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THE CURRENT SITUATION IN AUSTRIA
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THE CURRENT SITUATION IN AUSTRIA
SUMMARY
Though the importance of Austria io thc US is largely negative, US commitments and interests there require maintenanceestern-oriented government which can be given eventual full Independence. Despite ils position on the fringes of the Soviet sphere of influence, virtually surrounded by Satellite countries, and partially occupied by the Soviet Army, Austria remains one of the most politically stable and anti-Communist countries in Europe. Thc people are apparently determined to maintain their identity with thc West. Thc USSR could absorb Austria only by military force, orombination of economic and political pressures supplemented by Satellitefollowing quadripartite troop withdrawal.
Thc present Austrian Government, which represents the overwhelmingly anti-Soviet sentiment of the people, is stable and is fundamentally cooperative with the West. The Communist Party is too small to exert any influence and has little chance ofwithout direct outside support, because thc well disciplined Socialists retain control of the elements through which the Communists would have to work.
Should the Communists gain control of Austria despite these obstacles, theresults would be:erious demoralization of pro-Western elementsEurope; (b) facilitated Communist penetration of Italy and exposure of thatto easier aggression; <c) lossost important current source of information on the USSR.
The major difficulties which the present government must overcome before it can attain its goal of real independence are economic, while in thc western zones are located some major industrial installations and the hydroelectric power to run them, the USSR has control of the agricultural region, of the oil, and of Industries in Eastern Austria claimed as German assets. By manipulation of these resources, thc USSR has delayed economic recovery, thus weakening the Government.
If Austria should survive quadripartite occupation intact and if its political and economic autonomy could be re-established, its economic prospects would be good and thus also its chances of eventually becoming an economic asset to the economy of Western Europe. Under present conditions, however, it is unlikely that Austria can achieve full economic stability within the next four years.
NoteThe information In this report Is as of
Thc Intelligence organizations of thc Departments or Stale, Navy, and thc Air Force have concurred In this report; the Intelligence Division, Department of lhe Army, concurs with those sections having military implications.
THE CURRENT SITUATION IN AUSTRIA
1. Tin Importance or Austria to the US.
Austria,S point of view, is ol considerable importance but almost entirelyegative sense. The country contains little of intrinsic valuo to the US: It la economically weak lo such an extent that It must remain an economic liability for some years lo come, and its military capacity Is negligible. Austria Is, however, to beamong those European nations which are of great intrinsic Importance to the US because they truly wish to aliain thc status of free and independent democracies. Thc United States has, moreover, firmly committed Itselfolicy directed toward the early establishment of an Independent Austrian state. The defeat of this policy by thc USSR wouldar-reaching and deleterious eflecl on the US European positionhole, disproportionately magnified by thc factart of Austria is presently occupied by US troops. The enrly establishment of Soviet control over Austria woulderiously adverse psychological effect throughout Western Europe and would have the immediate concrete result of greatly facilitating Communist penetration of Italy. Possibly of minor importance but still of some consequence to the US would be thc loss of one of the few remaining valuable US sources of information concerning the USSR.
2. Tin: Political Situation.
The most Important single political circumstance relating lo Austria, and one which overshadows and conditions all other problems is the fact that Austria is under thc military occupation of thc United States. Great Britain, France, and the USSR, with thc country divided into four zones each occupied by thc armed forcesingle power.
Functioning under the supervision of an Allied Commission, thetable coalition of the two major partiesthe People's Party and lhe Socialist Party. Thc stability of this coalition, representingercent of thc voters In5 election, Is based on the determination of the Austrian people to recover their Independence and to resist absorption Into the Soviet sphere Although theCommunistsegligible factor in Austrian politics and are not nowin thc Austrian Government, the Communist coup in Czechoslovakia andof Communist strength in Italy, have considerably dampened thc eagerness of both major partiesithdrawal of thc occupation troopsirst step toward actual independence Although Austrian leaders arc confident that no similar coup is possible in Austria, lhe prospectirtual encirclement by aggressive Soviet Satellite states Is now particularly disturbing to them. These leaders consider it necessary that the Austrian police force be expanded and that an Austrian Army properly armed and trained, be created as soon as thes put into effect.
Treaty (or th* lie-establishment of an Independent and Democratic Auitrla. presently under neeoliation by the US, UK, France, and the USSH.
Austria's sovereignly is still greatly limited by conditions of thc occupation, and the treaty which would terminate the occupation remains stalled by thc conflict between the East and the West. Unanimous approval by the four occupying powers (US, UK, France, USSR) is required only for matters involving constitutional changes. The number of important matters left to the jurisdiction of the zonal commanders has,enabled the USSR unilaterally to nullify decisions of thc Austrian Government by countermanding them In Ils zone. This has been done, for example, by the Soviet seizure of key Arms as German assets, by nonrecognition of Austrian nationalization of industries, and by Soviet interference in the distribution of food supplies and petroleum.
Through employment of delaying tactics in negotiations on the treaty, andthrough economic penetration of Austria, the USSR has sought to force changes in the composition and orientation of the pro-Western coalition government, intensifying these tactics since5 elections revealed the extreme weakness of the Austrian Communist Party. The few prominent members of thc conservativeParty who once felt that concessions to the USSR might procure Soviet agreementreaty now join in supporting thc coalition government's opposition to any treaty which would violate Austrian sovereignty, or prejudice Austria's economic recovery. Austrians in general understand clearly, moreover, that firm resistance to Sovietis prerequisite to continuation of US economic aid and that they are bound to the US by economic necessity.
The majority People's Parlyeservoir ol all righl-of-center political forces. lis instability Is thc resultariety of sectional and class interests. This one-party bloc on thc rightovel development in Austrian politics. Because lhe former pan-German and Nazi parties obviously could not beote for thc rightist People's Party was the only means of expressing an anti-Marxist sentimentS. This Party currently represents the middle-class, and the industrial and peasant interests; Itsaims primarilyapitalist democracy acceptable lo the Catholic Church. The Party looks to the US for support.
The Austrian Socialist Party is highly disciplined- Its traditional policy ofextremism and practical moderation has enabled il to retain left-wing elements and to extend party influence over some of thc peasants and the lower middle-classes. In addition to having the overwhelming support of the trade unions. Currently, its policy of gaining objectives by democratic, evolutionary means is expressed through active participation in the coalition government While its strong, conservativehas gained it enough prestige toarrow majorityew nationalit would, however, probably not gain sufficient votes to givernctical working majority in the lower house. The Socialist Party platform alms chiefly alocialist democracy, in general corresponding lo that espoused by the British Labor Party. This Parly supports US objectives in Austria.
The Austrian Communist Parly has been prevented from making nny great gains, even during the hardships following each World War. by the strong Socialist hold over the working classes The Communists withdrew from thc government The
u_jiHsii Visit
that Austrian communism is regardedool of the USSR continues to stigma-trie the movement.
3. The Economic Situation.
Shortly before the Anschluss with Germanyustria was dependent on imports forercent of its foodstuffs, much of its industrial raw material, and aboutercent of its hard coal. Given general European recovery, relaxation of Sovietcontrols, financial assistance for capital equipment, and favorable trade policy agreements with foreign nations. Austria could achieveew years an economic balance which would provide higher standards of living than it had before the war, by exporting electric power, timber, magnesite. and industrial products. At present Austria's economy, even though bolstered by large subsidies from the US, is liltie above the subsistence level.
Agricultural recovery lags behind that in all other European countries, andhave one of the lowest food rations in Europe. The present basic calorie rationer day as comparedrewar food consumption level. Currentlyercent of Austria's basic food ration comes from the US. Any delay or interruption in receipt of food from abroad would reduce the ration toalorics per day.
Austria's industrial production stands between SO andercent of7 level, but Soviet withdrawals from current production reduce still further the outputto the Austrian people. Revival of Industry lias been retarded primarily by the difficulty Austria has encountered in obtaining minimum hard coal requirements, although the supply has increased markedly during the past six months. Most of such anthracite as has been obtained has come from the Ruhr and Poland and could be bought only because it was subsidized by the US (Substantial quantities of brown coal, produced in the western zones, cannot substitute for hard coal.)
Allhough the crippling effect of zonal partition has diminished in the past year. Austria's potential for economic recovery Is .severely handicapped by the Sovietin key industries, its appropriation of current Industrial production for shipment lo the USSR, and its removal of industrial facilities from the eastern zone. Although current oil extraction isighly excessive rale, increasingly smaller amounts are being made available for Austria.
The eastern zone includes all of thc Austrian oil fields and refineries, the industries manufacturing railroad equipment, heavy and lighl electrical equipment, machine tools, as well as important chemical factories, and automotive and related industries. The rich farming land that formerly producedercent of all agricultural commodities produced in Austria also lies in the Soviet Zone.
In the three western zones are located the forests and the iron deposits, all the hydroelectric potential, pig iron and crude steel production capacity, the nitrogen, staple fiber, and aluminum plants, and the largest antifriction bearing factory inEurope, outside Germany.
Thc USSR not onlyonopolistic position in oil. heavy electrotechnlcal equipment. Danube shipping, heavy cables and dyesluffs. but it operates these key
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industries, seized in thc eastern zone as German assets, as an effective instrument of economic penetration In the western zones. These industries, which are largely exempt from any form of control by the Austrian Government, have been systematically used by the USSK to influence the parts of thc Austrian economy it cannot control directly: by means of forcing delivery of raw materials and finished products from the western zones to the Soviet Zone through carefully placed orders, and by tying up Austrian production capacity. This latter is accomplished,resently reduced scale, by keeping industrial facilities busy processing raw materials furnished by the Soviet Administration which in turn collects thc finished goods.
Although the Administration of Soviet Assets in Austriahich operates these industries, has made large profits primarily through black market operations, the Soviet economic position in Austria is reportedly now less strong than it has been al any previous time. This decreased activity in Soviet-controlled plants is attributed to Soviet inability to operate thc firmsompetitive economy, to reluctance to make capital investments for replacement of obsolete equipment, and to general shortages of raw materials. Soviet moves to Integrate USIA enterprises with the economies of the Satellite bloc have apparently been abandoned. The loss of these enterprises, however, is highly detrimental to the Austrian economy, which receives no compensation for thc products and raw materials shipped to the USSR or for thc finished goods, critically needed at home, bartered by USIA to get raw materials from Czechoslovakia and Yugoslavia.
The actual potential of Austrian industry cannot be gauged by pre-Anscnluss characteristics, and. until the future relationship of thc USSR to the Austrian economy has been established, cannot be assessed with accuracy. Austria's industrial capacity, especially because of developments in petroleum and hydroelectric power, was expanded and diversified during the Anschluss, but exploitation of this potential has not yet been possible. Thc new industrial capabilities will require development abroad of new markets and supplies of raw materials; at the same time, Austria could producenew industrial wares for home consumption and sale abroad in exchange for the needed raw materials.
By means of bilateral agreements with both western and eastern EuropeanAustria has revived some international trade.6 the country's leading trade partners have been Switzerland. Czechoslovakia, and Italy, followed by other Western countries. Arrangements were completed recently for limited trade with the US-UK Zones of Germany. Although the immediate foreign trade outlook is poor, Austria's natural resources and increased industrial potential are sufficient to support foreign trade above7 level, given rehabilitation and restored control of industrial capacity. Under improved conditions in general European trade, thereeasonable prospect that Austria could balance its exports against its importsew years, meanwhile contributing exports of electric power, timber, and magnesite to the European Recovery Program.
Present meager foreign trade does not reflect Austria's expanded industrial capacity. While7 Austria imported8 million worth of food
and other relief supplies2 million in agricultural and Industrial goods, it ex-ported raw materials and industrial products totallingillion. Serious deficits are expected to continue at least four years.
In thc fiscal, Austria will require7 million in assistance to cover an anticipated balance-of-payments deficit. Under ERP it isthat Austriahole will require assistance in excess ofillion during thc next four years. Even with outside aideasonable solution of lis occupation difficulties, it Is unlikely that Austria can expect any great Improvement in its basic economy within the next four years. Agricultural recovery will be especially slow. Industrial replacement parts, machinery, and tools must be imported, as well as raw materials. Thc solution of ail these problems depends on the extent to which Austria is successfully absorbed into lhe economy of Western Europe, or forced intoto the USSR, or is able to integrate its economy independently with Europehole.
4 Military Situation.
Currently, Austria has no military forces, and0 police are Inadequately equipped and armed. Terms of the Austrian treaty will condition the eventual pattern of Austria's national defense policy. In thc meantime, thc four occupying powers have agreedeiling0 men for the future Austrian Army,or the Austrian Air Force,op limitation oflanes. While Austrian leaders wish lo havo an adequate defense force available when the treaty becomes effective, theythat, as in thc past, only international guarantees, backed by active support of major foreign powers, can assure Austrian territorial Integrity and political
At thc end ofhe occupation forces had the following strengths: The USSR0 men broken down as follows: groundir0ombers.ther; security. All Soviet units in Austria arc considered battleworthyof rigorous combat training.
Franceround force troops. There are no French Air Force units in Austria.
British occupational forces0eing combat tioops Their occupational duties all but preclude military training There are no operational Royal Air Force units in Austria
5. Probable Future Developments.
No drastic changes in thc current situation in Austria ore expected in the near future. It is unlikely that thc USSR will sacrifice its present hold over the economy of Austria in order toreaty settlement with thc Western Allies, until thc USSR decides that quadripartite occupation is blocking thc coinmunlzation of Austria
The enthusiasm of both major parties in Austria for an early treaty settlement has been considerably reduced by the Communist coup in Czechoslovakia and by other
evidences ol Cominunist strength, particularly in Italy. Moreover, thcraised by virtual encirclement of Austria by aggressive Soviet satellite nations are beginning to take precedence in the minds of Austrian leaders over their concern with obtaining withdrawal of the occupation troops. In order, however, to counter Communist propaganda, it is likely that both Parties will continue to agitate publiclyreaty, althougheduced scale and with reservations. Under presentthe present coalition government will continue unchanged. Although the Socialists are now believed to have sufficient support toarrow majorityew national election, they could notractical working majority in the lower house, and hence are most unlikely in the near future toollapse of the government which would call for elections. Thc negligible role of the Austrianis expected to continue unchanged.
While the USSR would be capable of communizing its zone of occupation byororced partition of the country, such moves are unlikely in thc near future. From the Soviet point ofutsch would seem undesirable because It would forfeit western Austria to the US. UK, and France. On the other hand, it is probablereakdown of the present treaty negotiations would cause the USSR to increaseits economic and political pressure on thc government.
Under the circumstances, no drastic change in thc Austrian economic situation is anticipated, although in the event that shipments of food arcajor crisis will arise in the food supply position in late May. The slow rise in the level of industry is expected to continue, but Austrian industry cannot be expected to become stable in less than four years.
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O
f'l
DISTRIBUTION Secretary of
Chief of Staff to Commander to Chief
Secretary- of Dafe-nae
Secretary of tbc
Secretary of tha Kavy
Secretary ofAtf Force
KiecaUre Secretary, NaUonal Security Council
Chairman. Katsooal Security Resource* Board
Onto* of Staff, VB Army
Chief of Naval Operation!
f Staff, us Air Pons
Director of Plana andeneral Staff, US Amy
Deputy Chief of Neeal Operation* (OperaUooj)
Director of Plane and OperaUoru. US Air Porea
Special Aaelitant to the Secretary of State, Research and Intelligence
Director of InteUlgecca, Ocneral Staff, US Army
Chief of Naral Intelligence
Dtrector ot IntaUtgeneo, US Air roroe
Secretary, Joist Chlefa of Staff
Secretary, Joist Intelligence Oroap
Secretary. Stale-Army-Navy-Alr Force Coordinating Committee
KiecatlTt Secretary, MLUlary LUlaoo Committee to tbe Atomic Energy OosmlaCOD
Director of Security and InleQlgenee, Atomic Energy Commission
ClUel, Acquisition and Distribution. OICD. Department of State
Original document.
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