840.50 Recovery/4–2848: Telegram
The High Commissioner in Austria (Keyes) to the Secretary of State
P–1680. Reference neutralization plan recommended in strategic survey of Austria (economic), October 1947,1 and our cable P–1477, 29 March 1948.1
In restudying this subject account has been taken of important changes and developments since October, especially progress of ERP planning and authorization by Congress. Original idea of offensive economic warfare against Soviet enterprises in Austria through allocations, licensing et cetera is not considered appropriate now. Instead we now contemplate a flexible defensive plan (called “strategic control plan”) designed to minimize Soviet capabilities for exerting economic pressure on Austria and jeopardizing recovery program in Austria.
In view of numerical and political weakness of local Communist Party, Austria is, in some respects, in better position than other important European countries to withstand Soviet pressure. At the same time Austrian position, has one vulnerable spot in that commodities essential for country’s economic rehabilitation include certain critical items, primarily oil, which are currently obtained in whole or in part from enterprises in Austria under Soviet control. All ERP and ECA estimates assume continued availability of commodities substantially at present levels. In view of established intention of Soviets to sabotage European Recovery Program if possible, and in view of the strategic importance of Austria in blocking further Soviet expansion, it is strongly apparent that in Austria means must be at hand to guarantee continued availability of these critical commodities. This applies to oil whether agreement is reached on treaty or not, and to other commodities until Soviets have surrendered control of industrial plants and withdrawn troops.
It is recommended therefore that ECA Administrator be requested to establish emergency 90 day reserves of these critical items as soon as possible and to hold them in readiness in or near Austria for immediate use in case of actual or threatened Soviet failure to continue deliveries from sources under their control in Austria. (Reserves need not necessarily be static or physically stockpiled if administrator can assure availability of emergency supply starting within 10 days, by [Page 1394] diversions, by purchase for dollars in nearby areas, or by use of stocks in other participating areas whenever necessary.) It is further recommended that in case reserves are drawn upon administrator be prepared to take immediate steps to assure continued deliveries after 90 day period. Obviously impossible to estimate duration of Soviet failure to deliver.
Funds required for 90 day reserves are tentatively estimated at $5,400,000 on following basis. Total Austrian requirements from foreign and Soviet controlled indigenous sources for commodities in question are estimated at $9,600,000 per quarter. Of this total, imports would provide for $4,200,000 (on basis of portion of Austrian comments of 19 March reference country study, fully supported by USFA and Legation, in which minimum import requirements for these commodities were placed at $16,700,000 for 12 months period), while balance of $5,400,000 is assumed as continuing to be available from Soviet controlled sources in Austria. Breakdown of $5,400,000, which we recommend as initial requirements, is as follows: Oil $4,000,000, chemicals $400,000, ferrous scrap $400,000, machinery equipment and spare parts $200,000 sheet steel $100,000, other items $300,000, total $5,400,000.
It is emphasized that above amounts recommended for these 90 day reserves are over and above any allocations for regular ECA country program for Austria.
In order to preclude Austrian requests for releases of commodities or funds from these strategic reserves to meet shortages arising from ordinary causes, Austrian officials would not be consulted or informed about plan until decision had been taken to draw upon reserves and then only to extent necessary.
Decision to use reserves would have to be left to discretion of responsible US official here, in order to permit necessary flexibility and realization of maximum economic and political benefits from plan.
Full statement of plan and more detailed estimates follow by courier shortly.
Since Soviets may exercise their capabilities for sabotage of ECA program at any time after actual commencement of program, it is essential to have commodities procured and stockpiled at earliest possible moment. Consequently, I recommend urgent discussion of this proposal with ECA Administrator, and immediate approval and implementation.
PolAd concurs and is sending parallel message to State.