gary, but also to treaty limitations imposed on the size of the armed forces which Rumania, and Hungary, and Bulgaria as well, may maintain.

11. GERMAN ASSETS

As noted earlier in this report, one of the most troublesome problems in connection with negotiation of the Austrian State Treaty has concerned the disposal of German assets in Austria. Since the Anschluss, the German Government and German nationals had acquired extensive properties in Austria-sometimes legitimately and sometimes by various methods of duress, seizure, and confiscation. At the Potsdam Conference in 1945 it was agreed that the Four Powers could satisfy their reparations claims against Germany in part from German external assets, including such assets in Austria. This right is confirmed in the first paragraph of article 22 of the pending treaty.

1

Difficulties relating to these German assets in Austria have arisen out of differing interpretations as to what might properly be included as such assets and differing policies relating to their treatment. Within the Soviet zone in Austria, the Soviet Government imposed a broad definition of German assets and applied a policy of taking such assets for Soviet use regardless of the impact of that policy on the Austrian economy. Indeed, Soviet exploitation was so onerous as to give rise to the belief that Soviet policy was directed at promoting the economic disintegration of Austria. Within the zones occupied by the Western Powers, however, the definition of German assets has been much more restricted and the policies applicable to the use of these assets have been conditioned by the underlying desire to maintain a strong Austrian economy.

Article 22 does not of itself confer any right to German assets that has not existed since the Potsdam agreement. It does, however, serve to transfer to Austria the rights of the Western Powers with respect to these assets.

The United Kingdom, the United States, and France by paragraph 11 transfer to Austria all property, rights, and interests held or claimed by or on behalf of any of them in Austria as former German assets or war booty. This action is taken by the Western Powers as a matter of policy in order to strengthen the Austrian economy and in partial compensation to Austria for her renunciation of claims against Germany (art. 23).

The Soviet Union, however, has agreed to surrender, at a price, its claims to certain German assets in Eastern Austria which it has been using since the war. The first four numbered paragraphs of article 22 set forth the assets which the Soviet Union has claimed in the past. The effect of paragraph 14 of this article and annex II of the treaty is to incorporate by reference that portion of the Austrian-Soviet memorandum of April 15, which provides that the oil enterprises covered by those first 4 paragraphs of article 22 are to be transferred to Austria in exchange for the payment to the Soviet of 1 million tons of oil per year for 10 years.

1 Section III of the Protocol of Proceedings of the Berlin Conference; A Decade of American Foreign Policy, pp. 39-40.

Paragraph 5 of article 22 describes the Soviet interests in the Danube Shipping Co. in Eastern Austria, which are also transferred to Austria in accordance with the Soviet-Austrian memorandum of April 15, at a cost to Austria of $2 million. All other Soviet property, rights, and interests held or claimed as German assets are to be transferred to Austria by paragraph 6, at a cost of $150 million, to be paid to the Soviet Union over a period of 6 years.

While the provisions of article 22 as they relate to Soviet disposal of German assets show a singular disregard of the interests of Austria, they are a great improvement over earlier Soviet demands. Article 35 of the earlier draft treaty, for example, would have entitled the Soviet Union to a substantial portion of Austrian oil properties over a 30-year period and to the assets in perpetuity of the Danube Shipping Co. It should be noted in this connection that article 22 was one of the last articles upon which agreement was reached at Vienna. Until the last moment the Soviet Union was unwilling to accept clauses in article 22, which would incorporate by reference those provisions of the Austrian-Soviet memorandum which had the effect of modifying article 22 in such a way as to avoid the possibility that it might later be used by the Soviet Union as a basis for assertion of a legal right to claim assets which it had agreed to surrender by the bilateral memorandum of April 15.

12. PROVISIONS RELATIVE TO CLAIMS

The unique position of Austria during the war and her enforced relationship with Nazi Germany has given rise to an unusually complex series of claims. Thus, there are Austrians with claims against Germany and Germans with claims against Austria; there are United Nations nationals with claims against Germany relating to property in Austria, and with claims arising out of the treatment in Austria, under Nazi German auspices, of minorities. Moreover, some of the German assets that were taken over by the Soviet Union were in part owned by nationals of the United Nations.

In order that the Senate might have before it an authoritative statement on the matter of private claims, the committee asked the Department of State to supply the committee with a memorandum on this matter. The text of the memorandum follows:

Article 25 provides for the restoration of American property rights and interests in Austria. The provisions of article 25 also apply to other United Nations which were at war with Germany. The terms of this article are generally similar to the provisions on this subject of the peace treaties with Italy, the Balkan former enemy nations, and Japan, except with regard to compensation. No specific obligations are laid on Austria with regard to compensation for property lost or damaged during the German occupation of Austria, since it was felt that these claims were the responsibility of Germany rather than Austria. However, the article does contain an undertaking on the part of Austria to extend any war-damage compensation granted Austrian nationals to American nationals

having property in Austria. The United States Government has also received assurances from the Austrian Government that United States interests in property included in the German asset settlement will be protected and fair compensation granted in cases where property cannot be returned.

Recommendations have recently been made by the executive branch to the Congress, in connection with the proposal for a limited return of German assets in the United States, for legislation to provide compensation for Americans having wartime claims against Germany. These recommendations, which were transmitted in letters from the Secretary of State to the Vice President and the Speaker of the House, dated June 6, 1955,1 would provide compensation for United States nationals whose property in Austria was lost or damaged during the war for reasons attributable to German action.

CLAIMS AGAINST THE UNITED STATES

Article 24 provides for a general renunciation by Austria of claims against the United States arising out of the war and the occupation. This type of provision is customary in treaties dealing with war problems and comparable provisions have been included in the various peace treaties.

CLAIMS OF PERSECUTEES

After the German occupation of Austria, large numbers of persons who were Austrian nationals or who had taken refuge in Austria were persecuted by the Nazis because of their religion or racial origin. Under article 26, property of which these individuals were deprived will be returned to them if this has not already been done. Where return or restoration is impossible, compensation will be granted on the same basis as is granted Austrian nationals in respect of war damage. Property of organizations and communities of such persons which have ceased to exist and of persons who left no heirs will be transferred to agencies to be designated by the four Allied Governments to be used for relief of victims of Nazi persecution.

AUSTRIAN-GERMAN CLAIMS

Under article 27 of the treaty, Austrian property in Germany will be returned to Austria in its existing condition. Austrian claims against Germany arising during the German occupation of Austria are waived by article 27, but Austria will receive under article 22 German assets in the western zones of Austria and the western sectors of Vienna. These assets will partially compensate Austria for her claims against Germany and will in effect place Austria in the same position as other countries occupied by Germany whose claims against Germany were dealt with in the Paris Reparations Agreement of 1946 and the London Debt Settlement Agreement previously approved by the Senate.

13. ECONOMIC EFFECTS OF THE TREATY

There is little doubt but that the Austrian State Treaty will have a heavy impact upon the Austrian economy. On the one hand, it imposes burdens on Austria. For some 10 years Austria will be making payments to the Soviet Union which will average over $30 million per year, roughly 5 percent of the current Austrian budget. Moreover, Austria will be required to devote part of its future budgets to building an Austrian army. At the same time, some sources of dollar exchange will be lost to Austria as a consequence of the withdrawal of the forces of the Allied Powers.

On the other hand, Austria will receive economic benefits from the

1 See Cong. Rec., June 14, 1955, pp. 6872 ff.

Agreement of Jan. 14, 1946 (TIAS 1655; 61 Stat., pt. 3, p. 3157); also, A Decade of American Foreign Policy, pp. 977-988.

3

Agreement of Feb. 27, 1953 (TIAS 2792; 4 UST 443).

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transfer of former German assets, from increased tourist travel as the result of the end of the occupation, and from an improved climate for private investment.

The Department of State has concluded that-

estimates indicate that the Austrian economy, now operating at about 87 percent of its industrial capacity, should be able to bear the burdens of the treaty without serious disruption to its economy.

Secretary Dulles, in testimony before the committee, stated that-assuming that the general world economy continues on approximately the present basis, it is estimated that Austria will, without any abnormal outside assistance, be able to carry on under this treaty

"It is not contemplated," he added, "that there will be any occasion to grant [United States] economic aid to Austria."

(a) Austrian trade

Article 29 of the treaty deals with post-treaty trade. It provides that pending the conclusion of commercial treaties, during a period of 18 months from the coming into force of the treaty, each of the United Nations shall on the basis of reciprocity receive unconditional most-favored-nation treatment with respect to import, export, and internal taxes. It also provides that Austria is not to make any arbitrary discrimination against goods originating in or destined for any territory of any of the United Nations.

The committee was concerned at the extent to which Austrian trade might be oriented toward the Soviet Union as a consequence of the future drain of goods into the Soviet Union in connection with the provisions of article 22. Not only will there be oil shipments at the rate of 1 million tons annually for 10 years, but there is an important question as to the type of goods to be shipped to make the required payment to Russia of $150 million over a period of 6 years.

At the present time negotiations are underway between Austria and the Soviet Union to determine the nature and quantity of goods that will be involved in these shipments. Since Austria has been prohibited from manufacturing military equipment for the past 10 years, and does not produce strategic goods in significant quantities, it does not seem that substantial quantities of strategic shipments to the Soviet Union are likely to occur.

At

Nevertheless, as Secretary Dulles observed to the committee, the treaty from our point of view "is not perfect in that respect.' the same time it does have the effect of greatly diminishing the degree to which the Austrian economy has been bound to that of the Soviet Union since the war.

The practical choice that we faced

said the Secretary of State

was whether, for example, to go on with the Russians getting 3 million tons of oil (per year as has been the case since the war) or changing to a situation where they would get only 1 million tons of oil. Obviously the latter was better than the former.

The committee expresses the hope that Austria will continue its participation in organizations moving in the direction of the economic and political integration of Western Europe. The Congress has reiterated its belief many times in the past that a strong, healthy Western European economy depends largely upon the economic and political integration of the free nations of Western Europe. The trend in that direction which was given tremendous impetus by the Marshall plan should not be interrupted or interfered with by the conclusion of the Austrian State Treaty.

14. REFUGEES IN AUSTRIA

Members of the Committee on Foreign Relations were much concerned during final negotiations of the treaty that steps be taken to eliminate article 16, which related to refugees and which had appeared in earlier drafts of the treaty. That article, originally designed to deal with the serious problem in Austria of displaced persons and refugees, contained provisions similar to those in other agreements which have been used as a basis for seeking forced repatriation to the Soviet bloc of some refugees and escapees.

The former article 16 has been dropped from the treaty. While as of January 1, 1955, there were an estimated total of more than 200,000 displaced persons, refugees, and aliens in Austria, only some 36,000 are non-German-speaking and only 7,500 of this category are in camps. It is these non-German-speaking people, not easily assimilable in Austria, who constitute the main problem for the future. They are the beneficiaries of Austrian legislation which provides minimum standards of care and protection. It is anticipated that those international agencies which have been assisting in their care in the past will continue to give help to Austria in dealing with this problem.

The committee asked the Secretary of State whether he thought there was any danger that pressure might be used against the Austrian Government by the Soviet Union to force the return of any of these refugees. Mr. Dulles replied:

I do not think so. Of course, that was the fear which we entertained under the old article 16, and it was because of that fear that the Soviet would use coercive measures which would frighten these people and maybe terrorize them into coming back, that we were able to obtain, after some difficulty, the elimination of that article 16. I think it is all right the way it now is, and I think that the sturdy qualities that have been shown by the Austrian Government give adequate assurances that they will not lend themselves to any coercive measures by the Soviet Union which would in fact be a violation of the due sovereignty and independence which the Austrian nation is winning back for itself.

15. EFFECT ON FUTURE UNITED STATES OPERATIONS IN AUSTRIA

Restoration of Austrian independence and the withdrawal of United States occupation troops will basically alter United States relations with Austria. This change will affect certain United States operations.