863.00/11–2746
The Minister in Austria (Erhardt) to the Secretary of State
No. 2079
[Received December 20.]
Sir: I have the honor to refer to a report on general conditions in Austria forwarded to the Department at the end of July 1946,65 at which time the Austrian people had experienced 15 months of liberation from Nazi domination. To a considerable extent, they had placed the experience of that great release behind them. They were prepared for the next step, namely to be “liberated from their liberators”.
There has been little change in public opinion since then. The Austrians are as tired and apprehensive as ever, and as anxiously desirous of achieving freedom at an early date. If there is any change it is in the direction of a further loss of confidence and an increase in skepticism.
It is a year ago now since President Renner, in a public speech at Salzburg, said that he thought of Austria as a rowboat in a stormy sea, and the occupation powers as a crew of four elephants, each pulling in a different direction. His description was considered very daring then, but it would currently be accepted, by Allies and Austrians alike, merely as a rather fanciful statement of the obvious.
Austria, as the first free country to fall a victim to Nazi aggression, should, in the Austrian view, have been the one most deserving of consideration, and yet the fact is that the country has stagnated since the end of the war. There has been no substantial revival of trade. The standard of nourishment is below that of any other European country. In contrast to conditions reported to exist in Prague or Budapest, the capital city of Vienna is still half dead.
The Austrians are not unaware of their own faults and of the past ideological mistakes for which retribution must be made, but they are also increasingly outspoken in their blame of the Allies for dilatoriness in implementing the Moscow Declaration of 1943. They blame all the Allies, but think primarily of the Russians as the chief culprits. In 1925, the League of Nations sent an economic mission to Austria, headed by the British economist Sir Walter Layton and the French economist Professor Charles Rist, to answer the question: “Is Austria viable?” It replied, rather hesitatingly, in the affirmative.
Today the question is not whether Austria is capable of living. Today the question is whether the country will be allowed to live, that is to say, whether Austria will be allowed by the Russians to [Page 377] live, in the way in which the Austrians desire to do so, namely as a politically and economically independent people. The Austrians hope, of course, they can survive, but feel that it will be a stiff fight for every regained position. In the view of Dr. Karl Gruber, the Foreign Minister, it will be a ten years’ struggle to loosen the Soviet grip on the economy of the country.
By contrast with Soviet Russia, relations with the other three powers, but especially with the United States, are about as good as one could expect the necessarily somewhat strained relations to be between the local population and the foreign forces in occupation of the country. The attitude of the United States was restated by General Clark in an Armistice Day announcement made on November 11, 1946. He said that the American people had accepted the mission of helping the Austrian people as a trust, and his sincere words were accepted by the great majority of Austrians as a statement of fact.
On October 24, 1946, a Soviet diplomatic spokesman in Vienna charged the Western Allies with failure to have a full or sympathetic understanding of Russia’s position in Austria. He especially charged the United States with carrying on a propaganda campaign to present the United States as a “ready-to-help Angel” and the Soviet as a “devil stripping the land”. The Russian spokesman could hardly have expressed more succinctly a widely held Austrian viewpoint in regard to the policies being pursued by these two of the four occupying powers.
The British and the French have made places for themselves between these two extremes. Both these powers periodically express sympathy for Austria and state that they recognize the need for the conclusion of a treaty, accompanied by a drastic reduction in the size of the occupation forces, “as soon as possible”. The British for almost all practical purposes are very close to us. As a matter of legal theory they do not consider Austria to be a liberated area, as the United States does, and a British Foreign Office spokesman stated on October 31, 1946, that it was not yet clear whether, under the proposed treaty, Austria would be considered an ex-belligerent. It cannot be said that either the British or the French have to the same degree the conception of trusteeship which animates the United States. For the most part, the French join with the British and the Americans against the Russian Element in the Allied Commission, but quite frequently also they join the Russians in a repressive or checking attitude. The French have quite a realistic approach to the Austrian problem, and are not guiltless of the removal of foodstuffs and other goods from Vorarlberg into France, in amounts which seem small only by comparison with the Russian removals
[Page 378]The chief cause of Austrian complaint against the outside world continues to be the unwillingness of the Soviet authorities to discuss a settlement of the reparations issue in their zone, and to accept a reasonable definition of German assets under the Potsdam Declaration. In the absence of this information, Austria does not yet know what assets she herself controls and so no real start can be made toward Austrian recovery. The Russians remain unwilling to countenance quadripartite jurisdiction when their own interests are affected. When they wish to do so, they ignore the spirit and at times also the letter of the Control Agreement of June 28, 1946, and by stubbornly independent action in this respect, they have made it clear that a major point of Soviet policy is to retain economic control of Eastern Austria. The task of ousting them has not yet been entered upon.
The reverse process, on the contrary, is still in operation. The Soviet occupation forces are digging themselves in more firmly than ever. Since July last, Soviet authorities have continued to take possession of factories in the Russian zone, again including some whose German ownership is highly questionable. The total, to date, is in the neighborhood of 200. It is true that the Soviets recently announced the intention of handing back to the Austrians three or four factories but they were relatively unimportant ones, and it is believed that Soviet motives were (a) to escape some of the unfavorable publicity which their actions have provoked and (b) to hold out an inducement to the Austrian Government for giving them clear legal title to the bulk of the property they have taken.
The possession of clear legal title, unnecessary during the occupation period, would be of importance if the troops were withdrawn, and obtaining legal title to the German assets claimed, may be one of the conditions which the USSR will wish to have met before the Soviet Government signs a treaty with Austria, and withdraws its troops.
The Austrian Government has prepared three Restitution Laws providing for the restitution of property to persons wrongfully deprived of it by the Germans. The first of these laws became effective automatically in September 1946. The Soviet authorities opposed it as contrary to the Potsdam Declaration and to the Control Agreement of June 28, 1946, and stated that it would not be recognized in the Russian zone. They will probably take the same position regarding the Second and Third Laws. This state of affairs may increase the danger of an ultimate partition of Austria, but it may also increase slightly the pressure on the Soviets to come to a settlement on German assets.
[Page 379]In July 1946, Bevin proposed to Molotov that German assets be defined as (a) pre-Anschluss German shares in enterprises in Austria and (b) German shares in industrial and commercial enterprises established in Austria since 1938 by the Germans, The definition expressly excluded private property and financial institutions. Molotov in August emphatically rejected the definition.
In October, this Mission was authorized to endeavor to work out with the British and French representatives here a new proposal for a definition of German assets in Austria and for procedures for disposing of them. The essential idea is to secure prompt agreed action at least by the United States, the United Kingdom, and France, and, assuming that the Soviet authorities will refuse to join in a quadripartite settlement, to put as much pressure as possible on the Soviet authorities to keep them in line with the settlement agreed upon by all the others. Tripartite discussions are now under way. The project illustrates the frequent current alignment of three powers on the one side and the fourth power on the other.
A year ago, it was thought that the four powers together gradually would reach agreement in the Allied Council on the progressive relinquishment of their supervisory and operational control. However, as the months have worn on, little common ground for such action has been found. In issue after issue involving the principle of an advance toward Austrian independence, the Russians have shown themselves to be opposed to the other powers, and many Austrians have come to believe that the Russians intend either to disrupt Austrian industry in such a way as to foster a swing toward Communism, or else, before evacuating their military forces, to gain so secure a place in the local industry that Austria will eventually have to submit to Russian political domination.
The following cases illustrate the Russian method of operation. One concerns navigation on the Danube and the Danube Shipping Company. The Russian representative in Vienna concerned with Danube matters stated, after protracted quadripartite discussion, that all questions involving the river were decided in Moscow, and that in the absence of instructions he himself could not discuss any phase of the matter. He also said that, contrary to the U.S. understanding, the Russian control of this section of the river was not centered in Budapest. Initiative by the American element in the Allied Commission, to revive discussion of traffic within Austria was defeated by the Soviets on the ground that this subject formed part of an international question with which the Allied Commission was incompetent to deal. It thus appears at this time to be unlikely that the Russians will enter in Vienna into any discussion of free navigation, either on a bilateral or quadrilateral basis.
[Page 380]The second illustration concerns developments connected with American oil interests. Despite the efforts of the American and British oil companies, strongly supported by the American military element, to obtain payment of some 15 to 20 million schillings due the American companies for deliveries of refined products, no payments have yet been made by the Soviets. The American companies have also been placed in a difficult position by a raise ordered by the Soviets of 10% in the price of crude ordered, as well as by the introduction of a Soviet jobbing organization which takes a substantial unearned profit. The American plants are now living on their cash deposits in Austria, which are not expected to last, under present conditions, more than a few months. No results, furthermore, have been achieved in efforts to recover from the Russians valuable American exploration rights.
The scope for effective activity by the Austrian authorities in establishing their independence is limited by vulnerability in several important directions. Denazification can be said by the Russians not yet to have been completed, and this reason is among the most plausible of those advanced for delaying any relaxation in Allied Control. After prolonged efforts, agreement was reached by the three Austrian political parties on the text of a denazification law, which was submitted to the Allied Council on August 6, 1946.66 It is now bogged down in quadripartite working committees, in spite of the efforts of the U.S. Element to hasten deliberations on it. The Displaced Persons problem can likewise be said to continue to constitute a threat of disorder, requiring Allied attention.
A heavy burden on Austrian official shoulders is the fact that Austria is dependent on material assistance from the outside, and if assistance should not be given from the West (which would be the preferred solution) it will have to be sought in the East, even at a high cost in terms of economic freedom. After the war was over, the Austrian people were able to set economic rehabilitation in motion but only with the help of the Allies, and later of UNRRA, and no lasting reconstruction will be possible without help from abroad.
Chancellor Figl, who has a stout heart and a sanguine temperament, in spite of or perhaps because of his endurance of nearly seven years in concentration camps, is among those Austrian leaders who are confident that the country can, in the long run and in spite of current difficulties, arrive at a sound equilibrium in its economy. There is no doubt that the indigenous products of the country are of first-rate [Page 381] quality, and that thanks to the normally high capacity of Austrian labor, they can compete on the world market. Promising developments in this respect in September and October, included the conclusion of agreements with Poland, Great Britain, and France, for exchanges of Austrian lumber and metallurgic, steel and electrical products, etc. for needed articles from abroad. Austrian agricultural production should be able to reach the pre-war level within a few years. An artificial insemination project, suggested by U.S. authorities, is to go into operation before the end of 1946, to assist in the rapid rebuilding of the depleted livestock industry. The hoped-for development of Austria’s trade relations with its eastern neighbors, under safeguards from the political angle; increased production of domestic electric power; and, if ownership difficulties can be overcome, the development of the oil industry; together with the hoped-for revival of the tourist trade, are among the other factors which should assist in consolidating the country’s position more firmly than before 1938.
The above is the long view, optimistically expressed. Meanwhile, the [and?] coinciding with the first cold spell of the present season, the Austrian Government announced, at the end of October, that the country was approaching one of the grimmest winters in its modern history. Austrian officials warned that epidemics were to be anticipated among the underweight populace. The statement was added that Austrian clinics and hospitals had available the inadequate total of only 5,500 beds for all of Austria.
The unfavorable situation in which Austria finds herself at present was seen, in October 1946, to continue to arise from the following causes: There is a shortage of professionally trained labor, due to the fact that only part of the Austrian prisoners of war have returned so far. (Most POWs have already returned from the West, but very few as yet from Russia and Yugoslavia). An efficient use of the available labor furthermore is impeded by insufficient nutrition, even at the higher ration scale of 1550 calories (raised from 1200) which went into effect in October as a temporary measure, under pressure of public unrest. The transportation and distribution of local products is very much retarded and hampered by the continuing division of Austria into the four occupation zones. It is true that the Allied Council unanimously agreed in October to recognize the right of the Austrian Government to control all indigenous resources in Austria and to utilize them fully in the Austrian economy, but the promise has as yet by no means been fully implemented, owing to Russian actions. The occupation costs, amounting to 30% of the budget, represent a serious obstacle to the stabilization of the currency. There is also great uncertainty regarding the ownership rights of property, as already mentioned.
[Page 382]The above subjects were among the eleven points listed as matters requiring urgent attention, in a Resolution unanimously adopted at a secret session of the Austrian Parliament on October 30, 1946. In a public session which followed immediately thereafter, Chancellor Figl characterized the present situation as the most critical in Austria’s history. Thus the end of October was also a very critical period in the history of the Figl Government, but fortunately the successful outcome of the secret session amounted to a vote of confidence. The strong Austrian Socialist Party, whose membership has increased by over 100,000 since the beginning of the year, decided to continue to give its support to the present coalition. The Socialists feel that it would be as well for the Peoples’ Party, rather than themselves, to bear the brunt of the coming winter’s difficulties.
UNRRA relief is to cease on December 31, 1946 or soon thereafter. In a letter of October 31, 1946, to the Allied Council, Chancellor Figl submitted estimates showing the dangerous character of the situation which will then arise, unless provisions are made for the granting of sufficient loans. Necessary imports for 1947 are currently estimated at $293,000,000. Nearly half of this total, namely $121,000,000, is for foodstuffs on the basis of a 1550 calorie rate. Exports, mainly of metals, ores, machinery, and textiles, are estimated at $115,000,000. This calculation results in a Balance of Trade deficit of $178,000,000, which the Austrian Government has, at present, no funds to cover, and which, large as it is, probably is by now an underestimate by $30,000,000 or more, in view of the rise in the price of the desired imports since the estimates were made.
Meanwhile the Austrians have tried to augment their external resources in various ways. They have made a claim for their share of the gold pot.67 Barter Agreements have been concluded but imports have been small. Clearings agreements are almost negligible in value. The recent loan extended by the British for 1.5 million pounds sterling is supplemented by credit for surplus goods worth about half as much again. Negotiations over the $50 million Export Import credit are regarded as of critical importance as are the current discussions of possible aid totalling $150 million.
A further program for relief in the first months of 1947 has been laid before the War Department. At an Allied Council meeting held on November 15, 1946, General Clark stated, in this relation, that on his recent visit to the United States he took steps to fill up his military pipe-lines so that he would be in a position to assist by January 1, 1947. He also countered recent Soviet propaganda which [Page 383] has been to the effect that through rendering aid, the United States was endeavoring to partition Austria into an eastern and a western section. General Clark made it clear that he was anxious to see that Austria was fed as a unit. He said he was willing to pool his food imports with those of the other Commanders and that he, on his part, was placing no restrictions of any kind on the movement out of the US zone of indigenous resources. He also indicated readiness to agree with the other Commanders on the ration scale for Austria after UNRRA ceases operations here.
Thus at this writing the intention of the United States to help Austria is clear. It is equally clear that United States desires to help Austria as a whole. At the November 15th Allied Council meeting, the British Commander, Lt. General Sir James S. Steele, expressed agreement with General Clark, and assured the Council that the British Government “right now is examining the question” of relief.
The French Commander, Lt. General M. E. Bethouart, took an ambiguous position. He stated that he had asked his Government “under what conditions France could take its share of the help”.
The Soviet Commander, Colonel General A. S. Zheltov, took what amounted to uncooperative action by stating that until the question of Austrian internal resources was reported on by the Austrian Government, the Soviet authorities “cannot propose anything concrete”.
The conclusion to be drawn from the above survey is felt to be that the Austrian people, in a spirit of hope for aid from the West and forbearance from the East, look forward to the conclusion of a treaty and the withdrawal of the occupying forces, not as a full solution of the country’s difficulties, but nevertheless as an immensely important practicable means of checking the current drift toward economic chaos and national instability.
Respectfully yours,
- Not printed.↩
- The Austrian Parliament passed the Denazification Law on July 24, 1946. It was discussed in the Allied Council meetings of October 11, October 25, November 15, November 29, and December 13, 1946.↩
- For explanation of the “gold pot” principle, see Foreign Relations, The Conference of Berlin (The Potsdam Conference), 1945, vol. ii, p. 938, footnote 4.↩