863.515/12–447

Record of Trans-Atlantic Teletype Conference

top secret
telcon 8812.

Washington Conferees:

Col W C Baker CAD
Lt Col P A Feyereisen BUD (Main Conferee)
Maj T W Archer CAD
Mr P P Claxton State
Mr Jerome Jacobson State
Mr Wm Stibravy State

London Conferees:

Lt Gen Keyes
Lt Col Kretzman
Mr Ekern
Mr Martin SD
Mr Beam
Mr Saltzman

Subject: Currency Conversion in Austria.

(Following Washington-London items constitute material transmitted by Washington to Vienna and London in behalf of the two stations. Items are also contained in Washington-Vienna conference, TT 8811.53)

washington: da–1

Purpose of setting up this circuit is to provide classified communication with Vienna who says they cannot talk directly to London.54

washington: da–2

(USFA–6, Vienna, in reply to DA–6, part I of TT 881155).

[Page 1210]

Soviets are in the chair and arranged meeting at 1000Z. No postponement of meeting has been arranged.

DA–3

(USFA–1, Vienna)

List of conferees present at USFA:

B Gen T F Hickey USFA C/S
Hon J G Erhardt US Minister
Col C E Hixon Asst Dep Commissioner
Mr A W Marget Econ and Fin
Mrs E L Dulles Polad
Mr C W Yost State Dept
Mr C C McIver Polad

DA–4

(USFA–2, Vienna)

Mr Erhardt requests that Williamson and Beam participate.

london: ea–1. Re da–4

Williamson enroute and will call Beam immediately.

washington: da–5

(USFA–3, Vienna)

We wish to repeat item (USFA–6, TT 880356) sent to Washington last night:

Briefly here is the situation. Two things are involved—the currency law and a bilateral agreement between the Soviets and Austrians,57 to which both agree. We are committed to upholding the Austrian Government who desire passage of this law. The Soviet-Austrian agreement is theoretically none of our business. The only way that we can prevent this agreement going thru is to veto the law when it comes up at the Allied Council meeting at 1100 Vienna time tomorrow. The political implications of any veto by US would be to place the entire responsibility for interfering with the orderly process of government in Austria on the US element. We propose to approve the law at the AC meeting tomorrow. We also propose to tell the Austrian [Page 1211]Government that the agreement between them and the Soviets is their responsibility alone and the fact that we do not publicly oppose it is not to be construed in any way as approving it. If this law does not pass at the AC meeting tomorrow the Federal Chancellor has informed the US element that the law could not be put into effect until after Christmas resulting in most serious political and economic consequences. As we failed to be present at an AC meeting today which fact has no doubt already reached the world press both Soviet and Communist elements will easily be able to place complete responsibility on the US element for failure to support the present government and will place that government in a precarious position. Both British and French elements were present at proposed AC meeting this afternoon and were prepared to approve the law and urged the US element to appear and join them in approving the law. This bargain not palatable to US but the price is not too much to pay for Soviet cooperation and other constructive results expected. On the other hand failure of prompt passage this law might be disastrous and we would be held responsible.

washington: da–6

(USFA–4, Vienna)

As you know we have been trying to get Washington approval of currency conversion law. This morning at 0500Z we received the following instructions.

“The statement to be made in ACC [ ACA ?] should include the following points:

US Govt is extremely anxious to assist Austrian currency stabilization in every possible way. Its position in this regard has been made entirely clear from its previous statements that it could approve the law as submitted by Austrian Government on November 20.

However, the law as submitted indicated no side agreement between the Soviets and Austrian Government. This side agreement has been examined and it is noted that it results in changing the meaning and effect of the law and would provide for special treatment for the Soviets. US cannot approve the law with this change and it is therefore essential that this side agreement be withdrawn.”58

washington: da–7

(USFA–5, Vienna)

Personal from Erhardt to Keyes.

[Page 1212]

Emphasis on technical aspects in communications from Washington makes us fear that overriding political considerations are not being given full weight. Austrian Govt is publicly committed to this financial settlement with Soviets and disapproval at this late stage would cause most grave political and economic repercussions which would seriously shake position of government. Moreover, failure of US to state objection at earlier stage has been interpreted by Austrians as tacit approval. Full onus for breakdown of Austrian-Soviet agreement and possible resulting collapse of financial reform would be placed on US which would be accused of interfering with democratic conduct of affairs by Austrian Government.

This action of US would be exploited to full both politically and propagandawise by Communists who have from outset opposed currency law.

Although Soviets have in my opinion through exercise of pressure obtained more from Austrians than may be justified I am convinced that deal will in any case be carried out in one way or another after expiration of 31 day period only effect of US veto at this point would be to place on US full responsibility for grave economic and political confusion which will certainly result from delay in application of currency law. We would be placed in position of interfering with measure which [has] solid Trade Union support.

In view of these considerations I strongly recommend to the Secretary that we approve law at ACC meeting this morning, at same time stating clearly that our approval implies no indorsement whatsoever of Austrian-Soviet agreement.

london: ea–2

To USFA Vienna.

What was the amount of the estimated advantage to USFA of lump sum settlement in connection with pay as you go plan?

washington: da–8

(USFA–6, Vienna. Re EA 2, London)

Austrians estimate that the approximately 309 million schillings involved in lump sum settlement will at best barely cover claims against US outstanding prior to 1 July 1947. Since final settlement of these claims will take a very long period, it may well be that the cost to the Austrian Government will be considerably more than 309 million schillings.

london: ea–3

To USFA Vienna.

Unless you have other urgent matters anxious to get away in order [Page 1213]to discuss situation Bohlen and Marshall in order to telephone you Marshall’s decision before 11:00 Vienna time.59

london: ea–5

To USFA from Keyes:

Secretary approves position outlined by Erhardt in his earlier personal for Keyes.

If bi-lateral agreement arises in AC today you may comment along lines indicated in Erhardt’s personal to Keyes or reserve comment pending further study. Keyes is telephoning instructions.

london: ea–6

Secretary’s decision made after full consideration basis Washington action. Fuller statement of basis Secretary’s decision will follow in personal message to Lovett.60

  1. Record not printed.
  2. In TT–8811, December 3, the Vienna conferees explained their communication problem as follows: “… our communication with London by two means only, one by coded messages which are very slow or by telephone which is tapped by Soviets.” (863.515/12–347)
  3. In the section of TT–8811 under reference, the Washington conferees asked the Vienna conferees if it had been possible to arrange a postponement of the December 4 meeting of the Allied Council for Austria which was scheduled to make a decision regarding the approval of the Austrian Government’s currency conversion law of November 20.
  4. Dated December 3, 1947, not printed.
  5. On December 2, 1947, the Austrian Government and the Soviet occupation authorities concluded an agreement relating to the proposed Austrian currency conversion law. Under the terms of the agreement, the Soviet authorities would receive from the Austrian Government 490 million new Austrian schillings, would surrender to the Austrian Government 133 million old Austrian schillings, and would cancel an alleged 600 million schilling loan to the Austrian Government on which Soviet authorities had sought repayment since 1945.
  6. In TT 8811, the United States position on the currency conversion bill was explained as follows:

    “State and Army hold view that treatment exacted by Soviets under Soviet-Austrian agreement is extortionate and would have unfavorable repercussions in Congress in connection with request for Austrian relief funds and possibly Marshall Plan.” (863.515/12–347)

  7. Secretary of State Marshall headed the United States Delegation to the Fifth Session of the Council of Foreign Ministers, London, November 25–December 15, 1947; for documentation on this Council session, see ante, pp. 676 ff.
  8. For the message under reference, see telegram Martel 31, December 5, from London, infra.

    At its meeting on December 4, 1947, the Allied Council for Austria unanimously approved the Austrian currency conversion law. The United States representative stated that approval on his part of the law did not imply any endorsement whatsoever of the December 2 Austrian-Soviet bi-lateral currency agreement and he reserved the right to comment further on the agreement at another time.