306. Letter From the Ambassador to Austria (Matthews) to the Under Secretary of State for Economic Affairs (Dillon)0

Dear Doug: When Cal Cowles, our ICA Program Officer, returned from Washington recently he told me that he has been instructed to program the PL 480 Title I loan funds as soon as possible, dispose of the unprogrammed counterpart funds and actively press for a counterpart settlement. I can well understand the feeling of ICA that with all its major problems around the world it is anxious to close business in Vienna as soon as possible. I certainly would have no wish for any extended delay in accomplishing this objective. There are, however, certain aspects of the present situation which I would like to draw to your personal attention and to plead for a little patience in pushing ahead.

As you know, it is well over three years since the signing of the Austrian State Treaty and a settlement has yet to be reached of the Austrian obligations to us contained in the Vienna Memorandum and Article 26 of the Treaty. For various good reasons we have been very patient and while the Austrians, I think, have appreciated that patience they had come to feel that it was perhaps unlimited and in view of possible coalition difficulties, etc., there was no need to hurry. This psychological atmosphere continued in spite of various proddings both by the Department and by the Embassy. I decided around the end of August that the time had come to utilize such leverage as is available to us without either being unfair to the Austrians or taking any rigid position which might arouse damaging resentment. In addition to feeling that the continuance of these unsettled issues was both unfair to the Jewish organizations pushing for the Article 26 settlement and to the oil companies under the Vienna Memorandum, and that it was an irritant to general Austro-American relations, I had another equally important reason. With all you have to do you probably have not kept au courant with developments on the Austrian scene but beginning this spring prior to the Chancellor’s trek to Moscow, during that red-carpet visit, and subsequently there has developed a sort of Soviet-Austrian honeymoon which is not in its implications advantageous either to the United States or to the West in general. The evolution of the thinking in Austrian Government circles of both parties with regard to their concept of neutrality—from the original limited one applicable only to the strictly military aspect to one of more general equating of East with West—has somewhat disturbed not only us in the Embassy but other Western colleagues here. I [Page 792] thought, therefore, that for this reason too it was well to bring home to the Austrians again the knowledge that they should not just take the United States for granted and that their real interests lie primarily with the West.

The leverage I have been using since August has been the simple one of withholding my signature as head of the ICA mission here to a growing collection of varying amounts of counterpart items to be dispensed. These items fall under the general criteria of our counterpart agreements and heretofore my required signature has been usually routine. To the various calls from the interested Austrian officials, in turn pressed by the concerns affected, we have merely replied that projects must be examined and that the delays and red tape of bureaucracy are not, of course, unfamiliar to Austrians. When on one occasion an Austrian official remarked that the delays were becoming embarrassing and that we had obligations under the counterpart agreement, our Economic Counselor, at my direction, replied that of course we recognized the validity of such obligations but such matters take time as the Austrians had discovered in connection with their obligations to us under the Treaty. This produced prompt results in the form of a luncheon given me by the Chancellor attended by Foreign Minister Figl, Finance Minister Kamitz, and others reported in brief outline in my telegram 1081 of October 27.1 That conversation galvanized the Austrians under the Chancellor’s directive into action and progress on both Treaty items has since been rapid. Specifically, for example during the talks on Article 26 the Austrians raised their offer for settlement of the Jewish claims from $5, 000,000 to $6, 000,000 within three days, something unprecedented in Austria. Now that Shell has come in line with Mobil progress also seems to be very good on the Vienna Memorandum and I am hopeful that both questions may be out of the way by Christmas. This has, furthermore, aroused no Austrian resentment (in fact Kamitz thoroughly approves because of his continuing needs for American money); it is the system which Austrians traditionally practice and understand. This has all been accomplished through my dilatoriness in signing the counterpart release or in presenting the annual program of 850 million shillings which the NAC has now approved.

I have gone into the foregoing in some detail so that you might understand the situation and, I hope, back me up to the extent of a few weeks delay in pursuing the ICA objectives. I have not inferred that there is any disagreement re these tactics between Washington and the Embassy and I fear that the Austrians may attempt in Washington to activate [Page 793] some ICA instructions to us here. I very much hope that you can hold them off until Christmas, and in any conversations you may have with Kamitz indicate that while Austria has promptly and punctiliously met its onerous treaty obligations to the Soviet Union, it has not met those to us and we find this difficult to understand.2

With all good wishes for continued success in the splendid job you are doing.

Very sincerely,

  1. Source: Department of State, Central Files, 763.5–MSP/11–758. Personal and Confidential.
  2. Telegram 1081 from Vienna reported the Ambassador’s luncheon conversation with Raab, Figl, Kamitz, Fuchs, Igler, and Loebenstein about implementation of Article 26 of the Austrian State Treaty and the Vienna Memorandum. (Ibid., 263.1141–A/10–2758)
  3. In a letter of November 15, Under Secretary Dillon approved the course of action proposed here by Ambassador Matthews. (Ibid., 763.5–MSP/11–758)