The Acting Secretary of State to the Legation in Austria
658. For Erhardt and Dodge from Acting Secretary. Kleinwaechter left Thursday by air for consultations his government. On Gruber’s instructions Kleinwaechter before departure conferred with me and with Saltzman, Hickerson, and Riddleberger as to acceptability Austrian approach to Soviets on German assets problem to reach settlement by bilateral Austro-Soviet agreement.33[Page 612]
Dept’s view is that conclusion separate Aust-USSR settlement of German assets problem in effect amounts to separate treaty, since German assets has become largest issue. Although negotiation of such separate settlement would mark deviation from quadripartite approach this Govt has attempted to follow since Yalta, Dept would have no objection in principle if in fact such ad hoc approach would clear up Austrian situation and obtain removal of all occupying forces from Austria. It was accordingly intimated to Kleinwaechter that proposed approach acceptable provided it resulted in agreement that (1) would be publicly approved in Austria, (2) did not impair Aust sovereignty, (3) would in fact get Soviet troops out of Austria, and (4) would not amount to giving away property interests US nationals. Under no conditions would Dept consent to bilateral settlement which left Soviets free to stay and postpone conclusion of treaty. Settlement must therefore be part and parcel final agreement on treaty which would go through.
There remain however serious questions as to timing such negotiations and suitability Aust approach before coming CFM, as well as terms of possible Aust-Sov settlement.
Believe Gruber was informed by USDel members that no advantage perceived in opening separate Aust-Sov discussions before coming CFM and disadvantage that this might easily prejudice further efforts Western powers. In view Gruber’s record of collaboration with US, opening separate negotiations at this time would in all probability be interpreted as acknowledgment of US diplomatic defeat. We should prefer to make any final offers at settlement in CFM in accordance with mechanism set up at Moscow, and Aust Govt should carefully weigh whether it in better position to take initiative than Allied powers in CFM.
Re terms of any agreement in so far as they affected interests US nationals in oilfields, similar interests other UN nationals, and Aryanized properties, our position that if these are surrendered to USSR as so-called German assets, compensation must be provided. US public opinion would not sanction settlement in which Aust Govt gave away US property and would not continue to support current policy of generous material assistance. If the Sovs take position that compensation is matter for the Aust Govt to work out with the claimants, Aust Govt has not the wherewithal. On other hand, if the position is that compensation is matter for individual claimants to work out with Sov Govt, this amounts to substitution of debtors which no creditor obliged to accept. Dept considers that list of German properties must be closed once and for all, barring possibility Sovs raising additional claims in future. Thus in any bilateral negotiations it will not be [Page 613] sufficient for Sov and Aust govts merely to work out settlement satisfactory to them, but must be also acceptable to US, UK, and Fr, which appears to be conditional upon provisions for adequate compensation, fair machinery for determination of individual claims, and cut-off date for Sov claims before any bilateral settlement will be confirmed by Western powers.
Suggest that these difficulties be pointed out immediately by Erhardt to Gruber before he undertakes any steps indicated by Kleinwaechter’s inquiries. Dept can not make any commitment until Dodge has been consulted. Also assumed that Gruber would have full support of Socialist leaders, as well as Fr and Brit acquiescence, before taking action. Problem is sufficiently crucial that there should be maximum unity Aust Govt and Western states. It would be preferable for Aust Govt to stay out of bilateral negotiations altogether than to embark upon negotiations in which she is weaker party than the Western powers. The logic in Gruber approach apparently proceeds from conviction that situation is one which demands sacrifices, and Aust Govt in better position to make sacrifices or obtain lenient terms than Western powers. Dept skeptical on latter point.
In your opinion, are instructions to Kleinwaechter an indication that Gruber intends to proceed independently with offer to Soviets without further consideration of our position? Does current situation make Gruber’s attempt necessary at this time from point of view of present Austrian govt?
Sent to Vienna as 658; repeated to Moscow as 1632, London as 3628, and Paris as 3145.
The memorandum by Riddleberger of his conversation with Kleinwaechter on August 19, not printed, described the Austrian approach as follows:
“The object of such a settlement would be to get the Soviet troops out of Austria. Dr. Kleinwaechter pointed out that the treaty negotiations so far had not produced this result and that Dr. Gruber considered that a bad treaty was better than no treaty provided the Soviet occupation forces were withdrawn. The Austrian Foreign Minister considered that his Government could control any Soviet-controlled enterprises in Austria and was confident that the Austrian Communists would not be a potential political problem. Dr. Kleinwaechter did not know precisely what the Foreign Minister would offer to the Soviets in the way of a ‘deal’ on the German assets question but believed that the offer would be based either on current Soviet claims or on a recognition of Soviet claims to ownership of assets already seized by their military authorities.” (740.00119 EW/8–1947)