THE SITUATION IN AUSTRIA

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP78-01617A002800160002-2
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 20
• Document Creation Date: December 27, 2016
• Document Release Date: February 27, 2013
• Sequence Number: 2
• Publication Date: May 28, 1947
• Content Type: REPORT

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I / 1
/cgR
May 28, 19147
Q{ARY
The inconclusive ending of the Conference of Foreign,
Ministers- in Moscow has prolonged the any olusar situation in which
Austria has been for the last two years. Without, s. treaty, it is
still a "libera viced nation6? on paper only; in fret, it is still
occupied by the four powers. The .political, social, and ocononic,
problem : of Austria m a3t be v'iiewet within the framework of th1.
duaal status as a country both liberated and occ:upieda
The four occupying powers exercise supra authority througj:n
the Allied Cc a.ission for Au.6tria (AC), the powers of which were
defin +d in the Control Agreement of June 27., l9'16. While this
Agreement was a step forward in restoring some M are of Inds
.pendence to the Austrian Goverment., it did not go very far in
this, direction. It retained the c aplex machinery of sups is2on
by the AC and authorized the continued presence of occupation
troops in Ausstria o
The burdens of occupation have been aggravated by
differences among the four pow,rers o. Initially all of them seed
to keep the.peri? d of occupation in Austria to a mini= and to
restore full ksovereignty to the Austrian people and Gover ent as
early MO possible. The Soviet attitudo,
after the Austrian national elections in
Sao=eve:,
changed r dicaU.y
hove her 1915 a in which
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NEXT REVIEW DM i E..
AUTHyo 'I--& _.
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the Catholic.People ?e Party ined an ,absolute- s. a jc:rity, the
socialists ran close second, and the c o uniate, obtained oiliy
5.,& per--cent of the total veto and elected, only
fou-r eyxt of 165 deputies to Farli .exit.
The USSR's 'ne%.T course waz de slg nc d to compensate by
Owns is .eane for the lose in politica:.. influence. hi,e led to
various ?3hort.wer i measures, including'direct, Unilateral exvloit'e~'tion
of 'agricultural and industrial resource{e in the eacter in zone of
Austria, the removal of industrial ec~,ii;r nt and output to the
Soviet Union, era?i the adoption of a poi:icy of delaying; action''bot:h
in the a0 and in the treaty negotiations o In ter m@ of bong -range-
oa jectivee, this reversal of the S6v ie3 t attitude alma at pea tua t
ing econemiic influence in Austria In o ~< r to counteract what thE,
Rueeiene consider a sane -aide a~ Western o:-;?:ientation of the Austria`,.
ruling groups. For this reason, the ieaue of Gea am~ assets in
Austria is the most crucial aspect of the Austrian treaty frca
the point of view or the USSR; an & its :tons-tc.m. algnifi?c ice 'ex
plains the unyielding position which the US 7 has t&z e a. on thi:Z
Of the three other powers, the, UK has consistently u5
the in its efforts to bring the, oce-u?ation -to an, early end Ind,
to Zt financial and other asaiet e e to Aus triao. The Frenca
have In general taken a positio . midwa between that of the ritishh
and -mericenee and that of the U& M. WhII.le they have generally
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ei.ded with the der .. a le objectives of the Weete powere, they
have fully exploited their of . zone for odla tq, French
ad.van ee Ad hr% e ciao et kod out their c:talme for ae sib ? , Sete?
Subject to the supreme author it; of the AC a dau t
the con.k'licte among the power?e, Austria ha e ? ,de little progreea
anise its liberation. The country 'hae ?Vnctioned es a Federal
]Rep blic within the constitutional framework of the, First Republic,
end'. rrdeor Hued Its internal adminietr?ati e, politic J.
econ nxic machine x,7, but this revival of l.nda.ger.ou? t over. .ent ?.
proceaaee b had little more than for e. sxx ngo The national
Gov i rme t, for d after the electi.onna In l9; as co lition of
the three i09i.tim+.. t : parties' bra been r eco nit>P by all femr
P6,wera r In all crucial i a,tteg a of inter oral lesia1atIon ea.ad
a minIetration? however;? It ban re iced eub jec>t, to the au thor` ty
of the AC or the individual zona:L c mdera, The three political,'
partlee lave e aged in lively par?liam ntar?y and public acti Vi'ti.ee,
but the two majority ; r?tiee have in fact been primarily CO=07-nod,
with maintaining their coalition a inet p :eeur?e frLvn the as m T.l
Comm: x et . for see and the Soviet autborl t ice rather than with a
forthright execution of theIr:r own political en social br a. :,
Finally, as r e8erdss economic policy Luetris, h v, beef t at-41i). 1401"0
pond-ant upon the action of,,' the oocup in o ire upon tie 1Y
an el or food relic: and fin ci.al aid, upon the Russians gin ;
French because they bt e_ deprived Auet 'ta of the full use of Ite
M
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indigenous resources
Under these circumstances, it is not surpriai gag that the
domestic scene in Austria has been dominated by foreign-political.
issues. arc the Austrian point of view, especially after the.
failure in Hoacow, the most important political objective has been
to f a mo .ass vivendi with the occu3p~yfng powers which would
terminate the occupation as soon as possible,., The present Govern-
rent (for all practical purposes a coalition between the Peo la`s
warty end. the Socialists) is strongly committed to a Western
-orientation in foreign , affairs ---traditional in Austria throughout
its histoy;yo Both parties, however, realize that Austria will
probably 'be obliged to readjust its relations with tie USSR an
a result of the changes in the European balance of power. after
this war. In addition to its political influence as one of the
powers presently occupying Austria, the Soviet Union will also, by
virtue of Its claims to former Ge n .icdustrial assets in Austria,
retain a certain measure of econc is influence which cannot b
disregarded altogether o Moreover, Austria Os neighboring c :ntrioe
in Eastern lhrope, which have always been its essential trade
partners, are now within the Soviet sphere of influence.
For-these reasons, there are Q.besides the Co .unist )
certain minority groups in the two other parties which, thou)
ideologically and politically opposed to the Soviet Union, favor
a more conciliatory course. The ability, of the. ruling groups to
maintain their traditional Westerns ties will depend on the success
SECRET
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a,5
of Western support in counteracting the now political and. 'ecca .ic
`pre?euree to thich Austria will be exposed in its relations with
the U?. anal other states of I'estern Europe.
Further discussion of specific issues in the ssituation in.,
Austria Is contained in the Enclosure hereto.
EICLCS : SP IFIC IS, S
Thee The Conference of Foreign Ministers in Moscow
(March-April l917) ended without a treaty for Austria because the
participants could not resolve their differences on the crucial
issue of German assets as well. as on a number of s2ibsiid1ery issues
such as the Yugoslav demands for reparations and a territorial
revision. While this failure to obtain a treaty neither upset the
Austrian Goverment nor produced any radical change-in its
traditional Western orientation, there is evidence that it has .
sooewbat strengthened the hands of those groups in Austria sbich
are prepared., if necessary, to make certain econonic concessions,
to. the USSR In order to bring about the end of the occupat1 ors,
The idea seome to be gaining ground that a treaty is the most,
indispensable prerequisite for any internal recovery and that,
even if the and of the occupation can be had only at the price of
economic concessions to the USSR, Austria will still be in a nuc>h
better position than it ire now. For t hie 'reasson the Austrian
deletion, in Moscow even considered the dol.otov foriiula for they
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SFCMI
disposal of Ge ?n assets `gas a aultsble bnsie for negotiatioaedO
Ceau Assets. At the Potsdam Conference, the four Taoverf3
Wood to use German ez ernal assets t n their respective zone'3 Of
occupation` in Austria as reparations against G'.?x ny Mffer aces
about this provision arose because the Potedan Agreement did not
.contain a definition' of what constituted a 'German asset*_ in
Austria. The Western powers claimed that the . Potsdam Agreement
should be interpreted in conjunction with the prior Allied
Declaration of January 194-3 according to which property transfers
in.Nazi-occupied area a, if ?ffected. under Qeforce and duress, w, rv
to be considered null and void and tho property was to revert to
its previous owner. In addition, the tfsstern powers have
maintained that any differences either among the four powers or
between e my one foreign power and the Austrian Government. should
be settled in quadripartite negotiations. Finally, they
have Insisted that any assets tr?en.sferrDc to one of the occupying
powers should remain subject to Austrian 1awo In general, t1+,o
aim of the Western powers on this problem has been to,r rrowr the
scope of 'Gex'Uan aseet&? in order to save. as, much as possible of
the financial and industrial assets physically located. in .ue.trie;
for the benefit of the Austrian economy,. The US, for example,,
has actually returned Garen assets in its zone' of occupation to
the Aust 4 lam. Goverment pending a f ix al settlement., The
British anZL French have Sonar ally supported. the US position; but
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ao far they have retained actual poe eaeion of former German assets
in their zones o
In contrast, tho USES has interpreted the 'Potedarn Agre (,rjor t
to Include. an large as possible an Mount of German assets in the
eastern zone. It has been willing to make exceptions only in the
case Of transfers under "direct orcible action,' with the burden
of Proof lying on the former owner of the property. Moreover, it
has always Insisted on bilateral negotiations with the Austrian
Government only, and on special provisions whereby assets trans-
ferred to the USSR would be exempt from future nationalization in
Austria e
,,No compromise solution satisfactory to all powers coal()' be
reached at the Moscow Conference. The Conference, however, a;zreec
to appoint a special Inter-Allied Commission for the further study
of this and the few other outstanding issues o the treaty.
Mea while, the Soviet authorities in the eastern zone
have implemented their ,own interpretation of the Potsdam Aeemente;
by ris ing ownership of some 125 industrial enterprises a-knd of
agricultural property estimated variously at between 10,000 a n.d
15,000 hectares m These transfers include such well-Yze a
industrial an rprIses as the l nube Stea hip Company and
vhe?
Zistersdorf oil fields. Regardless of the final outcome of the
quadripartite negotiations on this subject, . it is quite` evident
that the U&M will retain a considerable economic influence over
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the Austrian economy as a result of inheriting former Germ=
assets. It is this consequence which renders the issue of
Coinan assets so crucial to the USSR from a political point of
The, Yugoslav. Den s . ? The other. ou 4stai ding issues of the
treater, though troublesome, are generally considered to bey
subeMiarye Of these. the Yugoslav demands for $15O million in
reparations from Austria and for a, cession of territory in `southern
Carinthia have received the widest public itya Both decode were
supposed by the Ufa and rejected.' by the three other powers o
The claim for reparations is in conflicF, with the
Pote Agreo nt, according to which no reparations of any kind
were to be exacted from Austria'.. The claim for a territorial
cession in abuthern Carinthia is based on ethnic grounds, This
area, according to the Austrian census of 1934, includes some 2?,C
Slovenes. Tho Yugoslavs have disputed. the official census
figures, but the Western pozrers have rejected their claim on two
gx otu..nds: (a) that it would violate the Moscow Declaration of 1943
according -to which Austria was to be reconstittated within its 1938
boundaries, and, (b) that the Yugoslav case for a territorial rovielon
wao air y adjudicated in favor of Austria by an inter tio: .1y
supervise, plebiscite after the last war. It is generally bol~evzid
that the U8 3t, after a settlement of the Gar z assets problom,
will be inclined to accept a ccm-pr
ise on these, ieasues which would
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SE'1tFT 9
be clove, to the position of the Western powers.
`gh? Government m The Austrian Goverr ent operates with .n
the, f'raeork Of a republicans federal, and democratic
conatitutioi a1 syStem. The ;present Constitution is essentially tilat
of 1920 as amend d. in 1929. It set" UP a republican stater. based on a
federal str zcture similar to that of Z she US; and it provides for
democratic Institutions anad practices Including free elections,
governmont responsibility toward tho electorate, judicial
pendence, a bill of rights, etc. such as are characteristic of the
traditional concept, of a parli :entary, liberal democracy. The
gover ent l structure is composed of a Fo .eral ea dent, a
naticna1 Government headed by a Federal Chancellor, a tionfa,l
Parliament consisting of two houses, a provincial 'governor and
part ient for each of the nine federal states, and subsidiary
district and, local goierxmiental agencies,
The present national G-orTera rat was formed after the
elections ors 1 cvember 25, 1945. -It is subject to, the authority of '
the Allied Co Ission (AC), as kated in the Control Agreement
of June 28, 191.6. This Agreement Improved ? ?e position of the
Austrian Goverment consId.erably by stipulating that Only
constitutional laws would henceforth be subject to ' neni .ougi
approval of the four powers; all. other legislation "would entanal"ically
90 into effect If the AC failed. to act upon it within 31 i ay c
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after it was submitted. The effect of this relaxation of Allied
controls, however, was considerably reduced by other provisions in.
the Agree nt which left a number of important matters eub jest to the
jinrisdi.ction of each zonal c c rider o Thus, in case any one power
disagreed with the decisions taken on the national level, it could.
The USSR took wie?est
advantage of this. possibility for unilateral action with regard to
such matters as the distribution of food supplies and petroie am
resources, the seizure of German assets,, and the nonrecognition of
nationalization in the eastern zone o
countermand them In ite own zone of occupation.
The present Government is a coalition of all three pa,-rtios
the People es Party, thd. Socialist Party, and the Communist Part~r.
In effect:,, however, It is a coalition of the first two only, partly
because political power in Austria is almost evenly divided between
them,,partly because the partici
ation of the numerically small.
Cbaamuriist 7 y in the Goverment is largely formal < On most
major issues the Caa uniets have voted s,gsin.st the Goverment; they
have also conducted en. intensive campal attacking the
Socialist.Poople ?s Party coalition and calling for new, elections
even before the end of the occupation.
T" e Political Pertiesa In the national elections, the People ?s
Party received 49.8 percent, the Socialist Party e6 percent;, slid
the C ist Party 5.4 'percent of tho total vote. In terms of
parlis>ntary. seats this remelt give the People ?s Party an absolute
majority of 85 deputies out of a total of 165. The Socialists.
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SMUT - m
elected 76 deputies, the Coa unists four. This is the first time
that Coi uniats have ever had any parli ientaary soaate in Auttri.a.
The Peeople ?s Party represents primarily middle-class,'
industrial r and peasant interests, and is closely affiliated with
the Cath?lie.Church. The Socialist Party represents -chiefly the
intoreets of the working-class and lower Iddle-class population,,,
which is usually without religious affiliation. Both these
Majority pa ties have a long political tradition and solid backing
in terms of the social structure of Austria. 'The Co .unists have
apparently gained tome strength among the vorking-class population
at the ezpenee of the c i al1sts p . they have also been
particularly active and partly successful in'.b ae trade-union
movement. But there is am yEt no evidence that* these ill
Communist gains will Increase to a degree which might seriously
on anger the dr inant position of the other two par-ties. Th
great 'majority of the labor, movement big firmly behind the, Socialist
Party, end most reports fr the a tern zone c?nflr i a conclusion
draw from the experience of other Soviet-occupied areas.:. the
fact of Soviet occupation, thaugh giving the C.o aanists certain
short- .ge ' Manta ges, may actually bArm their political
prospects in the long run. The Co gists could become a threat in
Austria only if the two other par-es failed utter.: y Im executing
a constructive progrof their own or'-if the Western posers
failed'to implement their repeated promises of economic end
financial aid to Austria.
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The two majority partiee differ in their Internal prof-13l
as well as in their foreign orientation.. The people'ep Ply alma
primarily at the i intenance of a capitalist democracy modiTi.ea .
roughly along the lines of the. eccial and political pr a , of the
Catholic Church.. The chief aim of the Socialist Party la the
eetabliehmoiat of a socialist democracy in general corresponding
to the program of the British Labor Party. The former party is
Inclined to lean particularly heavily on the US for supports the
latter has a- certain distrust of US irn tentiona in rope and a a ars
closer cooperation with the 'UL The rajor?itp par,
oR hot i i y,
hawever, is united in oppoeltion to the US with regard both to
i ediate Soviet demands on Aubtria and to any long-term
dependency on the Soviet Unnion..
The Government Record. Faced, with the after, th of the -ear and
the difficulties arising from .ate Aa power Occupation, than. Gone n-
> at has not made an overly impressive recordo What it has achieved
Is almost entirely due to the .wocecefaai cooperation of the two
jority parties, which have been able. to ca m romice on a number
of? iwc a -at intern i .a3s on several of which they were oppocod
by the C unntets. In addition to the over-all reor. .rci~ation of
governaa nt services, the reconeta :action of the educational end
judicial system., and the meaeuree undertaken " Tor'.econowdc zrv?vvval
(discussed. below), the most port ant internal laws and fox` ign
agreements. we tho following:
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a- CPirexledy 20-079EeiM By ea -14-W of 170veriba:r . 30, tuo
Austrian oarrencyi e, converted f in e reichu arks to schilling.Ti a
one- -or basis. Further legl.ea.ation for she et;a)ill.',! -'t-,ion the
currency is still pe ding .
h? ul o bn o February 15, 19146, Brarli at
paeaed a providin fog: co p's 1 ory- labor eorvice for all Ia?v=n 'h
tMeen tho gees, of 16 and 55 and. all women between the ages of :iti
and 50 who were not employed On a basis. Coo puleory
Bar -vice uae to apply for a period of eix months, with, the poseeib-.'.ity
of an additional six onth s at the option of the Gone ent.
ca Nationnliaa.tion Law. By r law of ~; Ids 26, 19L.7, ow-Le 70
major ante rises in .they key i.aduetr .eE; of 41,uctria were tru ferred.
to public ownership of the state or to join o nerahip of 0R?
cooper tivoe" and the s tats a Thie law, which is undoubtedly the
most import ra nt piece of le ;iela; Ucn adopted by the Gove meex , 11,as
not, yet been implemented owing to Soviet re -Neal ? o recogni%e ite
validity' in the eastern zone The Bova of eau thoritlee cl ,i. ted
that it violated Soviet rights to Ge $n property under the
o'i;adan Agrewment0 When no ag~-aemsnt on this issue could. b,-;,!i
obtained in the AC end the Soviet wa horitiea declared thuaOc, they
would. not recognize the nationalization law in `.t. pair zone, the
Auctrio Government announced that-, h f a c $ ica of
?>
law would. be post= ed pendi he fin 1 clarification of th"q
rights of fo1eIgn Property candor the Ica%
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do S Q th Tirol nxor-'Iant a 71 September 21, i946 I.t;? ..an
l riz e Meiaiater Aleid.e de Ga peri and Aau tz,i: 'oreI T Mi,zi.
dvber sl ed an accord. in Paris by which Austria a . ter
renounce Its cl aixPIa for recovery of the di gated area of Sao,
(Alto d,ige,) e?d Italy a eed to Lpmmnt Ghie area -- which hae a
G e;rrk -epeekirg r jori-ty. a l rge i gree Of adarainletrati o, ani
cultu M-l eu GaontCmy. Though the el t of
e t Laic iaai:
(Auetris ) In this eze& will be conei..e bly improved if teen,
reaement ie fully :b leMente . by the Italian Gove ?a rnt, thin,
eettlement actually constituted a ee:r-amaas, eetb ,: to Auetri ,n
aepiratie e, Gbaitd que,lly by all gouges for 9, r,,70iwry
of this long d..e prated territory.
e. Deg zi.ficateion law. The fivss1. Denaziflcab eion w w er 1: a: 3d
.by P lia eut or. Febr r 6, l9 It ie vatic ated th . it
directly affect approximately 500,000 Auet l.e xe o s ;ne re g`l.etE,red
Nazie3 a . Unvever, only acme 50, 0 O of this number are expected to
fall into the category of ,Yvalulor of'f'end: or=e; the reef will b
claeelfled as less implicOnted and minor of: erdera,s, and will be
cs1ea?M. after z nominal, nine. 'Never,. eleea, thin final xer icn
of "the Denazification, 1 wu vas virtual; forced upon (o errmen ,
by the.t llied Commission, which ccnsidwred: pravlcue Aueetrien
legialation on the subject as 'too mild.;
f .. C ollec lve 13ar 71i Lau a On Feh: ar7 26, 1947; lead h; "t
? adopted. a now collective braining lath. An o: tenei,on of pro is t .'s
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leg9 elation during the Fi.r3 . ivy y hob: i it P oVides for
nrs~3Gi }; ,= Tie 3
collective h e a .ining, and, Zivee a v l.rta ~.. onopol tae ei? ion to the
Chamber of 6cwae ce end. the Tr. e-tjn s.on Fede ration O's tile
preseen .fives of ..a age ont zi labor respectively in sae;
bar i i rooeae o A new Worke O Councils Law providing for
creased 'labor par';icipation in industrial enterprises is a rs `.?s
compiOtion in draft f0m.
cc. o .1,e; 11 vE3 _o xai9 Y'co ncooxic recovery has been ono
o~z van mad ;; in induc , ?i 1. U ;io daring the la
quarter of 1946, tbia wasp offeot by an tmv;c ukliy eevere prix-tor
auring which OW -0 of the najor e"ntorr. icec 7.eu.ch as the ote3e1. t.;;'r'ks
at I)o ~a1tY,e the nitrogen plant at LinnZ, and the a 4?Linn . plaid ?t, art
Raps-ho 'e f Ere forced to discontinue opers tione. Eo1rever, the economic
plc .are hac ix %ave again with the ?bagin ni.nc; of eprix e . i't . a?. t,ri.es
;have roe operation , hydroelec. ;?ic power pro uctioz sa, in-
er~? A., and. coal imports have auaain reached th level of met. faall o
`. ba impor% prcgrfi for 1.94-1, totaling $320 ' ,il.li.on;
cotinciate of $128Q5 millions for 'eao p x;1.10 million for indua`'itr:i? .
32.. million for coal, $33-7) million fors
Ao i. n a, 30 million for ':;aa~lical '6.~up,~liea, cm d- 12
h oi? m i.ece1la oue items. . The export Program. for 1947 Me been fie t
at $120 million. 'Me if i l1aent of , a substantial Portion of the
inndustriel i port grogram ie of ex ount i. orPtance in order try
a t i .al.ate the eXP rt program ax-01 isniprc ?Te A a. tri.a Qe balance of
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 Declassified in Part - Sanitized Copy Approved for Release 2013/02/27: CIA-RDP78-01617AO02800160002-2
payment. A. large part o: ? tz c it . d~ ?Ana'anoiel aasiat rce of
110 Million starling w 11 be ueed for industrial eq i nsnt aid. raw
.teri s4 This side of the uconooic proms will be furtah_ar .
stg g t b o n e d . if the .ustrian application for a $25 million 1 ( : i , , ns.,
fr ,th.e !!port-lrniaort Bark should be approved.
Several factors 1a `lueace he etate and dsveloy.mennt of
Auatrian. economic roconetructjo i The full effect on Austria?
of the Potsdam A cement on the disposal of German aeeet$ To aa1.xaa to
be seen. This, ae shown above, is particularly i po as t with
re a l to the valuable assets claimed. btl the USM is ite s: xv of
occ :t ne An ~t er aa~ for ire the 'prevention of 1r flatio ry trende o
The currency ref o in None abor;? 1911v5 e;Fae only a first step in 'this
direction. It has not 'yet pro1uced a, currency which Ii t2-uwtz d. by
the po ulationa Although black ar t pr` ces dropped conaiddx-abl
in l9 6 and have only recently @bo3 a II :tt up j #. tyl'VA' rd~r.c . pre
sent money prices are not a eu f icient incentive to incroaaed.
prod ac tat o,
In the long r , howeverF, the ree ption of foreign ? rr ?ta
and. the establishment of international oxch ge z tea will be the
most epo t at factore for ecoao .ic recovery and atabilizatlon
In 1937, o uistri . ? total --o ~ a ~ r Q d sex i 1 o aae:t~
amounted to 27-9 percent, 1 ? Maaateriale 'nd samiflni shed pct
?
to 3506 rgeat, and hard coal to 7 percent. To pay for tt eee0
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 Declassified in Part - Sanitized Copy Approved for Release 2013/02/27: CIA-RDP78-01617AO02800160002-2
imports, Austria needs export 7elzet for its industrial px?c ucte,
Before the war about 40 percent of Auo aria ? ' industrial output
was egorteda The major `grad .ng partners were Ge nyD I' ely,
and .Austria?e eaetern neighbors (Ozechaelo .kia, Hungary, .~,oela ia;,
a:a:ia, Wild Pollard) Germany held the largest sharp in Auetriale
ores ,~ eF Providing between 15 and 22 percent of Austrlaas
import's d receiving between 13 and 16 percent of its export e
idea
The share of Austria?a eastern neighbors varied between 39 ate
47 percent. on the import aide and 32 and 47 Percent-ox, the oxport
Me present law level of foreign trade is indicate by the
.fact that the monthly average during 1946 (not including trade ?F th
Germany) a 13 percent on the import ride and 1705 Percent, on
the export side ass cc -pa,rod with the monthly, average ' of
foreign trade in 1937, Trade i tth S ri tzeriand, never before- a very
active a e partner with Austria, is at present. the heaviest,
followed by that with Ozechoslovakkia and Italy. The resumpt-ioxx of
foreign trade on a larger scale is savorely hamper ed -by, the. lack of
international exchange rates, xpor ; trade must be conducted
on a barter basis in the forma of bilateral or even trilateral
transac=tions. Trade with Czechoslovakia dk Polar d; on which,
Austria is p; icularly d pendent for its solid fuel require nbs,
has been restricted because those countries have insisted on
pant in "hard' ?c;rrency or acceptable goods. 4oreoTer, Austria ?s
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 Declassified in Part - Sanitized Copy Approved for Release 2013/02/27: CIA-RDP78-01617AO02800160002-2
BECRET
economic position vie-a-vie its eastern neighbors, on which. it
depends for other raw L ter1als and food, bas further deteriorated
because of the political charades in the 2uropean balance of power
which have brought these countries within the Soviet sphere o:,?
influence. Fimlly, at least a mo '.crate resumption of trade with
Germs is iortant for Austria a- partly because much of Austrian
industry, to tooled with Ge-71 machinery 30 that agare, pants and
certain materials ' ca nnot be procured elsewhere, partly becs see
Austria needs coal' from Ge r'ny, and Ger ? , in turn,. is ~' tpernd nt
on bYdr -oelectric polier?from Austria. The original US policy
advocating complete severance of economic relations between tie
two countries has- recently been s odifled, but the actual voluan,
of ~ trait between them c ur:irng 1916 remaine& negligible o
The food si tua do . re ins critical. The ration of
1,550 calories per day for the normal consumer could not he
maintained equally in all parts of the cuantry. Last ye ?aa
crop was barely more tb ,n 50 percent of the prewar level. Th.Is
placed Austria ? s foot level Ong the lowo t in Europe and ads
the country largely dependent. on foreign imports for more physical
cur-ivai. A higher food ration is provided in the import prof a aa
for 1.947, but the delay in elecutireg the proms has prevented, a
iM.Prov nt so fair during -the current year o The full use of
Austria's Indigenous food resources has been considerably hampered;
Partly by unilateral. Soviet action depriving the Goveerxaa dent of full
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 Declassified in Part - Sanitized Copy Approved for Release 2013/02/27: CIA-RDP78-01617AO02800160002-2
? . ?
- 19 -
Jurisdiction over the allocation and distribution' of food supplies
in the eastern zone and partly by the v vacs of the Govern ent?s
own system food collection and distribution,
12RS-R? gs Prosocts< Despite current difficulties, the
long-range prospects of Austria, both political and economic, are
generally estimated as fairly good. Politically, the-position of
the People?s Party and the Socialists appears quite secure- Even
if, as is generally assumed,, the Socialists should win a majority
in the neat national election, it is highly probable that.:the'-present
coalition would continue even after the. end. of the occupation. For
some years to come, neither party will wish to assume sole
responsibility for national affairs. The stability of this regime
could be endangered by Cmrniet forces or diet influence only-
if give economic crises should., occur in the next few years.
This political structure also explains the emphasis which
0 the U has placed on gaining an economic foothold in Austria
? throuO the acquisition of formor German assets. Under the
i
L
t
c
rc
ances,
he beet caicula ed long-range objective of the UM
in Austria, would seem to involve the use of this economic foothold
in order to retain some Soviet influence in Austria after the
occupation is lifted. The prospects for'this objective deport
both on Austria?s bargaining position via-Na.?is the countries of Eastern
Europe and on the possibility of alternate trade relations with the
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 Declassified in Part - Sanitized Copy Approved for Release 2013/02/27: CIA-RDP78-01617AO02800160002-2
West . with -he economic z rkets in. "Eaete.ma Europe
should not develop sat. ie aac?tortiE., Auetr is oe dexpandonce 01 the 'Wes't
wouid obviously increa? e greatly. Howe rer, unti economic o atIon
with the Western powore de :relop to a degree which won.16 p,e ?e
Austria to diepenee, if neceesar ; with 3. tai traditional mrja::'Iiota in
Aern `grope, it is unlikely that eny Austrian goverx ize:it c; uld
afford. to ImAr3Ue a course which would Eer iouaiy jeopaard iz r,. t`alS
Eastern -trade.
. E.ieutaing that the international situation remains f-"airl.y
stablo and that Auetrie. -retains control of most of its rei imarcea p ,
econo is recovery should continue, at a satisfactory rate o ` he
newly deco'? oped petroleum resourceas- and the increasM h l,. cR.ale; W tric
pod, er output should reduce appreciably the, need for bit aa ,?nty:;z cog'16
inpoA s in the future, and the expanded fecilitiee in the fee.*&Ulizea
alu..minun, ball-bearing, gin e. ring, chemical,, and other ;.ndv..otr1eF
should reduce import needs and .provide neii, products for eK: a?p, ; o
Taking those de?.,alomsnts Into account, a decrea?.1m anna:tl
deficit may be expect061,1. for the next few years and
an,
the ball nnce of pa nts MY reached in the early 1950's.
Declassified in Part - Sanitized Copy Approved for Release 2013/02/27: CIA-RDP78-01617AO02800160002-2