740.00119 Council/4–1048: Telegram
The Acting Secretary of State to the United States Deputy for Austria at the Council of Foreign Ministers (Reber), at London
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1268. Ausdel 13. For Reber. In view of considerations pointed out Delsecs 1657–9,1 Dept believes you should endeavor to reach maximum extent of agreement on Article 35 and then proceed to other disagreed articles of treaty. We still do not know whether Sov intentions are to execute tactical maneuver for propaganda purposes or to attempt to reach agreement on reasonable terms and under these cir-circumstances feel it essential to continue negotiations until Sov purposes are revealed.
Consider that following should be basic approach: SovDel has offered to accept settlement of 150 million dollars and other delegations are willing to approve figure of 115 million dollars (15 million dollars to be derived from Austrian assets in ex-enemy countries). Since gap in positions of respective delegations has been reduced to 35 million dollars, USDel feels this represents considerable progress [Page 1493] and believes agreement can be reached somewhere in area between 115 and 150 million dollars for lump sum. As US has consistently maintained, USDel is willing to accept reasonable sum which is realistically related to Austria’s capacity to pay without impairment of Austria’s ability to achieve economic independence and to become a self-supporting nation as envisaged in the Moscow Declaration and the new control agreement.
USDel is certain that Austria can pay any such amount as 115 million dollars only if the terms of payment are generous and do not require Austria to surrender convertible currency which it does not possess or cannot afford to deliver without jeopardy to its economic position. With this in mind US Delegation is willing to make following proposal:
- (1)
- Lump sum payment of 125 million dollars (and this must be our limit) as compromise between figure of 100 million dollars in original French proposal and recent Sov offer of 150 million dollars.
- (2)
- Fifteen million dollars of this sum to be derived from Austria’s assets in ex-enemy countries.
- (3)
- Balance of 110 million dollars to be paid, preferably in graduated installments, over a period of 6 to 8 years with initial payment of 10 to 20 million dollars.
- (4)
- Initial 2-year moratorium after ratification. (You must insist on 2-year moratorium in order to defer initial payment until latter part of ERP period with prospect thereby of obtaining more favorable reaction in US to treaty providing for lump-sum obligation).
- (5)
- Austria has option to pay all or any part of obligation in goods, services or value added on Italian formula.
- (6)
- No claim to be made to interest on unpaid balance of lump sum.
- (7)
- Provision for appeal by Austria, whenever Austria cannot meet annual installment, to appropriate international body of experts, preferably connected with or designated by UN, with view to a finding by that body on Austria’s capacity to pay without external government assistance and to a grant of moratorium on such terms as these experts may recommend.
- (8)
- Provisos specified in sub-paras 3, 4, 6, 8 and 9 in Ausdel 9.2
- (9)
- Agreement on other unagreed articles of Austrian treaty.
Re your previous references to payment in convertible currency, we point out that after World Bank subscription paid, Austria will retain only about 30 million dollars out of gold pot share. No reasonable possibility can be seen here of a favorable balance of payments amounting to 20 million dollars for 1948, 1949 or 1950 so that no sum as great as 50 million dollars is in sight during this period. In any event, since major portion of 50 million dollar payment in two annual installments would be derived from Austrian gold reserve, this reserve might suffer total exhaustion leaving Austria in unsound financial position. Moreover US public would probably consider payment [Page 1494] from gold reserve during period of ERP assistance as especially objectionable. (Sent London as Ausdel 13 for Reber; repeated Vienna as 338 for Keyes and Erhardt).
Concessions western delegations indicated Delsecs 1657, 1659 acceptable assuming agreements reached on percentages will be subject to conditions specified above for settlement assets problem.
Foregoing will answer your Delsec 16623 which has just arrived.