Foreign Relations of the United States, 1950, Central and Eastern Europe; The Soviet Union, Volume IV

663.001/10–1050

Memorandum of Conversation, by the Assistant Secretary of State for European Affairs (Perkins)

top secret

[Washington,] October 10, 1950.

Participants:	Dr. Karl Gruber, Austrian Foreign Minister1
	Dr. Ludwig Kleinwaechter, Austrian Minister
	EUR—Mr. Perkins
	EUR—Mr. Bonbright2
	WE—Mr. Byington3
	WE—Mr. Williamson

Dr. Gruber raised the following points during the course of an extended conversation today on the Austrian question:

1. The Treaty Settlement: Dr. Gruber stressed that Western Powers maintain the initiative in seeking a final Austrian settlement in order to bolster the morale of the Austrian population in the Soviet zone and to prevent any popular support for Communist objectives in that area. He stated that the Austrian Government could do a great deal in preserving morale by pointing out the continued efforts of the Western Powers to obtain a final settlement which would involve the withdrawal of Soviet occupation troops. Dr. Gruber pointed out that a Soviet peace move might be made either in diplomatic channels or in the General Assembly in the near future. He hoped that Austria would not be forgotten in any discussions with the Soviet authorities on a general settlement but rather be made a paramount issue in any possible settlement. In addition, he hoped that Western representatives would make reference to Austria as often as possible during the course of debates in the General Assembly in order to keep this question alive and to link it to any general European settlement. Dr. Gruber expressed doubts concerning the advisability of presenting the Austrian Treaty issue to the General Assembly this year. He did not believe that sufficient coordination existed among the Western Powers or with the Austrian Government on this question. He stated that the Austrian Government had no special plans for appealing to the UN but such a course of action should be considered, possibly at the next Assembly or at some future time.

I told Dr. Gruber that we had certain reservations about presenting the Austrian Treaty issue to the General Assembly until we could simplify the issues in the Treaty negotiations and present the Assembly with a clear, concise problem. I stated that we did not want to put the Assembly in the business of negotiating the remaining unagreed articles in the Treaty. I stated, however, that we were thinking about this subject and had discussed it at length but further cooordination would be required with the British, French and the Austrians before any decision was reached.

2. Coordination of U.S. activity and relations with the International Monetary Fund: Dr. Gruber raised the same question he had discussed with Mr. Matthews on October 9 concerning the coordination of U.S. activities in Vienna.⁴ He stated that he was sure the activities of the Legation, the Army and the ECA would be coordinated by Mr. Donnelly⁵ but that there remained a problem of activity of the International Monetary Fund concerning the Austrian exchange rate. He pointed out the political implications in Austria raised by the IMF proposal for changes in the exchange rate. He hoped that the Austrian point of view could be presented to the U.S. member of the Fund or to the other participants in the Fund through diplomatic channels. It was impossible, Dr. Gruber stated, for the Austrian representative to discuss frankly the relationship between Communist activity and alterations in the exchange rate in view of Iron Curtain representation in the Fund.

I informed Dr. Gruber that we would make his views known to Mr. Southard⁶ and to the NAC.

3. ERP assistance to Austria: Dr. Gruber pointed out that recent action by OEEC had resulted in dollar cuts in the Austrian assistance program. He outlined the need of the Austrian Government for dollar assistance in view of the drain on the economy caused by the presence of Soviet troops and Soviet economic activity. He stated that he realized that the Austrian position in this regard should be made known to the participating countries of OEEC through diplomatic channels. Nevertheless, he wished to stress to this Government the acute situation facing the Austrian Government.

I urged Dr. Gruber to make these views known to Mr. Foster of the ECA.⁷

4. East-West Trade: Dr. Gruber spoke at length about the difficult situation which Austria faces with regard to current Western policy toward East-West trade. He stated that it was necessary for Austria to procure grain in Eastern Europe. If East-West trade were curtailed, credits will be necessary to enable Austria to purchase grain in the Western areas. Dr. Gruber stressed that this problem was urgent in Austria and lay at the basis for all future economic planning. He expressed the hope that due consideration would be given to Austria’s special requirements. Dr. Gruber further pointed out that there was considerable pressure in Austria, particularly among the industrialists, to conclude a trade agreement with the Soviet Union. The Austrian Government has informed the Soviet Government that the proposed agreement can not be concluded until a settlement is reached on the German assets question and all other Soviet claims contained in the remaining unagreed articles in the Treaty. Dr. Gruber inquired what attitude the U.S. Government would take if Austria concluded the trade agreement with the Soviets. He stated that he would not take any action until the U.S. view was made known.

I informed Dr. Gruber that there was now in progress a series of discussions concerning East-West trade and that the objective was a situation which would work to the Western advantage and which would not increase the Soviet war potential. I assured him that due consideration would be given to the Austrian position. I further informed him that we would communicate to him through our Legation in Vienna the view of this Government concerning the conclusion of an Austro-Soviet trade agreement.

5. Post-ECA aid assistance: Dr. Gruber inquired whether any decision had been reached concerning a U.S. assistance program after the termination of ECA aid in 1952. He stated that continued assistance will be required for Austria, certainly as long as the Soviet occupation persists and until clarification is obtained on the entire question of East-West economic relations.

I informed Dr. Gruber that this question was currently under discussion both in Washington and with the Western Powers. I stated that we hoped to achieve soon a clarification of the relationship between the ECA program and the armaments program which has recently been agreed. I stated that in all probability assistance would be continued in one form or another but could not give him any definite information at this time. I informed him, however, that due consideration would be given to the Austrian requirements.

6. Austrian internal security: Dr. Gruber expressed the hope that tripartite arrangements would be made to facilitate the plans for the creation of an Austrian army. He stated that it was extremely difficult for the Austrian Government to deal with the British, French and U.S. Commanders on this question. He hoped that tripartite agreement would be reached whereby one Commander would be designated to speak for the three Western Powers. He has been informed by Sir Harold Caccia that the British element in Vienna would be willing to designate the U.S. Commander as tripartite spokesman. No approach has been made to the French. Dr. Gruber justified this request on the grounds of security and the highly classified nature of the negotiations. He stated that only one person had been designated by each political party to deal with this question in the Austrian Government and that the entire cabinet had not been informed.

I replied that this proposal would require serious consideration in as much as all three Western Powers had the same status in Austria and were mutually agreed to carry out the program for the Austrian security force. I stated that no formal arangement should be made to designate one Commander as spokesman but that this question should be discussed by the three High Commissioners in Vienna and local arrangements made to facilitate contact with the Austrian Government on the question of the Austrian army.

7. Increase in the Gendarmerie: Dr. Gruber stated that he had been requested by General Keyes and the British Commander, Major General M. M. Alston-Roberts-West, to increase the Austrian gendarmerie immediately by 2,400 men. He stated that this request raised a serious problem of financing since provision for the costs involved could not be included in the Austrian budget and presented to the Allied Council for approval. Such action would lead not only to a Soviet veto of the budget, but also to accusations by the Soviet member concerning Austrian military activity. He hoped that funds could be provided in some way, possibly through the use of counterpart schillings, so that provision could be made in the budget for some new item thereby releasing funds for the increase in the gendarmerie. He stated that the increase in the gendarmerie was necessary not only to maintain security at the present time but also to provide a means for training officers in the future Austrian army. He stated that the fire brigades could be expanded to provide training for enlisted men in the future Austrian army.

I stated that no immediate answer could be given but that we would look into the question and consult Mr. Donnelly after his arrival in Vienna to ascertain if by any device the necessary funds could be provided. Also told Gruber that arrangements would have to be worked out on the ground and he should consult Donnelly.

8. Occupation costs: Dr. Gruber stated that he had been informed by the British that the recent decision to increase the number of Western troops stationed in Europe would involve an increase in the British troop strength in Austria. The British Government has informed him that this will involve new requisitioning of housing in order to provide billets. It will also involve an increase in the occupation costs paid by Austria to the British and French. Dr. Gruber stressed the political and economic necessity for obtaining a renunciation by the British and French of their right to collect occupation costs. He stated that new requisitioning of housing would have major political effects in Austria. He stated that to his knowledge the British and French have done nothing with regard to relieving the burdens of occupation since the tripartite declaration in London of May 1950. He stated that if some provision could be made to provide an offset whereby the cost of occupation could be obtained from other sources by the British and French, the Austrian Government would be willing to provide funds to assist the British and French in constructing billets for the projected increase in troops. He stated that he had no definite proposals to make on this question.

I inquired whether the Austrian Government would regard the payment of occupation costs as part of their contribution for the common defense of Western Europe since Austria was not required to maintain a national army. Dr. Gruber stated that he realized the difficulties involved in obtaining British and French approval for his plan due to the increase in their own military budgets but hoped that some device could be worked out whereby schillings provided by the Austrian Government would not be called occupation costs. He stated that he believed the British would renounce their right to collect these costs if Austrian assistance could be provided for a building program. He stated that this problem was the most urgent and pressing political problem in Austria today.

I assured Dr. Gruber that we were studying this question and were continuing to discuss it with the British and French. I expressed the hope that we would be able to give him some definite proposal in the near future but that any arrangement must be worked out in relation to the entire program for European rearmament.⁸

George W. Perkins

1. Gruber had been in the United States since October 8 on an unofficial visit.
2. James C. H. Bonbright, Deputy Assistant Secretary of State for European Affairs.
3. Homer M. Byington, Jr., Director of the Office of Western European Affairs.
4. Gruber had stated that the Army, Legation, and ECA “had not always coordinated their activities in presenting instructions to the Austrian Government” and “expressed the hope that greater coordination would be established in the future.” Memorandum of conversation, October 9, not printed (763.001/10–950).
5. Walter J. Donnelly, Minister to Austria from September 20, 1950.
6. Frank A. Southard, Jr., Special Assistant to the Secretary of the Treasury and United States voting member on the Board of Executive Directors of the International Monetary Fund.
7. William C. Foster, Administrator of the Economic Cooperation Administration.
8. On October 13, the substance of this memorandum was transmitted to Vienna (repeated to London and Paris) as telegram 685, not printed (663.001/10–1350), together with the information that Gruber had also discussed the Austrian question with Secretary Acheson, Under Secretary Webb, Secretary of Defense Marshall, Under Secretary Lovett, Administrator Foster, and President Truman. Memoranda of conversation with Webb and Acheson, not printed, are in files 611.63/10–1150 and 763.00/10–1150. No records of Gruber’s discussions with the other officials have been found in Department of State files.