Foreign Relations of the United States, 1949, Council of Foreign Ministers; Germany and Austria, Volume III

CFM Files: Lot M–88: Box 84: Reber File

Memorandum by the Deputies for Austria of the United Kingdom, United States, and France to Their Foreign Ministers ¹

top secret

Paris , May 30, 1949.

1. The last session of the Foreign Ministers’ Deputies for Austria was held in London from 9th February to 10th May,² 1949, when the Deputies suspended their talks in view of the negative attitude adopted by the Soviet Representative and in order to give the Ministers the opportunity to discuss the Austrian Treaty at their meeting in Paris. The Deputies agreed to resume their meetings not later than 25th June.

2. During their last session, the Deputies had completed two reviews of the eighteen outstanding Treaty Articles without, however, reaching full agreement on any one of them. The principal results of the meetings were (a) the withdrawal by the French Delegation of its proposal in Article 27 of the Treaty for certain restrictions on Austrian economic activities of military significance and (b) the declaration by the Western Delegations that no German assets should be made available as reparation from the Western Zones of Austria. A further development was the offer by the United States Delegation to agree to an increase in the lump sum payment by Austria to the Soviet Union, if, in turn, agreement could be reached on conditions of payment that would permit Austria to maintain its economic independence. Some progress has been made in regard to a solution of Article 26 (Disposal of War Materiel of Allied and German origin), Article 38 (Austrian Property in Germany and Denunciation of Claims by Austria on Germany) and Article 48 (Debts).

3. These discussions have shown that the deadlock arises from the failure of the United Kingdom, United States and French Delegations to obtain the agreement of the Soviet Delegation on three basic issues:—

(a) The frontiers of Austria as of January 1, 1938 (Article 5);

(b) No reparations (Article 34); and

(c) The German Assets Settlement (Article 35).

On the assumption that the Soviet Union is not opposed to the early conclusion of a Treaty, the solution of these three problems should allow a speedy settlement of the other unagreed articles which are of lesser importance. Further progress on the treaty depends upon consideration of these three problems in relation to each other.

4. The Western Delegations have now to decide whether they are prepared to enter into a bargain whereby they would agree to meet Soviet insistence on a lump sum settlement of $150 million in return for Soviet agreement to the Western attitude on frontiers, reparations and the complete Soviet withdrawal from Austrian industry not covered in the German Assets Settlement. This arrangement would include as an essential condition the relinquishment to Austria of all property held or claimed as German assets or war booty (except those oil assets and Danube Steamship Company properties transferred to the Soviet Union by other clauses of the Treaty and retained under Austrian jurisdiction) together with a general waiver of creditor claims arising out of the control of these properties after 8th May, 1945.

5. The present session of the Council of Foreign Ministers would appear to present a good opportunity for consideration of this bargain, which, if accepted by the Soviet Union, would enable the Deputies to continue their work usefully; but it should be considered as a whole, and no opportunity should be given to the Soviet Minister to separate the various points and accept only those which are favorable to him, It must therefore be kept to its simplest terms and involve only principles. Other points should be left to the Deputies for further negotiation. In the opinion of the Western Deputies, the compromise offer might have greater chance of success if made orally at a private meeting of the Four Ministers when discussion could be freer and the nature of the bargain more easily understood and if possible prior to their formal consideration of the Deputies report.

6. It is therefore recommended that, at the earliest favorable opportunity, one of the three Western Ministers should propose agreement to the payment by Austria of a lump sum obligation of $150 million in six years, on condition that the Soviet Minister accepts Articles 5 (Austria’s 1938 Frontiers) and 34 (No Reparations) and agrees to the relinquishment of Soviet claims to German assets (other than to oil and Danube Steamship Company properties transferred to the Soviet Union by other specific clauses of the Treaty) and of creditor claims, as set out in paragraph 4 above. If this proposal is accepted, the matter should immediately be referred back to the Deputies for settlement of the details. It could also then be suggested that the Deputies be instructed to complete their preparation of the Austrian Treaty text by a definite date, perhaps by 1st September, 1949.

7. If the foregoing offer is presented, an attempt should be made to avoid discussion of other issues by the Ministers. It would, however, be desirable to eliminate any question of the establishment of a special “autonomous area” in Carinthia. If necessary, special arrangements of a cultural and economic nature in favor of the Slovene-speaking population of the entire province of Carinthia could be substituted therefor.

8. As soon as the Deputies resume their meetings, they should discuss the means of payment of the lump sum. The United Kingdom, United States and French Deputies should endeavor to obtain agreement on the transfer to the Soviet Union of Austrian assets in Bulgaria, Hungary and Roumania as a partial payment of the $150 million. If agreement on this point is impossible, the Western Deputies might agree that the obligation should be discharged entirely by other means.

9. In dealing with oil properties in connection with the offer, the Western Deputies could agree (a) to the transfer of rights to specific oil production areas in Eastern Austria which would produce the equivalent of 60 per cent of the 1947 oil production (rather than their present offer of 58–60 per cent subject to determination of the actual properties involved) and (b) to rights to 55 per cent (rather than 47 per cent) of the oil prospecting areas in Eastern Austria, subject to determination of the actual properties involved and to a possible increase within the maximum of 60 per cent.

10. In dealing with Danube shipping, the Western Deputies could likewise agree to the transfer to the Soviet Union of a certain number of ships located in the Western Zones of Austria.

11. In return for Soviet agreement that the Treaty should contain no provision for the payment of reparations by Austria, the Western Deputies should be prepared to accept the following:

(a) Transfer to Yugoslavia of Austrian property, rights and interests within Yugoslav territory;

(b) Special arrangements relating to the water supply of the River Drau and to electric power furnished by the stations at Schwabegg and Lavamund;

(c) The inauguration of bilateral negotiations between Austria and Yugoslavia for the purpose of increasing trade between the two countries.

1. Attached to the source text was a memorandum of transmission from the United States Deputy, Reber, to Secretary Acheson, not printed, which explained that the source text was the outcome of meetings among the Western Deputies since May 22 and represented the Deputies’ joint proposals for the settlement of the outstanding issues of the Austrian Treaty.
2. For documentation relating to this session of the meetings of the Deputies for Austria, see pp. 1066 ff.