740.0011EW(Peace)/2–748: Telegram
The Minister in Austria (Erhardt) to the Secretary of State
155. Following is summary of paper by Gruber outlining Austrian judgment of Soviet treaty proposals:
Paper opens with argument that Soviets, because of failure of their policy in Austria and because of unfavorable developments in Europe generally during past year, are now genuinely desirous of concluding treaty if offered economic bargain they consider satisfactory.
Paper then discusses whether there would be danger to Austria, from either security or economic point of view, in concluding treaty now. Paper denies security danger on following grounds: (1) Com [Page 1461] munists now removed from Austrian administration, (2) peasantry satisfied by sound distribution of land, (3) peasants and workers represented by two principal parties working closely together, (4) Austria has large military reserve of trained manpower, (5) US army will remain in Bavaria, (6) Austrian federal structure safeguards security even in unlikely case of “putsch” in Vienna, (7) closer union of west European states indirectly strengthens Austrian security.
On economic side paper maintains: (1) Austrian economy has sound basis and can be restored if foreign aid continues two to four years, (2) Austrian economy now not dependent upon Danube basin because of lack of wheat in Danube countries and lack of surplus goods in Austria. No dependence of Austria on east will exist during ERP period and even later will not be sufficient to threaten Austrian independence, (3) program of European customs union creates new possibilities for Austria, (4) military evacuation following treaty will stimulate Austrian economy and facilitate closer union with west.
As to international repercussions, Gruber argues conclusion of Austrian treaty would be first important success of “Marshall policy” and would stimulate collaboration of west European states. Also effect on Czechoslovaks of evacuation of Austria might be decisive.
Paper cites favorable features of Russian proposals as follows: (1) Soviets prepared to abandon Austrian economy as political weapon in exchange for economic compensation. (2) Russian claims not reparations but repurchase by Austrians of important industrial units. Austrians get with exception of oil, full sovereignty over their economy. (3) This involves considerable step in advance even over original US proposals which recognized Soviet right to considerable number of industries in Austria. Furthermore value of German assets in east Austria before 1938 does not differ substantially from medium [median?] sum between French plan and Russian proposals.
Gruber urges following modifications of Soviet proposals be sought in negotiations: (1) essential oil needs of Austrian domestic market be safeguarded by either (a) altering proposed percentage turned over to Soviets, (b) enabling Austrians to limit exports, or (c) “by such juridical formulation as to secure Austrian requirements”.
(2) As to lump sum settlement, figure must be lowered, period of payment must be prolonged, all credits granted by Russian state bank to USIA (Administration Soviet Enterprises in Austria) industries must be covered by settlement. (3) As to means of payment Gruber suggests: (a) payment in goods over ten to fifteen years; (b) payment in cash by loan from west which would be repaid over ten to fifteen years from production of former USIA industries; (c) raising of lump sum through emergency contributions from Austrian population and commercial credits from various sources secured by mortgages [Page 1462] on Austrian industries; (d) turning over to Soviets Austrian properties in eastern European countries (value about one hundred million, dollars); (e) combination of above possibilities.
In annex to Gruber paper appears table of rough estimates as to extent production of USIA industries could be raised after Soviet withdrawal and used as basis either for payment in kind to Soviets or repayment of loans from west. Estimate concludes that 1947 USIA production valued about $61 million could under Austrian administration be in short time increased to about 109 million of which about 35 million could be exported annually.