Foreign Relations of the United States, 1948, Germany and Austria, Volume II

740.0011EW(Peace)/2–648

Memorandum by the Director of the Office of European Affairs (Hickerson) to the Secretary of State

secret

Washington, February 6, 1948.

Problem:

To determine US policy in the discussions of the Deputies for the Austrian Treaty to begin in London on February 20.

Background:

The Austrian treaty has previously been discussed at meetings of the CFM in London and Moscow and at the Treaty Commission in Vienna.¹ The forthcoming meeting in London will discuss the question of German assets in Eastern Austria which were assigned to the Soviet Union by the Potsdam Agreement. These discussions will be based on the French and Soviet proposals which provide a framework for settlement of this question by assigning to the Soviets certain ownership interests in the oil industry and Danube shipping, and provide for a lump-sum payment by the Austrian Government to the Soviets in satisfaction of all remaining Soviet claims to German assets. The Soviet proposals claim approximately double the properties and payments originally envisaged under the French proposals and exceed the figures agreed informally by representatives of the United States, the United Kingdom, and France as the limit to which the Western States might go in meeting Soviet demands based on the Potsdam Agreement. The figures in the Soviet proposals, however, are less than the claims made in the Austrian Treaty Commission which met in Vienna in 1947, and, if accepted, would involve a Soviet renunciation of claims to and present control of many economic enterprises in Austria in return for a lump-sum settlement.

A tabular comparison of the French and Soviet proposals represents what the Soviet Union would receive in final settlement of their claims under Potsdam:

FRENCH	SOVIET
Oil Extraction: Concessions corresponding to 50% of current production.	Concessions corresponding to ⅔rds of current production.
Oil Prospecting: Concessions for rights to ⅓rd present producing areas in Eastern Austria.	Concessions for rights to ⅔rds of undeveloped areas in Eastern Austria.
Oil Refining: Capacity for annual production of 250,000–300,000 tons.	Capacity for 450,000 tons annual production.
Distribution: Facilities now under Soviet control.	Facilities now under Soviet control.
Danube Shipping: All DDSG assets in Hungary, Rumania, and Bulgaria.	All DDSG assets in Hungary, Rumania, and Bulgaria, and 25% share of DDSG assets in Austria.
Lump-Sum Payment: $100 million, spreading over 10 years, starting at such time when Austria’s minimum needs have been met.	$200 million in convertible currency payable within 2 years.

Recommendations:

In the forthcoming negotiations it is recommended that the US Deputy be guided by the following basic policy:

1. To adopt the basis and method of the French proposals as the basis for a settlement with the Soviets on the German assets question.

2. To maintain that the figures contained in the French proposal are the maximum which are consistent with the aim of restoring and maintaining Austria’s independence, but to negotiate the differences between the French and Soviet proposals if it appears that a final settlement can be reached by a modification of the figures in the French proposal.

3. If an increase is necessary in the figures of the French proposal, to assure that the Soviets are not given a monopolistic control over any Austrian natural resources, that Austrian domestic needs are not unduly restricted, and that the supremacy of Austrian law and the rights of non-discrimination are guaranteed.

4. That no obligation be assumed by the Austrian economy in meeting a lump-sum payment to the Soviets which is beyond Austria’s capacity to finance successfully without substantial financial aid by any other signatory to the treaty. Provisions should be made to enable the Austrians to have sufficient time before assuming payments to meet their minimum financial requirements, and to have the option of paying either in currency or in goods.²

5. Any agreement on the German assets question should be made contingent on agreement on all other unresolved issues in the Austrian treaty so that it would be an integral part of the final settlement of the Austrian treaty as a whole.

6. To be prepared, in conjunction with the British and French, to renounce the right of the United States under the Potsdam Agreement to claim its share of the German assets in Western Austria in order to strengthen the bargaining position of the Western States.³

1. The Council of Foreign Ministers met in Moscow March 10–April 24, 1947, and in London November 25–December 15, 1947; the Austrian Treaty Commission met in Vienna May 12–October 11, 1947. For documentation on these meetings see Foreign Relations, 1947, vol. ii, pp. 139 ff., 676 ff., and 577 ff.
2. Marginal note beside paragraph four: “This should not be used as a device to funnel U.S. aid through Austria to Soviets. L[ovett]”
3. Added at the end of this memorandum was: “OK as amended by Mr. Lovett. G. C. M[arshall].”