164. Memorandum of Conversation

//Source: Department of State, Secretary's Memoranda of Conversation: Lot 65 D 330. Confidential. Drafted by McBride and approved in S on March 8.

Washington, February 14, 1961.

SUBJECT

US-Austrian Relations

PARTICIPANTS

The Secretary

Ambassador Wilfried Platzer, Austrian Embassy

Mr. Robert H. McBride, WE

The Austrian Ambassador opened the conversation by saying that general US-Austrian relations were good and that there were no real problems remaining now that the Vienna Memorandum/1/ had been settled. He said that the Austrian Government did hope that the US would ratify the Austrian Assets Treaty but said he did not think his Government would press this claim under current circumstances because the Austrians were also delinquent in settling the Jewish claims matter. Ambassador Platzer then said that his Government hoped if the Geneva Nuclear Test Ban negotiations were to lead to the conclusion of an agreement, that the US Government would support Vienna as the location for the Nuclear Test Ban Control Agency. He noted that the British Government had agreed to Vienna, as had the previous US Administration. Therefore, he hoped that the new Administration would also agree on Vienna. The Secretary said that he saw no reason to oppose location of this institution in Vienna and said that the Austrian request seemed a reasonable one.

/1/For text of this memorandum, May 10, 1955, outlining protections afforded by the Austrian State Treaty with respect to the United States and the United Kingdom, see 7 UST 803.

The Secretary then inquired as to the members and status of Hungarian refugees in Austria. Ambassador Platzer said there were about 18,000 still there and that these were mostly integrated into Austrian life. It was thought that around 10,000 would remain permanently. He noted that in 1956 this had been a great problem when there had been 200,000 Hungarian refugees in Austria. The Secretary noted that he had been in Vienna at that time and had gone to Budapest with the International Red Cross.

Ambassador Platzer then said that his Government hoped there could be a bilateral PL 480 loan/2/ to cover housing projects which the Austrians wished to undertake. He said that this was now in the process of being drafted and that we would be consulted further on this question. He said the Austrian proposal would be to use counterpart funds accruing from PL 480 corn. He thought the total cost was in the vicinity of $12 million, of which $1.6 million would be from US sources.

/2/For text of P.L. 480, the Agricultural Trade Development and Assistance Act, enacted July 10, 1954, see 68 Stat. 454.

The Secretary then noted that we had an extremely experienced and distinguished diplomat in Vienna and we expected him to stay on there.

The Austrian Ambassador then reviewed the South Tyrol problem briefly. He noted that this had been raised in the United Nations General Assembly last fall because up until that time there had not been any progress achieved./3/ He noted, furthermore, that the Italian and Austrian Governments started from quite different premises in approaching the question. He said that the Italians spoke only of the implementation of the existing de Gasperi - Gruber agreement/4/ whereas what the Austrians had in mind was local autonomy in the Province of Bolzano. He said the Austrians were continuing to undertake bilateral talks with the Italians because this was the sense of the UNGA resolution. He added, however, that the UN resolution spoke of seeking a settlement by other peaceful means if it were not possible through direct bilateral talks.

/3/The Special Political Committee of the General Assembly heard the issue at a special 10-day October 1960 session. On October 27, it adopted a resolution urging Austria and Italy to resolve their differences through direct negotiations. The General Assembly approved the resolution on October 31. For text, see U.N. Res. 1497 (XV).

/4/For text of the de Gasperi - Gruber Agreement, signed on September 9, 1946, and appended to the Treaty of Peace with Italy, signed in Paris on February 10, 1947, see 61 Stat. 1245.

The Secretary said he thought a solution of this problem would take patience and a long time.

The Secretary inquired as to whether there were any contacts in Vienna with Eastern Europe through students, etc. Ambassador Platzer said there were not many Eastern European students in Austria but noted that some contacts did take place during the Vienna Trade Fair. He then referred to Austrian efforts in the cultural and other fields in underdeveloped countries. The Secretary said that the help of all the European countries to the underdeveloped countries is extremely useful and thought that countries such as Austria should supply experts and technicians which were even more in short supply than money.

Ambassador Platzer then referred to the Common Market - EFTA problem which he said was a serious one for Austria. The Secretary said that we, of course, did not know what the outcome of this problem would be but that we hoped the OECD would be of assistance. He thought the presence of friendly outsiders such as ourselves in the OECD might be useful and that an ultimate solution depended on time, patience, and hard work. Ambassador Platzer said that Austria's problems were made acute by the fact that fifty percent of her trade was with the Common Market countries whereas only twelve percent was with the other six EFTA countries. Italy and Germany were the main trading partners of Austria. He added that Austria also imported wheat, cotton, and corn in large quantities from the United States. The Secretary inquired if tourism was the main source of dollar income for Austria. Ambassador Platzer said that Austria's principal exports were iron and steel products and other industrial products. He said that tourism did definitely assist in the balance of payments field. For example, Austria imported about $100 million a year in products from the United States while exporting only about $50 million to us. Tourism largely made up this difference so that the Austrian dollar position was not unfavorable.

165. Memorandum of Conversation

//Source: Department of State, Secretary's Memoranda of Conversation: Lot 65 D 330. Confidential. Drafted by Knight and approved in S/S on October 25.

Washington, October 2, 1961.

SUBJECT

South Tyrol

PARTICIPANTS

Dr. Ludwig Steiner, Austrian Under Secretary for Foreign Affairs

Dr. Kurt Waldheim, Director of Western Political Affairs, Austrian Foreign Ministry

Dr. Wilfried Platzer, Ambassador of Austria

The Under Secretary

WE--Mr. William E. Knight, II

State Secretary Steiner and Ambassador Waldheim called on the Under Secretary in the course of a ``get acquainted" trip to Washington. On the subject of the South Tyrol, Dr. Steiner said that the Austrian Government hoped that a final settlement acceptable to the people of the area of the South Tyrol would result from the work of the Italian study commission recently established under the aegis of the Italian Ministry of the Interior. However, the work of this commission could hardly be completed before next March at the earliest. In the meantime, the Austrian Government desired an agreement with the Italians on peaceful methods of settlement to be adopted should the commission fail to achieve a solution. Foreign Minister Kreisky had made two specific proposals in this regard to Foreign Minister Segni in New York:/1/ 1) that a mediator be chosen to make recommendations on a procedure for peaceful settlement; or 2) that a ``conciliation and arbitration" committee be set up to deal with the substance of the dispute. He said there had been no response from the Italians as yet to this proposal but that the Austrian Government would be in further bilateral touch with the Italians before the October 23 deadline when the ``truce" on the General Assembly debate would expire.

/1/The Foreign Ministers met during the 16th session of the U.N. General Assembly.

166. Airgram From the Embassy in Austria to the Department of State

//Source: Department of State, Central Files, 661.63/12 - 2261. Confidential; Noforn. Drafted by Matthews.

Vienna, December 22, 1961.

A - 299. Subject: Kreisky on Austrian-Soviet Relations and Common Market. I had over an hour's talk with Kreisky yesterday (partly reported in mytel noforn 1094)/1/ devoted almost entirely to Austro-Soviet relations and Common Market negotiations. He said he would send me copies of the two speeches he had made in Finland during his recent visit. I said I had already read with considerable interest his first speech on Austrian neutrality transmitted by our Embassy in Helsinki. He said that he felt his second speech was ``even more anti-Communist" than the first though the ``young and inexperienced Austrian reporters" seemed to have misinterpreted some of his major points. It was much more important for him to make those speeches in Finland with Russians present than here in Austria.

/1/Telegram 1094, December 21, reported on Matthews' discussion with Kreisky over the Soviet note on Austrian association with the EEC. (Ibid., 375.42/12 - 2161)

He then referred to his remarks concerning possible negotiations with ECE which have been ``misunderstood" in some circles here. ``After sending our note requesting negotiations with the Common Market we/2/ must make some counter gesture to restore the balance with the Russians" he said. ``The ECE is an organization to which the Russians belong but in which the West can outvote the Soviet bloc. The United States is likewise a full member. To talk about trade or other economic questions in that forum seems to me at least harmless even though it is mostly 'bla bla'; it might even in the long run produce some results." In talking to Avilov latter had complained that Austria only dealt with NATO or Western organizations, why not make some approach to CEMA. Kreisky replied that because of fact CEMA has many political provisions and implications with which Austria could not be associated and its whole system is based on state trading and controls with which Austria could not be associated, this was impossible. He, Kreisky, suggested ECE as a possible forum to which both United States and Soviet Union belonged and he saw no objection to discussing Soviet proposals in that forum. Avilov asked whether Austria would discuss all Soviet proposals. Kreisky replied not all but those which seem ``reasonable". Avilov, he said, seemed interested.

/2/Austria applied for EEC associate status on December 15.

In other words, Kreisky clearly considers his ECE gesture as a demonstration of Austrian neutrality between the two blocs which might lessen future Soviet pressure and cost Austria nothing tangible. He hoped we would understand his motivation and the need for some such gesture.

He reiterated (my airgram A - 272)/3/ the firmness of his insistence that Austrian negotiations with the Common Market must go on. This was not only against the strong opposition of Gorbach, Bock, etc. as well as Austrian industrialists who were opposed to taking any steps at this time in fear of offending the Soviets, but they had even sent some of his Socialist friends to try to persuade him to agree. He said he had made it quite clear that if the announced note were not sent he would resign and publicly explain the reasons. It would have been a fatal invitation to the Russians to step up their pressure. During his absence in Finland, he said, ``they made two changes weakening the original text in our note to the EEC which I would not have agreed to had I been there, but they were very minor ones." The Govt had also agreed to substitute the word ``arrangements" for ``association", though he said the Russians of course ``really understand the distinction between association and membership, whatever they may pretend to the contrary." I inquired concerning a current rumor that the Chancellor and some others in government circles would now like to withdraw the note and he said this was not true.

/3/Airgram A - 272, December 7, reported Kreisky's views on EEC association and Soviet pressures. (Department of State, Central Files, 374.52/12 - 761)

[1 paragraph (5 lines of source text) not declassified]

Matthews

167. Memorandum of Conversation

//Source: Department of State, Central Files, 763.56/3 - 3062. Confidential. Drafted by Sulser.

Washington, March 30, 1962.

SUBJECT

Possible Credits for Austrian Arms Purchases in the United States

PARTICIPANTS

Austria

Defense Minister Karl Schleinzer

State Secretary Otto Roesch

Dr. Wilfried Platzer, Ambassador, Austrian Embassy

United States

Mr. George Newman--G/PM

Mr. William Robinson--G/PM

Mr. Philip Barringer--Department of Defense

Mr. Samuel Cross--Treasury Department

Mr. Jack A. Sulser--WE

After opening the meeting, Mr. Newman called on Mr. Cross to comment on the practicability of the Export-Import Bank as a source of credit for foreign arms purchases in the United States. Mr. Cross said the EXIM Bank is a possibility which should be explored, but he said the Bank does not usually operate in the military field. Therefore, there is little past history which would be useful in the present consideration. Ordinarily the Bank extends credit for a maximum of five years, but somewhat longer terms may be possible.

The Minister said the Austrian Government had agreed on an increase in the military budget, but the rate and extent of the increase would not be adequate for the quick buildup which is necessary. He stated that it was his hope to obtain credit under the terms of the Mutual Security Military Sales Program although it would be necessary to give it another appearance. Mr. Newman said we would do our best to meet the Austrian need. It is, however, a problem which requires further study. He assured the Minister that we will seek to come as close as we can to the requested solution.

The Minister repeated that it is his aim to acquire the equipment over a three-year period, with payment stretched over a ten-year period. In addition to ammunition, the Minister intends to acquire modern tanks, communications equipment, and spare parts. Mr. Newman inquired what the difference in interest rates might be from the various sources. Mr. Cross stated that, since there is no precedent, it would be impossible to state what the EXIM Bank rate might be. The recent rate for export promotion credits, which would be the most comparable, was 5-3/4 per cent. However, the terms would, of course, depend upon further negotiations. The Minister interjected that such an interest rate would be unacceptable to the Austrian Government as a basis for negotiations. He stated frankly that he had hoped for no-interest credit under MSMS. Mr. Barringer responded that the current MSMS credit rate was 3-1/2 per cent. Non-interest terms applied only to so-called cash sales, for which payment could be made in installments up to a maximum of three years. Mr. Newman said these were questions which could be studied further and negotiated later.

The Minister inquired whether, as a minimum, the way could be indicated by which a solution to the problem might be achieved. Mr. Barringer replied that, following the meetings in the Pentagon this morning, Defense Department attorneys had been in touch with both the Treasury and the EXIM Bank. He had been assured that, if terms could be negotiated with the Austrian Government, the problem of processing all documents and other formalities through the EXIM Bank could be managed. Mr. Newman commented that the Pentagon had obviously lost no time in exploring the matter. He assured the Minister that we understood and appreciated the Austrian position. The Minister expressed his thanks.

It was suggested that representatives of the interested offices meet in the near future with Dr. Edgar Plan, Financial Counselor of the Austrian Embassy, to continue the discussion. The Defense Minister and Ambassador concurred in this proposal.

168. Memorandum of Conversation

//Source: Department of State, Central Files, 763.56/4 - 562. Confidential. Drafted by Sulser.

Washington, April 5, 1962.

SUBJECT

Austrian Request for Arms Credit

PARTICIPANTS

Dr. Wilfried Platzer, Ambassador, Austrian Embassy

Dr. Robert Ladner, Counselor, Austrian Embassy

WE--Mr. Knight

WE--Mr. Sulser

The Ambassador inquired about the prospects for approval of Minister Schleinzer's request for a $50 million credit to purchase US military equipment. Mr. Sulser replied that a further meeting of representatives of interested offices had taken place on April 3, and we were proceeding to clarify some of the problems involved. We hoped to be in a position to meet with Dr. Plan and Colonel Rainer soon. We were somewhat concerned that the Minister might have gotten the impression from the sympathy and encouragement which he encountered on all of his calls that the matter was simpler than in fact it would be. The discussion on April 3 had revealed that there were several substantial problems to be solved.

The Export-Import Bank appeared to be willing in principle to act as a ``front" or go-between to give the transaction a commercial appearance. This might be relatively uncomplicated as far as items such as new tanks and communications equipment, which could be procured directly from the manufacturers. Certain items, however, such as ammunition, which could probably be procured only from the Defense Department, would present a problem of documentation. The Export-Import Bank would probably be unable to accept title to any of the items involved in the transaction. Therefore, if Ex-Im is to serve as the channel, some means of ``commercial" documentation will have to be found for items procured directly from the Defense Department.

The problem of financing, of course, is the major hurdle. If Ex-Im and/or private sources are to be used, the total cost, including guarantee charges, would probably not be much under 6%. Military assistance funds which would bear lower interest rates are extremely scarce.

Therefore, it seems likely that the transaction could not be realized in one piece with a single source of financing and a single agreement. Particularly because of the financing problem, it might even be necessary to space the various pieces of a ``package deal" over a period of time.

Provided that the total cost could be held to a reasonable figure and the commercial appearance maintained only through several apparently separate transactions, the Ambassador said he thought this would be acceptable to the Austrian Government. Furthermore, since delivery of the equipment was desired only over a three-year period, he also thought it would be acceptable to have the various agreements spread over a similar period of time. He said the Austrian Government sincerely appreciated the obvious desire of the U.S. Government to meet the Austrian request.

169. Telegram From the Embassy in Austria to the Department of State

//Source: Department of State, Central Files, 763.13/4 - 2662. Confidential. Repeated to Bern, Brussels, Paris, Stockholm, The Hague, Bonn, Copenhagen, Lisbon, Helsinki, London, Luxembourg, Olso, and Rome.

Vienna, April 26, 1962, 5 p.m.

1765. Paris for Embassy and USRO. Brussels for Embassy and USEC. During call on Secretary General Bielka today, I remarked I hoped Chancellor is being well briefed for US visit on American views on neutral association with Common Market. He said papers had been prepared and Austrians welcomed opportunity to present their own views and seek answers to certain questions. He had seen press reports of Hallstein's talks with Under Secretary Ball/1/ for example and found it difficult to see even if ``typical Austrian products which are just magnesite and petit point" of very little importance are granted tariff concessions by CM, why important competitive products like steel and machinery would be given CM concessions if these are to be generalized to all GATT countries.

/1/President of the EEC Commission Walter Hallstein visited Washington April 9 - 12 for talks with senior U.S. officials. A memorandum of an April 9 conversation among Rusk, Ball, and Hallstein is ibid., Secretary's Memoranda of Conversation: Lot 65 D 330. Other documentation on the Hallstein visit is ibid., Central File 375.800.

He also felt there is still American misunderstanding as to Austrian preparedness to participate fully in non-trade economic aspects of Rome treaty, for example freedom of labor or capital movements and social welfare standardization, and he welcomed opportunity for Austrian personal presentation to Ball.

Bielka said general agreement had been reached at the expert level during harmonious Geneva talks on definition of limitations imposed by neutrality on Common Market participation, and he expected paper thereon would be approved by Ministers at Stockholm. Agreement was likewise reached on very general paper setting forth objectives of three neutrals and contributions they expected to make in Common Market arrangements. This will likewise come before Ministers at Stockholm.

There have been suggestions from Brussels that the CM commission could meet with representatives of three neutrals in May for exploratory talks. Bielka feels strongly that this should be preceded by opportunity for Ministers of three neutrals to present their general ``statement of intent" to Common Market Ministers. Statement will be designed reassure Soviet bloc re maintenance neutral status but at same time assure West of neutrals desire participate maximum possible degree in all economic aspects Rome treaty.

Austrians had approached both Schroeder and Fayat during their recent visits here and found them both receptive to this idea. Similar approaches are now being made to Italians, Dutch and French. He sensed certain embarrassment on part of CM members that nearly six months have passed without any gesture toward neutrals by CM other than acknowledgment of December note.

Austria recognizes it cannot expect real negotiations until conclusion of British talks but does feel it important to make such an approach before summer holidays. It fears also that any exploratory talks by experts not preceded by Ministerial presentation would arouse further Russian suspicions and opposition where Ministerial presentation would confirm and clarify December approach.

Matthews

170. Editorial Note

In January 1962, Foreign Minister Kreisky sounded out Ambassador Matthews regarding the possibility of a visit by Prime Minister Gorbach to Washington for a meeting with President Kennedy. (Airgram A - 351 from Vienna, January 23; Department of State, Central Files, 033.6311/1 - 2362) Initially, the United States sought to postpone a visit until 1963 because of President Kennedy's extremely full schedule. However, in an April 2 memorandum to the President, Secretary of State Rusk recommended inviting Gorbach to Washington May 2 - 4 for a private visit in order to clarify U.S. views on neutral states' participation in the Common Market. (Ibid.) The White House approved this recommendation on April 17.

Gorbach met with Under Secretary Ball and with President Kennedy on May 3 on Austria's relationship with the EEC. He also held discussions with Kennedy regarding the Berlin crisis. The memoranda of these conversations relating to the EEC are ibid., 763.00/5 - 362. The memorandum of conversation covering the Berlin issue is ibid., Presidential Memoranda of Conversation: Lot 66 D 149. For text of the joint communique issued at the end of the Kennedy - Gorbach talks, see Department of State Bulletin, May 21, 1962, page 832. For a summary of the visit, see volume XIII, pages 88 - 89.

171. Telegram From the Embassy in Austria to the Department of State

//Source: Department of State, Central Files, 763.56/5 - 1462. Confidential.

Vienna, May 14, 1962, 7 p.m.

1889. Reference recent US visit DefMin Schleinzer concerning possible credits arms purchases.

As reported separately by military attache, Schleinzer feels follow-up to Washington discussions not sufficiently energetic. We get impression he feels this due at least partly to some foot-dragging by Aust Embassy which of course reports to Ministry headed by member Socialist Party. Under pressure from DefMin to do something, Aust G - 4 General Mitlacher wishes depart for States soon as possible and in any case before end of month and has requested MA accompany him.

We feel present urgency for action has basis in Schleinzer's desire obtain political credit for concluding favorable deal with US, in time to be of value November elections. Cabinet approval for foreign credit must be secured, in face as yet unpredictable Socialist reaction. In view long summer recess, Schleinzer's inability make firm proposals to Cabinet next few weeks would necessitate delay until late fall, nullifying possible election value for him and People's Party and forcing consideration at worst possible time--during perennial fall budget crisis.

Schleinzer considering requesting credit approx $50 million. Ideally would prefer arrangement whereby MSMS interest rates and terms could be extended under cover of a commercial financial institution. Comparable rates and terms under EXIM Bank auspices might be acceptable, although politically less desirable. Direct granting of credits by US Govt would, as Dept aware, not be acceptable. GOA has already taken decision not accept govt-to-govt arrangement because of fear of Sov reaction during period Austrian negotiation with Common Market. Schleinzer insists minimal interest rates necessary to give supporters of plan reasonable chance secure approval of an undertaking involving possibly strong political opposition by Socialists.

Emb strongly urges definite US offer be made soon, even if impossible comply fully with conditions Austrians have set. Meanwhile Mitlacher informed that US visit seems pointless at this time, until specific US proposals received. Would appreciate progress report on recent talks in Washington. We still hold view, however, that Washington should continue be locus for continued negotiations, despite Schleinzer's suspicions re possible foot-dragging by Aust Emb and FonMin./1/

/1/In telegram 2121, May 16, the Department of State responded that the Export-Import Bank had made an opening offer. Delay in getting the talks started had been due to the technical problems of putting together a loan package. The Department also cautioned: ``Although interested agencies at highest levels sincerely desire satisfy Aus request, outcome negotiations cannot be anticipated." (Ibid., 763.56/5 - 1462)

Matthews

172. Telegram From the Embassy in Austria to the Department of State

//Source: Department of State, Central Files, 763.56/5 - 1862. Confidential.

Vienna, May 18, 1962, 1 p.m.

1933. Proposed Austrian defense credit.

Kreisky indicated to me May 17 his personal endorsement proposed US credit for strengthening Austrian defense force. Said he felt it essential Austrian military be of strength to serve as credible deterrent against threats or military probing adventures on part Austria's Communist satellite neighbors, though he had no illusions re resistance to any major Soviet attack.

He urged extension US credits on favorable terms since it was politically impossible increase defense budget enough to allow procurement on pay-as-go basis. Budget would be increased in future by gradual increments which would be adequate repay credits plus maintaining current defense expenditures. He said loans being requested in Sweden and perhaps other Western countries as well as US.

I urged reconsideration Austrian coalition decision not to request US credits under MSMS. I referred to published exchange of notes of August 9, 1957 between US and Austria concerning purchase of military equipment./1/ Since it must be assumed Russians already well aware this exchange of notes, as well previous role US as principal supplier Austrian military, perhaps direct procurement by Austria through MSMS procedures would not create problems which GOA had anticipated (Embtel 1479)./2/ Kreisky was not aware or did not recall note exchange. I have sent him copies and pointed out Austrians are already receiving some Austrian schilling 300 million of military equipment under this exchange of notes and he has promised take another look at matter. We have also advised Schleinzer of above conversation and emphasized administrative difficulties of trying to get credits outside MSMS. Schleinzer was approached prior Washington trip with suggestion that note exchange might be basis for extension proposed credit, but was not then willing reopen question in face adverse coalition decision even though latter was made in ignorance of notes.

/1/For text of these notes, exchanged August 9, 1957, see 8 UST 1241.

/2/Dated March 14. (Department of State, Central Files, 398.1901 - IAEA/3 - 1561)

ARMA saw Schleinzer this morning and received assurances that Schleinzer would meet with Kreisky morning Monday, May 21 to explore possibility getting GOA agreement on requesting US credit on MSMS basis. ARMA, Mitlacher and Small accompanying group plan depart for US afternoon May 22 and will be in Washington remainder week. We will advise if possible prior their arrival results Kreisky - Schleinzer talks and change if any in Austrian position. Meantime, suggest appropriate Washington agencies continue plan talks around proposals outlined Deptel 2121./3/

/3/See footnote 1, Document 171. In telegram 1962, May 23, the Embassy reported that Austria had agreed to conduct negotiations on the basis of the exchange of notes of August 9, 1957. (Department of State, Central Files, 763.56/5 - 2362) On May 24, Ambassador Platz-er met with Sulser for discussions on the modalities of an Austrian military purchase agreement. (Ibid., 763.56/5 - 2462)

Matthews

173. Telegram From the Embassy in Austria to the Department of State

//Source: Department of State, Central Files, 763.56/6 - 262. Confidential.

Vienna, June 2, 1962, 2 p.m.

2043. Pass Defense. Schleinzer informed ARMA yesterday he concerned negotiations defense loan not proceeding well. ARMA explained that costs, delivery items and delivery dates all basically worked out and only outstanding problem is financing. ARMA stressed that world-wide US obligations and resultant effect on available appropriated funds required that basic Austrian approach be made through EXIM Bank. Referred meeting Harrer of Finance Ministry Washington with Linder 7 June.

Schleinzer told ARMA of importance US credit to strengthening GOA defenses and of significance of political victory in securing GOA approval negotiate for loan in magnitude dols 50 million. He frankly stated his worries re future of defense forces if current attempts at securing credit fail.

ARMA reminded Schleinzer of Secretary McNamara's assurances to him and reiterated US Government doing everything possible assist Austria securing necessary US credits. Schleinzer stated that if it appears negotiations likely collapse he wishes make direct written appeal to Secretary McNamara. In meantime he requested ARMA send urgent telegram expressing his concern.

It apparent in Schleinzer - ARMA talks, and later confirmed in Embassy talk with Harrer, that Schleinzer had not coordinated financial details with Finance Minister Klaus. Klaus apparently approved credit on assumption terms would be nominal or no interest with approximately 10-year repayment period. Schleinzer implied to ARMA that a credit approaching commercial terms had not been authorized by Finance Ministry.

Harrer in later conversation with Embassy officer stated Finance Ministry due to secrecy surrounding matter was not informed details preliminary negotiations. Finance Minister had indeed operated on assumption loan would carry no interest. As things now stand Klaus had not approved accepting credits under terms provided proposed US package. Harrer had prepared report for Fin Min based on info just received by him from Defense Ministry confirming that about four percent interest involved and repayment of about seven years. Claimed that such terms could not be approved by Fin Min. Harrer's report included certain recommendations for counterproposals which Fin Min had not as yet acted on. Harrer departing for US on assumption that counterproposals would be approved early next week and serve as basis negotiations. Implied he would have some sort of limited signing authority but could not at present be more specific about counterproposals. Embassy officer remarked that trip to US on assumption non-interest loan achievable would be waste of time. Harrer admitted this but reiterated suggested repayment period much too short and suggested interest rate considerably too high.

Embassy has been in frequent touch with Harrer, and upon return ARMA from US, outlined to him on 28 May general nature US proposals, including lack MSMS funds. We had assumed Fin Min Klaus fully informed on details negotations to date. Much of present confusion here undoubtedly derives from Schleinzer's failure keep his colleagues informed, as well as his ignorance financial matters. Understandably, Klaus wished secure most favorable terms possible, both for budgetary reasons and view potential controversial political aspects first Austrian defense loan since achievement sovereignty. Harrer departs Vienna today. He is knowledgeable Fin Min senior official who will provide financial expertise to Austrian negotiating team which has been lacking until now.

Deptel 2248/1/ just received. Concur in views expressed FYI, but urge door be kept open for continued negotiations, since strongly doubt Harrer will be able accept present US proposals. With view anticipating GOA objections, suggest, if possible, consideration formula such as price cutting which might have some effect as offset against contemplated rate of interest.

/1/Telegram 2248 to Vienna, June 1, reported that a military credit would be easier under the MSMS program and outlined the probable difficulties of securing the Export-Import Bank loan desired by the Austrians. (Ibid., 763.56/5 - 2362)

Porter

174. Telegram From the Embassy in Austria to the Department of State

//Source: Department of State, Central Files, 763.56/6 - 862. Confidential.

Vienna, June 8, 1962, 4 p.m.

2093. Pass Defense. People's Party official informed Embassy in confidence Defense Minister Schleinzer has received invitation visit Soviet Union but plans delay acceptance on grounds preoccupation with forthcoming elections. Embassy aware possibility such invitation since last fall when ARMA recommended US invitation to Schleinzer in order permit him avoid Soviet offer.

In light fact proposed US-Austrian defense loan possibility rather accurately reported local Communist press, matter will no doubt be raised not only during Schleinzer visit but also during Gorbach visit Moscow end this month.

Aside from equipment (now largely unusable) acquired from Soviets just after peace treaty, Austrians have since followed consistent policy making only token purchases from East bloc. At time visit several years ago, Soviet Defense Minister Malinovsky urged Austria request Soviet equipment. No action taken on this offer but it can be anticipated similar and perhaps more specific offer would now be made to Gorbach as countermeasure to present negotiations with US. Soviets will presumably make point Austrian reliance US as principal military supplier is not consistent neutrality, and will probably (perhaps mainly through Czechs or Poles) repeat attractive credit proposals we know have been made in past. Having gotten nowhere with Raab government on matter, they will now try hard test Gorbach's vulnerabilities.

We further confidentially informed by party official close to Gorbach that Chancellor uneasy about prompt utilization US defense credits if arranged, possibly because of forebodings about pressure Soviets will apply during Moscow visit. Perhaps source was simply forewarning us that our credit proposal would have to be sufficiently favorable to avoid easy rejection by Chancellor on purely financial grounds but in any case developments suggest some urgency in trying reach basic agreement with GOA soon as possible.

On other hand, Schleinzer told me at reception June 6 he not unhappy about his reports from Washington on status negotiations, and he felt progress being made.

Porter

175. Telegram From the Embassy in Austria to the Department of State

//Source: Department of State, Central Files, 763.56/6 - 1962. Confidential.

Vienna, June 19, 1962, 4 p.m.

2169. Reference: Department's telegram 2403./1/ Both Schleinzer and FinMin Klaus, whom I saw at reception last night, delighted with terms DOD offer embodied June 15 Nitze letter./2/ Both expressed deep gratitude for US efforts and understanding for difficulties involved in working out proposals which Austria could accept.

/1/Telegram 2403, June 18, reported on the status of negotiations over the loan. (Ibid., 763.56/6 - 1862)

/2/Not found.

Klaus said without reservation that ``he could afford" this proposal and would proceed immediately with internal implementation. GOA now intends send two-man team (one each from Finance and Defense Mins) to Washington in about ten days to complete details negotiations.

It obvious great load lifted from Klaus' mind by US offer. Embassy feels US defense credit to Austria will bring major long-range political benefit, and appreciates efforts all participating Departments.

Porter

176. Telegram From the Embassy in the Soviet Union to the Department of State

//Source: Department of State, Central Files, 033.6361/7 - 662. Confidential. Repeated to Vienna, London, Paris, and Brussels.

Moscow, July 6, 1962, 4 p.m.

36. Austrian Counselor (Karasek) who accompanied Gorbach throughout USSR visit/1/ reports Chancellor's party departed with final impression that (1) although USSR opposes Austrian membership in Common Market, it tacitly acquiesces in Austrian intention open negotiations with Common Market, but (2) reserves its position regarding whatever special arrangements Austria may be able to work out with Common Market.

/1/Gorbach visited the Soviet Union June 28 - July 4.

At Gromyko - Kreisky meeting on July 4, Kreisky read out several paragraphs of document Austria proposes to present to Common Market on July 28. Gromyko reportedly made no comment other than to say that Soviet position on Common Market already well known.

In discussions with Khrushchev, Gorbach took line that Austria's independence dependent upon its standard of living which in turn dependent upon export possibilities. Pointing out 55 per cent Austria's trade with Common Market, Gorbach said USSR should have confidence that Austria's relations with Common Market would be in strict conformity with its international obligations.

Khrushchev acknowledged Austria's need to trade, advised Gorbach to ``get your friends in the West to understand your position," but carefully refrained from committing USSR to any specific approval of Austrian approach to Common Market.

Final Austrian-Soviet communique published today's press was largely Austrian draft which Soviets accepted without making any suggestions for major changes or additions. Soviets privately expressed satisfaction with Gorbach's constant emphasis on his determination to follow in footsteps of Raab.

On basis public Soviet statements and detailed account from Karasek on private talks, appears USSR has retained freedom of action with regard to Austrian desire to develop relations with Common Market.

McSweeney

177. Telegram From the Department of State to the Embassy in Austria

//Source: Department of State, Central Files, 763.13/9 - 2762. Secret. Drafted by Stone, cleared by U and S/S, and approved by Tyler. Repeated to Brussels and USUN for the Secretary.

Washington, September 27, 1962, 7:43 p.m.

854. Following based on uncleared memcon./1/ Foreign Minister Kreisky called this morning on Acting Secretary Ball and held cordial and frank discussion question Austrian association with Common Market. Kreisky indicated Soviets appreciated need Austria work-out ``arrangements" with Common Market but Khrushchev had politely indicated that for Austria to go too far in direction of membership would have serious consequences. Kreisky indicated language relating political aspects Austrian association which delivered at hearing before Six in July had in effect been cleared with Gromyko. Kreisky said he not pessimistic that solution re Austrian association could be found and was convinced that will existed on the part of Six to find solution. Formula to be worked out needed to be more than just trade agreement because that was not enough and yet less than customs union since that not achievable. Agreement would have to include provision for harmonization Austrian social policy and cover such matters as capital and labor markets. Kreisky stressed importance of Austrian people feeling that they participating to some extent in European integration.

/1/A copy of the memorandum of the Ball - Kreisky conversation is ibid., Secretary's Memoranda of Conversation: Lot 65 D 330.

In reply Acting Secretary's question re timing, Kreisky indicated that he thought exploratory talks could go on now for one to two months and then would be followed by formal negotiations lasting 8 to 9 months. To Acting Secretary's observation that EEC running out of qualified people conduct negotiations, Kreisky replied that separate special group had been working on matter Austrian association and individuals involved (Seeliger) happy for chance to become involved in negotiations.

Ball

178. Telegram From the Embassy in Austria to the Department of State

//Source: Department of State, Central Files, 661.63/10 - 1962. Secret. Repeated to Paris, London, Bern, Stockholm, Oslo, Moscow, Brussels, Lisbon, and Copenhagen.

Vienna, October 19, 1962, 5 p.m.

774. Brussels for ECBUS; Paris also for USRO. Foreign Minister Kreisky told me October 18 he received Soviet Ambassador Avilov October 16. Avilov, speaking for his government, gave stern warning (but no ultimatum) about Soviet disapproval ``negative attitude" of Austria on question EEC. Avilov brushed aside Kreisky's familiar arguments that Austrian attempts associate EEC were for vital trade and economic reasons and would avoid political obligations Rome Treaty. He referred instead to Austrian ``beitritt" (joining) and ``anschluss." Demarche was verbal, but Avilov implied formal note would follow.

Soviets expressed astonishment at public Austrian statement optimism concerning ``success" Gorbach's Moscow trip in avoiding active Soviet opposition Austrian EEC participation. Avilov said Khrushchev made his position very clear. Austrian neutrality and state treaty prohibited formal ties with Common Market and Soviet relations with Austria would of necessity be significantly altered in case Austrian-EEC relationship established. Austrians should understand Soviets view Common Market as economic base for NATO, and attachment to such important arm Western military bloc incompatible Austrian neutrality. Soviets now beginning wonder what Austrian neutrality means, said Avilov. Should they believe Chancellor Gorbach, Vice Chancellor Pittermann (whose recent utterances have been inclined to soothe Russians) or Governor Krainer of Styria (past exponent of close Austrian ties with Common Market)?

Kreisky's response was Austrians under no illusion about implications Khrushchev's statements at time Moscow trip, but they prepared associate with EEC under terms which will protect their neutrality, which only they must define. Kreisky had shown Gromyko in advance proposed Austrian EEC application statement which defined limits Austria-EEC association, and Gromyko had interposed no objection. Soviets should now wait and see how Austrian EEC negotiations progressed, and nature of measures Austrians took to uphold their neutrality.

Kreisky told Avilov Soviets making mistake attempt read hidden meanings in campaign statements on neutrality. Austrian Government united on EEC policy and on neutrality issue and election would not affect these views. On NATO issue Kreisky repeated Austria intended engage in no commitments which would violate neutrality, and asserted Rome Treaty has no military clauses or secret protocols. He challenged Avilov explain if COMECON was any more or less economic base for Warsaw Pact countries than EEC and NATO. Kreisky alluded to Khru-shchev's statement during Moscow visit that Soviets also want agreement with EEC and asked why neutral Austria should be denied same privilege. Avilov answered difference great. Soviets simply wanted trade with EEC whereas Austria wanted integration. When Kreisky pointed out Austria proceeding jointly with Swiss and Swedes, Avilov off-handedly replied Soviets no longer view Swiss and Swedes as true neutrals. (Kriesky put this down as impulsive personal response rather than official government position.) Avilov then berated Austrians for participating European Space Agency (ESRO), stating that this too was program serving Western military objectives and not consonant neutrality. Kreisky said anything, including telephone, can be instrument of war. Austrians cannot deny themselves right benefit from participating peaceful rocket research any more that they can on communications research. Otherwise country would be relegated backwater in keeping up with technological change.

Kreisky cautious about assessing reasons for Soviet approach at this time. He thought it was part of basic campaign against EEC but also beginning of intensified bloc pressure on Austria. He repeated his views of Moscow's proliferation of trouble spots during periods tension. In Embassy's view, Soviets may also have been encouraged by Moscow trip Vice Chancellor Pittermann and his recent ill-timed and partially misinterpreted public statements on ``economic neutrality". Soviets also of course aware Austrian Government in midst heated political campaign and unable take strong coordinated government action until after November 18 elections. Also may hope renewed threats, combined with existing internal opposition to EEC affiliation, might cause new government reconsider Austrian position re EEC.

Kreisky, however, foresees no shift in GOA plans start EEC negotiations soon as possible. He can be expected in meantime report this development Oslo EFTA ministerial meeting next week.

Porter

179. Telegram From the Embassy in Austria to the Department of State

//Source: Department of State, Central Files, 763.56/12 - 762. Confidential. Repeated to Bern and Stockholm.

Vienna, December 7, 1962, 7 p.m.

1027. There are increasing indications that speculative stories on US $50 million defense loan to Austria may begin appear local press. Defense Ministry request for bids for construction flatbed rail tank transporters has stimulated speculation in Austrian industrial circles. Friendly military attaches, Swiss in particular, have been querying US MA on subject.

While it is GOA intent to keep matter confidential it will probably be most difficult do so. Should story break, Embassy plans refer inquiries to GOA, taking line that Austria has from time to time procured military equipment in US as well as from other countries. If GOA wishes, we will add that US would be pleased assist in any new procurement efforts she may wish initiate.

Disclosure of loan arrangements at time when Austria target of persistent campaign by Soviets against Austria's efforts associate with EEC would unquestionably intensify Soviet efforts prove Austria not really neutral but member NATO bloc.

Department may wish to alert interested agencies of disclosure possibility to ensure coordinated replies to inquiries. Recommend no official US comment without prior approval GOA.

Austrians are continuing their effort secure loans for purchase military equipment from Swedes and Swiss. Austria's hope is that there would be no disclosure US loan prior to announcement successful completion Swiss and Swedish arrangements./1/

/1/In telegram 1369, December 12, the Department of State instructed the Embassy to inform the Austrian Government that it would have no objection to making the loan public. (Ibid.) In telegram 1383, December 13, the Department of State instructed the Embassy to avoid the use of the term ``US defense loan" in any publicity, suggesting instead the phrase military procurement program extending over a period of years. (Ibid.)

Riddleberger

180. Telegram From the Embassy in Austria to the Department of State

//Source: Department of State, Central Files, 763.56/12 - 2062. Confidential; Priority.

Vienna, December 20, 1962, 6 p.m.

1100. Dept pass Defense. Embtel 1090./1/ Emb off today met with Waldheim FonOff who furnished copy proposed Austrian press release on US loan transaction. FonMin requested earliest agreement on a press release since Vienna will be devoid of Cabinet officials over holiday and statement must be approved on Friday. GOA plans leave statement with senior DefMin officer on duty for release should story break. GOA hopeful that it won't.

/1/Telegram 1090, December 19, reported discussions with Austrian officials regarding the timing of release of information on the loan. (Ibid.)

Full text draft release which Emb believes basically acceptable being transmitted by separate message./2/ GOA anxious include ref EXIM Bank to emphasize ``commercial" nature of transaction. Pertinent section their draft follows:

/2/Telegram 1101 from Vienna, December 20. (Ibid.)

``To accomplish the procurement of equipment for the Austrian army an agreement dating from 1957 was used as the basis for transacting a loan with the US Govt and the Export-Import Bank (Washington DC)".

Emb proposes but has not yet cleared with GOA, substitute for above sentence, as follows:

``On the basis of an agreement dating from 1957, arrangements were concluded with the US Govt for the establishment of a line of credit to permit the procurement of the necessary equipment from various suppliers in the US."

GOA also wishes release fol genl info on procurement:

``The basic items to be delivered are ammunition, tanks of the M - 60 type and all types of communications equipment to a total value of about 1 billion Austrian schillings."

Emb recommends inclusion if Dept concurs.

Comments required soonest./3/

/3/In telegram 1436 to Vienna, December 20, the Department of State reported inter-agency agreement on the release of information relating to the Austrian loan. (Ibid.) The final agreed text of a press release was forwarded to the Department in telegram 1110 from Vienna, December 31. (Ibid., 763.56/12 - 3162)

Riddleberger

181. Memorandum of Conversation

//Source: Department of State, Central Files, POL Aus - E.Eur. Confidential. Drafted by Appling and approved in S on October 2. The meeting was held at the U.S. Mission. The source text is labeled ``Part 1 of 4." A separate memorandum covering the conversation on East-West relations is ibid. Memoranda of conversation dealing with two other topics discussed are printed as Documents 182 and 183.

SecDel/MC/54 New York, September 27, 1963, 4 p.m.

SUBJECT

Austrian Relations with Eastern Europe

PARTICIPANTS

United States

The Secretary

Ambassador Stevenson

Mr. Tyler

Mr. Appling

Mr. Lissance--Interpreter

Austria

H.E. Bruno Kreisky, Foreign Minister

Dr. Ludwig Steiner, Under-Secretary of State

Dr. Franz Matsch, Representative to the United Nations

H.E. Dr. Wilfried Platzer, Ambassador

Ambassador Hans Thalberg, Foreign Office

Kreisky said Austria had settled its differences and established good working relations with all of its neighbors. After working well with Bulgaria and Rumania, they were now taking up Hungary and perhaps ultimately would take on Czechoslovakia. He felt it Austria's political task to keep the region calm, and felt that they were having reasonable success. They were also collaborating closely with the church and had been able to assist in its concerns in Hungary. In a way, they were achieving a certain ``liberation" of the area and it was now possible for thousands of people from the Communist countries to come to Austria where they could see a free, prosperous and happy society where people were ``free to complain".

Kreisky said there was a certain disintegration in process in the Bloc. For the present, it was largely economic. If Moscow could not put pressure on Albania, the satellites had to realize that Moscow certainly could also not push them around. The opportunity to choose either of two leaders gave satellites a certain freedom of action. For example, Rumania refused to take sides until it had what it wanted from the Soviet Union in economic questions. Khrushchev badly needed the support of all European Communist parties and in each of them there were nuclei of doctrinal opposition.

The Secretary asked about the iron curtain on the Hungarian border and Kreisky said they were moving cautiously to weaken it. They were proposing a treaty with Hungary for a mixed commission which would deal with frontier incidents on the spot rather than involving the two governments at top levels. They were working out an exchange of farmlands on both sides of the frontier which had been troublesome.

To a question from the Secretary, Kreisky replied that he saw no reduction of fear of Germany in Eastern Europe. It might not be so evident now, but it was always an important imponderable.

Ambassador Stevenson asked about internal shifts in Czechoslovakia and said they had recently shown some interest in increased trade with us. Kreisky said Czechoslovakia was the most reactionary (in the Communist sense) of the satellites. They had left it to the Stalinists to liquidate Stalinism. This had not been possible and therefore, they were only now moving in that direction. He suggested it would be best to stand off for several weeks or months to see how things go. It seemed unwise to deal with people who might soon depart.

Kreisky said that minorities from the satellite nations living in Austria were loyal to Austria and that no efforts were being made to use them to stir up trouble in Austria. Kreisky said Ulbricht was an arch Stalinist. He remained in power as a figurehead and as a matter of prestige. With Adenauer's departure, perhaps this would change./1/ Ulbricht was known to be disagreeable and inflexible and had no political sense at all. The Communists needed a man more adequate to their present policies.

/1/Adenauer, who had announced his intention to step down in September 1962, resigned as German Chancellor on October 11.

182. Memorandum of Conversation

//Source: Department of State, Central Files, POL Aus-E.Eur. Confidential. Drafted by Appling and approved in S on October 2. The meeting was held at the U.S. Mission. The source text is labeled ``Part 2 of 4"; see Documents 181 and 183.

SecDel/MC/55 New York, September 27, 1963, 4 p.m.

SUBJECT

Cooperation in Europe and Trade Negotiations

PARTICIPANTS

[Here follows the same list as Document 181.]

The Secretary said it was our earnest wish to have the closest cooperation with France. We greatly regretted French withdrawal, for example, from Geneva negotiations. General DeGaulle seemed to want to work with a group of 4 rather than a group of 18 and that problem was procedural rather than substantive. France's cooperation in NATO and UN was similarly limited. Couve de Murville was coming in October and we hoped for some improvement. The Secretary said the question was how Europe is to be organized. Closer cooperation might have been possible if a directorium had been accepted in 1958, but Europe would not accept it. There was not now even a consensus as to how we should consult. Kreisky summarized by saying that in the past France had had a policy of presence; now they had a policy of absence.

The Secretary turned to the prospects for the Kennedy Round. Kreisky said he thought there was a good chance for success if discussions were kept on purely economic grounds. Success was favored by the probability that by the time of the negotiations the position of ``outsiders," like Austria and the Scandinavians, would be improved. Austria, together with Denmark and to some extent Norway, wanted to stay out of political complications. He did not believe Erhardt would change the structure of German policy, but he was an economic man and talked in those terms. DeGaulle was always interested in economic matters--although for him agriculture was not an economic matter. Kreisky agreed with the Secretary that a political will for successful negotiations was essential but he considered that the discussions and the agreements themselves should be economic in nature. The Secretary said Hallstein's views were similar.

Kreisky said for DeGaulle it was absolute doctrine to prevent political influence of the Anglo-Saxons in European affairs. He was hard and inflexible and just would not change. DeGaulle saw the EEC as a delicate balance based on Germany and would not let it be disturbed. Nevertheless, we should always seek new approaches and new points of departure. For the U.K. this would be natural and easier after their elections. In the long run, the problems would be solved.

183. Memorandum of Conversation

//Source: Department of State, Central Files, POL Aus-E.Eur. Confidential. Drafted by Appling and approved in S on October 2. The meeting was held at the U.S. Mission. The source text is labeled ``Part 3 of 4"; see Documents 181 and 182.

SecDel/MC/56 New York, September 27, 1963, 4 p.m.

SECRETARY'S DELEGATION TO THE EIGHTEENTH SESSION OF THE UNITED NATIONS GENERAL ASSEMBLY

New York, September 1963

SUBJECT

South Tyrol

PARTICIPANTS

[Here follows the same list as Document 181.]

Kreisky said Austria had the warmest feelings of friendship for Italy and wants very much to settle their differences by negotiation. On the South Tyrol he saw two differing approaches in Italy. There were those, more toward the Right, who wanted to settle it internally by dealing with powerful interests in the Tyrol. This would only lead to new discontent and disorder and, in a few months the Austrian Government would again be involved. The other group, rather to the Left, favored agreement with Austria which would obviate further Austrian intervention. At present everything in Italy was in flux and they are not now ready to talk seriously. It was too late to have polite conversations about procedure, they had to get down to substance.

The Rossi Commission Report/1/ had some good points, Kreisky said. Austria felt it necessary to reach an agreement in which the Italians would say how they would deal with problems which might arise in the future. Austria believes the best procedure for this would be agreement by the Italian Government to deal with the Senators from the South Tyrol as the true representatives of these people. This was the way the Italians dealt with other internal problems. The Austrian Government wants a formal document, perhaps an annex to the Paris Accord, and would also want to report any agreement to the GA. Such a formal agreement would include provisions for treating any breach of the agreement. For this purpose Austria was not averse to the International Court's acting.

/1/A report prepared by a committee of Italian parliamentarians, chaired by Social Democrat Deputy Paolo Rossi, was scheduled for presentation to the Italian Government at the end of October.

Kreisky said there were minorities in many European countries and there were satisfactory arrangements for all except for those in the South Tyrol. He warned that there was real danger in the situation. If Italy and Austria reached no agreement this would become a German/Italian issue. This was already true in part of German public opinion. He did not welcome the engagement of the German press in the problem and wished above all to avoid its becoming a pan-German issue. Within the CDU in the Federal Republic, there were strong nationalist elements and exile German groups with great influence who were pressing to make the Brenner boundary an issue like the Oder-Neisse boundary. Kreisky said Italy had failed to heed his warning about terrorism and the center of these activities had now shifted to Munich.

Kreisky complained that the Italians kept finding pretexts to cancel meetings with the Austrians. He said the U.S. had not been able to accept his proposals several years ago that we tell the Italians they must cope with the problem and offer our assistance, as had been done successfully in Trieste. The Secretary noted the great and numerous burdens which we have in the world. He implored Kreisky to save us this one and to work it out with the Italians.

Kreisky said they did not intend to ask for GA action this year. They had to keep the pressure on Italy and, therefore, he had reported on the matter in his address to the GA.

184. Memorandum of Conversation

//Source: Department of State, Secretary's Memoranda of Conversation: Lot 65 D 330. Confidential. Drafted by Frank and approved in U on October 15. The meeting was held in Under Secretary Ball's office.

Washington, October 10, 1963, 4:30 p.m.

SUBJECT

Austrian-EEC Relations

PARTICIPANTS

Austria

Foreign Minister Bruno Kreisky

Ambassador Platzer, Austrian Embassy

Minister Kurt Waldheim, Director General of Political Affairs, Foreign Office

Minister Hans Thalberg, Director of Information, Foreign Office

United States

Under Secretary George W. Ball Mr.

Galen L. Stone, Deputy Director, Office of Western European Affairs

Mr. A. Eugene Frank, WE

Turning to the subject of relations with the EEC, Minister Kreisky said that exploratory talks between Austria and the EEC had started. So far as the economic matters to be discussed were concerned, he thought it would be possible to find a common ground with the Commission. However, this might not be possible with the Council. The French, for example, would want an answer soon on Austria's attitude toward EFTA. To this the Austrian Government will reply that it cannot take a position before seeing what sort of an arrangement is worked out with the EEC. Kreisky noted a dilemma here, with France pressing for Austrian withdrawal from EFTA, while the Dutch, he thought, would not want to see EFTA weakened at this stage by such a move. The main problem, however, was what Austria could actually do, and this will require that the Austrian Government come to an internal agreement on this. He noted that Austrian trade within EFTA had increased from 11.5% to 16.8% without any loss of trade with the EEC. This growing EFTA market had considerable appeal to Austria and it would be reluctant to take any steps which would damage this trade. Moreover, the Socialist Party and elements within the People's Party would both be unhappy to leave EFTA so long as the other two neutrals were still members. In response to Mr. Ball's query whether membership in both EEC and EFTA was not an unrealistic goal, the Minister agreed that it was, but he still favored such a ``multilateral" solution, even if it were unrealistic. Moreover, at the present time matters in Europe were perhaps on the verge of change with Erhard coming to power in Germany and with the strong possibility that a Labor Government would soon take over in the UK. However, he agreed with Mr. Ball that things would not change very fast.

In response to the Minister's question of what he thought about the possibility of the UK association with the EEC, Mr. Ball replied that he had spoken to French Foreign Minister Couve de Murville about this a few days ago, and Couve gave the impression that the French were not serious in this and that even a trade arrangement between the EEC and the UK would be impossible unless the UK were to give up its special relationship with the United States and the Commonwealth. Minister Kreisky added that he thought perhaps a Labor Government might be more receptive to the idea of association--that oddly enough, a Labor Government would be more Anglo Saxon than the Conservatives. Mr. Ball agreed except that it might be difficult for Labor to deal with a Gaullist Government in France. Minister Kreisky thought this would be no more difficult than for the United States to deal with Spain.

Minister Kreisky went on to note that the neutrals were of course no problem for De Gaulle. The problem was, as he had stated earlier, what the Austrian Government could do. Turning to the present attitude of the neutrals, Kreisky said that while the Swiss had initially been very strong in their support of EFTA, they were now less favorably disposed. This was because the Swiss industrialists were concerned about the Socialist complexion of EFTA. With Socialist Governments in the Scandinavian countries, with a Labor Government probable in England, and a half-Socialist Government in Austria, the Swiss were worried that EFTA might rely too much on government planning. Sweden, while in favor of association with the EEC, was unwilling to leave EFTA. The presence of the two neutrals and their continued support of EFTA led Kreisky to want to have Austria remain in EFTA. In passing, he thought the UK under a Labor Government would be positive towards EFTA, which was, in fact, a sort of European Commonwealth.

Finally, Mr. Ball asked how Austrian trade with its Eastern European neighbors was going, to which Minister Kreisky replied that at the moment it seemed stabilized. The problem, as always, was what could the Bloc sell Austria in order to enable the Bloc to buy from it? While the USSR was presently able to purchase for cash, he thought that it would not be long before it would be pressing for credit. The meeting closed with a brief discussion of the present grain crisis in the USSR and of the USSR's intention greatly to expand its fertilizer output.

185. Memorandum of Conversation

//Source: Department of State, Presidential Memoranda of Conversation: Lot 66 D 149. Secret. Drafted by Stone and approved in the White House on October 22. The meeting was held at the White House.

Washington, October 11, 1963, 11 a.m.

SUBJECT

Meeting Between the President and the Austrian Foreign Minister

PARTICIPANTS

United States

The President

William R. Tyler, EUR

Mr. Galen L. Stone, WE

Austria

Foreign Minister Bruno Kreisky

Ambassador Wilfried Platzer, Austrian Embassy

Ambassador Kurt Waldheim, Austrian Foreign Office

Minister Hans Thalberg, Austrian Foreign Office

The President greeted the Foreign Minister and said that he had heard that President Truman had admired very much the speech that the Foreign Minister had given in Kansas City. Foreign Minister Kreisky said he had enjoyed talking with the former President and had received a fine lesson in modern American history. He had met many, many businessmen and other civic leaders.

The President said we were having some difficulties with the Soviets on the autobahn. Our convoys were still being held up. We did not know what this development indicated as far as the Soviets were concerned. Foreign Minister Kreisky said he had just heard of this development. He had just told Mr. Tyler/1/ that the real problem was that Khrushchev was very popular with the Soviet people because he stood for two things--peace and de-Stalinization--but having popularity with the Russian people meant nothing to the Communists. An outstanding German Communist had once told him that Stalin thought he could build up the same apparatus in China as they had developed in the Soviet Union. The German Communist was asked if this were done what would happen if there had to be a choice between the support of the majority of the people and support of the people in the hierarchy. He replied he thought in any event the decisions must conform with the pressures of convictions of the hierarchy. This conformed to the Communist pattern.

/1/No record of the Tyler - Kreisky meeting has been found.

Foreign Minister Kreisky said that as far as he could see there were only two individuals in the Soviet Union who might be in a position to succeed Khrushchev. There was no doubt in his mind but that the Soviet leaders were already preparing for the period after Khrushchev. These two men were Brezhnev and Malinovskiy. He did not include Malinovskiy as one of the two because he was important as a Marshal of the Soviet Union but because he was important as a Communist leader. The Foreign Minister had known Malinovskiy personally right after the war in Vienna and said he thought he was intelligent. Malinovskiy had served in the French army during the First World War and spoke French. He thought Malinovskiy was a brilliant man. He said Malinovskiy had told him a story that shortly after the war when the Soviets were occupying Austria Stalin had received a message from the then Austrian President Karl Renner to say that the people had nothing to eat and Stalin had telephoned from Moscow to Malinovskiy and had asked him what he could do. Malinovskiy said he replied that he could provide 20,000 tons of wheat. Stalin expressed surprise at this relatively large amount. Malinovskiy said he wanted to tell Stalin a story and he told the story of Peter the Great who had received a delegation of Germans who had asked for some material assistance. Peter the Great had reportedly replied that he would not give them the material assistance they required but would give them a whole city. When one of his ministers started to protest, he told him to shut up and said he was giving them their own city.

The Foreign Minister said he thought Kozlov was out of everything because he was a very sick man. Mikoyan was not a Russian and the other leaders such as Suslov were basically technicians.

The President said he thought the timing of the recent Soviet action on the autobahn was quite curious. The Foreign Minister said he was certain that this action did not have the approval of Khrushchev. Also he was convinced that it could not be said that this development was caused by a lack of communications or bad organization. The Soviets might have their problems but they were not in the organization or communications of the Soviet army.

The Foreign Minister said that Khrushchev might have a great deal of popular support and have a commanding position within the Politburo but there were two areas which gave evidence that he did not have complete control. One was Albania and the other was Molotov. Albania was a relatively small country and if Khrushchev wanted to, the Russians could take it over in two hours. The Albanians had more people in their Embassy in Vienna than there were in the Austrian Embassy in Washington. These people distributed booklets against the Soviet Union. As for Molotov, he was still walking the streets of Moscow. The Foreign Minister said he was convinced that the leaders of the Communist parties in Europe and Asia were continuously working to overcome the Peking - Moscow split.

The Foreign Minister said in his opinion the President's policy was the only possible one at this time. We had to be responsive to the Soviet approaches. We could never find out how far the Soviets might be prepared to go unless we were willing to meet them. He personally believed that a policy could only be built through direct conversations. The Foreign Minister said in this context he had been in favor of Mayor Brandt of Berlin meeting personally with Khrushchev. To make it a question of policy whether to meet with the Soviets or not would always be doomed to failure. It was important to meet.

The Foreign Minister said he thought that the role of Germany in East-West relations would be easier after Adenauer had stepped down. Erhard would be more in favor of dealing with the Soviets. On the other hand Adenauer would use his power against such dealings and he would use it with all the resentment of an old man but in a short time the Christian Democrats would react against him. The party would soon decide in favor of the new Chancellor. It would be an extremely difficult situation.

The Foreign Minister said that German Foreign Minister Schroeder was a much more intelligent man than Erhard. Erhard was not a very clever man. He was not a man to handle political power and would have a lot of difficulties. Erhard had had to wait a long time before becoming Chancellor and Adenauer had done a great deal to undercut him by making such remarks as saying that Professor Erhard believed he was a German miracle. The Foreign Minister felt that Erhard would not be Chancellor for a long period of time. Foreign Minister Schroeder was a coming man and former Defense Minister Strauss was not dead politically. The Foreign Minister said he personally believed that if a coalition government was formed with the Socialist Party, Strauss would be in the government. The situation after Adenauer was really not a very clear one but any real political change could only emerge from a great coalition. Neither party could run the risk of making a major move vis-a-vis the Soviets for fear of being accused of treason against Germany.

The Foreign Minister said he thought the next election in Germany might see an increase in Socialist strength by about three percent. He felt that personalities could only affect the vote by some two to three percent. Below that was a hard core of votes which would not change.

The President asked for the Foreign Minister's judgment regarding Europe and the United States. He pointed out that our policies toward Europe were based on past as well as present policies. The Foreign Minister replied that to speak of Europe as a unit was unrealistic. He felt there would be no unified Europe. Rather Europe would be divided into two major groupings. One would be the Europe des patries and the other would be a Europe des affaires. Europe would not be a unit because de Gaulle detested integration and there was no real desire among the Six to integrate with France. The second point he wished to make regarding Europe was that one must understand that there was a real divergence between generations. The younger generation was for the unity of Europe and was not for de Gaulle. The Foreign Minister said that if one compared the crowds in Germany that greeted de Gaulle with the crowds that had greeted the President you would find that those who cheered de Gaulle came from the middle generation and those that cheered the President were predominantly from the younger generation. The younger generation was now extremely tired of the old man who was in power. They were attracted to the President because he represented a young nation and was himself young. The Foreign Minister said he was not saying this out of flattery but that this was a fact. The whole way of living of the younger generation in Europe was nearer to the younger generation of America in such things as clothes, dances, newspapers, etc. He could see it in his own children. The American way of life had had a lot of influence on European youth. The Foreign Minister said he had also noticed during his visits around the United States that Europe had had an influence on American youth. This was not a political fact but it was the basis for political conclusions.

As far as de Gaulle was concerned the Foreign Minister said that no one could change him. He was an old man and he had made his policies with a view to history. He ignored Parliament. It was an ironic fact that the one party in France which had always been against Parliament, namely the Communists, had lost out because Parliament had no power. By liquidating the French Parliament, de Gaulle had made the French Communists powerless. De Gaulle was following a policy of absence.

The Foreign Minister said he thought the only way to handle de Gaulle, if it was possible to do so, was to ignore him and not to provoke the French. De Gaulle was a great man for France and he was a great man in his own right. He believed that the Anglo-Saxons had to be kept outside of Europe. Swiss Foreign Minister Wahlen had told him that de Gaulle should have said that the United Kingdom could join Europe but they would have to come ``naked as a worm".

186. Telegram From the Embassy in Austria to the Department of State

//Source: Department of State, Central Files, POL 32 - 1 Aus-It. Confidential; Noforn. Repeated to Rome and USUN.

Vienna, October 17, 1963, 4 p.m.

953. South Tyrol. In conversation today with Foreign Office Political Director Waldheim, Embassy received impression Austrians satisfied with way things went on South Tyrol at UNGA/1/ and with conditions established for holding October 23 meeting between Kreisky and Piccioni in Geneva. They expect no great results from meeting, but see it as useful in getting two governments together again in reasonably cordial atmosphere. More important consideration is what contents Rossi Commission report will be, and whether report will be approved unanimously by Commission, thereby making it easier for Italian Government accept. Waldheim said he believes report is serious attempt solve problem, but difficulty is that it responds to only about two-thirds South Tyrol complaints.

/1/An apparent reference to talks held with Italy during the General Assembly meeting. The General Assembly took no action on the South Tyrol question in 1963.

From Waldheim's comments we gather that Austrian Foreign Office, at least, fervently hopes Rossi report will be accepted by Italian Government and that political leaders South Tyrol can muster necessary support for it. If this should happen, Foreign Office envisages Austrian-Italian agreed report to UN and establishment some kind of international arbitration to settle any disputes arising from implementation agreement. While projecting this optimistic-sounding schedule, Waldheim repeated his basic doubts about whether agreement could actually be reached between Tyroleans and Italians.

Riddleberger

187. Telegram From the Department of State to the Embassy in Austria

//Source: Department of State, Central Files, POL 1 Aus-US. Confidential. Drafted by Lambert and approved by Stone.

Washington, November 26, 1963, 7:15 p.m.

1597. At 10 minute courtesy call President last evening, Gorbach said there were no major problems in Austrian-U.S. relations he needed to discuss at this time. In view our heavy commitments elsewhere in world, Austria did not wish burden us with its problems. If our help ever needed, he knew Austria could always count on us for sympathetic response. President thanked Gorbach for coming to funeral/1/ and expressed keen interest and appreciation Austria's special position.

/1/President Kennedy had been assassinated in Dallas on November 22. His funeral was held November 25.

Rusk

188. Memorandum of Conversation

//Source: Department of State, Central Files, ECIN 6 EEC-Aus. Confidential. Drafted by Lambert. The meeting was held at the Metropolitan Club.

Washington, November 29, 1963.

SUBJECT

Austrian-EEC Relations; Habsburg Case; Eastern Europe; Sino-Soviet Relations; Various Other Topics

PARTICIPANTS

Austria

Dr. Erich Bielka-Karltreu, Secretary General, Ministry of Foreign Affairs

Ambassador Platzer, Austrian Embassy

United States

Mr. William R. Tyler, Assistant Secretary, EUR

Mr. Dwight J. Porter, Assistant Secretary for Administration

Mr. Francis X. Lambert, WE

Mr. Tyler had invited Ambassador Bielka to lunch. A member of the Austrian delegation to the UNGA, Bielka had come to Washington for a three-day visit.

Dr. Bielka said that some of the EEC countries had been pressing Austria for a commitment to leave the EFTA if an Austrian-EEC arrangement were successfully negotiated. French Foreign Minister Couve de Murville was one of those insisting that Austria make such a commitment. Austria, however, did not wish to commit itself, no matter how informally, until it had a much clearer idea than now of what kind of an arrangement it would be able to work out with the EEC. Austria's trade with the EEC had not suffered to date as result of the increased EEC discriminatory tariffs, but some manufacturers and exporters were complaining that, in order to compete in the Common Market, they had to reduce their profit margins and even sell at a loss on occasion. It was extremely difficult to ascertain how much truth there was in these complaints.

Turning to Eastern Europe, Dr. Bielka said that there were indications that important changes were taking place there. He referred specifically to the recent relaxation of travel regulations by Czechoslovakia and Hungary and to the apparent attempts by the satellites to gain a greater degree of economic independence from the USSR. He knew of no recent developments concerning Cardinal Mindszenty. Cardinal Koenig, who had seen Cardinal Mindszenty at the U.S. Legation in Budapest several months ago, had been attending the Ecumenical Council in Rome during the past two months.

In reply to a question, Dr. Bielka said that Otto von Habsburg had publicly denied recent reports in the Vienna press that he would attempt to enter Austria during the Christmas season. Bielka thought that the Government controversy over Habsburg's attempts to return to Austria, which reached a crisis stage just before the summer holidays, had subsided markedly since then and that it was unlikely to pose a serious problem for the coalition again in the near future. Agreement of the coalition partners on the budget was a good sign.

Dr. Bielka asked about the future of U.S. - USSR relations, the Sino-Soviet controversy, the situation in Laos, and the possibility of a President Johnson - General de Gaulle meeting. Mr. Tyler thought that Mikoyan's thumbs-up gesture at the Moscow airport upon his return from President Kennedy's funeral was significant. The Russians were not given to making such gestures lightly. President Johnson had stressed to Mikoyan that he would make unremitting efforts to continue President Kennedy's policy of seeking peaceful solutions to outstanding problems in U.S.-USSR relations./1/ As for Sino-Soviet differences, Mr. Tyler said it was difficult to foresee what the outcome might be. However, he thought these differences involved something more than ideological interpretations. He saw no indications that the gap would be closed appreciably in the near future. With regard to Laos, Mr. Tyler said that he was not fully current on the situation there since he did not normally have time to read the cable traffic on this subject. So far as he knew, there had been no significant changes in the Laotian situation recently. As for a President Johnson - General de Gaulle meeting, agreement had been reached in principle that there should be such a meeting, but no details were settled regarding the time or place. President Segni of Italy would pay an official visit to Washington in January and meet with President Johnson. This visit had been scheduled before the death of President Kennedy.

/1/For documentation on the Johnson - Mikoyan meeting, see vol. V, Documents 236 and 237.

Replying to a question by Mr. Tyler, Dr. Bielka said that he had no matters relating to U.S.-Austrian bilateral relations to discuss. When Mr. Tyler said that he also had no bilateral matters to raise and in passing mentioned the assets problem, Dr. Bielka merely nodded. Ambassador Platzer asked if Mr. Mansfield (IGA) had returned from Europe, where he had gone to investigate the grain diversions. He said that Mr. Plan, the Embassy's Financial Counselor, would like an appointment with Mr. Mansfield to be briefed on the progress of the investigation. There followed a brief discussion on the possibility of lifting the suspension on PL 480 feed grain shipments to Austria. The recent press articles on the diversions and the interest of Congress in the irregularities, as well as the fact that the investigation had not yet been completed, were cited by Department officers as impediments to an early lifting of the suspension.

Further on Austrian-EEC relations, in reply to questions by Mr. Porter, Dr. Bielka said that there were some Austrians who were willing to make a commitment now to the EEC that Austria would withdraw from the EFTA upon entering an arrangement with the EEC. Others, however, were opposed to making such a commitment, in part because they feared it would entail a progressive decline in Austria's exports to the EFTA countries while the Austrian-EEC negotiations were still in progress. They feared permanent loss of EFTA markets if the negotiations with the EEC were unsuccessful. As for the USSR's attitude toward an Austrian-EEC arrangement, Dr. Bielka said that although it was true that the USSR had not recently reiterated its earlier warnings, there could be no doubt that the Soviets took a serious view of Austria's entering an arrangement with the EEC. Their recent silence stemmed from the realization that an arrangement was not imminent and their warnings would undoubtedly be resumed if the prospects for an arrangement improved.