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

740.00119 Council/7–1549: Telegram

The Secretary of State to the United States Deputy for Austria at the Council of Foreign Ministers (Reber)

secret

Washington, July 15, 1949—8 p.m.

2473.¹ Audel 85. Following comments and instructions are based on problems raised 171–172 meetings² and Delau 169 (London 2763) July 14.³

1. Previous instructions are reemphasized on desirability obtaining exact language re export profits and other income in order to provide clear basis future implementation to avoid repetition Hungarian experience. In present reconsideration Art 35, final agreement par 7 as whole shld be withheld in order to obtain maximum US position on such questions as inclusion of word “net”, specification of words “in general” respecting applicability Aust law, agreement on your position regarding industrial and transportation equipment in definition war booty, and responsibility for promissory notes. We consider these problems are interrelated and constitute, along with schedule of payments, and settlement of disputes crux of assets settlement vitally affecting Aust’s future. If profits to be exported are “net” why does Zarubin object to inclusion this word or other similar clarifications of Sov draft as provided by him in Delau 156?⁴ Can device be proposed similar to par 8 draft Art 42⁵ to give precision to agreement?

2. Re schedule payments, Audel 78⁴ authorizes acceptance Brit proposal and recommends procedures for acceptance quarterly payments only if necessary, but reiterate this concession shld be used to maximum bargaining advantage in obtaining acceptance of points listed above since it is apparently earnestly desired by Sovs. Info on form of payment (Delau 158 July 14⁴) and agreement on joint responsibility are essential (Audel 82⁴) as it is likely that. Sovs may attempt same techniques employed in Hungary where Natl Bank and the economy generally were bankrupt by Sov demands. Problem is not where payment is made but out of what assets. Natl Bank will not be in any position to bargain with Sovs or have means to protect its solvency if all its assets are made available for making required payments. For that reason Govt shld be signer of notes and specimen note shld be in Treaty as integral and basic part of four power settlement of Ger assets question. If Natl Bank is sole signatory Sovs for strategic reasons may encourage an Aust default to obtain control of all bank assets, thus obtaining wider area of control within Aust and participation in enterprises other than those stipulated in Paris agreement. Similarly, Treaty shld not obligate or impair assets of Natl Bank thus preventing their use for other purposes. You shld therefore attempt to obtain agreement on these lines and those contained Audels 78 and 82. Final agreement along lines of Sov proposal shld be made only after entire settlement, including DDSG and oil lists, can be examined and evaluated by Dept.

3. Re settlement of disputes, we regard this provision as a key point in Treaty and repeat we can not accept any proposal which amounts to a bilateral settlement outside framework of four power agreement. Brit and Fr must be made to realize that their position will make impossible West support for Aust Govt to withstand Sov pressure in future. In view of extent Sov holdings in Aust, every means possible must be provided in Treaty either to extend agreed arbitration procedures to Ger assets settlement or to provide for nomination of third member of arbitration commission by sources other than Sov or Aust.

4. We can not see basis for Zarubin’s optimism that work will be completed in early Aug unless he is prepared to withdraw Sov claims on foregoing points which in our view exceed terms of Paris agreement. We have considered date Sept one as a guide for Dep’s discussion. In event reasonable agreement can not be reached by Sept 1, US wld feel no hesitation in extending that date in view of long range and vital importance of questions under discussion to maintenance of West interests in Aust stability and independence.

Acheson

1. Repeated to Vienna as 737.
2. At the 171st and 172nd meetings, July 12 and 14, the Deputies had discussed the various paragraphs of the Soviet draft of Article 35 without reaching any agreement.
3. Supra.
4. Not printed.
5. For the text of this paragraph see the unagreed articles of the draft treaty for Austria, p. 1139.
4. Not printed.
4. Not printed.
4. Not printed.