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

CFM Files: Lot M–88: Box 142: United States Delegation Minutes

United States Delegation Minutes of the 21st (6th Restricted) Meeting of the Council of Foreign Ministers, Paris, June 16, 1949, 3:30 p.m.

Paris, June 16, 1949, 3:30 p.m.

secret

Present

United States

• Mr. Acheson, Chairman
• Mr. Jessup
• Mr. Dulles
• Mr. Bohlen

France

• M. Schuman
• M. Parodi
• M. Couve de Murville

U.S.S.R.

• Mr. Vyshinsky
• Mr. Smirnov
• Mr. Pastoyev
• Mr. Zarubin

United Kingdom

• Mr. Bevin
• Sir I. Kirkpatrick
• Lord Henderson
• Mr. Dean

Austria

Mr. Vyshinsky said he had not yet received his instructions concerning the German paper sent him on June 15 by Mr. Schuman (Annex l¹) but would give them a reply on Austria. He said that his colleagues would remember that the Soviet Delegation had objected to the inclusion of war booty in the original paper on Austria from Mr. Schuman;² that he was now prepared to meet the views of the Western powers by excluding from War booty transport, military, industrial equipment, barracks, etc. He said the Soviet Delegation would not insist on excluding such property from that covered by the $150,000,000. The Soviet Delegation was prepared to accept the Western point of view in regard to the waiver of creditor claims but thought that this should be made more complete by specifying that all manner of claims and taxes on property transferred to the Soviet Union and likewise to Austria would be waived. He said it was a reciprocal waiver and should apply to any claims on such property since May 8, 1945 and up to the time of its factual transfer. He emphasized he included taxes in this category. He further stated as indicated in the memorandum which he was now circulating (Annex 2³) that there should be in the treaty guarantees for the rights of Slovene and Croat minorities in Austria.

Mr. Bevin inquired whether it would not be sufficient to state that Austria would be required to protect the rights of these minorities since he felt that it would be very complicated for the Council of Foreign Ministers to try and write a minority statute into the treaty.

Mr. Vyshinsky agreed that that would be sufficient.

Mr. Acheson said he understood that the oil properties which would be under Soviet concession under 1(a) and 1(b) of the Soviet proposal of January 24, 1948⁴ would be specifically listed in the treaty and that the Deputies would specify the exact extent and location of the properties.

Mr. Vyshinsky confirmed this understanding and said it was so provided in the January 24 paper.

Mr. Acheson said there was the question of the Danube shipping. The Soviet proposal was that 100 percent of the assets of this company would include certain docks and facilities in Vienna itself. He said that they would like to propose that while the Soviet Government would get 100 percent of these assets that there be substituted for these docks in Vienna other property such as ships from the Western part of Austria to make up the 100 percent of the value of the company’s assets in Eastern Austria.

Mr. Vyshinsky said that 100 percent was 100 percent and that he could not accept the present possibility of substituting other property for the wharves and repair facilities in Vienna and that he would have to consult with his experts and get instructions.

Mr. Acheson said that this was not a new point since it had been discussed by the Deputies, but he was not sure that Mr. Vyshinsky understood that there was not a question of reduction in value but a substitution.

Mr. Vyshinsky said he understood but that there was difficulty in operating a steamship company without repair facilities. He said from the Soviet point of view it would be better to settle the matter right now particularly in view of the concessions they had made on other points.

Mr. Bevin said he wanted to be sure that the Deputies would in effect list very specifically all the oil properties in order to avoid any further misunderstanding.

Mr. Vyshinsky again confirmed this point reading from the Soviet proposal of January 24 which provided that such properties be marked on a map.

(There was an hour’s intermission and the Ministers reassembled at 5:45.)

Mr. Acheson said they had redrafted their paper of June 15 (Annex 3⁵) inserting the amendments proposed by Mr. Vyshinsky in his memorandum⁶ in the light of their earlier conversation today. He said they had only included those parts of the memorandum which were put forth as amendments to the June 15 document, but that if Mr. Vyshinsky preferred they could also include the explanatory observations. He said there were two additions, the proposal for dealing with the properties of the Danube shipping company and the other concerning the specific listing of properties.

Mr. Vyshinsky said he felt they should settle the matter of the shipping company upon the basis of the Soviet proposal. He said a port lost its value if there were no repair facilities and that the question was more than just the value in money. He repeated he would have to consult his experts and that if the other Ministers insisted on referring the matter to the Deputies as proposed he would have to get instructions from Moscow which he could not receive before Saturday. He said he wished to deal with the question of Austrian jurisdiction over the properties transferred to the Soviet Union. It was true that they would be under Austrian jurisdiction but with the reservations contained in the Soviet paper of January 24, 1948; namely, that Austria could not eliminate this property without Soviet consent nor place obstacles on the export of profits in freely convertible currency or in production. He said also there was the question of the settlement of any disputes which might arise in connection with these properties and that they felt that should be settled through bilateral negotiation with the Soviet Union. He said that what they had in mind of course was to protect this property against possible nationalization by Austria as a means of depriving the Soviet Union of these assets.

Mr. Acheson suggested the Deputies consider this problem und that we had proposed a ten year period during which Austria could not nationalize any of these properties. He said it was a complicated question and he personally was not familiar enough with it to settle it here.

Mr. Vyshinsky stated that the Deputies had tried and failed, that the Soviet Government could not accept the situation whereby the Austrian Government could take from them this property. He emphasized that his Government insists on this point and he felt that it should be dealt with by the Ministers. The property would be under Austrian law subject to the reservations he had mentioned in order to protect Soviet interests. He said that he had thought that in relinquishing support of the Yugoslav claims and in accepting the $150,000,000 with a waiver of outstanding claims on such property that the Soviet Government would receive satisfaction on the eight points of the January 24 proposal. He said the question of jurisdiction was a serious legal matter. All three Western Deputies had agreed in principle that there should be some reservations but then this had arisen in regard to the time period. He said that it was impossible to accept the ten year period since in regard to the concessions for exploitation and exploration they ran for 30 and 33 years. He said property rights are property rights and that possibly when paradise came to earth these could be eliminated but that it was impossible in a treaty to forecast when paradise would come to earth. He said that if Austria was in a position to expropriate these properties the agreement concerning their transfer to the Soviet Union would be meaningless. He could not agree to the elimination of the reservation concerning profits and convertibility; otherwise these Soviet properties would be working for somebody else. He said the Soviet Government could not accept any such situation.

Mr. Bevin inquired whether Mr. Vyshinsky meant that these profits [properties?] could not be nationalized for the period of the concession.

Mr. Vyshinsky said not without Soviet consent, but that when the concessions ended all Soviet rights lapsed.

Mr. Bevin pointed out that certain properties such as the shipping company did not have any time period but appeared to be in perpetuity.

Mr. Vyshinsky said that this was correct. That in regard to the concessions the Soviet rights would lapse when the concession ended but that in regard to the shipping company there was no time limit, Mr. Vyshinsky said that he could not accept Mr. Acheson’s proposal to send this question to the Deputies since he felt that this was a very important question and not similar to the question of the definition of war booty.

Mr. Acheson said he thought that the same principle applied to all property, that there should be a definite time limit set.

Mr. Bevin inquired whether Mr. Vyshinsky seriously expected them to agree that any country would oblige itself not to nationalize forever an industry such as shipping. He said the question of the oil properties was clear, that there was no time limit on the properties of the shipping company.

Mr. Vyshinsky asked whether Mr. Bevin seriously thought that the Soviet Union could agree to receive the shipping assets today and have them taken away tomorrow without their consent. He said words like “socialization” and “nationalization” had no meaning in this connection. They could not accept the situation in which what they received would be taken away from them. He repeated that in regard to the concessions, when they expired all rights would lapse, but in regard to the shipping properties and the refineries there was no time limit. He added that they had built their agreement on the basis of accepting the Soviet positions on the German assets in return for the abandonment of the Yugoslav claims and $150,000,000. It made no difference in his opinion whether the property was a ship or a factory, that to speak without diplomatic subterfuge they could not accept the right of Austria to take this property away from them.

Mr. Schuman remarked that these were German assets and that in effect the Soviet Government was succeeding to the position of the German owner and they, therefore, could not get more rights than the previous owner had. To do so he felt would prejudice Austrian sovereignty. He agreed that there should be no discrimination against these properties but did not feel that Austria should be required to take on greater obligations or restrictions on their sovereignty than had been the case with the previous owner. He said that under the Soviet proposition it would in effect be a disguised form of reparations from Austria.

Mr. Acheson said he thought there was a fundamental misunderstanding here. He gathered that Mr. Vyshinsky had felt in accepting Mr. Schuman’s memorandum of last Sunday⁷ that we would accept all eight points in the Soviet proposal of January 24, 1948. He said as a matter of fact that as he understood the situation that by their agreement here they had settled 1(a) and 1(b) of these points; 2, 3, and 4 were agreed by the Deputies; 5 and 6 had likewise been settled here; but 7 and 8 were still open and he felt should go to the Deputies. They were not asking Mr. Vyshinsky to abandon his position on 7 and 8 anymore than they were abandoning theirs and they could go to the Deputies without prejudice to any position. He said he felt the Deputies could agree upon a reasonable period during which the Austrian Government could not nationalize these properties and could work out the principle of compensation for any such action after that period. He said he was merely mentioning one of the possibilities that the Deputies could work on. He said the question was whether they could record here the large measure of agreement they had reached or whether because of the failure to reach an even larger accord they should have no agreement at all.

Mr. Vyshinsky said he could not accept Mr. Schuman’s statement that they were successors of the German Government. It was impossible to confuse the Soviet and Hitler Governments, that he must object in principle even to the formulation of the question. Soviet relations with Austria stem from the war and Austrian participation therein. The Moscow Declaration of 1943 made it plain that Austria must bear responsibility for her actions. Austrian troops had fought in the Soviet Union, and on the subject of German assets there was a new legal relationship between the Soviet Union and Austria arising out of this fact of responsibility. It was, therefore, impossible to state that the Soviet Government did not have greater rights in this respect than the German Government. He must reject entirely Mr. Schuman’s thesis on this point. He said the Soviet Government was prepared to deal on an equal basis with Austria but with certain reservations concerning these properties. He said that this was not reparations and could not be compared with reparations. These properties would be under Austrian law. The Soviet Government could not be dependent upon the control of the Austrian Government. He said that Mr. Acheson had spoken of a misunderstanding concerning the agreement of all eight items. He had understood Mr. Schuman’s proposal too involved a settlement of Article 35 on German assets to give satisfaction to the Soviet demands. He said, however, that this was not the point if they could agree on the substance. Mr. Acheson was right in saying that it was necessary to reach agreement on fundamental questions and that the Soviet Union’s point 7 was fundamental and most important. If that point was not agreed they would be at the mercy of the Austrian Government, and that they could not accept. He repeated they could not refer so fundamental a question to the Deputies particularly when the Western Deputies wished to limit their rights. He said that without a settlement on this point it would be difficult to go forward in this matter.

Mr. Bevin said he thought there were two points; one on the Danube shipping which involved the question of transit docks in Vienna and the other on the question of Austrian jurisdiction. He said he thought they might pass over this question and think it over overnight.

Mr. Vyshinsky said he could not agree to its going to the Deputies, but he thought it was wise to think it over overnight.

Mr. Bevin said that all they asked was to refer it to the Deputies without prejudice.

Mr. Vyshinsky said he could not agree to send this question to the Deputies. On shipping he would have to await the report of his experts concerning the docks. Point 7 he emphasized is a fundamental question and he must state that if there is no agreement on this point then there is no agreement on any of the questions they have discussed—frontiers, Yugoslav reparations, the $150,000,000. He could not agree to drop point 7 as that would render the other agreements valueless. He would not even suggest such a thing to his Government. He said he felt the discussion on what might at first glance appear to be a purely legal question had shown that it had large political implications involving sovereignty etc. Mr. Vyshinsky said he thought they were all Allies who had fought against the common enemy but here it appeared that there were three Allies and that he was somehow in the capacity of a representative of the German Government.

Mr. Schuman said that Mr. Vyshinsky’s argument was without foundation. He merely made the juridical point in regard to ownership and there was no question, of course, of any suggestion that the Soviet Government was the successor to the German Nazi Government. He was merely interested in the fact that they were being asked to impose a heavy burden upon Austria.

Mr. Acheson emphasized that they were not asking Mr. Vyshinsky to give up his position nor were they in advance refusing his proposition, but it was merely that the matter required further study by the Deputies. He asked if he was right in understanding Mr. Vyshinsky to say that unless we agreed here to his position on point 7 and on shipping there was no agreement whatsoever.

Mr. Vyshinsky read from his record of what he had said on June 14 in which he had stated his understanding that in return for the frontiers, reparations, and the $150,000,000 all Soviet claims concerning German assets would be satisfied. He said of course he understood that all this was conditional since nothing had been finally agreed on. He felt that the questions under 7 and 8 were serious and that if they insisted that they go to the Deputies he would have to consult his Government.

Mr. Schuman remembered that they had given a large measure of satisfaction to the Soviet claims but that on 7 and 8 they needed the new draft and the experts might find a formula. He said he understood the Soviet Government could not be put into a position where they could be evicted from these properties by unilateral Austrian action but he said that they must also find an action that would not infringe on Austrian sovereignty.

Mr. Bevin said that Mr. Vyshinsky’s remarks looked rather like an ultimatum since they were to accept all eight points or face a breakdown.

Mr. Vyshinsky remarked that there was no ultimatum and pointed to Soviet concessions as well as Western concessions to indicate that they were proceeding through mutual concessions and not through an ultimatum.⁸

Germany

Mr. Acheson then asked Mr. Vyshinsky if he had instructions yet on the German question.

Mr. Vyshinsky said he had and he could briefly outline them and would give them in writing later in the evening (Annex 4⁹). He said there was one small difference and one important one. The Soviet Government was prepared to accept the present language of paragraph 5 but requested the inclusion of a reference to transit traffic. He said the important difference was that the Soviet Government had suggested the elimination of 3(a) (ii) since they could not seem to agree on language for this paragraph.

(The meeting then adjourned to reassemble at 11:00 P. M.)

Procedure

Mr. Acheson said he had a suggestion concerning the procedure for the rest of this session as follows: (1) The Soviet Delegation would if possible let them have by noon on Sunday their observations on the Austrian treaty; (2) The Ministers would meet four hours after they had received these observations in closed session; (3) The final plenary session of the conference would take place on Monday, preferably in the morning. This procedure was accepted by the other Ministers.

Germany

Mr. Acheson then turned to the German question and said he would like to know exactly why the Soviet Delegation proposed to delete from the paper Point 3(a) (ii), dealing with balance of trade. He said it seemed to us that unless the question extending credit was involved, which no one had proposed, it was obvious from a practical point of view that a balance in trade would have to be achieved. He emphasized that he was dealing with the practical aspect of the matter and not one of prestige but that it was clear that in any expansion of trade as envisaged in 3(a) (i) that the balance would have to be achieved between the two areas in Germany in which different currencies circulated.

Mr. Vyshinsky said that Berlin cannot be separated geographically or economically from the Soviet Zone in which it was located. He understood that the three Western Ministers did not wish to emphasize this point and they [he?] appreciated that point of view. It was apparent, however, that no language could be found which would adequately express on this point what they had in mind. The new Western formula said in different words the same thing as the previous one. He thought therefore it was better to leave this question to practical solution through a trade arrangement or other practical measures.

Mr. Acheson then inquired if the Soviet Delegation thought it was possible to retain 3(a) (i) if 3(a) (ii) was deleted since the agreement would then call for an increase of trade without indicating one of its fundamental bases, namely, that it should be balanced.

Mr. Vyshinsky said he saw no difficulty on that point and suggested retaining 3(a) (i). There are of course two problems but he felt that the second could be dealt with in a trade agreement.

Mr. Acheson said he thought that they would like to think over the-question of the deletion of 3(a) (ii).

Mr. Vyshinsky agreed and said he understood that they would think over this German question and discuss it further on Monday.

Mr. Vyshinsky had one more question which he could either bring up now or on Sunday.

Mr. Acheson said it would be helpful to know what the question was so they could think it over in the interval.

Mr. Vyshinsky said he had no concrete proposals to make at the moment on the subject he wanted to raise but that he wished to draw the attention of his colleagues to the matter of the functions of the Berlin Kommandatura. It was for this reason that he had been anxious to return to Point 1 when the matter was raised in the open session. It seemed to him that their differences concerning the principle of unanimity were connected with the functions of the Kommandatura. He would like to know if the attitude of his colleagues on the question of unanimity might be different if they could agree that it would apply only to certain fundamental points. If so, it might be worthwhile to examine the termination of the functions of the Kommandatura. If, however, his colleagues felt that the subject had been exhausted, he would not waste the time of the Council. If they did not, he was prepared to submit his views either in writing or orally.

Mr. Schuman remarked that it was difficult to separate the question of the functions of the Kommandatura from the problem as a whole.

Mr. Bevin said he thought that they had covered the subject very fully and that in fact Mr. Vyshinsky had knocked them out in the first round.

Mr. Vyshinsky said he would not insist on this point but he did not wish the chance to go by to talk such matters over with his colleagues.

Mr. Acheson stated he thought that our proposals had made very clear what functions we proposed to leave to the Kommandatura, what functions were to go to the City Government, and what functions would require unanimity. However, if Mr. Vyshinsky had some new proposals he would of course be glad to receive them.

Mr. Bevin suggested that any proposals which Mr. Vyshinsky might have might be communicated to the governments for study before the next CFM. Mr. Vyshinsky said he saw that it was hardly expedient to raise the question at this session.

Austria

Mr. Acheson, turning to the Austrian question, said he hoped they might get some clarification on the Soviet views on Point A of their January 24, 1948 proposals. They had discussed the other seven items but had not discussed Point A. He drew Mr. Vyshinsky’s attention to the relationship of this question and Articles 50 and 57 of the draft treaty.

Mr. Vyshinsky stated that Article 50 related to restitution and matters affecting UN property and Article 57 to other types of dispute. In regard to German assets, however, the Soviet Delegation proposed a special procedure because of the nature of the problem, namely, settlement through bilateral negotiation which however by common consent would not exclude arbitration.

Mr. Acheson said he was aware of the Soviet proposal but he did not see why the other procedures for settlement of disputes would not also apply to the case of German assets. He saw no reason why Soviet property in Austria should be on a different status than property of other members of the UN. He said he thought this was a question which could well be sent to the Deputies to examine.

Mr. Vyshinsky stated that Paragraph 8 sets forth the procedures that propose to deal with the disputes concerning German assets. He said this property would go into the Soviet Union or another country only after the most careful examination and specific listing of the property in question. Therefore, there could be no dispute in regard to what was a German asset or what was not. That would all be settled by the treaty itself. Therefore, the disputes that might arise would be of a secondary nature which could be easily settled and should be settled by bilateral negotiations. It was not necessary to verify the property which might not be the case in regard to property in general owned by other countries such as, for example, Argentina. The proposal for the global sum and the specific listing of the properties not covered by that sum settled that question in regard to the Soviet assets. He did not think, therefore, it was necessary to invoke the machinery provided for in Articles 50 or 57.

Mr. Acheson remarked that the fact that it was simple should make it more amenable to the regular procedures. He stated, however, that as Mr. Vyshinsky well knew, every Foreign Office had a number of disputes which required arbitration which was the accepted form of dealing with such difficulties.

Mr. Vyshinsky said he did not see how there could be any objection to the procedures set forth in these clauses of the treaty since they were representative of the four Ministers who were actually drawing up the treaty. Mr. Vyshinsky repeated that, in their view, a special procedure should be set up with the special question of German assets namely, settlement of disputes by bilateral negotiations.

The meeting broke up with the understanding that the Soviet Delegation would by noon on Sunday transmit to the other delegations its views on Austria and that four hours thereafter the Ministers would meet in closed session.

1. Vyshinsky was referring to USDel Working Paper/32 Rev. 6, June 15, p. 1055.
2. Under reference here is the Tripartite paper submitted by Schuman on behalf of the three Western Ministers, June 14th, at the 20th meeting of the Council. For the text of this paper, see footnote 1 to the United States Delegation Minutes of the 20th (5th Restricted) Meeting, p. 1001.
3. For the text of this Soviet memorandum see p. 1057.
4. The text of this proposal, CFM(D) (L) (48) (A)1, is printed in Foreign Relations. 1948, vol. ii, p. 1448.

5. On June 15, the paper submitted to Vyshinsky at the 20th Meeting of the Council (footnote 1 to minutes of the second part of the 20th Meeting, p. 1001) was revised by the three Western Ministers and the new text sent to the Soviet Member on their behalf by Schuman. This new text read:

   “The Ministers have agreed:

   (a) that Austria’s frontiers shall be those of January 1, 1938;

   (b) that reparations shall not be exacted from Austria, but that Yugoslavia shall have the right to seize, retain or liquidate Austrian property, rights and interests within Yugoslav territory; and

   (c) that, on condition that the settlement includes the relinquishment to Austria of all property, rights or interests held or claimed as German assets and of industrial and transportation equipment in Austria held or claimed as war booty (except those oil assets and Danube Shipping Company properties transferred to the Soviet Union under other paragraphs of Article 35 of the Treaty and retained under Austrian jurisdiction) with reciprocal waivers of creditor claims arising out of control or operation of such property, rights or interests after May 8, 1945, the Soviet Union shall receive from Austria $150 million in six years;

   (d) that the Deputies shall resume their work promptly for the purpose of reaching agreement not later than September 1, 1949 on the draft treaty as a whole.”

   (CFM Files: Lot M–88: Box 142: Minutes and Records of Decisions)

6. Post, p. 1057.
7. June 12, p. 1053.

8. The substance of Vyshinsky’s position on the Austrian Treaty was transmitted to the Department of State in Delsec 1909, June 17, from Paris, not printed (740.00119 Council/6–1749) and discussed at the Under Secretary’s Staff meeting June 17. The Director of the Policy Planning Staff, Kennan, expressed his opinion on that day as follows:

   “If Vishinsky’s demands are accepted, there is sure to be serious trouble in the future between the Soviet Union and Austria. The Soviet Government, through its property holdings in Austria and its right for export of profits in the form of output or freely convertible currency, will have what it wants: namely, an ample arsenal of pretexts for quarrels with, and differences with, the Austrian Government. These will end in new demands and encroachments from the Russian side. In all of this, we will be powerless to help the Austrians by virtue of the bilateral clause and the Austrian Government will be in many respects, at the mercy of the Soviet Government.”

   (PPS Files: Lot 64D563: Box 20029: Chron File)

9. The Annex under reference here read as follows:

   “The Delegation of the USSR agrees with the proposals set forth in the document: ‘Provisions as to permanent consultations concerning Germany,’ received from Mr. Schuman on June 15, provided the following changes are introduced in this document:

   1. Paragraph 3(a) (ii) should be worded as follows: ‘There must be an equilibrium in the movement of essential goods and in the movement of not-so-essential goods between the Western Zones, on the one side, and the Eastern Zone and Berlin, on the other side.’

   2. In paragraph 5 after the words: ‘concerning the movement of persons and goods and communications between the Eastern Zone and the Western Zones and between the Zones and Berlin’ to add the words: ‘and also in regard to transit.’”

   (CFM Files: Lot M–88: Box 142: United States Delegation Minutes)