740.0011EW(Peace)/1–2848: Telegram

The Minister in Austria ( Erhardt ) to the Secretary of State

secret

93. Legtel 84, January 26.1 Legation submits following comments in regard to Soviet treaty proposals.

[Page 1452]

Proposals do not clearly reveal whether Soviets (1) have fundamentally altered their policy regarding Austrian treaty and now wish to reach early settlement or (2) merely wish to prolong negotiations and shift onus to US for failure to reach settlement, though we feel balance of present evidence lies slightly on the side of (1).

Following signs point to (1) Adoption of horse trading approach rather than that of defining German assets should accelerate negotiations; most of Soviet proposals are for first time precise, and therefore helpful for real exchange of views; carrying out of provisions along these general lines, if once agreed to, should be relatively simple; and above all abrupt relinquishment of all share in Austrian industry except oil and shipping is important substantive concession. Reality of concession made is indicated by fact Ginsburg estimated admissible German assets eastern Austria had aggregate value around $700,000,000 as compared with value of oil and DDSG assets now demanded amounting to possibly $200,000,000 and a $200,000,000 lump sum payment, totaling in all $400,000,000.

Principal sign pointing to (2) is that payment of $200,000,000 obviously impossible without US assistance, and it is realized here US Congress will be reluctant to appropriate large sum for payment to USSR, especially in view dispute over reparations out of current production in Germany. However if Soviets intended to have agreement on Austrian treaty breakdown because of US unwillingness to advance dollar payment, they should have asked higher price than $200,000,000 since, according to certain allied diplomats here, Soviets run substantial risk that US Congress may be willing to advance $150,000,000 to $200,000,000 to push back Soviet sphere of influence or that other solutions will be devised.

It is conspicuous Soviets have held to former positions on acquiring assets free of outstanding debts, freedom to export profits or output of enterprises acquired, on bilateral settlement of disputes, and on safeguards against nationalization. However these points are of secondary importance in a proposal of this limited type, and assuming some concessions or limitations obtained in negotiation, e.g., ceiling on export of profits or output, they would in themselves create no danger of crippling or undermining Austrian economy or jeopardizing political sovereignty.

Department will note that by these proposals Soviets recover tactical advantage in part. Even if these purely economic proposals should be agreed upon, treaty could still be blocked on questions of Yugoslav border, demilitarization, denazification or other matters.

Clear here that $200,000,000 demand crucial issue, since agreement will depend on Soviets’ willingness to negotiate on amount and specific terms and on US willingness to seek workable solution. Austrian and world opinion it is said here will judge Soviet and US aims by their [Page 1453] attitudes on this point. Various devices for reaching agreement suggest themselves, e.g., whittling down figure, extending two year period, payment in goods, payment through processing of materials furnished, financing of payment by US loans payable through delivery of needed goods to ERP countries, financing of payment by commercial loans possibly secured by pledge of unclaimed German assets in eastern or western Austria. Such arrangements as these, and others to be developed later, all taken together, should make it possible arrive at agreement if both major parties are fundamentally willing. Attention is called to fact that termination of military occupation and release of many so-called German assets now under Soviet seizure would undoubtedly permit substantial increase in total production and exports of Austrian economy, possibly equaling or exceeding dollar payments.

In any event all Austrians, including Renner, Gruber, Sehaerf and other political leaders, take position Soviet offer should be taken seriously and maximum effort made to reach reasonable settlement.

Sent Department 93, repeated London for USDel 6.

Erhardt
  1. Ante, p. 1449.