CFM Files: Lot M–88: Box 66: Correspondence

The United States Member on the Committee of Experts of the Austrian Treaty Commission (Ginsburg) to the Counselor of the Department of State (Cohen)

Personal and confidential

Dear Ben : This is an interim report on what has happened in Vienna on the Austrian Treaty during our first month.

The Commission—now designated as the Austrian Treaty Commission—has conferred more than fifteen times in meetings which have [Page 591] lasted from 2 to 5 hours. Unfortunately, we cannot report progress. The Commission began its work with the German assets question and has remained on that question; the Committee of Experts, established to obtain “concrete facts” regarding German assets, is not yet functioning on a quadripartite basis. The Soviets are just beginning to inch toward us from their initial position; the British are in London seeking new instructions; the French are modestly concealing their pride in a compromise which they formulated and which with reluctance we may be prepared to swallow.


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Proceedings in the Commission

Our initial effort was to put the fact-finding Committee to work immediately under terms of reference that would enable it to get such facts as each delegation regarded as relevant under its own definition of German assets. The terms of reference which we proposed provided first that each delegation should indicate what assets it regarded or had taken as German. We had two purposes in mind: (1) to ascertain the extent of the liability under the competing definitions, and (2) to guard against the possibility that an indefinite number of claims might be “discovered” in the future. After that, categories of assets were to be established by the Committee of Experts, cases placed within each category, facts determined, samples examined, principles agreed, and a definition or a list of “German assets”, or both, formulated.

In this approach we were strongly supported both by the French and the British who independently had proposals of their own much along the same lines.

The Soviets took a different view. Although their emphasis and tactics have shifted from week to week, their objectives, in my judgment, have remained the same: (1) quadripartite agreement on oil (oil is of controlling economic importance to Austria; US and UK interests in oil are large; the Soviet legal position in much of Zistersdorf is weak); (2) a general definition of German assets in the treaty to cover assets other than oil; (3) unilateral application of the definitions; (4) bilateral negotiation of disputes.

They have sought to achieve these objectives by continued insistence that it is the responsibility of the Commission itself to reach agreement on all disagreed provisions of the treaty, including Articles 35 and 42; that the Commission should first define the precise areas of agreement or disagreement in the verbal formula; that the Commission should then begin a “practical discussion” of these disagreements [Page 592] in the light of the facts of oil, and “after oil” other cases “including DDSG, insurance companies, and industry”; that if the Commission then disagrees or needs facts which are not available, it may (subject to Soviet veto) refer particular questions to the Committee.

To the US-UK-French position the Soviets reply that it is contrary to the CFM directive establishing the Committee. The reasons given are that lists and fact-finding are (1) “impractical” because of the large number of cases involved (of course it isn’t too much of a job to identify all claims, and then to examine only the important ones; the Soviets merely choose to ignore our willingness to eliminate from Committee debate the unimportant or small cases); (2) in derogation of the Soviet concept of bilateral negotiation because it would establish the Committee or the Commission as “arbitral bodies”. The Soviets, therefore, have consistently demanded that the Commission (not the Committee) discuss the disagreed provisions of Article 35 and the appropriate parts of Article 42 in the light of oil. They have also identified these aspects of the oil industry which they regarded as pertinent to our differences, and which should be discussed.

Our approach to the Soviet position has not been inflexible. (1) Bevin made it perfectly clear to Rendel that he wanted no more time wasted on formulae and that the essential purpose of the Commission was to provide a new approach—from the particular to the general, based on facts, instead of the reverse. We were similarly advised. Despite this background, we did agree to a general discussion of Articles 35 and 42 (in so far as those articles had any bearing on the work of the Committee of Experts) in order to accommodate Novikov. We spent three meetings focusing our differences and nothing came of it. (2) Novikov was suspicious of our broad general direction to the Committee to get concrete facts on German ownership of assets in Austria. We, therefore, revised our proposal to specify the nature of the facts we wanted, and the categories into which the cases might be arranged. He merely shifted his attention to other alleged defects in our approach. (3) We felt that the Committee should gather the facts first before the Commission discussed them—indeed, the Committee, we thought, had been established by the CFM for that very purpose. Nevertheless, Novikov insisted that discussion of facts begin in the Commission, not the Committee. We have indicated our willingness to meet him, although it may result in a merger of the functions of the Commission and the Committee. (4) Novikov consistently objected to the idea of telling the Committee or Commission what assets he regards or has taken as German. He argued that as a result of [Page 593] Potsdam,14 the Harriman note of September 7, 1945,15 and Law 5,16 title to German foreign assets had passed to the Allies, so that the Soviets were free to decide for themselves which assets were German in Eastern Austria, just as the western Allies were free to decide which assets were German in western Austria. Because of Novikov’s position, the French and British have dropped the idea of lists. To meet Novikov we have also indicated that, at the moment, we’ll not press the point.

The Soviets seem to be giving way a little on their single proposal of May 14. They would infinitely prefer to discuss our differences as illustrated by the single case of oil, although they say that they are willing to broaden the discussion to include all important cases, provided the discussion is held in the Commission, and references to the Committee are carefully confined. We don’t know yet if they’re serious. If they are, we’ll go along. This could hardly be viewed as a glorious accomplishment, but considering the character of the issues and the nature of the differences the result should probably be regarded as progress—at least as Lenin defined it. If the Soviets persist in their efforts to confine the work of the Commission to oil, we should probably move on to the other disagreed articles of the Treaty rather than give way. This development, if it occurs, would seem to mean that the Soviets are not prepared to join in an acceptable treaty, and that quadripartite agreement within the Commission, at this time, is impossible.

Austrian Attitudes

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Gruber and the Economic Planning Minister, Krauland (also of the People’s Party), still hold the viewpoint indicated to our Delegation in Moscow. They regard a treaty as an imperative, and are willing to make almost any concessions to secure one.

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The essential elements of this position are withdrawal of the troops and an agreement by the Soviets that all properties will remain subject to Austrian Law, without extraterritorial rights of any kind.

[Page 594]

To the suggestion that the Soviets are neither impotent nor fools Gruber and Krauland reply that the Soviets will be in no position to retaliate. They will not march back because that would precipitate war and the Soviets would not risk overt warfare now. They cannot exert economic pressure directly because Soviet-Austrian trade is negligible. They will not apply economic pressure indirectly through the Soviet satellites because Austrian trade with these satellites, although substantial, is not decisive. That the Soviets will stimulate fifth column activities and may even precipitate civil war is true. But this the Soviets could do and probably will do in any event regardless of the treaty. Gruber and Krauland accept as an unhappy but indisputable fact the Soviet design to undermine Austrian independence and to subject Austria to Communist control.

But the Gruber-Krauland crusade for an immediate treaty is by no means universally supported. Not only do the Socialists reject the People’s Party thesis, but the People’s Party itself is divided, and the Austrian Government, as a coalition, is not committed. Some critics hint that the GruberKrauland viewpoint is myopic because of personal political difficulties—a quick treaty might be highly advantageous to Gruber and Krauland. But most Austrian criticism is based on the broader ground of national security. For example, the Socialists Renner and Shärf flatly reject the policy of a treaty at almost any price and insist that no treaty for a while is far better for Austria than a bad treaty, The Chancellor, Figl, also shares this attitude, and Figl is of the People’s Party. Renner, whom I found appealing and impressive in the role of elder statesman and President, almost contemptuously rejected the GruberKrauland conclusion that Austria will be able to handle the USSR. He passed the matter off with a curt reference to the chicken and the fox. The Socialist program, given new emphasis by a recent series of newspaper articles inspired by Renner, calls for nationalization of the properties transferred at Potsdam; compensation in the form of bonds; with the transaction sweetened, if necessary, by “amortization” of the bonds through payments in kind from current production.

Underlying the positions of both the People’s Party and the Socialist Party is a pervasive fear that Austria is approaching the breaking point; that it may pass that point if next winter is as bad as the last. The argument is simple and familiar: with the country divided into four zones and Vienna itself into four sectors, and with the occupying powers split into two hostile camps, Austria has fallen victim to big power political warfare. Reconstruction is impossible; indeed, if reconstruction were possible it would be because the Soviets [Page 595] had failed in their purpose. The Communists, with four out of 165 seats in the Austrian Parliament, would have no chance whatever if reconstruction seemed likely.

The first three items on Austria’s list of requirements are coal, coal and coal again. After that come food and raw materials. Even if the country were unified economically the costs of occupation are so heavy, considering the limited resources, that the prospects for rehabilitation—without outside assistance—are almost hopeless until a treaty is drawn and the occupation forces withdrawn.

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Personal Conclusions (tentative)

The Soviet objective in Austria is domination and incorporation of Austria into the Soviet sphere of influence. I base this conclusion partly on the USSR’s program and activities in Austria and neighboring countries during the past two years; partly on the positions the USSR has taken in the ACA and the Treaty Commission; partly on our intelligence reports, and partly on the judgment of our Legation observers and British, French and Austrian officials here.
Speedy political domination with the express or tacit consent of the western powers through the provisions of a peace treaty is, I believe, the maximum Soviet objective in Austria. Her minimum objective is to tighten her grip on the Austrian economy so that future political control becomes a realizable possibility. That the USSR will obtain material benefits from the ownership and control of German assets in Austria, as she defines them, is a factor of significance. But I think it is secondary to the desire for political power.
Our own objectives in Austria, as I understand them, are beneficent and limited: a free and independent nation with an economy at least adequate to support her people at a reasonable standard of living. This is a reflection of our good-will to a country presumably liberated, but it is also a matter of self-interest. Apart from the Greek-Turkey policy, Austria flanks Germany and commands the Brenner and other routes south to Italy and Trieste; geographically Austria is a deep bulge eastward—or westward—in the Stettin—Trieste line. With reference to U.S. owned interests we have sought only to protect them against discriminatory treatment. Those interests in any event are negligible compared with the nearly $300 million we have already spent in Austria since VE Day. We are fully prepared to interpret the Potsdam Agreement in such way as to resolve reasonable doubts in favor of the Soviets. We also recognize that Austria in the future must live with the Soviets and [Page 596] their satellites as neighbors, suppliers and customers, and that she must make her peace with them. We are aware that neutrality for Austria is an indispensable condition for survival.
I see nothing in our policy which conflicts with reasonable Soviet security interests or which otherwise should preclude the possibility of a settlement in Austria.
I believe that Renner, Figl and Shärf are more nearly right in their analysis of the treaty problem than are Gruber and Krauland. To leave Austria with the kind of treaty which the Soviets offer, or at the moment would accept, would be to abandon the country to Soviet control.
I am doubtful regarding Soviet intentions with reference to the Treaty Commission. Soviet actions until very recently were responsible for lack of progress, since every delegation other than the Soviet had indicated a willingness to negotiate in a true sense, and to compromise even what had been regarded as essential in order to achieve a moderately satisfactory or even a tolerable agreed report. This may mean that there was a genuine misunderstanding in Moscow as to the functions of the Commission and the Committee. (Cherrière is inclined to this view). Or it may mean that the USSR is simply stalling and regrets its decision to establish the Commission and the Committee. (Rendel is inclined to this view. He feels that the Soviets grabbed so much to which they are not entitled that, even apart from economic and political consequences, they would be acutely embarrassed and lose face by an honest fact-finding inquiry.) Finally, it may mean that although not stalling, the Soviets are in a hard bargaining mood. As an act of faith as much as of judgment, I choose to accept this view. Besides, I have already given away all of my Army equipment and all but one of my uniforms.
Since it is quite possible that the Soviets may not choose to participate fully in a quadripartite examination of the facts regarding German assets, we must redouble our efforts to secure them unilaterally. If the British and French are willing to exchange information and join us informally in the inquiry, so much the better.

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If the Soviets would consider funding their ownership claims to German assets in eastern Austria, and accept bonds plus reasonable arrangements regarding payments in kind from current production, I believe it would be in our interest to support such a solution. (We might even consider a guarantee of the bonds if the burden of payments in kind are excessive.) However, I do not believe the Soviets will accept bonds, nor do I believe that Potsdam obligated them to do so.
Assuming a reasonable measure of recovery in Austria, I believe [Page 597] that an acceptable treaty can probably be negotiated with the USSR within the next six to twelve months. Heretofore there have been many ultimatums and too little negotiation on all sides; we have, I fear, been somewhat unyielding and unimaginative in our approach to a treaty, and delay is bound to be the price of the suspicions and animosities we have aroused. There are many ways to skin a cat, and the least effective way is an unequivocal, if not insulting, demand that he skin himself.
The greatest danger in the situation is that we shall ourselves lose patience. By “we” I mean not only the Commission but more particularly the Department’s policy makers and other official spokesmen. Clark’s screams, for example, didn’t help a bit; Soviet intransigence seemed particularly plain the day his remarks were headlined in Vienna. The “high State Department spokesman” in Washington who after the Hungarian coup told the American press (without consulting or advising us) that the Department was considering ending treaty negotiations also made quite a stir here. I have no doubt whatever that the Soviets are spending long hours trying to guess what U.S. intentions and policy really are. They think we’re as well organized as we think they are; we’re both wrong.
I have said that an acceptable treaty could probably be negotiated within the next six to twelve months if there is a reasonable measure of recovery here. Such recovery, I believe, is impossible unless we are prepared to provide Austria with the marginal economic support that will enable her to break the vicious circle that begins and ends with coal. If Austrians must go through another year of misery, the miraculous stability, which led most the entire population into two fairly moderate, democratic, political parties, will crack. (By “year” I don’t mean twelve months—merely the reasonably near future.) If the Soviets, who in Austria are sponsors of disunity and impoverishment, foresee success for their policy, they will assuredly not yield on the vital elements of the treaty. They will yield only if despite their efforts conditions in Austria improve to the point where despair and hopelessness can no longer be used as a political lever. The power to sustain Austria economically through the next year or so lies not with the Treaty Commission but with the Department and the Congress. What we say or do in the Treaty Commission during the next few months is as far removed from the fundamental problems of Soviet plans and Austrian living standards as Washington is from Vienna. The Austrian politicians have made a bad mistake in looking to the Treaty Commission for relief, and promising the people relief if the Commission can reach agreement on an elusive problem having to do with something called “German assets”. This is pathetically unreal. Relief can come only from increased supplies of coal, food and raw [Page 598] material. And if these are provided, an acceptable treaty will also result as a matter of course.

As ever,

David Ginsburg
  1. For documentation on the conference of the heads of government of the United States, the United Kingdom, and the Soviet Union at Berlin, July 17–August 2, 1945, see Foreign Relations, The Conference at Berlin (The Potsdam Conference), 1945, 2 volumes.
  2. For a close paraphrase of the note under reference here, see telegram 1964, September 6, 1945, to Moscow, Foreign Relations, 1945, vol. iii, p. 1283.
  3. The reference here is to Allied Control Council for German Law No. 5, October 30, 1945, on the vesting and marshalling of German external assets. For an extract from the law, see Ruhm von Oppen, Documents on Germany Under Occupation, p. 85.