Foreign Relations of the United States, 1947, Council of Foreign Ministers; Germany and Austria, Volume II

740.0011 EW (Peace)/10–1447: Telegram

The Acting United States Representative to Austrian Treaty Commission ( Ginsburg ) to the Secretary of State

secret

Vienna , October 14, 1947—5 p.m.

1032. From Ginsburg.

1. Pursuant to request in para 4, Deptel 782,⁴⁸ USDel has spoken informally with British, French and Austrians here re possible approach to Soviets along lines indicated in Legtel 971, Oct. 6.⁴⁹

2. There appears to be acceptance in principle of following elements of compromise offer subject to the reservations indicated:

a. Oil.

(1) USSR to receive about 50% of Austria’s 1946 production, reserves, and refining capacity.

(2) Under USDel’s recommendation contained in Final Report⁵⁰ Sovs would retain all of their present claims to production except the Niederdonau Erdoel GMBH and 40% of the Internationale Tiefbohr A. G. (Steinberg-Naphtha).

(3) The return of Niederdonau, and a physical division of possible reserves in the exploration lands of the Erdoelproduktions GMBH and the Internationale Tiefbohr AG, on a 50–50 and 60–40 basis, respectively, would result in a division of possible reserves transferring 40% to the USSR and retaining 60% in non-Sov hands.

(4) In refining, under USDel’s proposal, the Soviets would be required to return Lobau refinery and pipeline but might be offered a cash indemnity equal to their cost. This would result in the retention by the USSR of Korneuburg, Nova, and Voesendorf, and the retention in non-Sov hands of Lobau, Floridsdorf, and Kagran. The resulting division of refining capacity is 45.2% Soviet and 54.8% non-Soviet.

(5) Believe this would be wholly acceptable to the Aus Govt and on balance to achieve agreement probably acceptable to the US and UK. However, emphasize that French would probably be dissatisfied since their claim for the Nova Refinery is ignored.

b. DDSG .

USSR to receive the properties of DDSG physically located in Eastern Aus, Hungary and elsewhere in Sov reparation areas. This amounts to about 75% of DDSG’s tangible properties. French, British and Aus all appear willing to accept this item as recognition of fait accompli.

c. Industry.

(1) USSR to receive 5 to 10 large formerly German-owned industrial plants in Eastern Aus.

(2) The following seven companies and plants are suggested by USDel in its final report because they represent an important percentage of what US regards as German assets in industrial enterprises in the Sov Zone (about 60% assuming that some non-German minority interests will also be turned over to the Sovs); because the Sovs have shown great interest in the output of these plants; and because it seems possible to replace the loss of production involved by increased or modified output of other plants remaining in Aus hands.

(a) Siemens-Schuckertwerke Aktiengesellschaft

Vienna I, Nibelungengasse 15

Plants: Vienna XX, Vienna XXI

This company supplied about 40% of all major electric equipment used in Aus. Produces generators, transformers, switch gears and motors.

(b) AEG-Union Elektrizitaets-Gesellschaft

Vienna III, Ungargassee 59/61

Plants: Vienna XXI

Same importance for Aus as Siemens. Share in total capacity another 40%. Produces same items as Siemens.

(c) J. M. Voith

St. Poelten (Office and Plant)

Company is the sole producer in Aus of water turbines (indispensable for hydro-electric plants) and of 80% of paper processing machinery.

(d) Wiener Kabel-und Metallwerke Aktiengesellschaft

Vienna XXI, Siemensstrasse 88 (office and plant)

Company is owned by Siemens, represents about 35% of country’s total capacity of high and low tension cables. Only producer of high frequency telephone cables.

(e) Osram GMBH, Kommanditgesellschaft Vienna-Atzgersdorf, Karl Heinzstrasse 67 (office and plant)

Company accounts for 40% of country’s capacity to produce incandescent lamps.

(f) Gebr. Boehler & Co. Aktiengesellschaft

Vienna I, Elisabethstrasse 14

Plant in Soviet Zone: Ybbstalwerke, Waid-hofen-on-the Ybbs.

Ybbstalwerke is the only Austrian producer of galvanized and bronzed steel strip and most important producer of welded tubing and high speed cutting tools.

(g) Enzesfelder Metallwerke Aktiengesellschaft

Vienna I, Karlsplatz 2

Plant in Enzesfeld

Company’s capacity is about 50% of Austria’s for non-ferrous metal products, including sheet strips, rods and bars.

d. Redemption Obligation.

In lieu of all other claims to German assets in Eastern Austria, USSR to receive $100 million face amount of 4% redemption obligations, amortizable over a period of 8 years, beginning January 1, 1952. (The US Delegation is itself of the opinion that this sum is probably too low to have any chance of acceptance by the USSR. $150 to $200 million is probably nearer the order of magnitude required although such an offer should probably not be made as an initial basis for bargaining.) Interest and amortization should be payable, so far as possible, in the form of Austrian raw materials (particularly oil), and value added by Austrian factories to materials supplied by the USSR (see Article 74, Italian Treaty). If necessary, a stipulated part of interest and amortization payments may be made transferable in foreign exchange.

e. Austrian Law.

Properties transferred to the USSR shall be subject to Austrian law in all but at most two respects: (1) freedom from nationalization for a limited period; (2) if necessary, freedom to transfer net profits in the form either of goods or of foreign exchange.

f. Settlement of Disputes.

All disputes shall ultimately be subject to settlement by some form of arbitration. This recommendation is of a lesser order of importance than the foregoing, but it is nevertheless of significance.

3. (a) After conversations here Ginsburg believes offer of nature envisaged would be wholly acceptable to the Austrians and with some minor reservations re the Nova Refinery and the return of a few DDSG vessels held by DDSG, acceptable to the French.

(b) USDel, together with the French and Austrians, is convinced that to have any chance of acceptance even in principle initial offer must be sufficiently attractive to compete with what Sovs can reasonably anticipate from their own zone without treaty. British appear inclined to feel that initial offer should be carefully limited because substantial increases will probably be required before final acceptance. Hence, British speak of one-third rather than one-half of oil industry and suggest that perhaps $75 million or even less is a better beginning figure than $100 million. USDel is unable to determine whether this British approach is based exclusively on bargaining considerations or upon second thoughts regarding desirability of an Austrian treaty in immediate future. British from time to time have informally suggested here that perhaps it is not to advantage of the powers in occupation of the western zones to speed a treaty at the moment and then to withdraw their troops immediately, pointing to developments in Eastern and Southeastern Europe. Whether local British are simply being cautious in avoiding commitments or in framing offer, therefore, because they are not authorized to speak or for some other reason, or whether such caution at bottom represents an effort to sabotage the offer by making it so small as to insure non-acceptance, is unknown. USDel feels certain, however, that offer along lines for which some British have expressed preference which would give Sovs far less than they can obtain without treaty would have little or no chance of acceptance.

4. Details of foregoing and supporting facts contained in USDel final report.

[

Ginsburg

]

48. Ante, p. 616.
49. Not printed.
50. Regarding the Report of the United States Delegation to the Austrian Treaty Commission, see the letter of November 4 from Dodge to the Secretary of State, p. 673.