740.00119 Council/12–1047

Memorandum from the United States Representative on the Austrian Treaty Commission (Dodge) to the Secretary of State

secret

1. Further CFM Procedure

a.
The discussion on Austria ended 4 December with your statement that “in view of the vital importance of this phase of the Austrian treaty (the German assets question) and the seeming impossibility of achieving agreement, the CFM pass on to Item 3 on its agenda, at least for the present”.8
b.
Informal discussions with the French and the British indicate that they, as we, regard it as important to have at least one more discussion on Austria.
The consensus is that another public session would probably be useless and might be harmful. The Soviets have refused to go along with the approach of the French proposal and are not likely to be willing, as yet, to commit themselves publicly to a different attitude. Privately, it is possible that Molotov might be somewhat more frank. A second public session, moreover, might give the Soviets another chance for a propaganda statement whereas at the moment they are on the defensive resisting an offer of settlement sponsored by the French. For these reasons, it is recommended that Austria be considered next time in a secret session. Mr. Bevin may suggest this in a day or two, perhaps as the discussion on Item 3 approaches an end.
c.
The tactical approach in a secret session should be substantially the same as was followed in the December 4 meeting.
Emphasis should be placed on our desire for a treaty; on our inability, after intense efforts, to reach agreement on a definition; on the fact that the USSR has seemingly rejected the approach of the French proposal, and on our consequent impasse. If Mr. Molotov can provide some concrete basis for negotiation, the German assets problem may appropriately be referred to the Deputies to formulate the agreements and disagreements in treaty terms. But unless Mr. Molotov can provide such a concrete basis, further discussion by the Ministers or further work by the Deputies at the moment would appear to be futile. We have done everything within our power to move the negotiations forward, and it is now time for Mr. Molotov to do his share.
d.
One other point should be made in the secret session. We have agreed among ourselves that the U.S. claims to German assets in Western Austria should not be a stumbling block to agreement. If a concrete [Page 802] settlement can be agreed, and if our other treaty differences can be satisfactorily resolved, the U.S. should be willing to consider renunciation of whatever rights it might have under Potsdam to such assets. This is all the more important since it is reasonably clear that the Soviets believe the U.S. wishes to retain a permanent economic interest in Austria via German assets.
France and the UK will almost certainly join in a conditional renunciation of this kind.
Such a renunciation has the advantage of retaining our claims as a bargaining counter yet offering the Russians nothing until agreement is reached. It destroys the basis for the Soviet propaganda charge of imperialist penetration and constitutes another demonstration to Austrians and others that we seek no preferential status in Austria.

2. Renunciation of Western Claims

a.
As stated above, an offer of conditional renunciation at the secret meeting may be advantageous and is recommended.
b.
Unconditional renunciation at this time is not recommended.
Although the British and the French may ultimately be prepared to support such unconditional renunciation, they are inclined at this time to join in the view that our hold on assets in Western Austria can be used for bargaining purposes. Moreover, the recent currency agreement negotiated by the Austrian Government9 does not provide satisfactory assurances that the Austrians will be able to withstand Russian pressure for settlement on German assets. If, for example, we renounce our claims to certain of the more important industrial concerns in our zone, it is possible that the Austrians may be induced to turn them over to the Russians in exchange for a more or less satisfactory general agreement on German assets. Soviet influence might thus be extended even into Western Austria.
It is true that unconditional renunciation might offer a measure of desirable encouragement to the Austrian people and would undoubtedly represent a substantial political coup for Gruber and the present Austrian Government. Nevertheless it is believed that on balance conditional renunciation is the preferable course.

3. Bilateral Negotiation

a.
At one time it was thought that if there was clear evidence that CFM negotiations regarding Austria were likely to fail, Gruber might be informally authorized to undertake discussions with the Soviets, within indicated limits, and with a clear understanding that any agreement arrived at must be acceptable to the other three powers and would be incorporated into the treaty.
It is now plain, however, (1) that the Austrian Government is not prepared to go much beyond the offer made by the French (the only likely additions are an increase to 50% of the percentage of oil exploration and refining capacity to be transferred; and 5 to 10 industrial plants), and (2) that the Soviets would probably not deal with the Austrians at this meeting. Gruber is aware of these considerations as well as of the fact that in bilateral negotiations the Austrian Government at the present time would operate at a great disadvantage.
It is unlikely, therefore, that Gruber will press for authority to conduct bilateral negotiations, but if the question is raised it is recommended that the problem of German assets, as well as the other problems in the Austrian treaty, be retained for settlement on a quadripartite basis.

4. Troop Withdrawal

a.
The Austrian Government officially takes the position that an offer by the U.S. of troop withdrawal conditional upon acceptance by the other three powers should be made.
The argument is that this will relieve Austria of the heavy burden of the occupation, will give Austria a greater degree of control over German assets now in Soviet possession, and will enable Austria, if necessary, to resolve outstanding issues with the Soviets on a more equal basis.
b.
It is recommended that such an offer should not be made.
Austria is almost unarmed and will be left subject to guerrilla warfare or worse on the Yugoslav border; the Soviets will be left in possession of all of the German assets which they now hold; these considerations would almost necessarily lead to bilateral negotiations in which the Austrian Government could be subjected to intense pressure; finally, it would be extremely difficult for the U.S. to reject even an unsatisfactory bilateral settlement since our major argument is likely to be the failure of the agreement to provide adequate protection for United Nations property interests.

5. Special CFM Session on Austria

If no agreement is reached on Austria at this session of the Council, consideration should be given to a request for a special session on Austria alone, say in May 1948 (within six months).

This is not likely to be accepted by the Soviets, and may not even be welcomed by the French. But it has certain obvious advantages: (1) it underlines our deep interest in securing an Austrian treaty in much the same way that was done by our insistence that Austria be first on the Agenda; (2) it demonstrates that fact to Austrians and [Page 804] others; (3) it enables Austria to be somewhat more disassociated from Germany and treated on its merits as an independent problem.

6. Incidental Aids for Austria

Apart from a treaty certain incidental aids can be provided Austria which would be highly advantageous to her. The list of such aids can be extended but would certainly include reduction of the number of occupation troops, free interzonal trade (which is already guaranteed by Art. 4(a) of the Control Agreement for Austria10), and the turning over of border and censorship control to Austrians. The U.S. might well sponsor a resolution to appoint a Commission to determine and recommend to the CFM what steps can be taken on a Four Power basis to ease the burden of the occupation on Austria. Pending the results of such studies, however, the U.S. (perhaps with the UK and France) may be able to take partial action without waiting for Four Power agreement.

7. Recommendations

(a)
That we join in recommending a secret session on Austria during the course of which (1) the Soviets would be pressed once again to indicate an acceptable basis for settlement, and (2) we would indicate a willingness to renounce our interests in German assets in Western Austria providing that a satisfactory treaty can be agreed;
(b)
That the U.S. reject any proposals for troop withdrawal; for bilateral negotiations of the German assets question; or for unconditional renunciation of German assets in Western Austria;
(c)
That in the event no significant agreements are reached on Austria (1) we support a special session of the CFM dealing exclusively with Austria and (2) that we consider immediate modification of unnecessary occupation controls.
  1. For the report on the Council’s 9th Meeting, December 4, see telegram 6326, Delsec 1521, December 4, from London, p. 747.
  2. For additional documentation on the topic under reference, see pp. 1167 ff.
  3. Agreement between the United States, the United Kingdom, the Soviet Union, and France on the Machinery of Control in Austria, June 28, 1946, Department of State Bulletin, July 28, 1946, pp. 175–178.