171. Telegram From the Embassy in Austria to the Department of State0

1889. Reference recent US visit DefMin Schleinzer concerning possible credits arms purchases.

As reported separately by military attache, Schleinzer feels follow-up to Washington discussions not sufficiently energetic. We get impression he feels this due at least partly to some foot-dragging by Aust Embassy which of course reports to Ministry headed by member Socialist Party. Under pressure from DefMin to do something, Aust G–4 General Mitlacher wishes depart for States soon as possible and in any case before end of month and has requested MA accompany him.

We feel present urgency for action has basis in Schleinzer’s desire obtain political credit for concluding favorable deal with US, in time to be of value November elections. Cabinet approval for foreign credit must be secured, in face as yet unpredictable Socialist reaction. In view long summer recess, Schleinzer’s inability make firm proposals to Cabinet next few weeks would necessitate delay until late fall, nullifying possible election value for him and People’s Party and forcing consideration at worst possible time—during perennial fall budget crisis.

Schleinzer considering requesting credit approx $50 million. Ideally would prefer arrangement whereby MSMS interest rates and terms could be extended under cover of a commercial financial institution. Comparable rates and terms under EXIM Bank auspices might be acceptable, although politically less desirable. Direct granting of credits by US Govt would, as Dept aware, not be acceptable. GOA has already taken decision not accept govt-to-govt arrangement because of fear of Sov reaction during period Austrian negotiation with Common Market. Schleinzer insists minimal interest rates necessary to give supporters of plan reasonable chance secure approval of an undertaking involving possibly strong political opposition by Socialists.

Emb strongly urges definite US offer be made soon, even if impossible comply fully with conditions Austrians have set. Meanwhile Mitlacher informed that US visit seems pointless at this time, until specific US proposals received. Would appreciate progress report on recent [Page 371] talks in Washington. We still hold view, however, that Washington should continue be locus for continued negotiations, despite Schleinzer’s suspicions re possible foot-dragging by Aust Emb and FonMin.1

  1. Source: Department of State, Central Files, 763.56/5–1462. Confidential.
  2. In telegram 2121, May 16, the Department of State responded that the Export-Import Bank had made an opening offer. Delay in getting the talks started had been due to the technical problems of putting together a loan package. The Department also cautioned: “Although interested agencies at highest levels sincerely desire satisfy Aus request, outcome negotiations cannot be anticipated.” (Ibid., 763.56/5–1462)