663.001/4–2053
No. 861
The Deputy Director of the Office of
European Regional Affairs (Knight) to the Assistant Secretary of
State for European Affairs (Merchant), at Paris1
Dear Livie: Following up our brief conversation before you left Washington, I would like to expand a bit on the suggestion that you do what you can while in Europe in order to bridge the gap between our thinking and that of our Austrian-Franco-British [Page 1851] friends, as it is clearly developing. I must say that this development had been expected by all of us as we have thought that as soon as the possibility of any Austrian Treaty appeared on the horizon they would be irresistably attracted thereby, regardless of terms. It would seem that our main job now should be to stand firm and point out the danger and shortsightedness of succumbing to temptation!
The key point of substance relates to Article 35 (German Assets). As you know, under the terms of this Article not only do the Austrians have to compensate the Soviets for the German assets which they will turn back to Austria ($150 million over 6 years), but in addition thereto the Soviets retain direct control of the Austrian oil industry for 30 years, and of the Danube Shipping Corporation for what would appear to be perpetuity. Thus, in effect, through their privileges in the oil and shipping fields, the Soviets would have the right in fact to maintain as many representatives in Austria as they wished, with all the related dangers and thus threaten permanently the security and perhaps continued existence of the Austrian State.
While all this should be obvious, it does not appear to have been thus accepted by our friends and it would be important to apply a brake to their wishful thinking and ponder the facts. The Department of Defense strongly supports us in our fundamental opposition to Article 35.
In order to achieve this major objective in our negotiations with the Soviets, it is obvious that we must start from a tactical position with plenty of margin from which we may recede. This leads to the second point which I made yesterday: the essential tactical importance of not withdrawing the Abbreviated Treaty before we sit down with the Russians.
Viewed from a different point it would seem that our acceptance of the long draft Treaty, including Article 35, would constitute a paradox in that the new Administration would be following a definitely weaker line re Austria and the Soviets than the old Administration. (True enough, in November 1949 we had expressed agreement to Article 35 in order to obtain a treaty, but we moved gradually away from this position to reach one of opposing Article 35 when we introduced the short treaty in March 1952.) As we told the French in connection with the Saar, and our January 1950 point of view thereon, “the compulsions of the present outweigh legalisms of the past.”
Lastly, the Senate ratification of any treaty with Article 35 is open to serious doubt.
I realize that you no longer intend to go to Vienna. Nevertheless, if you could get acceptance for our views on Article 35 in Paris and [Page 1852] London, it would be a great step forward and one which probably could not be taken at the Austrian Treaty Deputies level. Also you may eventually decide to go to Vienna after all, or you may be seeing Tommy Thompson elsewhere.
As long as we do not have an agreed position with the British and the French on Article 35 (in the final analysis, we can give in on everything else even though neither happily or willingly, for there would be strong opposition from Defense and the interested US oil concerns), we are in a vulnerable position should the Soviets take the initiative and request a meeting of the Deputies.
I am transmitting herewith as background material the Austrian memorandum of July 1952 and our summary of the treaty negotiations,2 as these documents are not readily available abroad and might conceivably come in handy if the Austrian Treaty goes into high gear while you are there.
With every good wish, I remain,
As ever,
P.S. The bald British position that the Austrians can compensate the Soviets for German assets under Article 35 out of future American aid is something quite unacceptable to the US, both politically and in substance. Obviously we will have to agree eventually to some compensation to the Soviets in exchange for the elimination or modification of Article 35, but it seems that at this stage the task is to obtain agreement on the principle that the article is unacceptable. The quid for the quo can be subsequently dealt with as a negotiation matter.
Merchant was in Paris to serve as an Adviser with the U.S. Delegation to the Eleventh Session of the North Atlantic Council, Apr. 23–25, 1953.
Attached to the source text is a memorandum to MacArthur, Apr. 20, in which Knight explained that he was sending MacArthur a copy of this letter to Merchant in response to MacArthur’s inquiry about the Austrian situation. Knight concluded his memorandum with the following sentence: “I feel most strongly that we would be ‘saps’ to accept Article 35, which is and will remain indefinitely a Trojan Horse at the disposal of the Soviets.”
↩- Not attached to the source text.↩