740.0011EW(Peace)/1–2648: Telegram
The Minister in Austria (Erhardt) to the Secretary of State
84. Sober reflection may change the picture but first reaction to Soviet Treaty proposals among Austrian officials is one almost of jubilation. Two points which encourage them are (1) Soviet proposals indicate desire to bargain and not to slam door on negotiations; (2) Soviets are willing to give up claims to all Austrian industry except oil and shipping.
[Page 1450]Gruber expresses chief concern about oil settlement particularly: (1) whether Austria will continue to be dependent on Soviets for domestic needs and (2) implications of 50 year exploration rights. These aspects are being given careful study by Austria this week.
Two hundred million dollar payment does not appear to trouble Austrians unduly, though they hope it may be possible to bargain Soviets down to 150. Gruber takes position that it is politically preferable to pay in dollars rather than in goods, for latter might serve to knit Austria economically into Eastern block, whereas, former will oblige Austria to export chiefly to west in order to repay whatever loans she might receive to assist her in meeting Soviet claim. Gruber recognizes that dollars would have to be provided by Western countries, chiefly by US and that it might be impossible to obtain US Government funds for this purpose. He hopes, however, that if US Government should on over-all political grounds give its blessing to cash settlement, it might be possible to raise money on commercial markets with certain Austrian industries mortgaged as security.
Gruber urges that US press forward with London negotiations as rapidly as possible in order that Soviet intentions can be promptly determined and period of uncertainty, disadvantages of which to morale of Austrian Government have been emphasized in several of Legations’ recent telegrams, brought to an end. On other hand, Gruber recognizes that if Soviets do prove ready to make acceptable settlement, it may prove necessary for over-all political reasons to delay conclusion or at least implementation of settlement until ERP has gone into effect.
Austrian reactions to Soviet proposals are obviously still somewhat half-baked. Significant points, however, are following: (1) that Austrians are pleased and optimistic; (2) that they feel US interest in freeing Austria from Soviet influence and attaching it to western orbit is sufficiently strong so that some way will be found to provide necessary dollars; (3) that disappointment and disillusionment would therefore be very great, with corresponding political repercussions, if settlement should fall through due to US refusal to make or facilitate necessary financial arrangements.
Legation comments on Soviet proposals and Austria’s attitude will follow shortly.