I attach for your information a memorandum reporting on the progress to date in the negotiations on the Austrian State Treaty which have been taking place in Vienna.

The memorandum examines the question from the point of view of Canadian interests.

[Paul Martin]

Secret
[Ottawa], May 13, 1955

It now appears certain that the Foreign Ministers of the U.S.S.R., U.S., U.K., France and Austria will sign the Austrian State Treaty in Vienna next Sunday, May 15. A communiqué issued in Vienna last night - May 12 - announced that the Conference had successfully completed its work on the text of the State Treaty and that full unanimity had been reached on all articles of the draft treaty.¹⁴ We have not yet been informed of the details of the terms agreed to in Vienna. However, all information available to us at present has been reviewed with the particular object of ensuring that the Canadian Government's interests in the Treaty are satisfactorily met.

2. As the Allied and Associated Powers were never at war with Austria, the proposed Austrian State Treaty has been conceived as a Treaty with "its official title" for the "Re-establishment of an Independent and Democratic Austria". It is not in the strict sense a peace treaty. Canada never recognized German sovereignty de jure over Austria, although de facto recognition was accorded. Never having been at war with Austria, Canada recognized Austria as an autonomous state after its liberation from German occupation and the Canadian Government agreed on January 25, 1949 to accept an Austrian Consul Général in Ottawa.¹⁵ The absence of a treaty has not therefore greatly affected our political relations with Austria.

3. The general views of the Canadian Government on an Austrian settlement were transmitted to the negotiating powers on February 25, 1947.¹⁶ In this statement the Government supported the expressed intention of the Four Powers to see a free and independent Austria re-established and noted with satisfaction the steps which had already been taken to this end. These principles are now re-affirmed in Article 1 of the draft treaty.

4. The Canadian memorandum also suggested that the boundaries should be those existing before the anschluss and this has been agreed in Article 5. Our memorandum also supported an early withdrawal of occupation forces after the ratification of the Treaty, a prohibition against a future anschluss and other political points of less importance which have all, in one form or another been embodied in the Treaty as at present agreed.

5. During the present negotiations in Vienna, a number of protests have been received from Canadian organizations and individuals regarding Article 16 of the Treaty. As in other Western countries, a number of people in Canada were deeply concerned at the prospect of agreeing to give the Soviet authorities free access to political refugees camps in Austria. They were afraid that the Russians would exert pressure upon these refugees to ensure their repatriation against their will. However, agreement has now been reached in Vienna to drop this article. From the political point of view therefore, the Austrian Treaty appears to be satisfactory to the Canadian Government.

6. The economic articles of the Treaty would also appear to be satisfactory from the Canadian point of view. The Allied and Associated Powers have long been in agreement that no reparations shall be exacted from Austria as result of the war (Article 34). The position as regards the other economic articles is however more confusing and requires a word of explanation.

7. The negotiations among the Ambassadors in Vienna were since the beginning deadlocked on Article 35 which deals with German assets in Austria. It now seems that the Soviet Ambassador has accepted a compromise submitted by the U.S. that Article 35 stay in the Treaty but be enlarged by a paragraph referring to the agreement reached by the Austrians and Russians in Moscow for the definite return to Austria of oil fields and the Danubian Steamship Company. The Russians had in mind to retain this article in its present form while the Western Powers insisted that it should be reviewed to take account of the recent Austro-Soviet negotiations and other events. The Western negotiators had also contended that other economic articles had become out-dated during the past twelve months and had come to Vienna with 97 formal amendments to the Treaty they had been prepared to sign during the Berlin Conference of 1954. For their part both the Russians and the Austrians have also had a number of amendments and deletions to propose.

8. In pressing the Western Powers to sign Article 35 in its present form, the Soviet Union appeared to have had two principal objectives:

(a) to prevent any risk of the Austrian Government returning to German or Western ownership Austrian oil fields in the Soviet zone, and,

(b) to take every possible political advantage from the success of the Austro-Soviet bilateral negotiations by dealing with them separately from the Treaty so as to retain all the political kudos for themselves. The principal interest of the U.K., U.S. and Canadian Governments in this article was to protect the oil interests of their respective nationals. One of the largest oil fields in the Soviet zone of Austria is owned by a Canadian, Mr. R.K. van Sickle. Representations have been made through the U.K. Government on his behalf and the Austrian Government have recently agreed, in private negotiations with the U.S. and U.K. Ambassadors, to compensate foreign oil companies who were forced to sell to the Germans at unfair prices after the anschluss and have been nationalized by the Austrian Government since the liberation. The van Sickle company is in a stronger position than other British and American interests because it has had its claim recognized under Austrian law.

9. Article 42 is the other principal economic clause of interest to Canada, because it provides for the Austrian Government to restore to U.N. nationals any property of theirs which had been seized by Germany. This article has been revised but its final terms have not yet been brought to our attention. As you may be aware, a number of Canadians will have claims under this article and provisions of the Treaty ensure that their claims will receive equal treatment with those of other U.N. nationals. However, here again the Soviet Union has made an effort to retain the article in its original form while the Western negotiators were seeking to have it revised.

10. Despite the fact that agreement has been reached on all articles, the latest press reports indicated that two main questions remained unsettled:

(a) the form of the Austrian declaration of neutrality, and,

(b) the proposed Four Powers' guarantee of the integrity of Austrian territory.

11. Now that the Soviet Union has agreed to drop Article 17 from the Treaty, Austria will be relieved of the obligation to restrict her armed forces to the very limited levels (53,000 men for the army) which would have been permitted under this article. The text of an Austrian parliamentary declaration of neutrality has been drafted for consideration by the Foreign Ministers but we have not yet received a copy. It would simply note Austria's intention voluntarily to adopt a neutral policy and refrain both from entering into any military alliances and from permitting the establishment of foreign bases on Austrian territory.

12. Western negotiators have privately agreed with the Austrians to keep the question of a Four Powers' guarantee separate from the Austrian parliamentary declaration of neutrality. The reason for this is partly to make it harder for the Russians to seek excuses later for undue intervention in Austrian affairs on trumped up allegations that Austria is not maintaining her neutrality and partly because the U.S. would have conventional difficulties on guaranteeing Austrian territorial integrity. For this reason the U.S. Ambassador declared that Mr. Dulles would be unable to sign a treaty if the Russians made signature conditional on obtaining firm U.S. commitments to a guarantee of Austrian territorial integrity. The Soviet Ambassador replied that his Government had never suggested guarantees were a pre-condition of signature. The Ambassadors have apparently not been able to dispose of this question which will in all probability be reserved for the Foreign Ministers' Meeting.

13. The U.K. has been considering a formula for a guarantee which would be within the framework of the United Nations. Under it, the Four Powers would solemnly declare that if in the opinion of any of them, there was a threat to, or violation of Austrian territorial integrity, they would treat this as a grave threat to peace and bring the matter immediately to the attention of the United Nations, with a view to securing appropriate United Nations action to meet the situation. We do not yet know whether the French and Americans have accepted this suggestion or whether it has been discussed with the Russians and Austrians.

14. If an Austrian Treaty is signed in Vienna on Sunday, the question of Canada's accession to the Treaty will arise. The Treaty is drafted for signature by the Four Powers and by Austria but provides in Article 58 for any member of the United Nations to accede, and upon accession to be deemed an Associated Power for the purposes of the Treaty. According to the old Article 14 of the Treaty, any bilateral Treaty in existence between Canada and Austria before 1948 would have had to be recorded bilaterally unless Canada acceded to the Treaty. Article 14, however, has also been dropped during the current negotiations. However, if as would appear probable, a number of other Western countries, in addition to the U.S., U.K. and France, decided to accede to the Austrian Treaty, then it would seem desirable for Canada to do so. Even if there was no legal advantage in Canada's accession, it might, in our opinion, be politically desirable to indicate our satisfaction at the re-establishment of an independent Austria.