740.0011 EW (Peace)/12–1647

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

Mr. Bevin’s last minute proposal14 that the Austrian matter be referred to the Deputies came as a complete surprise. In asking if there were any objections you and M. Bidault had no alternative, under the circumstances, but to agree.
When Bevin pressed Mr. Molotov, the latter obviously attempted to avoid such a reference, but finally suggested that two-thirds of the oil production and exploration area should be taken as a basis of agreement. Thus, Mr. Bevin gave Mr. Molotov the opportunity to appear to make a concession.
The two-thirds suggestion was not a concession. It represents the U.S. estimate of the total Soviet claim under their own definition of German Assets. It is even a step backward as it does not include the ten percent discount.
(a) The original French proposal suggested one-half of oil production. The U.S. Deputy objected to this as being too high. The Soviet two-thirds is the approximate equivalent of their total claims.
(b) The original French proposal also suggested one-third of the oil exploration area. The Soviet two-thirds is the approximate equivalent of their total claim.
As I see them there are these possible favorable developments in the exchange regarding Austria yesterday:
For the first time the Soviets stated their major demand.
That demand was framed in concrete terms. Thus, for the first time, the Soviets appeared to be abandoning their insistence on a definition, and accepting the idea of a concrete settlement.
By implication Molotov seemed to be willing to accept the other major elements of the French proposal. This, of course, must be checked.
My guess is that the Soviet Deputy to Koktomov, who doesn’t hold an important place in the hierarchy, will not be authorized to budge from the two-thirds oil demand. Our major efforts, therefore, will be concentrated on these two questions:
Will the Soviets accept the other elements of the French proposal? (Certain Danube shipping properties, plus $100 million in lieu of all other claims).
To what extent will oil transferred to the Soviets be subject to Austrian law? (This may emerge as the critical question; if Austrian law is fully applicable, the percentages although important, are not altogether controlling.)
One or two meetings should suffice for these purposes. Thereafter, in accordance with Bevin’s suggestion, I believe the matter can be dealt with, for the time being, through diplomatic channels.
  1. Bevin’s proposal was made at the 17th and final meeting of the Council, December 15; see telegram 6479, Delsec 1548, December 15, from London, p. 770.