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 22nd (7th Restricted) Meeting of the Council of Foreign Ministers, Paris, June 19, 1949, 6 p.m.

Paris, June 19, 1949, 6 p.m.

secret

Present

United States

• Mr. Acheson
• Mr. Jessup
• Mr. Dulles
• Mr. Bohlen
• Mr. Nitze
• Mr. Reber

France

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

U.S.S.R.

• Mr. Vishinsky
• Mr. Smirnov
• Mr. Zarubin
• Mr. Pavlov

United Kingdom

• Mr. Bevin
• Sir Ivone Kirkpatrick
• Mr. Dean

Mr. Schuman (Chairman) proposed that discussion start with the German question.

Germany

Mr. Acheson said the Soviet memorandum received that morning on the German question was not clear [USDel/Working Paper/46¹]; that it contained a reference to the acceptance of our draft on paragraph 5² which confirmed what the Soviet memorandum of June 16 had stated [Unnumbered USDel Paper June 16³] but then proceeded to give a draft for the same paragraph which was quite different from the proposal apparently accepted.

Mr. Vishinsky, after examining the drafts referred to, stated that this had been an error in typing and that the draft of paragraph 5 proposed by the three Western Powers on June 15 [USDel/Working Paper/32/Rev. 6] was accepted with the addition of the reference to transit as suggested. This paragraph was, of course, agreed on by the four Ministers.

Mr. Acheson pointed out, that in regard to the language of 3(a) (ii), the Soviet memorandum of June 19 repeated the original Soviet language although Mr. Vishinsky indicated he had proposed deleting the entire paragraph.

Mr. Vishinsky said that he proposed their language if there was to be such a paragraph but that he still suggested that it be deleted entirely.

Mr. Acheson stated that the difficulty was that paragraph 3 (a) had been originally followed by two principles which were to guide the occupation authorities in their consultation on trade. If one was dropped he thought the other should be dropped.

Mr. Vishinsky said that if that was the opinion of his three colleagues he was prepared to drop 3(a) (i) also. He would, however, prefer to retain 3(a) (i) because it was desirable to have trade raised to a certain level, but if his colleagues wished it removed he would agree.

Mr. Acheson said that these matters could be worked out in trade agreements and it was not necessary to deal with either of the points at this time.

Mr. Vishinsky agreed.

Mr. Schuman pointed out that the principle of expansion of trade was already contained in 3(a). Mr. Bevin added that he thought the proposal to drop both subparagraphs was a good step since paragraph 3(a) itself mentioned the desirability of the expansion of trade and the development of financial relations.

It Was Agreed therefore to drop both subparagraphs 3(a) (i) and 3(a) (ii).

Austrian Treaty

Mr. Schuman suggested that discussion turn to the Austrian paper, inquiring whether Mr. Vishinsky wished to speak.

Mr. Vishinsky stated that he had nothing to say but would answer questions if any points were not clear.

Mr. Acheson stated that he had several questions with respect to the Soviet draft.⁴ The first question had to do with the transfer of property to the Soviet Union on the one hand and the Austrian Government on the other. His question was how did the Soviet Government visualize such transfers? Would they be effected simultaneously upon the coming into force of the treaty?

Mr. Vishinsky said that the language used was the same as they had used in discussing this on June 16. The USSR was to get $150,000,000 for the property, including all the German assets with the exception of what is noted in brackets and also the word “booty”, which was previously discussed and included in footnote one. The language was the same, but if it was not clear, he would be willing to change it.

Mr. Acheson said there were two things to be transferred. He wanted to know whether Mr. Vishinsky agreed they were to be transferred on the same day.

Mr. Vishinsky stated that the properties which were to go to the Soviet Union are properties which it has now; therefore we cannot transfer simultaneously. But he understood that, as soon as the treaty is signed, the property would be transferred. He felt it was possible to clarify this point further.

Mr. Acheson suggested that this clarification be attempted right then, but Mr. Vishinsky felt it was better to let the Deputies do this later.

Mr. Bevin called attention to the two references to dates at the end of paragraph 2 and asked whether they were the same date. He understood that they were.

Mr. Vishinsky said that if possible the transfers would be effected on the same date, but it was possible they could be formalized on different dates. The Austrians might want to do it on May 1 and the Russians on May 5, but there was no objection to doing it on the same date. He stated his understanding that all claims and charges to which the properties may be subjected after the date of transfer to the Soviet Union would be a responsibility of the latter, but the Soviet Union would not be responsible before the date of transfer. Some date for the transfer could be set later.

Mr. Acheson said that they understood each other. The point was to make the transfer at the same time and as soon as possible after the treaty was concluded.

Mr. Bevin agreed.

Mr. Acheson said in the Soviet memorandum of June 19 he noticed that the parenthesis in paragraph e(i) had been moved up so as to exclude Austria’s jurisdiction. He felt this was merely a mistake since obviously it should be within the parenthesis.

Mr. Vishinsky agreed with this.

Mr. Acheson said, in regard to war booty, that what was still lacking was a reference to industrial and transport equipment which might be distinct from the mere enterprise itself. He suggested that a precise definition of war booty be referred to the Deputies.

Mr. Vishinsky agreed.

Mr. Acheson noted that there was a dispute concerning some 500 locomotives; that the Austrian Government was claiming locomotives manufactured before the Anschluss, or after 1945, and were willing to relinquish any locomotives manufactured under the German occupation. He felt that the Ministers should be clear on this point, although it might not be necessary to change the draft since the Deputies were instructed to define more accurately what was meant by “war booty.”

Mr. Vishinsky said that this was the clarification meant in referring the question of definition to the Deputies.

Mr. Bevin inquired as to the meaning of the words “as a rule” at the end of part paragraph e(i) of the Soviet draft. Mr. Schuman said that in French it meant “in general.” Mr. Bevin felt it would be better to delete these words.

Mr. Vishinsky said he thought that it was a correct statement since the property as a general rule would be under Austrian jurisdiction but that there would be certain exceptions in regard to alienation on the export of profits.

Mr. Acheson said that with reference to the property of the DDSG he assumed that with regard to assets in Bulgaria, Hungary and Rumania, it was the assets of this company that was envisaged and it should be stated.

Mr. Vishinsky agreed.

Mr. Acheson then said they had looked carefully into this question of the property of the DDSG and had found that the docks in Vienna were held in many cases on lease and he therefore assumed that the Soviet Government would accept the lease and not the property itself since they were succeeding to the assets of this company.

Mr. Vishinsky said they wanted 100% of what belonged to the DDSG. They regarded it as a German asset but that the Deputies were instructed to draw up a list of this property in eastern Austria and that would have to be agreed. He said they did not wish to take what belonged to others but they wished to execute what was to come to them.

It Was Agreed that the draft was satisfactory and the Deputies would draw up the list of the properties.

Mr. Bevin said that it gave him great pleasure to hear Mr. Vishinsky argue as to rights in property. Mr. Vishinsky said this was especially true when it was somebody else’s property.

Mr. Acheson then said that he had two questions left—namely, the export of profits and the procedure for the settlement of disputes. In regard to the export of profits, he asked whether it would be the option of the Austrian Government to choose whether these profits would be exported in the form of production or currency.

Mr. Vishinsky said that according to the draft Austria regulates as it finds necessary the profits and income. He felt that the right to choose the form of export should belong with the Soviet Government. He emphasized that only profits were envisaged here and that the rest of the income would remain in Austria and could only be exported in the usual way under the Austrian licenses, but whether or not the profits were to be exported in kind or in valuta was up to the Soviet Government.

Mr. Acheson said that this was not satisfactory; that it was one thing if Austria was bound to place no obstacles in the way of export in kind—that would be all right; but it was another thing if Austria were to be forced to convert schilling profits into hard currency which she would probably not possess.

Mr. Vishinsky reiterated that what was involved was only that portion of production that represented profits. They were not asking Austria for any currency, but that if they obtained freely convertible currency for this production in Austria they should have the right to export it.

Mr. Acheson said this was a very important question and they were not yet in agreement. For example, suppose there was a profit of a million schillings, how could the Soviet Government export that unless they obtained hard currency for it which could only come from the Austrian financial authorities? He said he felt it was a very complicated subject and it obviously required more precise language.

Mr. Vishinsky said there must be some misunderstanding. Austria was not obligated to make currency available. It was simply a case where, if the Soviet Government had a profit of 60,000 tons of oil, it had the right to export this as oil or to sell it to anyone. If they received dollars for this sale, they should have the right to export the dollars.

Mr. Acheson said there was no objection to the export of profits in kind, but if the Soviets sold their 60,000 tons in Austria and asked the bank for American dollars it raised a different question.

Mr. Vishinsky said that the text of the Soviet draft of paragraph g did not in any way state that the Austrian bank was obliged to pay in freely convertible currency. All the draft stated was that the Austrian Government should not put any obstacles in the way of the Soviets should they wish to export any freely convertible currency out of Austria. As to the currency in which Austria will pay for the oil, that would be stated in a trade agreement and of course if Austria wished to pay in dollars that would be satisfactory. In any case, this particular problem was eliminated in the present document and the only point made is that Austria should raise no difficulty to the export of profits.

Mr. Acheson suggested that the language of the draft did not reflect what Mr. Vishinsky was saying and suggested that it be amended accordingly, for example by stating “currency in which the profits are earned” or some words to that effect.

Mr. Vishinsky stated that they recognized Austrian jurisdiction and that because of the possible enactment of certain laws the Austrian Government could prohibit the Soviets from selling the oil for foreign currency. For example, suppose the total production was 600,000 tons and that 540,000 was sold in Austria for schillings. The Soviet Government wished to have a guarantee that the profit of 60,000 tons could be exported and that they would not be obliged to sell it in Austria. They might for example wish to sell it for francs or kroner or any other kind. He stressed that the wording of this paragraph was merely designed to protect the Soviet Government from a monoply that could be exercised by Austria.

Mr. Bevin felt that the difficulty resided in the words “freely convertible currency.” He noted that the UK would have difficulty in agreeing to this wording. He stated that he did not wish to prevent the Soviet Government from exporting the profits either in currency or in oil but he did not see how Austria could obtain freely convertible currency if this was demanded of it.

Mr. Acheson thereupon proposed a re-wording of paragraph g.⁵

Mr. Vishinsky did not see why the text should not say “freely convertible currency” [not mentioned in draft read by Acheson] for no one wished to sell for non-convertible currency. If the sale of oil was made abroad, they did not wish to be prevented from exporting the proceeds from such sales from Austria. He noted that Mr. Acheson’s proposed text included the word “abroad.” This would prevent the Soviet Government from selling the oil in Austria.

Mr. Acheson stated that this was the very point involved. There was no desire to prevent the Soviet Government from realizing a profit for the oil. If the Soviets sold the 60,000 tons to say Norway and payment was made in dollars in Norway there was no reason why they should not keep this profit.

Mr. Vishinsky repeated again that they did not wish the Austrian Government to prevent the export of currency realized on the sale of the oil whether the sale was effected in Austria or abroad and he did not wish to get into a position where the Soviet Government might wish to obtain dollars for the oil while the Austrian Government could pass a law preventing them from taking these dollars out of Austria. He stated that the Soviet Government must have a clear right to export the profits in any form they wished whether the oil was sold in Austria or abroad. He said that he could not make any concession on this point, and reminded his colleagues of the previous concessions he had made on war booty, Danube Shipping, etc.

Mr. Bevin stated that he was puzzled as to where Austria would get freely convertible currency. It could not get it from Switzerland nor could it get it from America. He stressed that there was no opposition on his part to permitting the Soviets from realizing profits and exporting them from Austria, but he felt that Mr. Vishinsky was asking for something impossible and that it was not wise to impose something on Austria which they well knew it could not fulfill.

Mr. Schuman believed that all were agreed to accept the point the way Mr. Vishinsky put it. The question was how would the Soviet Government realize the profits from surplus production. This profit could be realized by sale in Austria provided the Soviet Government found a buyer, and it could be in schillings or any other currency that the buyer wished to pay. If there was no appropriate buyer in Austria, the sale could be made elsewhere, for example in Norway, and could be payable in dollars if the buyer agreed to pay in dollars. We are all agreed that the Soviet Union is free to dispose of the currency realized on the sale of oil whether this be freely convertible currency or not depending upon the buyer and all agreed also that the Austrian Government should not prevent the Soviet Union from exporting such proceeds. If all were agreed on this it seemed clear to him that the proposed text did not say that, and he suggested that a text expressing this agreement be adopted. He thereupon suggested the addition of the following words to paragraph g: “in the form of production or if that production is sold, in the form of whatever foreign currency is realized.”

Mr. Acheson said he wished to point out that there was no question that the Austrian Government could not interfere through exchange controls with any sales outside Austria. The only question was regarding sales which might be made in Austria and for which the Soviet Government might demand freely convertible currency. In this case, as Mr. Bevin had stated, he did not see where Austria could get dollars or Swiss francs to pay for the oil. This did not mean that the Soviet Government could be prevented from obtaining and exporting freely convertible currency realized for the sale of oil outside of Austria.

Mr. Vishinsky noted that Mr. Bevin and Mr. Acheson both wondered where Austria would get freely convertible currency but he noted that nowhere in the Soviet document did it say that Austria must pay in freely convertible currency. Mr. Schuman clearly stated the principles involved: that Austria should raise no difficulty with the Soviet Government to exporting that portion of its production which represented profits or whatever was realized from the sale of that profit. That was just what the Soviet draft of paragraph g stated. If the principle is acceptable, the Ministers should take the Soviet language. If not, he would have to consult his experts further and perhaps postpone further discussion until the next evening. He felt that perhaps that would be better in any case.

Mr. Acheson then proposed a new wording of the Soviet text to include the phrase “in the form of production of [or] any freely convertible currency in which sales are made.”

Mr. Vishinsky said that he wished to think about this text a little bit before agreeing to it because it introduced the word “sale” whereas the convertible currency realized might be the result of some other arrangement such as barter. He desired time to consult his experts.

Mr. Bevin wondered what was meant by the words “other income” in paragraph g.

Mr. Vishinsky explained it as income from commercial operation.

Mr. Acheson wondered why that was not the same as profits.

Mr. Vishinsky said that it was not necessarily the same thing; that over a period of 6 months for example they might have an income which for commercial reasons it might become desirable to export although in the final analysis the whole operation might not show a profit over the fiscal year.

Mr. Acheson confessed to being confused.

Mr. Vishinsky stated that income was not profit. That income might be the result of payments on leases for warehousing, transport or other items and that an enterprise might have a temporary income during a fiscal year which as a whole showed a loss but that the Soviet Government might find it necessary to export the temporary income.

Mr. Acheson said that he was still confused and wanted to know whether this point could not be referred to the Deputies for clarification. He was not sure whether Mr. Vishinsky meant that he could export the gross production, and if that were the case the confusion to which he confessed a moment ago was really terrible.

Mr. Vishinsky said that they should perhaps accept the Soviet draft and refer it to the Deputies for clarification. Since he had no financial experts present, he wanted to consult with them and suggested that the meeting adjourn until Monday night.

Mr. Acheson said he was under the impression that a final session was being held on Monday morning. He was planning to leave for Washington at 11 p. m. Monday. It might be desirable to leave this question open and let the Deputies work on it. We could agree here that we accept the principle that Austria shall raise no difficulty regarding the export of profits or other income in the form of output or freely convertible currency, but leave the final formula to the Deputies.

Mr. Bevin said that he did not understand the meaning and would not accept any commitment in principle without understanding what was involved.

Mr. Acheson then read the following text:

“That Austria shall not put any obstacles in the way of the export of profits or other income in the form of production or any freely convertible currency received, subject to clarification by the Deputies with respect to the export of freely convertible currency and the definition of other income.”

Mr. Vishinsky indicated his preliminary agreement and said he would try to give the final answer by 8 p. m. Monday.

Mr. Acheson said he had a further question to raise on the settlement of disputes.

Mr. Vishinsky proposed that it be referred to the Deputies and that no comment be made on it by the CFM.

Mr. Bevin said that the Ministers should therefore delete paragraph h.

Mr. Vishinsky said that he understood all the rest was agreed except paragraph g.

Mr. Acheson said that it would be a great convenience to him to have this settled, since they had been scheduled to hold a plenary session the next day.

Mr. Vishinsky said that he would send a wire right away but that he did want the confirmation of his Government. He suggested that the advisers be asked to prepare a communiqué that night, and that the Ministers meet for a half hour the next day to reach final agreement. He proposed that the communiqué merely set forth a short preamble and then quote the texts agreed upon first on the German question and second on the Austrian question.

Mr. Acheson suggested a meeting at 3 p. m. to agree on the communiqué. If Mr. Vishinsky did not have an answer by then, the meeting could be postponed until evening.

Mr. Vishinsky said that in order not to force Mr. Acheson to change his plans he proposed that, if he had no answer on paragraph g, this whole paragraph be referred to the Deputies.

It Was Agreed to hold a secret meeting of the Ministers at 3 p. m. on Monday to review the final communiqué and to hold the final open meeting of the CFM immediately following the secret meeting.

[The meeting adjourned at 9:15 p. m.]

1. All the brackets in these minutes are in the source text. USDel Working Paper/46 is printed on p. 1060.
2. Acheson was referring to paragraph 5 of USDel Working Paper/32 Rev. 6, p. 1055.
3. Not printed; the text of this Soviet memorandum, which was designated USDel Working Paper/42 in the records of the United States Delegation, is indicated by the footnotes to USDel Working Paper/32 Rev. 5, p. 1051.
4. The Soviet draft proposal on the Austrian Treaty, June 19, is printed on p. 1060.
5. The United States Delegation minutes do not indicate the wording which Acheson proposed, but a British record of the Sixth Session of the Council shows the following formula suggested by the United States Member: “Austria should raise no difficulties in regard to the export of profits or other income whether in the form of output or of the currency earned by its sale abroad.” (CFM Files: Lot M–88: Box 142: Council of Foreign Ministers)