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

740.00119 Council/7–649: Telegram

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

secret
niact

Washington, July 6, 1949—6 p. m.

2334.¹ Audel 68. Sov draft Art 35² reed and preliminary comments follow:

You shld be guided in negotiations on specific questions in Sov draft by general policy considerations and objectives Audel 65 July 1.³ Complete clarification is necessary on all points in order to avoid misunderstanding in future treaty implementation since Sov draft represents effort to obtain maximum material gain through Ger assets settlement as well as to provide means for future economic and political exploitation of Aust.

Recognizing need to utilize agreed language Delau 135⁴ we are prepared to concede format to Sovs and recommend that Art 35 be presented in manner apparently desired by Sov Del. Consideration shld be given, however, to drafting appropriate para in Art pointing out what Aust shall receive as result of settlement in addition to spelling out long list of Sov benefits.

Para 1 is satisfactory provided phrase “located thereon” is inserted after “and other property.” Presume word “Art 1” means list 1 which will be subject to further comment and agreement.

Para 2 recommend redraft along lines proposed Audel 6 Feb 15⁵ and FMP 1/28a Mar 9⁶ omitting reference to Ger assets and making para 2 consistent in drafting with para 1. Inclusion of model concession contract as annex to Treaty or annex to Art is considered important to specify exact nature of Sov rights and interests. Every effort shld be made to include model contract. Comments will follow on list.

Subpara on duration of contracts shld also be drafted in accordance with model contract and contain if possible wording to effect that 25-yr period will prevail only if oil is discovered within period of Sov exploration rights. Wording of Deputies agreement on duration contained in May Summary of Issues wld be preferable to present draft.⁷

Paras 3, 4, and 5 are satisfactory as worded provided complete agreement is reached on lists.

Para 6 shld he divided into two paras as contained in Paris communiqué.⁸ We wld prefer word “relinquish” to “cede” as contained in official English version of communiqué. Does term “cognate immovable property” include land? We presume cognate in this connection means “similar” as used in communiqué. Portion of first part of para 6 dealing with war booty shld be redrafted along following lines: “and also other property located in Aust now held or claimed by the Soviet Union as war booty or otherwise including war industrial enterprises, houses, and similar immovable property in accordance with the categories of property contained in list blank.” Such redrafting is considered necessary in terms of exact reference this question by Ministers to Deputies in final Paris agreement. It must be made clear that our intention in Paris was that the Sovs relinquish everything now held either as Ger assets or war booty to Aust except such properties specified in paras 1 through 5 of Sov proposal. Some provision shld also be made to prevent removal of movable property either in text of Art 35 or in official record of conference.

Section of para 6 dealing with lump sum shld be separate para as contained in Paris communiqué. We consider that no agreement can be made beyond provision that Aust shall pay 150 million dollars in annual installments preferably beginning one year after effective date of Treaty provided this does not affect turnover of assets to Aust. If payment schedule does not provide equal annuities, payments first years shld be smaller than subsequent years. Provision shld be made to extend payments over full six years to avoid telescoping payments into five and one half years. We cannot accept quarter payments as proposed unless some provision is made for a moratorium in event Aust cannot fulfill obligation. Agreement on quarter payments wld prevent Aust from gathering resources sufficient to meet annual payments and wld make continuous fear of consequences of any default. We consider that such agreement is impossible economically and politically since it would provide Sovs with continuing basis for psychological warfare against Austs in difficult first year period.

Subpara on gold parity value is unsatisfactory and should be redrafted in form contained in satellite treaties to affect that basis of calculation will be US dollars at parity value.

Subpara on promissory notes is not necessary in as much as Aust undertakes to fulfill all articles in treaty of which Art 35 is integral part. If Sovs insist on this it shld be made clear in draft that promissory notes are non-interest bearing notes and shld conform to a model note attached to Treaty as annex.

Para 7a should be subject to complete clarification in terms of recommendations made in Audel 65. Subpara b is completely unclear as to meaning of “as a rule”. In redrafting this section efforts shld be made to assure that property transferred to Sovs will operate under jurisdiction of Aust law with specific exceptions noted. Use of term “freely convertible currency” shld be redrafted in terms of recommendations in Audel 65. While language in subpara c of this subpara conforms in general to Paris agreement clarification shld be obtained whether Sov waiver includes claims for improvements made to property while under their control. US intention shld also be specified that we regard this waiver as a quit claim by Aust and Sovs which does not involve any third country claims which may exist. Proposal shld be made embodying paras e and f Audel 6 Feb 15.⁹

Re para 8 we presume “the transfer by Aust” means “the transfer to Aust.” We agree two months period wld be desirable in as much as the transfer wld take place prior to withdrawal of occupation forces. It wld be desirable in redrafting para 8 if specific reference eld be made to paras 1 through 5 of Sov proposal.

Para 9 as pointed out in Audel 65 is not acceptable since it amounts to a bilateral settlement of Ger assets question within the framework of a four-power treaty. We consider that settlement of disputes arising from Art 35 with Sovs shld have same treatment as settlement of disputes with other signatories of the Treaty. If it is necessary to accept this proposal it shld not be accepted unless it is specified that if no agreement can be reached on the third member of the arbitrary commission an appeal can be made to the Secy Gen of UN for designation of a member. Every effort shld be made to apply the principles already agreed in Treaty to settlement of disputes arising from this Art.

Specific comments on list will follow. Brandon Grove¹⁰ will discuss with Dept this week list on oil and possibility of coming to London. Comments on DDSG list follow.

Acheson

1. Repeated to Vienna as 681.
2. Supra.
3. Telegram 2297, p. 1102.
4. Not printed; it reported that the Western Deputies had agreed in principle with the first five paragraphs of the Soviet draft for Article 35 at the 166th meeting of the Deputies July 5. (740.00119 Council/5–749)

5. Not printed; paragraph 2 in this draft read:

   “Transfer to the Sov Union rights of ownership to the materials and equipment used in exploring for and extracting crude oil and gas located within the areas described in Annex A, to the extent that such materials and equipment existed in such areas on January 1, 1949.” (740.00119 Council/2–1549)

6. Not printed.

7. Not printed; the wording for this subparagraph in the Summary of Issues read:

   “The period of validity of concessions to be transferred to Soviet Union shall be established as follows:

   (1) For the extraction of oil from the areas already under exploration—30 years;

   (2) For oil explorationn—8 years, with a further period of 25 years for extraction to run from the time when oil has been discovered in the explored areas.” (CFM Files: Lot M–88: Box 113: Reber Files)

8. Ante, p. 1062.

9. Not printed; the paragraphs under reference here read:

   “e. (1) Aus shall, within a period of 18 months from the coming into force of the present Treaty, take all necessary measures to identify and eliminate any ownership or control, or claim thereto, by Germany or by German nationals resident in or repatriated to Germany of property, rights, and interests which were in German ownership or control as of May 8, 1945.

   (2) The elimination of German ownership shall not affect property, rights, or interests (a) held directly or indirectly by the UN or their nationals, including any property, rights or interest which are to be restored or reestablished under Article 42 of the present Treaty, (b) of German individuals deprived of life or substantially deprived of liberty pursuant to any law, decree or regulation discriminating political, racial or religious groups, (c) belonging to German religious bodies or private charitable institutions and used exclusively for religious or charitable purposes, (d) which have come within the jurisdiction of Aus as a result of resumption of trade with ‘Germany since May 8, 1945.

   f Aus shall pay prompt, adequate, and effective compensation for any loss suffered by any Allied or Associated Power or its nationals as a result of the application of the provisions of paras. 2. a. and 2. c. of this Article.” (740.00119 Council/2–1549)

10. Representative of the Socony-Vacuum Oil Company.