Foreign Relations of the United States, 1951, Europe: Political and Economic Developments, Volume IV, Part 2

No. 509

763.0221/9–2651: Airgram

The Secretary of State to the Legation in Austria ¹

secret

Washington, September 26, 1951.

A–218. At Washington mtgs FonMins agreed Aust occupation costs shld be discussed by their HICOM in Vienna. Presentation US case limited to outline of arguments and request in point one of Dept position paper WFM T–7/1a (sent Vienna Sept 5) Morrison replied flatly Brit required additional payments. Schuman said his Finance Min obdurate on this issue.²

You may wish to raise question with Brit and Fr HICOM and if their instrs have been recd to proceed on basis position paper. In tripartite discussions you shld present strongest case and seek to obtain as favorable settlement as possible. Arguments shld stress anticipated results of $105 million aid level, further reductions in Aust personnel (Dept not aware of Brit and Fr progress during and since take-over), unjustified uses of occupation costs such as purchases of Laenderbank stock (Legdes 345, Sept 4³), onus Brit and Fr will bear for increasing Aust burden at critical time, and unfavorable US reaction to indirect use of aid to pay occupation costs. Latter point particularly important in view of outspoken Congressional sentiments which have direct effect on aid legis and USFA budget. Reurtel 1082, Sept 21,⁴ Dept also disturbed by Brit and Fr restrictions on imports from Aust but doubts effectiveness of connecting this issue to occupation costs except as last resort since reduction soft imports logical step now.

In view Schuman and Morrison adamant views, not likely that Brit and Fr will modify their demands. It may be ultimately necessary, therefore, to accept their position to avoid public tripartite rupture in Allied Council, but all negotiating tactics shld be utilized to hold costs to minimum and clear exposition US position shld be made in AC.

Acheson

1. Drafted by Rutter and cleared with Colladay, Williamson, Towsley of ECA, and Perkins. Repeated to London and Paris.

2. At the fifth Tripartite Foreign Ministers meeting in Washington on the afternoon of September 13, the issue of occupation costs was briefly discussed. For text of the U.S. Minutes of that meeting, see vol. iii, Part 1, p. 1279.

   Point one of Department of State position paper WFM T–7/1a, August 22, reads as follows:

   “Achievement of tripartite policy objectives in Austria rests largely on the avoidance of severe economic disturbances. Austrian political stability is endangered by deterioration of the Austrian economy because:

   “a. The allotment of tripartite policy ECA aid to Austria will be cut from $200 million in 1950/51 to less than $145 million in 1951/52.

   “b. Austria’s deficit to the EPU, partially financed by the U.S., continues to be a drain on Austrian resources.

   “c. Austrian efforts to decrease export of strategic materials to the East have increased its trade deficit.

   “d. Recent wage-price agreement has increased the budgeted costs of the Austrian government by more than $100 million.

   “Under these circumstances British and French should associate themselves with the U.S. in paying all occupation costs.” (CFM files, lot M–88, box 158, WFM—Tripartite Talks, 1951)

3. Not printed.
4. Telegram 1082 informed the Department that the Legation and the ECA Mission both agreed that the Austrian trade deficit with the EPU area could be reduced if France and the United Kingdom were willing to accept more Austrian exports. (863.00R/9–2151)