PROVISIONAL INTELLIGENCE REPORT RECENT AUSTRO-SOVIET ECONOMIC RELATIONS

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79-01093A000800040008-9
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 79
• Document Creation Date: November 9, 2016
• Document Release Date: February 11, 1999
• Sequence Number: 8
• Publication Date: February 11, 1955
• Content Type: IR

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PROVISIONAL _IN-T -LLIC EN_C_E -REPORT
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RR PR-97
11 Fe~i uary 1955 GE 'N CLASS, 0
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CENTRAL I_ fill NT A E-NT Y
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OFF I i; C5 ~E EAit R AM REPORTS
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R .,CENT AUSTRQ -SOVIET ECONOMIC RELATIONS
. _1
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WARNING
This material contains information affecting
the National Defense of the United States
within the meaning of the espionage laws,
Title 18, USC Sees. 793 and 794, the trans-
mission or revelation of which in any manner
to an unauthorized person is prohibited by law
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US OFFICIALS ONLY
PROVISIONAL INTIJ'LLIG: '?C S R;;-PORT
RESENT AUST'RG-SOVIET ECON10:IIC RELATIONS
CIA/RE PR-97
(ORR Project 10,343A)
NOTICE
The data and conclusions contained in this report
do not necessarily represent the final position of
ORR and should be regarded as provisional only and
subject to revision. Co mlents and data which may
be available to the user are solicited.
Office of Research and Reports
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This report, a revision of the ORR contribution to NIE 25-54, is
confined to two of a nu_,.ber of economic topics taken up in the NIE.
Li;niting the discussion to those two topics -- the Soviet economic
holdings in Austria and Austria's trade with the Soviet Bloc -- is
in keeping with ?RR's pririary responsibilities in the economic intel-
ligence field. The Soviet-controlled enterprises in Austria and
Austrian trade with the Soviet Bloc are regarded as the principal
aspects of the econo.,iic relations between the two areas, but this
subject also includes some matters which are not taken up here ,or exaiiple, international use and control of the Danube River.
This report is concerned only with developments since World War II,
although some prewar-postwar comparisons are drawn.
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COPITENTS
Page
Summary and Conclusions . . . . . . . . . . . . . . . . . . . . .
I. Soviet Economic Holdings in Austria . . . . . . . . . . ? ? ? 6
1. Allies' Attitude toward Austria . . . . . . . . . . . 7
2. German Assets in Austria . . . . . . . . . . . . . . 7
3. Soviet Removals of "War Booty" . . . . . . . . . . . 9
B. Soviet-Controlled Enterprises in Austria . . . . . . . . 10
1. Administration of Soviet Property in Austria
(USIA) . . . . . . . . . . . . . . . . . . . . . . . 10
a. Extent and Organization of Operations . . . . . . 10
b. Major Industrial Enterprises . . . . . . . . . . 14
(1) Automotive and Fine Mechanics . . . . . . . 14
(2) Electrical Equipment . . . . . . . . . . . . lt+
(3) Chemicals 15
(4). Metallurgy and Coal . . . . . . . . . . . . 16
(5) Machinery and Precision Instruments . . . . 17
c. Extralegal Nature of Operations . . . . . . . . . 18
d. Value of the Properties to the U3 It . . . . . . . 20
2. Soviet Mineral Oil Administration (S Y) . . . . . ? ? 23
a. Production and Distribution . . . . . . . . . . . 24
b. Value of the Properties to the USSR. . . . . . . . 26
3. Danube Shipping Company (UDSG) . . . . . . . . . . . 29
a. Historical Ba.ckgroUnd 29
b. Current Situation . . . . . . . . . . . . . . . . 30
c. Value of the Properties to the USER . . . . . . . 31.
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C. Soviet Economic Policy in Austria . . . . . . . . . . . . 32
1. Strategic and Political Context ? . . . . . . . . 32
2. a,conomic Exploitation .. ? . . . . . . . . . . . . . . 33
3. Economic Obstruction . . ? ? ? ? ? ? ? ? ? ? ? ? ? ? 34
D. Applicability of the Long Draft Treaty . . . . . . . . . 35
1. Pertinent Provisions .. . .. . . . . . . . . . . . ? . 36
2. Probable Effects of the Adoption of Article 35 . ? . 38
..II. Trade of Austria with the :soviet Bloc . ? . . . ? . . . . . . 1+0
A. Introduction . . ? . . . . . .. . . . . . . . . . . . ? ? 40
E. Volume of Trade . ? ? . . . . . . . . . . . . . ? . ? ? 42
Co Geographic Distribution of Trade . . . . . . . . . . . . 45
D. Co~,_u-nodity Composition of Trade . . . . . . . . . . . . ? 47
i. Imports . . . . . . . . . . ? ? . . ? ? ? . . . . . ? 47
2< rxports . . . . . . . . < ? . ? 50
E. Relative :extent of Unrecorded Trade . ? . . . . . . . . 51
F. Austrian Dependence on Trade with the Soviet Bloc . ? . . 52
I mend ixes
Appendix A. Tables 12-14 . . . . . . . . . ., . . . . . . . . . 55
Appendix B. Methodology . . . ? . . . . . 61
Appendix C. Gaps in Intelligence ., 65
Appendix D. Sources and Lvaluation of Sources . ? . . . . . . . 67
1. Total Production and UTA Production of Coal, Soviet
Zone of Austria, 1937 and a?->3 . . . . . . . . . . . . . 16
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2. Gross Value of USIA Production and Exports, 1946-53. . . .
22
3. Production and Disposition of Crude Oil and Petroleum
Products in Austria, 1938 and 1947-53 . . . . . . . . . .
25
4. Exports of Austrian Crude Oil and Petroleum Products
to the Soviet Bloc, 1952-53 ?,
26
5. Value of Austrian Crude Oil and Petroleum Products Sold
to Austria and Exported to the Soviet Bloc, 1945-53
28
6. Indexes of the Volume of Total Recorded Trade of
Austria, 1937 and 1948-53 . . . . . . . . . . . . , . .
43
7. Indexes of the Volume of the Recorded Trade of Austria
with the Soviet Bloc, 1937 and 1918-53 . . . . . . . . .
45
8. Recorded Trade with the Soviet Bloc as a Proportion of
the Total Recorded Trade of Austria, 1937 and 1948-53 . ?
46
9. Geographic Distribution of Austriais Recorded Trade
with the Soviet Bloc, 1937 and 194.8-53 . . . . . . . . .
48
10. Commodity Composition of Austria's Recorded Total
Imports and Imports from the Soviet Bloc, 1953 . . . . .
49
11. Commodity Composition of Austria's Recorded Total
Exports and Exports to the Soviet Bloc, 1953 . . . . . .
51
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Following Page
Figure 1.
Figure 2.
Figure 3.
Austria: Disposition of the Output of
Petroleum, 1947-53 . . . . . . . . . . 26
Austria:: Index of the Volume of Total
Recorded Trade, 1937 and 1948-53 ? ? ? ? ? 44
Austria: Geographic Distribution of
Total Recorded Trade, 1937, 1948, and
1953 . . . . . . . . . . . . . . . . . . 46
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REC:1T AUSTRO-SOVIET ECONOMIC REIATIONS*
Summary and Conclusions
Since the end of World War II, a small but nevertheless signif-
icant segment of the Austrian economy in the Soviet zone of occupation
has been under the control of the USSR. The extent and nature of
Soviet control over these alleged German assets in Austria is the
result of a sweeping, unilateral interpretation by the USSR of the
provision in the Potsdam Agreement concerning the disposition of
German assets in foreign countries.
The USSR is currently exercising the rights of ownership over
about 240 industrial and commercial enterprises in Austria. These
enterprises, together with a chain of nearly 250 retail stores
developed since 19148, are administered by a Soviet governmental agency
in Austria -- the Administration of Soviet Property in Austria
(Upravleniye Sovetskogo Imushchestva v Avstrii -- USIA). In addition,
the USSR controls the Austrian oil industry, which is located entirely
within the Soviet zone of occupation, as well as the few remaining
assets of the Danube Shipping Company in the Soviet zone.
The estimated 240 industrial and commercial enterprises under USIA
produce a wide variety of goods and are the dominant producers in
Austria of some of these. USIA has organized these enterprises into
nine groups, the most important of which include the plants in the elec-
trical equipment, automotive and fine mechanics, chemicals, metallurgy,
and machinery categories. Other enterprises operate in the fields of
light, industry, construction and construction materials, food and other
consumer goods, and agriculture and forestry. Apart from some 650 Soviet
managers and officials, the USIA establishments employ some 50,000
Austrians, or about 6 percent of Austria's industrial workers.
The gross production of the USIA enterprises from 1946 through 1953
is valued at roughly $1 billion, with an annual peak of about $200 mil-
lion in 1951. An estimated'20 percent of USIA production has been
* The estimates and conclusions contained in this report represent
the best judgment of ORR as of 1 December 1954.
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exported to the Soviet Bloc, the remainder being so:Ld within Austria
(including the non-Soviet zones) or, to a minor extent, exported to
non-Bloc countries. The net takings of the USSR from USIA operations
from 1946 through 1953, making an allowance for limited investments
in the enterprises, are; estimated at about $150 million.
USIA profits have been enhanced by limiting expenditures for the
maintenance of plant facilities and by operating the enterprises in
an extralegal manner. In general, the USSR claims extraterritorial
rights in Austria for the enterprises under its control. Thus USIA
buys, sells, imports, and exports goods without regard to Austrian
legislation concerning taxes and customs duties and observes the
foreign exchange regulations only when convenient.
Not only the industrial and commercial firms claimed as German
assets after the war but also the chain of retail stores later orga-
nized in the Soviet zone are operated in this way. By avoiding
import duties, defaulting on taxes, operating without trade licenses,
and ignoring other Austrian economic regulations, these stores have
caused a heavy loss in treasury revenues and have put Austrian retail-
ers in a most difficult competitive position. Under the circumstances
of military occupation and firm Soviet control over the USIA establish-
ments, the Austrian government is unable to do much about this situa-
tion. Both persuasion.and threats backed up by law have been employed
by the government to bring about a boycott of USIA firms by Austrian
businessmen and consumers, but these efforts have been largely unsuc-
c ess.ful.
The oil properties, which are the second major component of the
Soviet economic holdings in Austria, are operated under the direction
of another Soviet state agency, the Soviet Mineral Oil Administration
(Sowjetische Mineraloelverwaltung -- SMV). Since the known oil resources
of Austria are located wholly within the Soviet zone, SMV controls
the industry completely.
SMV has carried forward rapidly the exploitation of Austrian oil re-
sources begun by Germany during the war. The output of crude oil of
over 3 million metric tons* in 1953 is double the 1950 figure and 50 times
as large as the output in 1938. Because of inadequate refining capacity,
about 40 percent of the total production of crude oil has been exported
to the Soviet Bloc during the past 3 years. About two-thirds of the
moderately increasing. output of petroleum products has been sold to
Austrian distributors at more or less competitive prices. Except for
Throughout this report., tonnages are given in metric tons.
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small quantities of petroleum products exported to non-Bloc countries,
the remaining output of products goes to the Soviet Bloc.
In value terms, the Soviet Bloc has received during the period
1945-53 about 60 percent of the total output of crude oil and petroleum
products of over $430 million. Soviet net takings amount to possibly
30 percent of the gross value of production, or about $130 million during
the entire 9-year period, with an annual peak of $27 million in 1953.
These estimates imply that SMV received full payment for one-half of
the shipments of crude oil and petroleum products to the Bloc. The
USSR, Czechoslovakia, East Germany, Hungary, and Poland each took
sizable shares of the crude oil exports in 1952 and 1953, but most of
the refined products went to the USSR and Czechoslovakia in 1952 and
to Czechoslovakia and Poland in 1953.
The present level of oil production in Austria can be continued
for several years without large additional investments, but in view
of the fact that the remaining potential oil resources amount to only
35 million tons, production can be expected to decline there-
after. The 1.8 million tons of crude oil and petroleum products
shipped to the Soviet Bloc in 1953 are only 3 percent of the Bloc Is
total crude oil production. Nevertheless, this quantitatively small
supply indirectly permits the sale of Rumanian petroleum to the West
and thus is a useful source of foreign exchange.
The claim of the USSR to German assets in the Soviet zone of
occupation also resulted in its acquisition of the properties of the
Danube Shipping Company (Donau Dampfschiffahrts Gesellschaft -- DDSG).
Since most of the seized vessels have been removed to the USSR or
turned over to the joint Soviet-Satellite shipping companies as part
of the Soviet capital contributions, the DDSG properties remaining
in the Soviet zone of occupation are of little importance. The
estimated value of these properties in 1953 was $3.8 million, most of
which was represented by the Korneuburg shipyard and port facilities
in Vienna. DDSG shipping activity is reported to be virtually at a
standstill.
The benefits which the USSR has received since the war through
its control of the USIA, SMV, and DDSG enterprises do not comprise
all of the Soviet takings from Austria. Soviet removals of "war booty"
in 1945 and 1946 have been valued at roughly 400 million. These
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removals included dismantled industrial equipment, stocks of raw
materials and finished goods, and large amounts of currency and
securities. Total Soviet takings in "war booty" and profits from
the operations of USIA and SMV may be estimated conservatively at
some $800 million.
Although exploitation is the paramount Soviet economic aim in
Austria, a policy of obstructing the rehabilitation and development
of the Austrian economy has also been apparent from time to time.
Both of these economid aims are conditioned, and perhaps overshadowed,
by strategic and political considerations arising from the presence
of Soviet military forces in eastern Austria. These Soviet troops
occupy an advantageous strategic position in central Europe. Moreover,
the USSR has repeatedly used its hold on eastern Austria as a political
bargaining point.
Negotiations between the Western powers and the USSR over the
State Treaty for Austria, which would end the occupation, have continued
off and on for about 8 years. The part of the Long Draft of the pro-
posed treaty which is pertinent to this discussion is Article 35, on
which the Big Four reached agreement in late 1949 after years of
haggling. This article provides, in brief, that the USSR shall receive
60 percent of the oil production of Austria for a period of 30 years,
sane concessions in oil exploration areas, certain oil refineries,
and the assets of the DDSG in eastern Austria. All other Soviet claims
to German assets or "twar booty" in Austria shall be relinquished in
consideration of the payment of $$150 million by Austria to the USSR
over a period of 6 years.
Adoption of Article 35 would be of economic benefit to Austria
in spite of the properties which it grants to the USSR. Profits
accruing to Austria through the return of all the USIA enterprises and
a small part of the oil industry should do much to keep the $150 million
settlement from becoming a serious burden.
The other main aspect of Austro-Soviet relations is the trade
between the two areas. Extralegal (and largely clandestine) shipments
of manufactured goods and crude oil and petroleum products from the
Soviet zone of Austria to the Soviet Bloc may have; exceeded the volume
of officially recorded exports from the whole of Austria to the Bloc
by one-third in 1953. There also have been some unrecorded shipments
of goods in the opposite direction.
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Trade with the Soviet Bloc, as indicated by official statistics,
is now much less important to Austria than it was before the war.
Austria was able to increase its total recorded volume of exports by
nearly one-half from 1937 to 1953, while limiting its imports in 1953
to 92 percent of the 1937 volume. In contrast, Austrian imports
from the Bloc in 1953 were only one-quarter of the 1937 volume, and
Austrian exports to the Bloc were less than one-half of the 1937
volume. Total trade turnover with the Bloc in 1953 was at the lowest
point of the past 6 years. The effect of these changes has been to
reduce the proportion of Austrian imports obtained from the Soviet
Bloc from 39 percent of the total in 1937 to only 11 percent in 1953.
The proportion of total Austrian exports taken by the Bloc has declined
to a comparable extent -- from 35 percent of the total in 1937 to 11
percent in 1953.
Austria's leading trade partner within the Soviet Bloc in 1953 was
Poland. Other European Satellites accounted for almost all of the
remaining trade of Austria with the Bloc. Bulgaria, East Germany, and
Poland have increased their shares of Austria's trade with the Bloc
since 1937, whereas the shares of Czechoslovakia, Hungary, and the
USSR have declined.
Austrian imports from the Soviet Bloc consist mainly of foodstuffs
and mineral fuels. In 1953 the Bloc provided one-third of the coal,
coke, and lignite and one-sixth of the foodstuffs imported by Austria.
Czechoslovakia and Poland were the sources of the coal, Bulgaria and
Rumania supplied the cereals, and Czechoslovakia and Hungary provided
most of the sugar.
Apart from the shipments of crude oil and petroleum products to
the Bloc, the bulk of Austrian exports is made up of manufactured
materials, notably iron and steel products;. inedible crude materials,
including large quantities of wood and lumber; and machinery and
transport equipment. only the first and last categories are signif-
icant in trade with the Soviet Bloc. In 1953 the Bloc took 11 percent
of Austria's exports of manufactured materials, which :jade up one-half
of total exports, and 29 percent of the exports of machinery and trans-
port equipment. The exports of manufactured materials were fairly well
distributed among the major European Satellites, but Poland alone
received about two-fifths of the machinery and transport equipment.
Austria is now less dependent on imports than before the war and
is less dependent on the Soviet Bloc than formerly for imports which
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are still essential. Industrial production has been increased 70
percent above the 1937 level without importing a much larger volume
of goods than in the prewar year. Imports of raw materials have,
in fact, declined by one-fifth during this period. Agricultural
production has been restored to the prewar level, which is sufficient
to meet about three-fourths of the country's food needs, and the
development of domestic resources of hydroelectric power, petroleum,
and brown coal has greatly reduced Austrian dependence on imported
coal.
Coal and foodstuffs remain the most important commodities which
are obtained from. the Soviet Bloc, but only 20 ;percent of Austrian
coal consumption and only about !. percent of Austrian food consumption
in 1953 were satisfied by imports from the Bloc. Moreover, the loss
of the Bloc as an export market probably would not be critical in
view of its mere 11-percent share of Austrian exports in 1953. It
seems doubtful that imports and exports of this extent could be used
effectively by the Bloc as an economic weapon against Austria.
Pressures which the Bloc countries might try to exert by this means
would be considerably restricted by the competitive world market for
cereals and by the availability of coal from other areas such as the'
Ruhr and the Saar. Austrian trade with the Bloc may increase some-
what during the next several years, but it is unlikely that such
trade will recover to anything like its prewar volume.
I. Soviet Economic Holdings in Austria.
A. Introduction.
Soviet ownership of several hundred industrial and commercial
enterprises in Austria has its origin in the part of the Potsdam
Agreement concerning reparations from Germany. The nature and extent
of this economic burden on Austria reflect the special position which
the Allies considered Austria to have occupied in the war and the
sweeping, unilateral Soviet interpretation of the Potsdam provision
regarding the disposition of German assets in foreign countries.
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1. Alliesf Attitude toward Austria.
Although Austria fought on the Axis side in the war, having
been thoroughly absorbed by Germany after the Anschluss, the Big Three
were disposed to look upon Austria as tithe first ree country to fall
a victim to.Hitlerite aggression" rather than as an enemy country.
This view, which was expressed in the Moscow Declaration in November
1943, did not, however, keep the Soviet representatives at Potsdam
from asking for reparations of $250 million from Austria. This proposal
was rejected by the US and the UK3 and it was concluded (though not
written into the Agreement) that reparations would not be levied on
Austria. 1/'*
This decision concerning reparations from Austria was
partially nullified on the last day of the Potsdam Conference. Stalin
requested that Soviet claims for reparations from Germany be satisfied
not only by property in Germany and by German assets in Bulgaria, Fin-
land, Hungary, and Rumania, as previously agreed, but also by German
assets in eastern Austria (the Soviet zone of occupation). The US
representatives accepted this proposal without too much thought,
apparently believing that it did not grant the USSR much that it had
not already seized as "war booty." After some hesitation, the UK
negotiators likewise agreed to this addition to the German reparations
clause. J
2. German Assets in Austria.
The distinction between Austrian reparations and control
of German assets in Austria eventually became quite blurred as the
USSR adopted the broadest possible interpretation of what constituted
German assets. The general statement on this matter in the Potsdam
Agreement made no provision for joint Allied determination of what
represented German assets in Austria. Moreover, in a note to the
Soviet government on 7 September 1945, the US proposed that although
the Allied Control Council in Germany "is entitled to supervise and man-
age the distribution of German foreign assets, the Soviet Government will
manage assets in Finland, Hungary, Bulgaria, Rumania and assets in east---
ern Austria without communicating with the British, French or American
representatives in the Control Council." / When the Western powers be-
came aware of the scope of Soviet claims in eastern Austria, they pro-
tested any such broad interpretation of the Potsdam provision, but to
little effect.
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Even a moderate view of the extent of German properties
in eastern Austria would have resulted in Soviet ownership of a signif-
icant segment of the economy. Germany began a program of industrial
development in Austria soon after the Anschluss in 1938. Production
capacity in established industries was expanded,, and Austria's first
plant facilities in such lines as aircraft, nitrogen fertilizer, alu-
minum, and synthetic fibers were built and put into operation. 4/
State-owned enterprises such as the National Bank ana the state forests
automatically became German property after the annexation. Numerous
businesses were acquired through the program of "Aryanization" of
property belonging to Jews, and others were simply seized.
Apart from this, however, the penetration of German capital
into the Austrian economy by more or less legal means was very exten-
sive. By 1944, nearly 70 percent of the share capital of Austrian
enterprises was German-owned, and in some lines of industry the percen-
tage of German ownership approached 100 percent. One student of this
problem states that "the economic exploitation of the former Austrian
state continued until, in the last years of the war, every commercial,
financial, or industrial enterprise of any importance in Austria had
been brought under German control through the acquisition of the nec-
essary shares or through outright seizure."
During the first year of the occupation, the USSR seized
numerous enterprises in its zone, claiming justification under the
Potsdam Agreement. By the end of June 1946, nearly 300 industrial
and commercial enterprises had come under its control. At this time
the Soviet High Commissioner directed all Austrian authorities and
private individuals to report known German properties in eastern
Austria not yet taken over by the USSR. The Austrian coalition
government protested :that the Allies had not yet determined what
constituted German assets in Austria and attempted to prevent Soviet
control of these enterprises and most of the others already in Soviet
hands by nationalizing them. The nationalization law, which was to
become effective in SEeptember 1946, was suspended when the Soviet
High Commissioner refused to allow it to become operative in the
Soviet zone. 6/
The USSR has in general taken the position that, except
for property, seized without compensation, by force, or as a result
of the "Aryanization" policy, all eastern Austrian enterprises
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in German hands at the end of the war are German "external assets"
within the meaning of the Potsdam Agreement. The Western powers, on
the other hand, have taken the view that this is an inadequate test
of whether an enterprise is a German asset, since some transfers from
Austrian to German control were accomplished through fraud and duress.
Furthermore, the properties claimed by the USSR were so extensive that
it would wreck the Austrian economy to remove them, and even if they
were not removed, it would seriously impair Austrian sovereignty to
put them under extraterritorial control by the USSR. In this connec-
tion., the Austrian government has repeatedly called attention to the
expressed aims of the wartime Allies to reestablish a "free and
independent Austria" and to open the way for attainment of "political
and economic security" by the Austrian people. Not only this decision,
it is argued, "but also generally accepted legal principles demand.the
invalidation of all transfers of Austrian property to the Germans
carried out under pressure." 7/
3. Soviet Removals of "War Booty.
Before considering the nature and extent of the enterprises
in Austria which have been under Soviet control since the war, it should
be noted that the USSR removed a large amount of property from eastern
Austria during the first year following the war, particularly during
the 5-month period from May through September 1945. This property was
claimed first as "war booty" and, later, as German "external assets"
granted to the USSR by the Potsdam provision concerning reparations
from Germany. Stocks of food, clothing, and fuel were requisitioned
and many industrial properties were dismantled and shipped to the
USSR. Livestock, raw and finished materials, automobiles, railroad
rolling stock, industrial and agricultural machinery and equipment,
and entire factories were removed from the country. 8/ Large amounts
of currency and securities were also confiscated. is activity
continued until the spring of 1946, when the remaining enterprises
claimed as German assets were placed under the Administration of Soviet
Property in Eastern Austria (Upravleniye Sovetskogo Imushchestva
Vostochnov v Avstrii, USIVA*) and production of goods was set under
way.
According to recent estimates by the American Embassy in
Vienna, 9/ the property confiscated and removed by the USSR immediately
after the war had a total value of about $500 million. Industrial and
agricultural property accounts for slightly less than one-half of this
The name was later shortened, by omitting "Eastern"(Vostochnov),
to USIA.
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amount, the remainder consisting of currency and securities. The
Austrian government, in a memorandum circulated among members of
the United Nations in July 1952, also estimated the loss at approxi-
mately $500 million, although the entire amount is ascribed to "losses
incurred through the dismantlement and removal of machinery, semi-
finished products, raw materials and equipment.It 10/ The US element
of the Allied Commission for Austria estimated the losses in capital
equipment alone at about $L00 million. 11/ Although any valuation
of this type is necessarily very rough,_T500 million probably can be
regarded as a conservative estimate of Austria's losses through
Soviet takings in "war booty" and alleged German assets in the first
year following the war. In any case, there can be little doubt that,
by the early part of 1946, the USSR had confiscated and removed from
its zone of occupation a considerably larger amount of property than
the $250 million worth of reparations it requested (and was refused)
at Potsdam.
B. Soviet-Controlled Enterprises in Austria..
The present Soviet economic holdings in Austria consist of
three major components, as follows: (1) the combine of industrial
and commercial enterprises (including a chain of retail stores)
under USIA; (2) the oilfields, refineries, and related facilities of
SMV; and (3) the properties of DDSG. These components are discussed
individually in the next three subsections.
1. Administration of Soviet Property in Austria (USIA).
a. Extent and Organization of Operations.
The properties in Austria which the USSR claimed as
"war booty" or German assets and which had not been dismantled and
shipped to the USSR were placed under USIA (then USIVA) in the
spring of 1946. .This change in policy concerning the disposal of
properties seized by the Soviet authorities probably reflects their
difficulties in successfully transplanting industrial facilties to
the USSR. Much of this equipment is believed to have been wrecked
during its dismantling and shipment to the East. 12/ Furthermore,
following the crushing defeat of the Austrian Communist Party in
the election of November 1945, the opportunity which continued con-
trol of enterprises in Austria offered for the employment of economic
and political pressure possibly seemed far more important than
formerly.
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Reports of the number of enterprises which USIA took
over upon its formation in 1946 vary somewhat. These differences can
probably be explained by the differing dates used, since the organi-
zation of the combine was a gradual process; by confusion between the
number of enterprises or firms and the number of physically separate
plants; and by inclusion or exclusion of nonindustrial properties which
were also taken over. Perhaps the best estimate is that USIA took over
some 400 enterprises during the first several months of its existence.
This figure probably includes between 250 and 280 industrial establish-
ments, 13/ a number of commercial and financial enterprises, and on~
the order of 100 agricultural and forest properties. Some additional
properties may have been acquired during the year or two after USIA
was established, but others apparently have been closed down or consoli-
dated in the intervening years. The most recent listing by the Ameri-
can Embassy in Vienna, 14/ as of April 1954, shows 298 firms under
USIA.* Fifty-eight of Uiiese are believed to be inactive, leaving an
estimated 240 enterprises currently in operation.*
As is shown below, the USIA enterprises produce a wide
variety of producer and consumer goods and are the dominant producers
in Austria of some of these. The USIA combine has at least 650 Soviet
officials 15/; in December 1953 it employed an estimated 49,,000 Aus-
trian workers. 16/ The employment figure for December 1953, consis-
ting largely oC TTndustrial workers, amounts to 6 percent of Austria's
total industrial employment of some 800,000 at that time. 17/ Early
estimates of the percentage of Austria's industrial capaciey repre-
sented by USIA enterprises ranged up to 10 percent, with estimates
as high as 30 percent for the Vienna metropolitan area alone. 18/
The estimate for Austria as a whole is probably too high under-pre-
sent conditions, since extensive economic aid from the US has per-
mitted a great postwar expansion of industry outside the Soviet
zone.
* Exclusive of two enterprises of the Soviet-controlled Danube
Shipping Company (DDSG), whose subordination to USIA is believed to
be largely nominal. See I, B, 3, belowfor a discussion of DDSG.
** The Embassy reports that an additional 33 firms have been reported
as.closed by one source or another. It appears, however, that some of
the firms are still in operation, in certain instances with a greatly
reduced staff, or have resumed operations after closing temporarily.
They are not yet regarded, therefore, as permanently closed.
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USIA is a geographical subdivision of GUSIMZ (Glavnyye
Upravleniye Sovetskogo Imushehestva Zagranitsey, Main Administration
of Soviet Property Abroad) and is directly responsible to Moscow.
Among the primary components of USIA are 9 known Production Administra-
tions, which are directly responsible to the Director-General of USIA.
The Production Administrations are organized functionally and are more
or less separate entities. With a few possible exceptions, the indi-
vidual USIA enterprises are subordinate to one of the Production
Administrations. 19/
The following tabulation shows the names of the Pro-
duction Administrations which have been identified; the general field
in which they are believed to exercise planning, production scheduling,
purchasing, and sales functions; and the estimated number of active
enterprises under each Administration: 20/
Name of Produc-
tion
Administration
General Field of Operations
Estimated
Number
of Active
Enterprises
Avtodelo
Automotive and fine mechanics
20
Kabel
Electrical equipment
13
Kraska
Chemicals
29
Les
Agriculture and forest products
13
Marten
Metallurgy and coal
15
Podyomnik
Textil (former-
Machinery and precision instruments
Light industry, including textiles and
3L.
ly Letex)
leather goods
38
Ts ement
Construction and construction materials
38
Vkus
Food and other consumer goods
15
Unlmown
29
244-*
This tabulation shows that the Soviet-controlled enter-
prises are engaged in a wide range of economic activities. The 10
or 12 most important enterprises are found in the electrical equipment,
automotive and fine mechanics, chemicals, metallurgy., and machinery .
This figureis larger than that given above for active enterprises
because 4 of the enterprises are subordinated to 2 Production Admini-
strations.
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categories. The light industry and food and consumer goods categories
include some decidedly minor firms, engaged for example in the produc-
tion of soda water, pastries and confectionery, alcoholic beverages,
cosmetics, and Christmas tree ornaments.
The hundred-odd agricultural and forestry enterprises.
which were reported to be in Soviet hands in 1951 21/ and which are
presumed to have been taken over along with the industrial properties
in 1945 and 1946 are not in evidence in the latest list from the
American Eknbassy in Vienna. Most of the 13 enterprises in the agri-
culture and forest products category are engaged in the manufacture
of wood and paper products. Some of the agricultural and forestry
enterprises may have been consolidated under one firm, Landwirtschaft
u.nd Industrie A.G. Angern, which according to the Embassy, manages
extensive agricultural enterprises.'t 22/
Of the estimated 93,400 hectares* of farm land which
the USSR took over, 60,000 hectares have been distributed on a rental
basis to some 12,000 farmers. Another 10,000 hectares of farmland
in large estates are leased to Austrian tenants. In both cases, the
USSR is paid annual cash rentals for the use of the land. The remain-
ing 23,400 hectares of seized farmland are used as training grounds
for the Soviet military forces in Austria. Soviet seizures of forest
lands amount to about 63,000 hectares. Relatively little is kno n
of the Soviet exploitation of these resources, apart from the fact
that cutting has been heavy and wasteful, especially during the first
postwar years. 23/
USIA comprises not only industrial, commercial, and
agricultural enterprises but also a chain of retail stores located
throughout the Soviet zone, including the Soviet sector of Vienna.
The chain started with a nucleus of three stores in Vienna in 1948
and developed rapidly during the next several years. / A recent
list of USIA enterprises includes 242 retail stores, a few of which
apparently had been closed. 25
Originally, the stores were intended to serve only
members of the Austrian Communist Party (KPOe). Since they offered
scarce consumer goods at the time of their organization, the stores
were supposed to make KPOe m aubership attractive, but this incentive
became less and less effective as supplies of consumer goods improved.
* One hectare equals 2.471 acres.
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The Soviet authorities subsequently. abandoned this policy of limiting
the clientele and decided to increase the number of stores in the
chain. These stores have continued to serve a useful purpose for the
USSR in earning schillings for the use of USIA industrial establish-
ments and also in weakening the economic position, of non-Soviet stores
in Austria. 26/
b. Major Industrial Enterprises.
Production and employment data are not available for
the great majority of the active USIA enterprises. Pertinent informa-
tion which is available is presented. in this subsection, following
the functional classification used in organizing the Production
Administrations of the USIA combine.
(1) Automotive and Fine Mechanics.
With one or two exceptions, production or employ-
ment data are not available for the 20 known firms in the automotive
and fine mechanics category. The Oesterreichische Automobilfabrik A.G.,
with about 1,000 workers at the latest report, is believed to be one
of the more important USIA establishments. This enterprise manufac-
tures trucks, buses, electrical and other special vehicles, cogwheels,
and gears.
(2) Electrical Equipment.
Some of the most valuable USIA plants are pro-
ducers of electrical equipment. Many of the leading Austrian enter-
prises were originally founded as subsidiaries of foreign companies,
on which they relied heavily for research and development. After
many years of almost steady growth, the industry reached a peak level
of employment of about 4,000 persons in 1944 27/ as a result of the
wartime requirements for such goods. The industry received a major
setback, however, in 1945, when most of the plants in the Vienna
area (including plants located in what became the non-Soviet sectors
of the city) were stripped of most of their equipment and processing
facilities. The remaining plants in the Soviet zone, which were
claimed as German assets and placed under USIA in 1946, represented
an estimated 75 percent of the productive capacity of electrical
equipment plants left in Austria at that time.
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While still useful to the USSR, the USIA plants
have in the past 8 years become a distinctly minor part of Austrian
industry in this category. No significant amount of plant expansion
has taken place in the USIA sector. Soviet efforts have generally
been confined to some degree of restoration of previously dismantled
establishments. On the other hand, expansion of non-USIA plants,
facilitated by ECA funds, was quite rapid after the war. By 1952
the USIA plants accounted for only about 17 percent of the estimated
total employment of 32,000 in this sector. Furthermore, the USIA
figure in 1952, about 5,600 persons, is believed to have declined to
about 4,700 in 1954. Two-fifths of the latter number are accounted
for by just one of the 13 known plants, Siemens-Schuckert Werke A.G.
Three other plants employ about 600.p ersons each.*
While these employment data give a more or 7e ss
accurate general impression of the importance of USIA electrical
plants, they conceal the fact that production of certain types of
equipment is concentrated in USIA plants. The largest battery,
wire and cable, and electric lamp manufacturing plants in Austria
are under Soviet control. Three leading producers of motors, gazerators,
and transformers are also USIA plants. USIA output may amount to as
much as one-third to one-half of total Austrian output of such goods,
depending on the general type of product.
USIA plants occupy a minor place in the electrical
equipment industry of the entire Soviet Bloc. The production of the
USIA plants is very small in relation to Soviet Bloc production, and
the part of USIA production which is shipped to the USSR and the
Satellites is a similarly small portion of their imports of such goods.
(3) Chemicals.
Virtually no production or employment data are
available for the 29 known chemical enterprises in the USIA combine.
Donau Chemie A.G.J. one of the principal USIA plants, is the only
sulfuric acid plant in the Soviet zone of occupation. Its capacity
is reported to be $,575 tons per year (on a 100 percent sulfuric.
acid basis). 30 This may be compared with total Austrian production
of sulfuric acid of 33,800 tons in 1937 and 60,150 tons in 1944
* Estimates ased, for the most part, on data in source 28/.
;r* USIA production estimated on the basis of plant capacity. Estimates
of non-USIA production are from source 29/.
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(100 percent acid basis). The estimated output of Donau Chemie is
only a fraction of 1 percent of that in the USSR. 31/ About one-fourth
of the output in 1953 was delivered to the refineries of SMV.
(L1.) Metallurgy and Coal.
Within the Soviet zone, both bituminous coal and
brown coal are mined, production of the former averaging about 40
percent of the latter in recent years. USIA controls Austria's only
significant bituminous coal mine, which usually accounts for over 90
percent of the country's small output of bituminous coal (see Table 1).
Production of brown coal in Austria, totaling 5.6 million tons in
1953, is of considerable economic importance because of the meager
resources of bituminous coal. The USSR controls only 1 brown coal
mine, which provides about 6 percent of the total production in the
Soviet zone and a fraction of l .percent of total Austrian brown coal
production. USIA production of bituminous coal and brown coal is
negligible compared with Soviet production. 32/
Total Production and USIA Production of Coal
Soviet Zone of Austria 33/
1937 and :L951-53 _
Thousand Me&rio Tons
:L937
1951
1952
1953
Soviet Zone
230
190
185
160
USIA Enterprises
218
172
165
155
USIA as Percent of
Soviet Zone Total
95
91
89
97
Brown Coal
Soviet Zone
335
523
450
401
USIA Enterprises
69
28
25
23
USIA as Percent of
Soviet Zone Total
21
5
6
6
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Iron and steel production by USIA plants in eastern
Austria is relatively unimportant, amounting to less than l percent
of the production in the non-Soviet zones. The USSR controls 2 rolling
mills and 2 steel foundries, which employ less than 3,000 workers. 31i/
Their estimated output in 1953 was 30,000 tons of rolled steel and
13,000 tons of steel castings, respectively. According to the best
evidence, there was no production of metallurgical coke, pig iron,
or steel ingots in eastern Austria in 1953, and steel scrap was in
short supply. 35/ Having to rely on foreign sources for semifinished
steel and steerscrap for its rolling mills and steel foundries,
USIA has developed a tacit arrangement whereby about.60 percent of
its output is exchanged with the West for the needed materials. 36/
The remainder is delivered to fabricating plants in eastern Austr as
or exported to the USSR or the neighboring Satellites.
Austria somewhat resembles Germany in that the
principal deposits of raw materials for iron and steel manufactures
lie west of the Soviet zone of occupation. There is no indication,
however, that the USSR plans to establish a substantial, integrated
iron and steel industry along the lines of that developed in East
Germany.
The Soviet zone of Austria has no nonferrous
metal or mineral resources of significance. Sporadic production.of
several such materials has occurred in the past, but antimony is
the only nonferrous metal with a commercial production record. One
mine, under Soviet control, is responsible for the entire output,
which amounted. to about 1400 tons in 1951, 300 tons in 1952, and 100
tons in 1953.* Production is believed to be sufficient for Austrian
needs, with a surplus which is normally shipped to Czechoslovakia.
(5) Machinery and Precision Instruments.
Little pertinent information is available for
the 34 enterprises reported to be active in the machinery and pre-
cision instruments field. At least 6 of these, however, must be
numbered among the most valuable establishments in the USIA group.
The manufactures of these firms include such essential items as
railroad rolling stock, excavators, diesel engines, fabricated
structural steel, power plant equipi,ient, oil-drilling equipment,
cranes, engine-fueling systems, agricultural equipment, and
* Estimates based on data from the US Bureau of Mines.
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optical and precision instruments. A large proportion of the output
of some of these plants has been going to the USSR, but these deliv-
eries are very small relative to total Soviet supply.
c. Extralegal Nature of Operations.*
USIA generally functions outside Austrian law, on a
basis of extraterritoriality. Such a situation was not, of course,
contemplated by the Western powers in the negotiations concerning
Austria, at the end of World War II and is in general contrary to
Article 35, paragraph 7 (a), of the Long Draft Treaty. But pending
adoption and enforcement of the treaty, very little apparently can
be done about it.
From the first, USIA has bought, sold, imported, and
exported goods without regard to Austrian legislation and economic
control measures. These enterprises were also active in the extensive
postwar black market in Austria. Foreign currencies received in pay-
ment for exports of USIA goods have not been turned into the Austrian
National Bank (as required by law) unless Austrian schillings were
needed. In order to increase output, the USIA plants have at times
paid higher wages and supplied larger rations of food than the regu-
lations of the four-power Allied Council and the Austrian government
permitted. USIA enterprises usually pay the wage taxes and the
ground tax levied by the local governments but not the Federal
Government's taxes on incomes, profits, and property. 37/ USIA alone
has determined that proportion of the goods produced by its enterprises
should be made available to the Austrian home market, and the value
to Austria of the deliveries which have been made has been reduced
by their uncertainty and irregularity. 38/
Even the pretext of taking over German assets in
pursuance of the Potsdam Agreement could not be used to justify the
Soviet establishment under USIA of a chain of over 200 retail stores
located throughout the Soviet zone of occupation. These stores sell
goods produced by USIA industrial plants and also goods imported
illegally. Most of the latter are smuggled in from eastern Europe
under the guise of Soviet military shipments. By avoiding import
duties, defaulting on taxes, operating without trade licensesq
#W Although this discussion has reference only to the operations
or USIA, the other Soviet-controlled enterprises in Austria raise
the same general problem.
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encroaching on the governmentts sales monopoly in cigarettes and
liquor, and ignoring Austrian regulations concerning maximum business
hours, these stores have caused a heavy loss in treasury revenues
and have created severe, unfair competition for non-Soviet retail firms.
Fullest propaganda use has also been made of the establishment of
these stores by claims that the low prices are made possible by more
r efficient Soviet methods and the absence of capitalist profits. 39/
Although the USSR has at times eased up on some of its
most repressive and resented activities, the present situation of the
USIA enterprises is very much as just described. In December 1953,
for example, the arrest by Austrian police of an Austrian employee
of a USIA administration was prevented by Soviet officials, who
claimed extraterritorial rights for USIA enterprises. L0/ More
recently, in another case, a representative of the Soviet High
Commissioner in the Province of Burger;land claimed that Austrian
police may arrest Austrians in USIA enterprises only with the
approval of the General-Director of the firm. 41/
Austrian municipalities have even had great difficulty
collecting from USIA enterprises for utility services provided to them.
According to Austriah press accounts, for instance, USIA owed the
Vienna Municipality more than 13 million schillings* for power and gas
deliveries as of October 1953. This bill was reduced by partial pay-
ment to 8.5 million schillings by the end of November, but USIA was
still in arrears an additional 20 million schillings in taxes and
other fees due to the city of Vienna. Austrian authorities threatened
to cut off the power and gas if a satisfactory settlement was not
arranged. But this threat was not carried out, because of the possi-
bility of Soviet retaliation. One means of retaliation was fairly
obvious, since SMV provided an estimated 55 percent of the gas used
in Vienna in 1953. L2/
Nonpayment of duties and taxes by USIA firms is
particularly irritating to the Austrians. The sum of 500 million
schillings which the Austrian government claims USIA owes it in
taxes and duties has been an issue for some time. Many attacks
were made on USIA during the debate on the Austrian national budget
in the latter part of 1953. Numerous examples of revenue losses
attributable to USIA and of disregard of Austrian economic legislation
by USIA were cited.
# One US dollar equals 26 Austrian schillings at the official rate
of exchange.
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From time to time, the Austrian government has attempted
to crack down on Austrian customers of USIA enterprises. Appeals to
boycott the Soviet retail stores have been made by the non-Communist
press and have probably had some effect, but the stores have nevertheless
acquired a.large clientele. 43/ There were frequent reports last year
of fines against Austrian merchants who engaged in illegal trade with
USIA enterprises. 44 / This activity has generally taken the form of
buying commodities imported illegally into Austria. But these efforts
have not been very successful. The problem was recently discussed
by officials of the Trade, Finance, Interior, and Justice Ministries
and representatives of leading Austrian business and labor organiza-
tions. As a result, it appears that another effort is to be made.
The measures under consideration include possible dismissal of
government employees if they or members of their families patronize
USIA stores, and cancellation of trade licenses and possibly other
penalties for manufacturers and wholesalers who sell to USIA firms
and for wholesalers and retailers who buy from such f irms in an
effort to evade taxes and duties. An intensive campaign to persuade
the public not to patronize USIA stores is also contemplated. Beyond
this, there is Section 132 of the.Austrian Trade Ordinances, which
provides that any Austrian citizen who buys goods at a store he
knows does not have a trade license is subject to prosecution. The
Ministry of Trade will publish an official list of 'USIA stores, which
do not have trade licenses. 45/
The American Embassy in Vienna is doubtful about the
effectiveness of these measures. At most, they promise only a partial
solution of the problem:, and even this will not be realized unless the
program is carried out with greater vigor and firmness than in the
past. The possibility of Soviet countermeasures must also be taken
into account. h6/
d. Value of the Properties to the USSR.
Appraisals by Western representatives of the value to
the USSR of USIA enterprises (as well as of its other holdings) show
some tendency to shift with the political winds. Thus, the value of
the enterprises was probably exaggerated in 145 and 1916, when the
Western powers were protesting the broad Soviet interpretation of
what represented German assets in Austria. A more modest valuation
was placed on them in October 19)7, when the French delegate to the
treaty discussions in Vienna suggested that the troublesome issue
of defining German assets be avoided entirely. Under his proposal,
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the treaty would grant specific assets to the USSR, and Austria
would pay $100 million for all other properties claimed by the
Russians under the Potsdam Agreement. At the meetings in the
spring of 19)48, the USSR demanded larger oil concessions than
proposed by the Franch and a settlement of $200 million rather
than $100 million for the alleged German properties to be returned
to Austria. A compromise oft the latter point at $150. million was
reached shortly thereafter.
More recently, the Austrian Foreign Office has
suggested $35 million as an equitable payment for the properties
which would be returned under the Long Draft Treaty.* The $150-mil-
lion valuation had been reluctantly accepted by the Western powers
on the assumption that the treaty would be concluded promptly. It
is argued by some Austrians that, after several years of under-
maintenance, depreciation, and obsolescence, the plants are worth
much less now than they were. Furthermore, they say, the amount of
the settlement should be reduced by the amount of Soviet takings from
USIA plants during this period of deadlock over the treaty. )7/ The
Russians have shown little inclination so far as to take such
matters into consideration.
Neither the gross value of USIA production and exports
nor the extent of net Soviet takings can be estimated accurately
with the data available. Information on USIA exports is somewhat
better than that available for production. Table 21pk chows USIA
exports as estimated for the period 1916-53 by the American Ilnbassy
in Vienna and the preceding Legation. 'A study in 1949 by the Austrian
Federal Ministry for Property Control and Economic Planning and the
Austrian Federal Chamber of Commerce indicated that, at that time,
USIA exports represented approximately 20 percent of total production. 48/
This relationship between USIA exports and production has been projecteT-
through the entire period to obtain the production estimates in Table 2.
The Embassy suggests 15 to 20 percent of the gross
value of USIA production as a conservative estimate of the extent
The properties involved do not include most of the-oil resources
and refineries or any of the Danube shipping assets now under Soviet
control. See pp. 22 and 23, below.
,* Table 2 follows on p. 22.
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of net Soviet takings.* A 15- to 20-percent profit is higher than
the average for Austrian enterprises, but the Embassy believes it
is reasonable in view of the customs duties and taxes which USIA.
firms evade ' a.nd in view of their failure to charge off adequate
depreciation expenses and make sufficient expenditures for the proper
maintenance of plant facilities. 49 Net takings of 15 percent of USIA's
gross production, to use the more conservative figure, would amount
to some $150 million during the period 1946-53. Net takings in 1953
alone would be $21 million and those??in the peak year of 1;51 about
,30 million.
Table 2
Gross Value of USIA Production and Exports 50/
1946-53
Million A
1946
1947
1948
1949
1950
1951
1952
1953
Estimated Gross Estimated Gross
Value of Exports Value of Production
10 50
15 26 130
150
29 145
40 200
30 150
28 140
Total 208
1,040
To estimate net Soviet takings from the USIA enter-
prises at 15 percent of the gross value of their production is, of
course, the same as to say that approximately three-fourths of the
indicated exports was available to the USSR without cost. Net
# As used here, the term "net takings" differs from the familiar
concept of,"net profits" mainly in that estimates of "net takings"
make an allowance for the limited investments which the USSR has
made in USIA enterprises.
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takings from the current production of these enterprises cannot
approach the total value of such production but must correspond to
the "profits" which the enterprises are able to earn, less any expen-
ditures on investment. Thus the situation is quite unlike that in
East Germany during the period of reparations deliveries to the USSR.
Soviet-controlled establishments in eastern Austria have the usual
costs for materials, labor,. and overhead. A substantial portion of
their output must be sold in order to meet these expenses. This
means that the USSR either must pay for some of the goods produced
by the USIA plants or must make some sales to the non-Soviet zones
of Austria or must export part of the output to the Satellites or to
non-Bloc countries.
Reports have been received lately concerning the closing
of certain USIA plants and the financial difficulties, layoffs, and
poor operating conditions of others. A number of USIA establishments
undoubtedly have been closed. During 1953, USIA employment declined
by an estimated 2,200 workers, according to US officials in Vienna,
but they point out that this is not a large proportion of total USIA
employment. Some transfer or dismissal of workers as a result of
plant consolidations may reflect further efforts to rationalize opera-
tions and thus reduce costs. 51/ Recent Austrian newspaper reports
have made much of the deterioration of USIA plants, the obsolescence
of the machinery and equipment, the inefficient methods and incompe-
tent personnel, and the resulting substandard goods which are produced.
Some accounts indicate that USIA as a whole is operating
at a loss, the deficit being made up by the profits of SMV. 52/ If
the above-mentioned estimates of USIA production have any validity,
these reports of USIA difficulties must be heavily discounted.
2. Soviet Mineral Oil Administration (SMV).
In September 1945 the USSR seized all petroleum producing,
refining, and distributing properties in Austria that were under German
ownership. Since all petroleum producing and refining facilities were
located in the Soviet zone of occupation, the USSR took over operational
control of all other petroleum properties as well.*- SPIV, which directs
* US, British, and Canadian ownership rights in certain oilfields and
refineries are recognized in a limited way by the Soviet authorities.
These properties have been left under non-Soviet management but are sub-
jected to a large degree of control,by SMV, which is in a position to
determine their profits from oil production and refining operations. 53/
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these properties, is nominally subordinate to USIA but operates in a
relatively autonomous manner. 54/ The properties controlled by STN
consist of 8 oil fields, 55/ 7refineries, 56/ and associated facili-
ties For distribution and other purposes. Since the war, STMIV, has com-
pletely dominated the Austrian oil industry.
a. Production and Distribution.
The Germans, during the war, had already done much to
develop the petroleum resources in eastern Austria. Early in 1946,
STN began an intensive drilling program, which'resulted in rapidly
increasing crude oil production. The crude oil output of 3.1 million
tons in 1953 is double the 1950 figure, more than three times the
1948 figure, and 50 times as large as the output in 1938 (see Table 3*),
Among the oil-producing countries. in Europe, Austria ranks after
the USSR and Rumania.
Refining capacity also was increased by SMIV, but at
a much slower rate than production of crude oil. In 1950, crude
oil production and refining capacity were nearly in balance; by
1953, production exceeded the annual refining capacity of 1,770,000
tons 57/ by about 75 percent. As a result, signif icant quantities
of cruoce oil have been exported to the Soviet Bloc since 1950. These
exports have averaged over 40 percent of the total production of
crude oil during the past 3 years (see Table 3).
The output of petroleum products has increased only
moderately since 1950 because of the limited refining capacity. About
two-thirds of the output of products in recent years has been made
available for distribution in the Soviet and other zones of Austria
and for minor exports to the West (see Table 3 and Figure 1:*).
STN sells these products to Austrian distributors at generally
competitive prices. 58/
The remaining output of petroleum products (apart
from small quantities used by the Soviet military forces in Austria)
is shipped to the USSR and several of the Satellites. This is in
addition to the previously mentioned shipments of crude oil. The
USSR, Czechoslovakia, East Germany, Hungary, and Poland each take
a sizable share of the shipments of crude oil. For the period 1947
through 1953, it is estimated that the USSR and he Satellites
Table follows on p. 25.
Following p. 26.
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received over 7 million tons of crude oil and petroleum products,
excluding consumption by the Soviet occupation forces in Austria
(see Table 3 and Figure 1). The bulk of the petroleum products
went to the USSR and Czechoslovakia. in 1952 and to Czechoslovakia
and Poland in 1953 (see Table fit.).
Table 4
Exports of Austrian Crude Oil and Petroleum Products
to the Soviet Bloc L7/
1952-53
' Thousand Metric Tons
Crude Oil
Petroleum Products
1952
1953
1952
1953
Czechoslovakia
220
230
175
190
East Germany
245
440
0
0
Hungary
350
320
35
26
Poland
130
233
50
145
USSR
200
200
200
22
Total
1,1145
1,123
460
383
b. Value of the Properties to the USSR.
The petroleum properties of SMV undoubtedly have been
profitable for the USSR, although not so profitable as the industrial
enterprises of USIA. Because of the location of the petroleum industry,
the USSR was able to gain complete control of it, including some enter-
prises which were not German owned. This control. has permitted the
USSR, after repairing some war damage and drilling additional wells,
to exploit the fields thoroughly at relatively small cost. All profits
earned by STAN accrue to.the USSR. Austria is able to buy some of the
products processed from its crude oil but receives no share in the
profits of the industry and (what is essentially the same thing)
receives no compensation for at least part of the crude oil and
petroleum products tit'nich are shipped to the Soviet Bloc.
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Estimates of the value of the petroleum products sold
to Austria and of the crude oil and petroleum products exported to
the Soviet Bloc during the period 1915-53 are presented in Table 5.:,-
The products sold to Austria had an estimated value of $171 million;
the crude oil and petroleum products exported to the Soviet Bloc, an
estimated value of $262 million, Bnth sales to Austria and exports
to the Bloc have been at record lev:ls during the past 3 years.
According to the American &nbassy in Vienna, 25 to 30
.percent of the combined value of the sales to Austria and the exports
to the Soviet Bloc may be regarded as a conservative estimate of the
value of net Soviet takings (the net profits of SMV less investment
expenditures). 68/ Although the estimate of the combined value of
.such sales and exports given in Table 5 is nearly half again as large
as the Embassy's figure,** 69/ an estimate of net takings' of 30 percent
of the total value still se s reasonable. Such an estimate, applied
to the combined value of domestic sales and exports to the Bloc of $)433
million for the period 1945-53, would amount to about $130 million.
Net Soviet takings in 1953 alone would be about $27 million.
It should be noted that the estimated value of exports
of Austrian .crude oil and petroleum products to the Soviet Bloc of
$262 million during the period 1945-53 (see Table 5) is approximately
twice the value of net Soviet takings as calculated above. This implies
that about one-half of the shipments to the Bloc were fully paid for that is to say, payment was made to SMV. Such payments to SMV were
necessary, if the data, in Table 5 and the assumption concerning the
size of net takings are even approximately correct, because SMV
required the funds to meet ito operating and investment expenditures.
The receipts from sales to Austria during the 9-year period of $171
million were by no means sufficient to pay the expenses of SMV,
which are implicitly assumed to be 70 percent of $433 million, or
$303 million. Such payments for exports to the Bloc presumably would
be made by the Satellites rather than by the USSR. As Table 4 shows,
by far the larger poroion of such shipments went to the Satellites in
1953, and the USSR was of course in a position to exact payment for
them.
In view of the remaining potential oil resources in
Austria, approximately 35 million tons, 7/ continued control of the
Table follows on p. 28.
See Appendix B, Methodology, for an explanation of the difference.
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aUb
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Austrian oil industry promises important additional benefits to the
USSR. Soviet exploratory activity in Austria virtually ceased in 1953,
but crude oil production can be continued at relatively high levels for
the next 3 to 5 years simply by maintaining the present facilities,
without large additional investment costs. Under these conditions,
however, the output of crude oil can be expected to decrease from year
to year thereafter.
In physical terms, the SMV properties do not represent
a very imposing addition to the Soviet Bloc petroleum industry, most
of which is located in the USSR and Rumania. The estimated 1.8 million
tons of crude oil and petroleum products shipped to the Bloc in 1953 is
only 3 percent of the Blocs 1953 crude oil production of 60 million
tons. 73/ SMV exports indirectly make a noteworthy contribution to the
Bloc's export program, however. The availability of Austrian petro-
leum to the Bloc has permitted the sale of Rumanian petroleum to the
West and thus has'had the effect of providing a useful additional
source of foreign exchange in non-Bloc currencies.
3. Danube Shipping Company* (DDSG).
The third element among the Soviet economic holdings in
Austria is DDSG. This enterprise occupied a prominent position in
Danube River shipping before the war, but, as the following brief
survey shows, the DDSG properties currently under Soviet control in
eastern Austria are of relatively little importance.
a. Historical Background..
Danube shipping from 1939 to 1944 was completely
dominated by Germany. In addition to obtaining a controlling interest
in the Slovak, Croatian, and Bulgarian shipping companies, Germany's
Goering Combine took over the German Bavarian Lloyd Company and the two
major Austrian companies, DDSG and its affiliate, the Continental Steam-
ship Company. Early in 1946, the USSR expropriated all of the vessels
and other property of DDSG in eastern Austria and eastern Europe as
German external assets, notwithstanding the coercive nature of their
transfer to Germany.
Most of the expropriated DDSG vessels, along with vessels
seized during and after the war from other countries along the Danube,
Also known as the First Danube Steamship Company.
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were placed under the control of the Soviet Danube Shipping Company
(SDGP). Later, in order to forestall demands for the return of these
vessels to their former owners, SDGP removed them to the USSR or used
them as part of the Soviet capital contributions to the newly formed
Soviet-Satellite shipping companies, in which the USSR held the con-
trolling shares. The remaining vessels and other property of DDSG
were placed under a Soviet-administered enterprise which retained the
name of the old Danube Shipping Company, 74/
The assets of the prewar DDSG in the US zone of occu-
pation, which has the Danube and a tributary as the larger part of its
eastern boundary, were taken over by the US at the end of the war.
The Austrian government was then appointed as a trustee to operate
the properties. During the summer of 1946, the USSR made an abortive
attempt to legalize its seizures in the Soviet zone by inducing the
west Austrian DDSG to surrender 51. percent of its stock. In exchange,
the USSR offered to return a number of vessels and restore the Vienna
port facilities of DDSG. At the end of the negotiations, the Soviet
authorities abruptly shut off the Danube at Linz, on the border of the
US and the Soviet zones.
Western vessels travelled infrequently to Vienna there-
after and then only with Soviet guarantees of safe conduct to guard
against confiscation. Soviet and Satellite craft proceeding upstream
took similar precautions, fearing retaliation by the US. In a surprising
and not yet adequately explained move in June 1952, the USSR relaxed its
control over the Danube within the Soviet Zone and has since permitted
DDSG vessels from western Austria to use the river without interference. 75/
The number of DDSG vessels in the Soviet zone immediately
following the war was comparatively large, amounting to about one-half
of the prewar DDSG fleet -- then the most extensive one on the Danube.
As late as 1949, the Soviet DDSG had 14 tugs, 2 passenger vessels, 3
self-propelled barges, and approximately 270 POL and dry-cargo barges
with an estimated capacity of 140,000 tons. 76/ As already stated,
this fleet was rapidly depleted as the USSR removed vessels to its
own inland waterways or transferred their ownership to joint Soviet-
Satellite shipping companies. Less than 20 percent of the expropriated
fleet remained under the control of the Soviet DDSG by 1950. 77/
b. Current Situation.
By 1953 the operations of the company were reported to
be virtually at a standstill. The Director-General of the DDSG in
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western Austria claimed in 1953 that only two DDSG tankers were still
plying the Danube, carrying crude oil from Vienna to the Soviet-con-
trolled refinery at Moosbierbaum. Soviet DDSG traffic thus appears
to be negligible. Eastern Austria must rely on SDGP and Satellite
fleets to meet its river transport requirements, which consist primarily
of POL traffic to and from Vienna. 78
c. Value of the Properties to the USSR.
The earnings of the Soviet DDSG are not known, but they
cannot have been very large in view of the transfer of most of its
vessels to the USSR and the Satellites. Calculation of earnings would,
in any case, constitute double-counting of Soviet takings from Austria,
since the value of DDSG properties presumably is included in the esti-
mate above of Soviet removals following the war of $500 million in
tangible property, currency, and securities. DDSG assets seized by the
USSR in eastern Europe at the end of the war had a value at that time
of approximately $33 million. A coal mine, a shipyard, and other
property in Hungary made up nearly three-fifths of this sum. Most of
the remainder was represented by the value of vessels. 79/
As of 1953, the value of DDSG assets remaining in the
Soviet Zone of Austria was represented at only $3.8 million. Nearly
two-thirds of this amount is represented by the Korneuburg shipyard,
and the remainder consisted largely of land and buildings, including
port facilities in Vienna. Vessels and floating equipment were valued
at about $200,000. 80/
Despite the fact that, for all practical purposes, the
Soviet DDSG no longer operates as a commercial shipper on the Danube,
some advantages accrue to the USSR through its control of the enter-
prise. The Vienna port facilities and the Korneuburg shipyard are
of benefit to the USSR and are a major loss to the DDSG of western
Austria. The Korneuburg shipyard, which was severely damaged during
World War II,-has been continuously occupied since.its reconstruction,
first in rehabilitating damaged Satellite vessels and later in filling
Soviet Bloc orders for new river craft 81/ in addition to continuing
repair work. Estimates of employment at the yard range from about
800 to 1,800.
Soviet control of the Vienna port facilities not only
has been a convenience for Soviet and Satellite shipping on the-Danube
but also has been a source of revenue from the west Austrian DDSG,
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since it must pay a fee for the use of the facilities. 82/ These
port facilities are essential to operations of the west Austrian DDSG
under present conditions, but the successful completion of two
modern harbors currently under development in the western sector of
Vienna will make further reliance on the Soviet-controlled wharves
unnecessary. 83/
C. Soviet Economic Policy in Austria.
Economic benefits can hardly be regarded as the only, or perhaps
even as the principal, advantages which the USSR enjoys by virtue of
its foothold in eastern Austria. Other considerations, which are
largely outside the province of this report, may be mentioned briefly
as a setting for the subsequent discussion of economic policies.
1. Strategic and Political Context.
First df all, Austria's location is strategically important.
Austria possibly is second only to Germany as a crucial point of contact
between the West and the East in Europe. The Soviet forces in eastern
Austria occupy,a vital position with respect to the rail and water
transportation networks centered. in: Vienna. The Soviet zone of occupa-
tion also may be thought of as filling in the "pocket" on the border
with Czechoslovakia and Hungary, which in this way are more effectively
insulated from Western political and economic influences. With troops
in Austria. as well as in Hungary and Rumania, the 'USSR is in a better
position to exert pressure on Yugoslavia. The continuing presence
of Soviet troops in Hungary and Rumania is justified in the Allies'
peace treaties with these countries by the necessity of maintaining
and protecting lines of communication from the USSR to Austria. While
this fiction is even less persuasive now than in 19L.6 and early 1917,
when Hungary still had a non-Comxzunist government and Soviet motives
in Europe were less clear, it is still useful for propaganda purposes.
Austria also has an undeniable political value to the
USSR. The Soviet position in Austria has repeatedly been used as a
bargaining point within the larger sphere of power politics in Europe.
During the years of negotiations over the Austrian treaty, Western
representatives typically have reached agreement with Soviet represent-
atives on one section or clause only to be confronted with new, and fre-
quently unrelated, issues and conditions. In the course of the Treaty
negotiations, Soviet representatives, at one time or another, interjected
such matters as Yugoslavia's claim for $150 million in reparations, and
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for parts of the south Austrian provinces of Carinthia and Styria; the
disposition of refugees in Austria; the progress of denazification; settle-
ment of the "problem" of Germany; and the alleged failure of the Western
powers to live up to the terms of the Italian peace treaty with respect
to Trieste.
2. Economic Exploitation.
In the matter of economic policy, it suns clear that the
first and foremost Soviet aim in Austria is simply exploitation. This
economic drain on Austria has taken a number of forms, as already
indicated. Large amounts of property were seized as "war booty" and,
later, as German assets. Control of the oil industry and the USIA
plants has provided the USSR with significant quantities of certain
types of goods and with foreign exchange. The profits of Soviet-
controlled enterprises in Austria have been augmented by disregard of
Austrian legislation concerning taxes and duties. The USSR (as well
as the UK and France) continued to charge Austria for occupation costs
for 6 years after the US began paying its own costs.
Despite its dimensions, this exploitation by the USSR
suggests a short-term, opportunistic approach rather than a carefully
considered, long-term program for the sovietization of Austria or even
of the eastern zone of occupation,. The American Embassy in Vienna
has pointed out that, during the first several years after the war,
rtefforts to exploit the Soviet economic and political strongholds in
Austria were uncoordinated and erratic. It was, by and large, a
hand-to-mouth occupation, determined by the contingencies of the day
and directed toward immediate returns rather than long-range results.
This was particularly the casee, with respects to Soviet activities in
the economic field, where for a long time the sole discernible rule
was rapacious exploitation." 84/
Later Soviet efforts in the economic field have been coordi-
nated more effectively through the cooperation of the Soviet High
Commissioner, the USIA, and the Austrian Communist Party, with the
vigorous support of the Soviet-controlled press. 85/ It is still
questionable, however, whether the USSR believes at the Austrian
economy can ever be integrated into that of the Soviet Bloc. The
people of Austria are firmly anti-Communist. In the parliamentary
elections since the war (1945, 1949, and 1953), which have been free
and fair contests, the Communists have received only about 5 percent
of the total vote. The postwar coalitions of Socialist and (conservative)
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People's Party members have formed stable and distinctly pro-'Western
and anti-Soviet governments. With the support of the US, the UK, and
France, these governments have resisted Soviet pressure and abuse and
have exercised increasingly broad powers within the framework of the
new Allied Agreement on Control Machinery for Austria of June 1946.
Two signs that the USSR has limited economic objectives in
Austria have already been touched on. First, through overdrilling and
excessive rates of production in the oilfields of eastern Austria, the
USSR has materially reduced the total yield which can ultimately be
obtained. In other words, maximum recovery of oil from these fields
with a reasonable expenditure of resources has been sacrificed for
short-term gains. The Soviet practice is all the more difficult to
understand because, even if the Long Draft Treaty is adopted and the
occupation of Austria ended, the USSR is to continue to receive a large
part of the country's petroleum output for a period of 30 years.
Secondly, there have been numerous reports of serious depreciation
and obsolescence of USIA facilities. Few investments 'which would
maintain or increase the productivity of these plants apparently have
been made. This action also suggests short-term goals rather than an
expectation by the USSR that the economy of Austria or the Soviet zone
of occupation can be brought under an effective degree of control.
3? Economic Obstruction.
A second aim of the USSR has been to obstruct the recovery
and. development of the economy of Austria. The zonal division of
Austria following the war raised serious economic problems, since
key resources and industries were very unequally distributed among the
zones. Austria's iron mines, nearly all of its brown coal mines,
and most of its iron and steel plants were located in the US and UK
zones of occupation. The bulk of the country's resources of hydro-
electric power and timber and the important magnesi.te deposits were
also located in these two zones. 86/ On the other hand, most of the
engineering industries were located in the Soviet zone, particularly
in the Vienna area, and, as already pointed out, the oil resources
were in eastern Austria exclusively. The Soviet zone also predominated
in agriculture under normal conditions, although 'the food supply problem
there was desperate during the winter of 1945-46 because of the heavy
fighting and plunder in this area and the almost complete disorganization
of commerce. 87/ Apart from substantial grants of aid from the Allies,
the situation called for a prompt reduction in zonal trade barriers to
facilitate the normal functioning of the economy.
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In the first months of the occupation, the Allied military
government assisted in the rehabilitation of Austria by restoring
communications lines, and steps were taken to remove restrictions
on the interzonal movement of goods and persons with the adoption by
the occupying powers of the new Agreement on Control Machinery for
Austria. But the USSR subsequently tried to block Austrian legislation
dealing with the distribution of goods within Austria. Failing to
secure Western approval for a stipulation that the Austrian Traffic
of Goods Act and the decrees based on it should not apply to the property
o';f the occupation powers and their nationals, the Soviet High Commissioner
refused to permit the law to become effective in the Soviet zone. The
USSR also attempted s anewhat later to recover'some degree of veto power
over the legislation and implementing measures of the Austrian govern-
ment. In signing the new Control Agreement, it had foregone this power
except in the case of constitutional laws, which required the unanimous
approval of the occupying powers, Other Soviet actions indicated
regret that the new Control Agreement had been signed and an intention
to do as much as possible to limit Austria's economic and political
relations with the West. 88
This aim of hampering the functioning of the Austrian
economy is less in evidence now than in the first years after the war.
Even at that time, some actions which were interpreted in this light
were possibly more closely related to the typical concern of Soviet
authorities with matters of internal security in their zone.
D. Applicability of the Long Draft Treaty.
Negotiations between the Western powers and the USSR over the
State Treaty for Austria have continued, off and on, for about 8 years.
The Western powers succeeded in bringing the matter before the Council
of Foreign Ministers on 12 July 1946 after some months of delaying
tactics by the USSR. Much of the discussion since that time has been
carried on by Foreign Ministerst Deputies representing the Big Four.
On 9 February 1953, the 260th meeting of the Deputies took place in
London and ended in a deadlock.. Efforts to reach agreement on the
Treaty have been made during the intervening period, but, as the
American Embassy in Vienna recently reported, the prospects for con-
cluding the Treaty were, in fact, "never so bleak.!? 89/
The so-called Long Draft Treaty under discussion here is to be
distinguished from the Abbreviated Treaty which the Western powers
proposed to the USSR in March 1952 as a way of breaking the impasse
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which had been reached. The Abbreviated Treaty, consisting of only 8
articles instead of the original 59 of the Long Draft, cut through
some of the issues which had blocked agreement. In view of the
continuation of Soviet takings from Austria during the more than 5 years
of Treaty negotiations, the new draft provided for the return to Aus-
tria, without compensation to the USSR, of all properties held or claimed
by the occupying powers. After a delay of 5 months, the USSR rejected
the Abbreviated Treaty on the grounds that it was inconsistent with
the Potsdam Agreement and failed to provide for elections and democratic
rights in Austria and for the complete eradication of Nazism. Subse-
quently, resumption of discussions on the basis of the Long Draft
Treaty was made conditional upon the unqualified withdrawal of the
Abbreviated Treaty by the Western powers. This they were unwilling
to do under pressure from the USSR.
The Austrian Treaty was discussed again at the Berlin Conference
in February 1954. The Western representatives offered to accept the
Soviet position on the five disputed articles of the Long Draft. Fol-
lowing a familiar pattern of Soviet tactics during the years of negoti-
ations, Molotov proposed several additions to the Treaty. These provide,
among other things, for the elimination of the Four-Power Allied Council
for Austria and the evacuation of all foreign troops from Vienna, where-
as withdrawal of other occupation forces from Austria is postponed until
a peace treaty is concluded with Germany. Such an arrangement is
completely unacceptable to the Western powers as well as to Austria.
1. Pertinent Provisions.
Article 3)4 of the Long Draft Treaty* provides that "no repa-
ration shall be exacted from Austria arising out of the existence of
a state of war in Europe after September 1, 1939." This article repeats
the principle which was agreed to at Potsdam. As already indicated, its
practical importance is negligible because the Soviet takings are not
regarded by the USSR as reparations from Austria but rather a? reparations
from Germany through the mddium of ownership of German foreign assets.
The Treaty's critical article.of an economic nature is
Article 35 on "German.Assets in Austria." After 3 years of haggling
The complete name is "Draft Treaty for the Re-establishment of an
Independent and Democratic Austria." An unofficial text of this draft
as it stood in 1953 (and now stands) is included in the Appendix in
Cary T. Grayson, Jr., Austria's International Position, 1938-1953,
Geneva., 1953, PP. 254-300.
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over the German assets issue, Four-Power agreement was reached on
Article 35 in late 1949. The most pertinent provisions of Article 35
are as follows :
1. The Soviet Union shall receive for a period of validity
of thirty years concessions to'oil fields equivalent to 60% of the
extraction of oil in Austria for 1947, as well as property rights
to all buildings, constructions, equipment, and other property belonging
to these oil fields ... .
"2. The Soviet Union shall receive concessions to 60% of
all exploration areas located in eastern Austria that are German Assets
to which the Soviet Union is entitled in conformity with the Potsdam
Agreement and which are in its possession at the present time ...
The Soviet Union shall have the right to carry out
explorations on the exploration areas mentioned in the present article
for 8 years and to subsequent extraction of oil for a period of 25 years
beginning from the moment of the discovery of oil.
"3. The Soviet Union shall-receive oil refineries having a
total annual production capacity of 420,000 tons of crude oil ... .
"4. The Soviet Union shall receive those undertakings con-
cerned in the distribution of oil products which are at its disposal ... .
"5. The Soviet Union shall receive the assets of the D.D.S.G.,
located in Hungary, Rumania and Bulgaria; and, likewise ... 1006 of the
assets of the Danube Shipping Company located in Eastern Austria.
"6. The Soviet Union shall transfer to Austria property,
rights and interests held or claimed as German Assets together with
existing equipment and shall also transfer war industrial enterprises,
together with existing equipment, houses and similar immovable property,
including plots of land, located in Austria held or claimed as war
booty, with the exception of the assets mentioned in paragraphs 1, 2,
3, 4 and 5 of the present. Article. Austria for its part undertakes
to pay the Soviet Union 150,000,000 American dollars in freely conver-
tible currency within a period of 6 years.
The said sum will be paid by Austria to the Soviet Union
in equal three-monthly installments of 6,250,000 dollars in freely
convertible currency ...
"7. (a) All assets which have become the property of the
Soviet Union shall, as the general rule, remain under Austrian juris-
diction and, in conformity with this, Austrian legislation shall apply
to them.
The properties mentioned in this paragraph and in paragraphs 2, 3,
4, and 5 are identified in detailed lists and/or maps annexed to the
Draft Treaty.
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"(b) Where duties and charges, commercial and industrial
rights and the levying of taxation are concerned, these assets shall
be subject to conditions not less favorable than those which apply or
will apply to undertakings belonging to Austria and its nationals and
also to other states and persons who are accorded most-favored-nation
treatment.
"(c) All former German assets which have become the
property of the U.S.S.R. shall not be subject to alienation without the
consent of the U.S.S.R.
"(d) Austria will not raise any difficulties in regard
to the export of profits or other income (i.e., rents) in the form of
output or of any freely convertible currency received."
2. Probable Effects of the Adoption of Article 35?
The adoption of Article 35 would be to Austria's economic
advantage despite the properties and rights granted to the USSR.
Austrian willingness to accept the provisions of Article 35 is,
however, predicated as much on a desire to end the occupation and
regain complete sovereignty as on anticipated economic benefits.
Although the properties which would be returned to Austria have been
of benefit to the USSR? they can hardly be considered vital. Adop-
tion of Article 35 would not, therefore, have any far-reaching
economic effects for the USSR.
The required payment to the USSR of $2i million annually
over a 6-year period probably would not be a serious economic burden
for Austria. The amount is less than the annual income which Austria
could expect to receive in earnings from the returned enterprises and
in taxes and duties from the enterprises to be retained by the USSR,
subject to Austrian law. Austria would receive all of the enterprises
under USIA. The profits of this combine in 1953 are estimated at about
x$21 million. The profits of the USIA enterprises presumably would
decline if they became fully subject to Austrian 'Law again and were
required to pay the regular taxes and customs duties, but what Austria
lost in profits it would gain in treasury revenues. There would, iii
fact, be a net gain in this respect if Section 7 (a) concerning the
subjection of Soviet properties to Austrian legislation were effectively
applied to the properties remaining in Soviet hands. Austria's payments
to the USSR over the period of 6 years could be made contingent on
Soviet payment of appropriate taxes and customs duties. To the extent
that they exceeded the required payments to the USSR, Austria's profits
from the properties which would be returned might be used for needed
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investments in the USIA plants.
Although the amount of the required payment to the USSR should
not be too burdensome, insistence that payment be made in US dollars,
as stated in the Long Draft, could cause some difficulty for Austria.
The sum of $150 million is a large additional amount for Austria to earn
in dollars over a 6-year period unless trade conditions are decidedly
favorable, as they have been during the past year. On the other hand,
Austria has now accumulated some X300 million in gold and dollars, and
it is possible that the USSR would accept goods in place of dollars.
In view of the limited resources of coal in Austria, it is
particularly unfortunate that its oil resources have been exploited
largely for the benefit of two foreign powers, An overwhelming propor-
tion of Austria's output of crude oil and petroleum products would,
moreover, remain under the control of the USSR even if a Treaty were
concluded on the basis of the Long Draft. Although Section 1 of Arti-
cle 35 ostensibly gives the USSR a 60-percent share of Austria's oil
output, the specific properties which the USSR would retain now repre-
sent well over 90 percent of the total production of crude oil in Austria.
This division of properties was made on the basis of pro-
duction in 19147. The three-fold increase in the output of crude oil
from 1947 to 1953 was concentrated in the fields which would be retained
by the USSR. Similarly, the capacity of the oil refineries which the
USSR would retain pursuant to Section 3 has now been expanded to consid-
erably more than 1420,000 tons. Austria therefore probably would
have to continue to buy a substantial part of its requirements of crude
oil and petroleum products from SMV after the conclusion of the Treaty.
The 30-year term of the oil concessions is sufficient to
permit a fairly thorough exploitation of this resource by the USSR.
Important additional resources of oil may be discovered, but the best
evidence is that Austria's oil fields will be badly depleted in 10 or
15 years.
Since the remaining assets of the DDSG in eastern Austria
are negligible, the treaty provision concerning their transfer to per-
manent Soviet ownership does not raise serious problems. More impor-
tant to Austria than these remnants of DDSG is continuing unimpeded use
of the Danube and its tributaries within Austria.
Sections 7 (b) and 7 (d) of Article 35 provide that the
enterprises in Austria which are to remain under Soviet ownership will
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not be discriminated against. Section 7 (c) insures that the transfer
of certain properties to Soviet ownership and control will not be
nullified by subsequent nationalization by the Austrian government.
Inclusion of this clause no doubt was prompted by Austrian efforts
to forestall Soviet seizure of many alleged German industrial and
commercial enterprises after the war by nationalizing them.
II. Trade of Austria with the Soviet Bloc.
A. Introduction.
The Austro-Hungarian Empire was a relatively well-balanced,
self-sufficient economic unit, but the Austria which emerged from it
after World War I has been described, from an economic point of view,
as "an irrational fragment." The new Austrian Republic contained
only one-eighth of the area and one-seventh of the. population of the old
Hapsburg Empire. Most of the Empire's arable land. and coal deposits
were within the areas' of the Succession States. Austria was left with
a force of government employees, a professional class, engineering
and light industries, and service businesses which were far beyond the
needs of a nation of 7 million people. Moreover, the political and
economic nationalism of the time offered little prospect that the
specialized economic structure of Austria could be integrated with
the Eastern European economies through the medium of international
trade.
Efforts to correct these structural defects in Austria's
economy were made during the interwar period and again after World
War II. Some steps in this direction were also taken by Germany
during the war, although other German economic activities had the
opposite effect. All'in all, the attempts over the past 35 years to
create a more viable economy in Austria have enjoyed a considerable
degree of success. Austria must still rely on other countries for
essential supplies of food and raw materials, but its dependence
on imports is probably little greather than that of the UK and
several other countries in western Europe.
Austria's trade with Eastern Europe has, of course, been affected
by the application of Soviet trade policies in that area since the war,
that is, by Soviet and Satellite goals of national self-sufficiency on
the one hand and increasing intra-Bloc trade and economic cooperation
on the other. It has: also been influenced by the desire of Austria
to reduce its dependence on imports for supplies of commodities
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in two vital categories, namely foodstuffs and enemy materials. Thus
one of Austria's first objectives after World War I was to build up
the agricultural sector of the economy. This expansion was limited
by the amount of arable land, which makes up less than one-fourth of
the total area, but the area under cultivation was enlarged to some
extent, and more intensive cultivation of land was undertaken through
the increased use of machinery and fertilizer.
By 1937, the country was able to raise about three-fourths of
its food requirements -- a considerable improvement over the years
immediately following World War I. Enlargement of this sector of the
economy was set back during tie German occupation, since it was the
Policy of Germany to promote industry in Austria and import a larger
portion of the necessary food supplies from eastern Europe. Agricul-
tural manpower was shifted to industry and the army, and adequate
supplies of machinery and fertilizer were unobtainable.
Increased production of agricultural commodities in Austria
again became an objective of high priority after World War II. The
large nitrogen works built at Linz by the Germans during the war has
been very useful in this respect. This plant produces a quantity
of nitrogen fertilizer which not only meets domestic needs but permits
some exports. The economic aid which Austria received from the US
under the European Recovery Program included large amounts of food,
but the more fundamental aim of the program in the agricultural. sphere
was the restoration of domestic production to the prewar levol by 1953.
This goal was realized, so that Austria has once again become able to
produce about three-fourths of its food requirements.
Similarly, an attempt has been made to reduce Austrian depen-
dence on imported coal as a source of energy. The buildup of heavy
industry during and after the war has resulted in a more diversified
industrial structure than in 1937 but has greatly increased the coun-
tryTs energy requirements. In spite of this, Austria is more nearly
self-sufficient in energy materials now than before the war. It is,
consequently, less vulnerable to Soviet economic pressure and to a
general deterioration of world trade and any consequent restrictive
effect on its exports.
The readjustment in the energy sector has taken a number of
forms. Foremost among these is further development of the country's
substantial resources of hydroelectric power and, in conjunction with
this, electrification of additional s egmrients of the railway system.
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Exploitation of Austrian petroleum resources has also lessened the
degree of dependence on imported coal, despite the fact that the oil
fields and refineries have been under Soviet control since the
war. Finally, domestic; production of brown coal has been increased
nearly three-fourths since 1937. The net effect of these changes is
that a higher proportion of Austria's energy needs are now satisfied
by domestically produced hydroelectric power and petroleum, and
domestic production of coal now provides a larger share of the total
consumption of coal.
These structural changes are reflected in the data in the
next three subsections concerning the vo1uae, geographical distribution,
and commodity composition of Austria's trade with the Soviet Bloc.
It should be noted that the data related only to the officially
reported trade of Austria. As stated above, USIA and SMV make exports
to and imports from the Bloc under the cover of "military shipments,"
generally without any accounting to the Austrian government. For
this reason, the official foreign trade statistics do not include by
far the larger part of the exports and imports of the Soviet-controlled
enterprises. The preceding discussion of the unreported trade between
these enterprises and the Soviet Bloc is supplemented by sortie additional
remarks in the fourth subsection following.
B. Volume of Trade:.
As a point of departure in analyzing the trade of Austria with
the Soviet Bloc, it is useful to consider the trend. in the volume* of
Austria's trade with the entire world. Although a degree of recovery
in trade was accomplished during the immediate postwar years, the total
volume of Austria's exports in 1948 was still little more than one-half
the level of 1937 (see Table 6'.-* and Figure 23H*). The volume of imports
in 1948 amounted to two-fifths of the 1937 figure, counting only
commercial transactions, but exceeded four-fifths of the 1937 level if
goods received as direct aid under the L'uropean Recovery Program are
also included. As a result of the receipt of direct aid from the US,
total imports surpassed the prewar level by a small margin during the
* The term "volume" is used throughout this section to signify the
value of trade in terms of constant prices and, where values are expressed
in dollars, in terms of constant exchane rates for the Austrian schil-
lings and the US dollar.
3H Table 6 follows on p. 43.
Following p. 44.
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following 4 years, but the volume of commercial imports has yet to
exceed 90 percent of the 1937 level. Exports, on the other hand, have
been increased considerably since 19!18, reaching nearly 12 times the
1937 volume in 1953.
Table 6
Indexes of the Volume a/ of Total Recorded Trade
of Austria 90/
1937 and 1947-53
a. Indexes of the value of imports and exports ca cu ated in terms oT
Austrian schillings on the basis of constant prices.
b. "Commercial imports" equal total imports less goods received from
the US as 1}direct aid" under the European Recovery Program. In general,
"direct aidtt consists of US allotments of dollars to pay for Austrian
imports of essential goods from either members or nonmembers of the
European Payments Union. "Indirect aid,," which is included in conm.er-
cial imports, consists of the amounts paid by the US in settling Austria's
unfavorable balances of trade with the European Payments Union. Of the
total aid of about, l billion which Austria received under ERP, two-
thirds was "direct" and one-third "indirect."
Such an increase in exports, coupled with the limitation of
commercial imports in 1953 to some 35 percent of the 1937 volume,
might be supposed to have resulted in a large favorable balance on the
trade account. This was not the case for two reasons. In the first
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1937 : 100
Imports
Exports
Total
Commercial b/
1937
100
100
100
1948
83
41
1949
107
77
67
1950
102
78
101
1951
106
87
110
1952
101
89
109
1953
92
85
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place, Austria's terms of trade heve deteriorated seriously since 1937.
Because of the failure of the prices of exports to keep up with the
prices of imports, the volume of goods which Austria had to export in
1953 to pay for a given volume of imports was 37 percent greater than
in 1937.* A second explanation of the failure of the large relativ
increase in exports to produce a similarly large favorable trade
balance is found in the fact that the volume of exports was considerably
less than the volume of imports in the base year of 1937. This situation
was feasible in 1937 because of Austria's net earnings on the services
account. The reduction in earnings from tourist trade, transit trade,
and foreign investments following the war has required a relative increase
in exports in order to bring commodity trade more nearly into balance.
The foreign trade position of Austria in 1953 was unusually
favorable. Despite the.decline of 9 percent in total imports, as a
result of the conclusion of the US aid program, and a small reduction
in commercial imports, Austria succeeded in increasing its volume of
exports one-third over 1952. Import requirements were reduced by the
good harvest in 1952 and by the larger and more regular receipts of
fuel oil from SMV, which permitted a cut in coal imports. Limitation
of imports and stimulation of exports were also furthered by the
devaluation of the schilling in May 1953.
One of the host :striking changes in Austria's foreign trade
since 1937 is the decline in the importance of trade with the Soviet
Bloc. The volume of such trade has not amounted to as much as one-half
of the prewar level in any year since the war. The volume of imports
from the Bloc in 1953 was at the lowest point of the past 6 years,
amounting to only one-fourth of the the 1937 volume (see Table 7**).
The volume of exports in 1953, on the other hand, increased about 10
percent over 1952, approaching one-half of the 1937 level. The reasons
for the much smaller decline in exports than in imports since 1937
are the same as those given above with reference to the total trade
of Austria.
The net effect of these changes is that the proportion of
Austria's imports obtained from the countries of the Soviet Bloc
declined from 39 percent of the total in 1937 to only 11 percent
in 1953. The share of the Soviet Bloc in Austria's total exports
declined similarly -- from 35 percent of the total in 1937 to 11 percent
Calculated from data in source 91/.
Table 7 follows on p. 45.
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in 1953 (see Table 8* and Figure 3**). The volume of Austria's total
trade turnover with the Bloc in 1953 was, moreover, 15 percent below
the turnover in 1949, the postwar peak.
Table 7
Indexes of the Volume a/ of the Recorded Trade
of Austria with The Soviet Bloc b/
1937 and 1948-53
1937 = 100
Imports
Exports
1937 c/
100
100
1948 -
27
23
1949
41
35
1950
32
45
1951
30
43
1952
30
41
1953
26
46
a. Indexes of the value of imports and expor s
calculated in terms of Austrian schillings on
the basis of constant prices.
b. Data are from column 4 of Table 14, p. 59,
below.
c. Data are adjusted to reflect the major
changes in boundaries since 1937. See Appendix
B, Methodology, for a description of the adjust-
ment.
C. Geographic Distribution of Trade.
Poland was Austria's leading trade partner among the countries
of the Soviet Bloc in 1953, accounting for a little more than one-third
of Austrian imports and somewhat less than one-third of Austrian
exports. The remainder of Austria's trade with the Bloc was fairly
well distributed among Czechoslovakia, East Germany, Rumania, Bulgaria,
* Tab e follows on p. 46.
Following p. 4+6.
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4-
Ci
0
0
ci I
to
r-I O
wf ro o
I H
N
~s c
m rH
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01 N M-N H'D
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M H H H H
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and Hungary (see Table 9* and Figure 2**). Austrian,trade with the
USSR, China, and Albania was very minor in 1953, as in previous years.
The relative importance of the European Satellites in Austrian
trade has shifted appreciably since 1937, as Table 9 indicates. To
make the data in Table 9 more comparable, the figures for 1937 have
been adjusted to reflect the major boundary changes since 1937. Poland,
Bulgaria, and (to a lesser extent) East Germany have increased their
shares of Austrian trade with the Bloc since 1937, whereas the shares
of Hungary, Czechoslovakia, and the USSR have decreased. The indicated
decline in trade with the USSR is almost entirely the result of the
territorial adjustment of the data. Austria's trade with the USSR in
1937 was negligible, and the acquisition by the USSR of parts of Poland,
Rumania, and Czechoslovakia after World War II has not resulted in a
materially larger volume of trade with the USSR of 1953.
Some marked changes in the Satellitest respective shares of
Austrian trade have also occurred since 1948. Czechoslovakia held a
dominant position in Austrian trade with the Bloc during the period
1948-51, but this is no longer the case. Trade with Hungary, as a
proportion of the Bloc totals, has also declined considerably sine
1948, while Poland, Rumania, Bulgaria, and Fast Germany***., have
increased their shares.
D. Commodity Composition of Trade.
1. Imports.
The broad commodity composition of Austria's imports in
1953 is shown in Table 10.*-','.+ Foodstuffs accounted for nearly one-
fourth of the total imports. Ranking next in value were categories
comprising inedible crude materials (except fuels), mineral fuels and
related products, machinery and transport equipment, and manufactured.
materials.
At this level of commodity classification, the only sizable
shares of total Austrian imports provided by the Soviet Bloc are found
Table follows on p. 48.
Following p. 44, above.
No estimate of Austria's trade with East Germany in 1948 is avail-
able, but it can be assumed that the volume of such trade was less than
in 1950, when it made up less than 5 percent of the total trade with the
Bloc.
**+* Table 10 follows on p. 49.
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43
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in the categories of mineral fuels (33 percent) and foodstuffs (16
percent). Within the foodstuffs category, the Bloc provided over
one-fifth of the imports of sugar and sugar preparations and cereal
and cereal preparations in 1953. Twenty-eight percent of total wheat
imports are included in the latter category. In all, about $50 million
of the $60 million of imports from the Bloc consisted of mineral fuels
and foodstuffs. Very small proportions of the goods in the other three
main categories of imports are obtained from the Bloc, and, as already
pointed out, the Blocts over-all share of Austrian imports was only 11
percent in 1953?
Table 10 shows that Poland and, to a lesser extent, Czecho-
slovakia were the sources of the coal imports. Czechoslovakia, Hungary,
and East Germany provided most of the sugar, whereas the cereals were
supplied chiefly by Rumania and Bulgaria.
2. Exports.
Apart from the largely unrecorded shipments of crude oil
and petroleum products to the Bloc, Austrian exports in 1953 consisted
primarily of manufactured materials, inedible crude materials (except
fuels), and machinery and transport equipment (sea Table 11*). The
Soviet Bloc received only 11 percent of the items in the manufactured
materials category, which made up one-half of total Austrian exports,
but this included 19 percent of the bricks and slabs of magnesite and
graphite and 35 percent of the steel bars. About 30 percent of the
exports of machinery and transport equipment went to Bloc countries.
Nearly all of the inedible crude materials were exported to non-Bloc
countries; consequently, the preceding two commodity groups include
most of the exports to the Bloc. Within these categories, iron and
steel and nonelectrical machinery and parts each represented about
one-fourth of Austriats total exports to the Bloc in 1953. Austrian
exports of manufactured materials to the Bloc were widely distributed
among the various countries in 1953, but about two-fifths of the
exports of machinery and transport equipment were received by Poland.
E. Relative Extent of Unrecorded Trade.
As already stated, an accurate picture of Austriats trade
with the Soviet Bloc cannot be obtained from official statistics alone.
The Russians may ship goods out of or into Austria under the pretext
* Table 11 llows on p. 51.
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O3
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that they are Irinilitary transports," and this may be done without
a license from, or even without the knowledge of, the Austrian
government. In some cases, Soviet authorities have requested export
licensee in order that the foreign exchange received for the goods
might be converted into Austrian schillings in the customary way.
A large proportion of the production of both the USIA and SMV enter-
prises is sold in Austria for schillings, which are needed to pay their
operating expenses. Consequently, it is not thought that the need for
schillings has forced the USSR to obtain export licenses for a very
extensive portion of the USIA and SMV exports to the Bloc. If this is
the case, it follows that the bulk of such shipments is not included
in the official Austrian trade statistics presented above. Similarly,
goods which the USSR imports into Austria from the Bloc, such as
consumer goods for the chain of retail stores under USIA and possibly
materials and equipment for the use of SMV and Una, USIA industrial
enterprises, are not included in the official Austrian statistics.
In I, B, 1, above, the value of USIA exports to the Soviet Bloc
is estimated at something like $28 million in 1953. The rough esti-
mate in I, B, 2, above, of the value of Austrian crude oil and petro-
leum products shipped to Bloc countries in 1953 is still higher --
about $52 million. The combined value of these largely unrecorded ex-
port to the Bloc is $80 million, or one-third more than the $58.5 mil-
lion of recorded exports to the Bloc in 1953. The estimated value of
the exports of USIA and SMV to the Bloc in 1952 is $77 million compared
(at 1952 prices and exchange rate) with recorded exports to the Bloc of
$64 million. A numerical estimate of the extent of unrecorded imports
is not possible with the data at hand, but it seems safe to say that
such imports have been small compared with the volume of unrecorded
exports.
F. Austrian Dependence on Trade with the Soviet Bloc.
A general contraction of world trade would raise difficulties
for Austria, in common with the other industrialized countries of
Europe, but Austria probably is in a better position now to cope with
such a development than ever before. one indication of the lessened
dependence of Austria on imports is found in the fact that industrial
production in 1953 was 70 percent above the level of 1937, 94/ although
the total volume of imports was smaller in 1953 than in 1937-and has
not exceeded the prewar level by more than 7 percent in any of the
past 6 years. Imports of raw materials have declined 20 percent since
1937 despite the indicated increase in industrial production.
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The greatly increased domestic production of energy materials has
already been remarked on. Relatively greater reliance on domestic
supplies of raw materials in place of imports has also been facilitated
by the development of industries producing staple fibers and chemicals.96/
The data presented above in regard to the volume and composition
of Austrian trade with the Soviet Bloc do not suggest that Austria is
seriously dependent on such trade. Recorded imports from the Bloc in
1953 represented,only 11 percent of total imports. Coal and foodstuffs,
particularly cereals, were the most essential items received from the
Bloc, but only 33 percent of the imports of coal, coke, and lignite
and 16 percent of the imports of foodstuffs were obtained from the
Bloc in 1953? Since nearly two-fifths of Austrian consumption of
coal (on a hard coal basis) was produced domestically in 1953, 97/
Austria obtained.only one-fifth of its total coal requirements Tom
the Soviet Bloc. Austria is now producing 75 to 80 percent of its
food supplies; consequently, the imports of foodstuffs from the Soviet
Bloc in 1953 made up only about 4 percent of food consumption in
Austria.
It seems doubtful that trade of this extent could be used
effectively by the Soviet Bloc as an economic weapon against Austria.
The already large imports of coal from the. Ruhr and the Saar could
be increased, although such a shift of coal imports away from the Bloc
would probably entail somewhat higher costs. Any severe limitation
of petroleum product deliveries to Austria by SMV presumably could be
made up at a moderate additional cost from other sources, such as the
Middle East. Pressures which the Bloc countries might try to exert
through the manipulation of the volume or prices of their cereal
exports to Austria are largely circumscribed by the competitive world
market for cereals.
Austria must, of course, maintain a certain level of exports
in order to pay for the imports of needed foodstuffs and coal, among
other things. The loss of the Soviet Bloc as an export market pro-
bably would not be critical, in view of its small share of Austrian
exports in 153. Austrian exports to the Soviet Bloc may, on the
other hand, increase during the next several years. This probably
would require batter performance on deliveries and payments on the
part of the Bloc countries than in the past, as well as some concessions
to Austria with respect to prices and types of goods to be exchanged.
Because of the changed economic circumstances in both areas, it seems
unlikely, however, that the volume of trade between. Austria and the
Bloc would be increased to anything like the prewar volume.
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APPENDIX A
TABLES 12-114
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0
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 Approved For Release 1999/09/02 : CIA-RDP79-01093A000800040008-9
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APPENDIX B
METHODOLOGY
Two matters of methodology require explanation beyond that given
in the main part of this report.
1. The first of these points concerns the computation of the
monetary value of the Austrian output of crude oil and petroleum
products since the war. The computation is based in part on data in
a State despatch 106 and in part on data presented in I, B, 2,of this
report, together with an estimate of a reasonable market price for
the Austrian crude oil exported to the Soviet Bloc. The net result
of this procedure is a substantially higher estimate of the value of
the output than that in the State despatch. The next several para-
graphs describe the data and method employed for the major elements
of the estimate and indicate how and to what extent these figures
differ from those prepared by the staff of the American Embassy in
Vienna.
a. The petroleum products sold by SMV to Austrian distri-
butors are valued at the prices used in the State despatch. The
physical quantities for 1945 and 1946 are also from this despatch.
The physical quantities for 1947-53 are from an ORR project. 107
The latter quantities total 4,287,000 tons, or about 157,000 tons
less than the Embassy's estimate for the same period. The prices
used in the State despatch range from $25.50 to $48 per ton, depending
on the year. The resulting estimated value of the petroleum products
sold to Austrian distributors from 1945 through 1953 is $171.5 million,
compared with the estimate of $177.2 million by the Embassy.
b. The crude oil exported to the Soviet Bloc is valued
uniformly at $27.50 per ton. Not only this price but also the quantity
of such exports which are used for the present computation differ con-
siderably from those in the State despatch.
The Embassy in Vienna reports Soviet "retentions" of
1,679,000 tons of crude oil during the period 1945-49, most of which
presumably was exported to the Soviet Bloc as crude oil. The present
view is that refinery capacity in the Soviet zone of Austria was
sufficient to process the entire output of crude oil during this period
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and that significant quantities of crude oil were not, therefore, ex-
ported from Austria prior to 1950. Soviet "retentions" during the
period 1945-49 thus are taken to be refined products and are valued
accordingly.
The estimates in Table 3* of this report of the exports of
Austrian crude oil to the Soviet Bloc for 1950-53 also differ somewhat
from the Embassy's estimates for these years. Table 3 shows total
exports of crude oil to the Bloc of 3,598,000 tons, all of which is
applicable to the period 1950-53. The State despatch shows exports of
crude oil to the Bloc of 3,870,000 tons from 1950-53, plus exports of
1,679,000 tons for 1945-49, or a total of 5,549,000 tons.
The price of $27.50 per ton used in valuing the exports of
crude oil to the Bloc is much higher than the prices employed by the
Embassy in Vienna. The latter prices range from about $7 to $16 per
ton, depending on the year. These are the prices which were paid for
crude oil by refineries in the Soviet zone which the USSR has allowed
to remain under nominal US and British control. The prices are con-
siderably less than what appears to be a reasonable market price for
crude oil in eastern Austria and are, in fact, not very meaningful,
since the US and British refineries are required to sell their outputs
of refined products to SMV at prices determined by SMV. Final disposal
of the refined products is entirely under the control of SMV.
The price of $27.50 per ton used in this report is a rough
estimate of the market value of Austrian crude oil computed on the
basis of the price of Middle Eastern crude oil at the eastern Medi-
terranean plus the cost of transportation by water and land from the
eastern Mediterranean to Vienna. This price is not much less than
the prices of $33 to $35 per ton which are used in the State despatch
in computing the value of petroleum. products exported to the Bloc
during the period 1950-53. This is more or less the relationship be-
tween these prices which is expected because the ;prices for refined
products are averages for relatively low-priced residual oils (worth
much less than crude oil) and relatively high-priced distillate products.
c. Estimated exports of petroleum products to the Soviet Bloc
are valued at the prices used in the State despatch. These prices
range from $33 to $35 per ton for the period 1950-53, as stated above,
and from $33.50 to $48 per ton for the period 1945-49.
P. 25, above.
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d. Use of the data and methods described above results in a
total value for the Austrian output of crude oil and petroleum products
of $433 million for the period 1945-53. Estimated Soviet net takings
from petroleum operations are computed as 30 percent of this value,
or $130 million. The corresponding valuation of the total output in
the State despatch is $358 million. The percentage estimates of Soviet
net takings are applied to only 85 percent of this value, which is
stated to be the proportion of total Austrian production controlled
by SMV during the period 1945-53. The remaining 15 percent represents
the output of the US2 UK, and Canadian oil fields. The present view
is that Western ownership of the latter properties is largely nominal
and that the USSR is able to gain substantially the same rate of net
takings from these properties as from those which were claimed as
German assets and have been operated directly by SMV. The gross value
of Austrian production of crude oil and refined products has therefore
been used as the base for the estimate of the amount of Soviet net takings.
2. The second methodological problem requiring special comment
concerns the adjustment made in the statistics of Austrian trade in
1937 with what are now the countries of the Soviet Bloc. In order to
show more accurately the trend in the geographical distribution of
Austrian trade with the individual countries of the Bloc, it is desirable
to make some allowance for the,principal changes in boundaries since
1937. Accordingly, 25 percent of Austrian trade with Germany in 1937
has been allocated to what is now East Germany; 11 percent of such
trade, corresponding to the areas of eastern Germany and East Prussia
now under Polish administration, has been shifted to Poland; and 1
percent has been shifted to the USSR in recognition of the Soviet
acquisition of tho northern part of East Prussia, including Koenigsberg.
Other Soviet acquisitions of territory from the Satellites are recog-
nized by adding the following to the reported amount of Austrian trade
with the USSR in 1937: 35 percent of Austrian trade with Poland, 17
percent of Austrian trade with Rumania, and 6 percent of Austrian trade
with Czechoslovakia, Two percent of Austrian trade with Rumania in
1937 is allocated to Bulgaria in order to reflect the small change
in the borders of the two countries.
These percentages correspond to.the adjustments for boundary
changes which are made in the prewar gross national products of
the Bloc countries in an ORR project. 108 In general, the adjust-
ments correspond to the fraction of a country's prewar area which
was transferred or to the fraction of the prewar population living
in the area which was transferred. Aside from furnishing an estimate
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for Austrian trade in 1937 with the present area of East Germany, the
main result of these adjustments is to increase greatly the 1937 figure
for Austrian trade with the USSR.
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APPENDIX C
GAPS IN INTELLIGENCE
There are several major gaps in the available information on
the Soviet economic holdings in Austria. The production of the
USIA enterprises in either monetary terms or in physical quantities
is not known in most instances. Specific data, also are 1acKing on
the amount of goods delivered to Bloc countries, the amount of Soviet
net takings from USIA, and the amount of capital investment, if any,
in USIA facilities. Most reports on the physical condition of the
plants are too vague to permit a satisfactory appraisal of the sit-
uation.
The outstanding gap in the statistics on Austrian trade with
the Soviet Bloc is found in the case of the largely tnliccnsed
(and thorofore unrecorded) exports to the Bloc by USIA. Reasonably
satisfactory data on the physical quantities of crude oil and petrol-
eum products shipped to the Bloc are available, but information on
the monetary value of these deliveries is inadequate. Virtually
nothing is known of the amount of goods smuggled into Austria from
the Bloc.
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APPENDIX D
SOURCES
Evaluations, following the classification entry and designated
"Eval.," have the following significance:
Source of Information
Information
Doc. - Documentary
1
- Confirmed by other sources
A - Completely reliable
2
- Probably true
B - Usually reliable
3
- Possibly true
C - Fairly reliable
4
- Doubtful
D - Not usually reliable
5
- Probably false
E - Not reliable
F - Cannot be judged
6
- Cannot be judged
"Documentary" refers to original documents of foreign governments
and organizations; copies or translations of such documents by a staff
officer; or information extracted from such documents by a staff officer,
all of which carry the field evaluation "Documentary."
Evaluations not otherwise designated are those appearing on the
cited document; those designated "RR" are by the author of this report.
No "RF," evaluation is given when the author agrees with the evaluation
on the cited document.
1. Cary T. Grayson, Jr., Austria's International Position? 1938-
1953., Geneva, 1953, p. 79. U. Eval. RR 2.
2. Ibid.
3. Ibid., pp. 80-81.
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4. CIA SR-1.6, Austria, May 1945, p. 11-6. S.
5. Grayson, op. cit., p. 30. Eval. RR 3.
6. Ibid., pp. 97-95.
7.
STATSPEC
8. Grayson, op. cit., p. 107. Eval. RR 2.
9. State, Vienna Despatch No. 1213, 17 Feb 1954, pp. 6-7. S.
Eval. HR 3.
10. Department of State Bulletin, "Review of the Austrian Treaty
Question," 8 Jun 1953, p? 514. U. Eval. RR 3.
11. US Allied Commission, Austria, The Rehabilitation of Austria,
1945-1 47, Vienna, Vol. II, p. 5. U. Eval. RR 3.
25X1A12.
13. Grayson, off. cit., pp. 97, :LC
14. State, Vienna Despatch No. 1563, 29 Apr 1954, enclosure. U.
Eval. RR 3.
15. CIA/RR PR-53, Soviet Control and Procurement Agencies in
Austria, 22 Mar 1954, p. 4. S, US OFFICIALS ONLY.
16. HICOA, Weekly Summary, No. 71, 14 Dec 1953, p. 3? S. Eval.
RR 3.
17. UN Economic Commission for Europe, Economic Bulletin for
18. CIA/RR PR-53, pP. cit., p. 15.
19. Ibid., p. 6.
20. Ibid., p. 7.
21. Richard Hiscocks, The Rebirth of Austria, London, 1953, p. 218.
U. Eval.?RR 2.
22. State, Vienna Despatch No. 1563, 29 Apr 1954, enclosure, p. 26a.
U. Eval. RR 3.
23. , No. 1213, 17 Feb 1954, p. 10. S. Eval. RR 2.
24,. CIA/HR x-53, 2b2. U l- , p. 8.
25. State, Vienna Despatch .110. 1563, 29 Apr 1954, enclosure.
U. Eval. RR 3.
26. CIA/RR PR-53, op. cit., pp. 5-9.
25X1 A27 .
28. Ibid.
29. Ibid.
30. ECA, The Austrian Sulfuric Acid Situation, undated. U.
31. CIA/RR _25, The Sulfuric Acid Industry in the USSR, 29 Oct 1953.
S, US OFFICIALS ONLY.
32. CIA/Ht PR_67, Solid Fuels and Coal Gas in the Soviet Zone of
Austria, 2 Aug 1954. S,
Jul 1954, P. 75
Europe., Vol. 6, No. 2,
5-F,-CR41 T
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33.
25X1A34.
Ibid.
35. Z=.
36.' Ibid.
37. Hiscocks, 22. cit., p. 219.
38. Grayson, 2, cit., pp. 109, 163,
39. ., pp. 109-110.
40. HICOA, Weekly Summary, No. 71, 14 Dec 1953, p. 3. S. Eval.
RR 3.
41. Ibid., Vol. II, No. 15, 15 Apr 1954, p. 6. S. Eval. RR 2.
42. State, Vienna Despatch No. 954, 4 Jan 1954, p. 3. C. al.
RR3.
43. Z=., No. 1743, 22 Apr 1952, p. 8. C. Eval. RR 2.
44. ., No. 954, 4 Jan 1954, p. 4. C. Eval. RR 2.
45. HICOA, l eekly Sumnarv, Vol. II,. No, lj.r, 6 Apr 1954, p. 9. S.
Eval. RR 2.
46. -bid., pp. 9-10.
47. Ibid., No. 4, 25 Jan 1954, pp. 2-3, S. Eval. RR 2.
48. State, Vienna Despatch No. 1213, 17 Feb 1954, p. 8.. S. Eval.
RR 3.
49. = ., footnote, p.l.
50. Ibid., enclosure 2, p. 1.
51.HICOA, Weekly Summary, No. 71, 14 Dec 1953, p. 3. S. Eval.
RR3.
52. ., No. 72, 21 Dec 1953, p. 11. S. Eval, RR 4.
53. Hiscocks, off. cit., pp. 215-216, Eval. RR 2.
54. CIA/RR PR-53, o cit., pp. 3-4.
55. Interior, NIS 1,'(draft) Supplement V, Pdar 1953. S.
56. CIA/RR RA, Petroleum Refineries in'the Soviet Bloc, Sep 1954.
S, US OFFICIALS ONLY.
57. Ibid
58. HICOA, Wee~kly Summary, Vol. II, No. 13, 30 Mar 1954. S.
59. CIA ORR Project 25.194, Petroleum Statistics in the Soviet Bloc,
to be published. C.
60. Interior, NIS 16 (draft), Supplement V, Mar 1953. S.
61. -Ibid.
62. CIA RR IM-375, Flow of Petroleum in the Soviet Bloc -- European
Satellites, 13 Jul 1953. S, US OFFICIALS ONLY.
63. CIA ORR Project 25.187, East-West Trade in Petroleum Products,
to be published. S. US OFFICIALS ONLY.
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64.
65.
66.
67.
68.
69.
25X1 A 70.
71.
72.
73.
74.
75.
76.
25X1 A 77.
79.
80.
25X1 A 81.
82.
83.
84.
85.
86.
87.
88.
89.
91.
92.
93.
94.
95.
CIA ORR Project 25.187, 2p. cit.
CIA/RR IM-375, o . cit.
CIA ORR Project-No.-.19L, Statistical Analysis of Petroleum
Production in the Soviet Bloc, to be published, S, US
OFFICIAT OPrLY.
CIA/RR IM-375, op. cit.
CIA ORR Project , op. cit.
State, Vienna Despatch No. 1 1T, 17 Feb 1954, p. 13, S, Eval. RR 3,
ate, Vienna Despa
Ibid.
CIA ONR Project No. 25.194,
to be published. S.
p. 13.
Petroleum Statistics in
State, Vienna Despatch No. 199, 31 Jul 1952.
State, OIR Report No. 6453
the Soviet Bloc,
C. Eval. RR 2.
111 3 16, Section 33, inland lWFatei airs of Austri??L, Mar 1952. C.
Eval. RR 2.
State, Vienna Despatch No.
Ibid.., p. 7.
Grayson, 2. cit., p. 104.
Ibid., p. 102.
Ibid., pp. 120, 127.
State, Vienna Despatch No. 1861, Joint We=~ a No. 25, Section I
24 Jun 1954, P. 1. S.
IJbnatsberichte des 0esterreichischen Institutes fuer
Wirtschaftsforschhan , Jul 1954, "Statistiscne Uebersichten,"
(hereafter referred to as I'Ionatsberichte), p. 26. U.
Oeesterreichisches Statistisches Zentralamt,.Si,atistik des
Aussenhandels Oesterreichs. 1953,
Ibid.
Monatsberichte.
Austrian Federal Chanc ii ery, Section for Economic Coordination,
Austria and. the. P, Twentieth -- Twenty-second Quarterly
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Report, Apr-Dec 1953, p. 45. U.
96. Ibid.
97. Ibid., p. 49.
98. Oesterreichisches Statistisches Zentralamt, op. cit., annual
volumes.
99.. Monatsberichte.
100. Oesterreichisches Statistisches Zentralamt, op. cit., p. 12.
101. UN-INS'-IBRD, Direction of International Trade, Series T,
Vol. IV, No. 1/2. U.
102. Oesterreichisches Statistisches Zentralamt, a. cit.
103. UN-IMF-IBRD, Direction of International.Trade, Series T,
Vol. V, No. 5, Sep 1954, p. 64.
104. Oesterreichisches Statistisches Zentralamt, op. cit., annual
volumes. U.
105. Monatsberichte.
106. State, Vienna Despatch No. 1213, 17 Feb 1954. S. Eval. RR 3.
107. CIA ORR Project No. 25.19+, Statistical Analysis of Petroleum
Production in the Soviet Bloc, to be published. S, US
OFFICIALS ONLY.
108. CIA ORR Project No. 13.117, European Satellites National
Accounts, to be published. S.
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