763.0221/12–2951
Memorandum by Peter Rutter of the Office of Western European Affairs to the Deputy Director of That Office ( Williamson)
Subject: Ambassador Donnelly’s Recommendations on Occupation Costs
Ambassador Donnelly’s recommendations on occupation costs contained in Embtel 2148, December 281 represent a complete break with previous U.S. policy on this subject. The position that we will not agree to any quadripartite allocations above 151 million schillings for each Power in 1952 affords an answer to American criticism of the system as now administered. It does not, however, offer any solution for the problem which continues to face us.
For six years our occupation cost policy has had three objectives. (1) strengthening the Austrian economy; (2) reducing unilateral Soviet spoliation of Austria; (3) decreasing U.S. aid. If the Department accepts Ambassador Donnelly’s recommendation we will do nothing to further these objectives and in fact may very well be confronted with a worsening situation. In the absence of U.S. agreement it can be expected that the French and British will demand from the Austrians 220 and 200 million schillings respectively. The Soviets may settle at this level or demand additional funds. We then will be placed in the position of a disinterested spectator or will be asked by the Austrians to support their efforts to resist these demands. The latter policy would signify an Austrian attempt to revise quadripartite custom, a step which the French and British could be expected to reject vociferously and one which the Soviets would be glad to exploit.
Furthermore once there has been a public tripartite rupture on occupation costs, it will be very difficult to make any special arrangement of the sort Mr. Donnelly contemplates even in the unlikely event that funds should be available to hand the British and French under the table.
The policy recommended by Vienna may thus be said to have temporary propaganda effect but offers no long-term advantages. If we are prepared to go so far as a tripartite rupture we can certainly demand quadripartite accounting of occupation costs. The first step in accounting would be to propose a formula for the kind of [Page 1090] costs which Austria properly could be expected to pay. All additional costs should be at the expense of each occupying Power.
I think the advantages of such a proposal are obvious. By the adoption of a sound accounting system public opinion both in this country and in Austria would at least understand what has hitherto been a highly esoteric subject. If the system were limited to payment for officially-requested office space, employment of Austrians on official duties, official transportation and communication expenses and the costs of the Allied Commission, a sharp drop in occupation costs could be expected. Also the low Soviet costs would become plain.
There is no reason to believe that the French and British and the Soviets would accept such a proposal; on the other hand, they will not accept Mr. Donnelly’s proposal, and my own proposal offers the U.S. a flexible position which could lead to a settlement more to our liking than the one now in prospect.
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