid by the interest which acquires full control.

  In all cases where foreign-owned property is physically restored, such property would remain part of Austria’s economic resources. Thus, if the property produces goods for export, the export proceeds should go into the Austrian foreign exchange pool which, in turn, should be used for such purposes as the Allied Council approves. If the property yields profits, the transfer of the share in such profits to which the occupying power (or its nationals) may be entitled shall be subject to the same foreign exchange restrictions as apply to the transfer of the profits or proceeds of any other property owned in whole or in part by foreigners or foreign interests.

  c. Purchase by the Austrian government or nationals of German assets in Austria, by agreement with the claimant power.

In general, a ‘substantial interest’ shall be defined as ownership of 50 percent or more of the ownership equity, individually or through business enterprises, subject to modification in specific cases, as may be jointly agreed. An interest other than ‘a substantial interest’ shall include not only minority ownership of equity, but also legitimate claims in the form of mortgages, loans or other liens on the assets of the affected property.”

Byrnes

32. This telegram was also sent for action as telegram 2420 to Moscow, and as telegram 5592 to Paris. It was repeated for information as telegram 970 to the United States Political Adviser for German Affairs, Berlin, and as telegram 316 to the United States Political Adviser for Austrian Affairs, Vienna. The following paragraph was added to the telegram as sent to Vienna: “Dept would prefer if other governments agree, that this matter be dealt with in Allied Council. It hopes that raising of issue at governmental level, and subsequent discussion, will satisfy Koniev view and will permit sufficient general agreement for Allied Council to proceed. Should this outcome result you may wish to make suggestions for strengthening of staff in Vienna for such negotiations. Your helpful suggestions have been taken into account with exception probable USSR view of German share of ownership factories in USSR zone. Your judgement on USSR view undoubtedly correct but we prefer more equitable formulation as initial US position.” The “helpful suggestions” referred to can be found in telegram 476, November 24, from the Political Adviser in Vienna, p. 659.
33. For complete text, see Conference of Berlin (Potsdam), vol. ii, p. 1499.
34. For complete text, see Foreign Relations, 1943, vol. i, p. 443.
36. Reference is to article 8 of the Agreement on Control Machinery in Austria, signed July 4, 1945. See Conference of Berlin (Potsdam), vol. i, p. 353.