SOVIET CONTROL AND PROCUREMENT AGENCIES IN AUSTRIA: USIA

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79-01093A000500040001-9
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 31
• Document Creation Date: November 9, 2016
• Document Release Date: January 19, 1999
• Sequence Number: 1
• Publication Date: March 22, 1954
• Content Type: IR

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SOVIET CONTROL AND PROCUREMENT AGENCIES IN AUSTRIA : V S' R
CIA/RR PR-53
(ORR Project 41.255)
22 March 1954
AF NI T rJ(
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.
Comments and additional data which may be available to the
user are solicited.
THIS DOCUMENT CONTAINS INFORMATION AFFECTING THE NATIONAL DEFENSE
OF THE UNITED STATES WITHIN THE MEANING OF THE ESPIONAGE LAW,
TITLE 18,, USC, SECS. 793 AND 79)+, THE TRANSMISSION OR REVELATION
OF WHICH IN ANY MANNER TO AN UNAUTHORIZED PERSON IS PROHIBITED BY
LAW.
CENTRAL INTELLIGENCE AGENCY
Office of Research and Reports
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CONTENTS
Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
I. Introduction . . . . . . . . . . . . . . . . . . . . . . . . . 3
II. Probable Organizational Structure of USIA . . . . . . . . . . . 4
1. Central Administration . . . . . . . . . . . . . . . . . . 4
2. Central Commercial Bureau . . . . . . . . . . . . . . . . . 6
3. Production Administrations. . . . . . . . . . . . . . . 6
4. Retail Stores . . . . . . . . . . . . . . . . . . . . . . . 8
III. USIA Subordination to Moscow and Relationships with Other
Soviet Authorities in Austria . . . . . . . . . . . . . . . . 10
1. Control by GUSIMZ . . . . . . . . . . . . . . . . . . . . . 10
2. Control by Other Moscow Agencies . . . . . . . . . . . . . 11
3. Relationships with Other Soviet Authorities Abroad . . . . 11
a. Soviet Military Authorities in Vienna . . . . . . . 11
b. Soviet Political Authorities in Vienna . . . . . . . . 12
c. Satellite Trade Delegations in Vienna . . . . . . . . . 12
d. Intrac . . . . . . . . . . . . . . . . . .. . . . . . . 12
e. USIG in East Germany . . . . . . . . . . . . . . . . . 14
IV. Interrelationships of CCB,. Production Administrations, and
Enterprises . . . . . . . . . . . . . . . . . . . . . . . 15
Appendixes
Appendix A. Chief Identified Personnel of USIA . . . . . . . . . . 17
Appendix B. Important USIA Enterprises Supplying the Soviet
Bloc . . . . . . . . . . . . . . . . . . . . . . . . 19
Appendix C. Methodology . . . . . . . . . . . . . . . . . . . . . 21
Appendix D. Gaps in Intelligence . . . . . . . . . . . . . . . . . 23
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Appendix E. Sources . . . . . . . . . . . . . . . . . . . . . . . 25
Following Page
Probable Organization of USIA. . . . . . . . . . . . . . . . . . 4
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(ORR Project 41.255) - - - - - -
Summary
The primary organization utilized since 1946 to control significant
segments of the Austrian economy seized by the USSR as "German foreign
assets" is USIA (Upravleniye Sovetskogo Imushchestva v Avstrii -- Admin-
istration of Soviet Property in Austria). The major components of USIA,
which has some 650 Soviet and 60,000 Austrian employees, are the Central
Administration, the Central Commercial Bureau, and the Production Admin-
istrations, which supervise several hundred enterprises. Other Soviet
organizations in Austria -- the Soviet Mineral Oil Administration, the
Danube Shipping Company, and the Soviet Transport and Dispatching Office --
are nominally subordinate to USIA but operate rather autonomously.
The nine identified Production Administrations supervise plants in the
general categories of metallurgy and coal, machine construction, automotive
and fine mechanics, electrical equipment, construction, chemicals, light in
dustry, food processing, and agriculture and forestry. In addition., the Main
Administration of Retail Stores manages over 200 retail stores located
throughout the Soviet Zone of Austria and the Soviet Sector of Vienna.
The Central Commercial Bureau initially acted as a central buying agency
for all of the Production Administrations and their subordinate enter-
prises, but in recent years some enterprises apparently have handled
negotiations with the Soviet Bloc and with Western customers rather
independently. The pattern of supervision of USIA enterprises varies from
exclusive.management by Soviet officials to operation by Austrians, who
may allocate much of their output to Austria but are subject to considerable
Soviet organizational and marketing control. In a few cases there is
very little Soviet control at the plant level, and there is one category
in which the unit in the Soviet Zone is a branch plant associated with other
plants and a main office in the Western Zone.
According to some sources, the Moscow supervisory organ, GUSIMZ (Glavnoe
Upravleniye Sovetskogo Imushchestva Zagraditsey -- Main Administration of
Soviet Property Abroad), controls USIA rather closely and frequently. USIA
* The estimates and conclusions contained in this report represent the best
judgment of the responsible analyst as of 1 February 1954. The information
contained in this report is generally applicable to an earlier period, so
that the organization is described as it existed about the end of 1952.
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probably has some relationships with other Moscow organs, especially
trading organizations, such as Techno-Export, and production ministries.
In Vienna, liaison is maintained with Soviet political and military
authorities, the Soviet Trade Delegation, and Intrac, the trade agency
of the Austrian Communist Party, which, in some respects, competes with
USIA. USIA also is in frequent contact with representative of Satellite
agencies, especially USIG (Upravleniye Sovetskogo Imushchestva v Germanii
Administration of Soviet Property in Germany).
Only a small fraction of Austrian industrial capacity is represented
by USIA enterprises, but USIA has a near monopoly or controls an important
share of the output in some important sectors. Reportedly, a few larger
firms are still profitable, but many are in serious financial difficulties
and some have been reorganized or even liquidated.
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I. Introduction.
USIVA (Upravleniye Sovetskogo.Imushchestva Vostochnov v Avstrii -- Ad-
ministration of Soviet Property in Eastern Austria) was created in the
spring of 19LIb by the USSR and subsequently became known as USIA when
"Eastern" (Vostochnov) was dropped from the title. It was set up as a
Soviet state organization responsible to Moscow (GUSIMZ -- the Administra-
tion of Soviet Property Abroad)*for the purpose of administering such
industrial, mineral, and agricultural property in the Soviet Zone of
Austria as had been confiscated by tke USSR as "German foreign assets."
The confiscations were theoretically based on the London and Moscow Dec-
larations of 1943 and the Potsdam Agreement of July 1945. The first of
these accords voided all transfers of property rights in regions controlled
by enemy governments; the second expressed the refusal of the Allies to
recognize any changes carried out in Austria after the 1938 Anschluss,
and the Potsdam Agreement had assigned all "German assets" in Eastern
Austria to the USSR.
Wide disagreement, however, soon developed between the USSR on the one
hand and the Western powers and the Austriai government on the other con-
cerning the extent and identity of "German assets." The point of view, for
example, of the Austrian government was recently reiterated in Ckancellor
Raabts speeck before the Austrian Parliament on 30 October 1953 (observing
the tenth.anniversary of the Moscow Declaration) in which he contended
that only a very small part of the USIA enterprises had been German property
in 1938. 2/ He also described it as "grotesque" to classify Austrian oil
resources and the Danube Shipping Company as "German assets." The
seized petroleum and shipping properties were placed under the operation of
two other Soviet organizations which are only nominally subordinate to
USIA: the Soviet Mineral Oil Administration (Sowjetische Mineraloelver-
waltung -- SMV) and the Danube Shipping Company (Donau Dampfschiffahrts
-Ge.sellschaft -- DDSG).
Furthermore, Soviet policy and Western policy regarding the handling of
"German assets" have differed sharply. After World War II the Western
Allies promptly assigned the assets that they had acquired to Austrian
government trusteeship. Pending,a treaty and financial settlement, the
Soviet properties continue under direct Soviet operation and exploitation.
* The nature of control over USIA from Moscow and from the ckief Soviet
officials in Vienna is indicated briefly in Section III of this report.
*- Footnote references in arabic numerals are to sources listed in"
Appendix E.
XXX The detailed subjects of "German assets" and the nature and amount of
Soviet confiscations are not within the scope of this report. Summary in-
formation regarding the categories and importance of Austria's industry
under USIA is presented later in Sections II and IV of this report.
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IT. Probable Organizational Structure of USIA.*
The primary components of USIA are the Central Administration (CA), the
Central Commercial Bureau (CCD), and the Production Administrations. Also
within the complex of USIA are several Soviet organizations, which, however,
operate in a relatively autonomous manner. They are the Soviet Mineral Oil
Administration (SMV), the Danube Shipping Company (DDSG), and the Soviet
Transport and Dispatching Office (Juschwneschtrans).**
1. Central Administration.
Of the estimated 650 or more Soviet officials and other employees in
all USIA (total Austrian employees are about 60,000), approximately 200 are
in the CA. 3/ This total includes the Director-General and his Deputy, the
heads of the main departments and their deputies, and the Soviet secre-
tarial staff, which is composed. largely of the wives of Soviet officials
and officers stationed in Austria.
CA headquarters is located in the international sector of Vienna
in the Trattnerhof building, the first floor of which is occupied by the
Soviet Military Bank. As of late 1952, no passes were required for entry
into the first floor, but red passes for Soviet and, blue for Austrian
employees were needed for admittance to the CA offices on the second floor
and above. J Soviet employees reportedly have a 1+8-hour week and Austrians
a 46-hour week in the CA as well as in the CCB. CA office conditions and
equipment are said to be adequate.
The CA includes three primary branches -- Technical, Personnel, and
Commercial -- each headed by a Deputy to the Director-General of USIA.
Although inte'ligence on USIA has not clarified fully the respective juris-
dications, structure, and interrelationships of these branches, the following
pertinent information has been obtained.
The Technical Branch comprises four departments: 'Planning. Quality
Control, Accounting, and Financial. The operations of the first two un-
doubtedly are closely coordinated. The Quality Control Department works
out production standards to be observed by the individual USIA enter-
prises. The Accounting Department examines and approves budgets for the
various production administrations and, in connection with the Soviet
Military Bank, keeps final records for all USIA plants. The chief ac-
countant controls finance in the CA as well as in the Production Adminis-
trations. The Financial Department, responsible to the Accounting De-
partment, examines production costs in the USIA factories,
* See the Chart following p. 16.
These organizations are not examined in this report. Juschwneschtrans
is the German transliteration of Yuzhyneshtrans (Yuzhnoveshniv Transport --
Southern Foreign Transport). This agency is also referred to in German as
Transport- wad Speditionskontor (Transport and Dispatching Office).
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The Auxiliary Administrations, although generally responsible to
the Deputy for Administration and Technical Matters and through him to
the Director-General of USIA, are relatively autonomous and specialized in
function. In general, they carry on research and legal activities re-
lating to former German property and patents in Austria which are of interest
to USIA. Each is headed by a Director-General whose identity in all cases
is unknown.
The Survey of German Properties Department examines enterprises and
properties in order to ascertain the percentage of ownership by German
creditors.. Questionnaires are used. Values are determined with reference
to the assets figures in the 1945 balance sheets, and, in case of real
estate, to the Austrian cadastral records (Grundbuch) in 1945 schilling
values.
The Legal Department reviews the legality of the decisions of the
German Properties Department and handles USIA cases in Austrian courts. In
this function, of course, Soviet interests are served. In-service train-
ing of young lawyers in USIA departments is also supervised by this
department.
The Patent Department examines USIA plant records in order to determine
which patents can be declared to be German-owned and therefore subject to
Soviet retention.
The Personnel Branch is composed of the Labor Regulations Section
(Trud -- Labor), which prescribes labor policy for all USIA plants; the
Central Bookkeeping Section (ASO), which supervises all salary matters of
USIA employees; the Austrian Personnel Section, which maintains liaison
between USIA with the Austrian Communist Party (Kommunistische Partei
Gesterreich -- KPOe); and the Administration and Services Section, which
is in charge of repair and maintenance crews in USIA buildings. The ap-
pointment of all Austrian personnel, even to the most minor jobs, reportedly
must be approved by the head of the Personnel Branch. In theory, the senior
Austrian posts must be filled by KPOe members. In practice, however, the
Soviet authorities, in order to obviate the development of KPOe control
over Austrian USIA personnel, have frequently appointed non-Party men,
even former Nazis, to important positions in USIA enterprises. Subsequent
KPOe protests have not been headed. 5/
The Commercial Branch comprises the CCB, the Economic Research De-
partment, and the National Desks, which handle liaison with the European
Satellites and the USSR. The Economic Research Department maintains
records of black-market and world prices for.the wide range of goods and
commodities of concern to USIA. It also follows foreign currency trends,
provides information needed by USIA department and enterprises, and in
general is responsible for economic intelligence dealing with the non-Soviet
portion of Austria.
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The Central Commercial Bureau is located in a large building at
10 Stalinplatz in -the Soviet Sector of Vienna. It employs,some 200
Soviet nationals in the senior and Soviet secretarial positions, including
the CCB Director-General, his Deputy, and the Heads of the Departments and
Satellite desks as well as their Deputie-s. 6/ According to one source, no
passes are required to enter the CCB offices. In June 1952 the CCB
Director-General considered introducing passes, since "otherwise any spy
can come in," but at. least until October 1952 no change was made. J
Certain categories, such as officials of the Austrian Ministry of Trade,
Verej however, reportedly excluded from free access by order of the CCB
Director-General. 8/ In any case, it is probable, in terms of general
Soviet practice, that special sections exist into which unauthorized
persons may not enter. Document security controls undoubtedly are main-
tained. For example, USIA barter agreements with European Satellites are
considered to be highly secret and are kept in safes, which are not only
locked but sealed every night with a thin steel wire secured at the ends
with.a lead or iron seal. 9/ The Soviet mentality apparently puts as
much, if not more, reliance on seals as on safe locks.
The Director-General of the CCB is subordinate to the. USIA Deputy
Director-General for Commercial Matters, but the extent and nature of such
supervision are not known. The CCB chief has been a main figure in USIA affa 25X1C5 b
affairs. From 1946 to 1952 this post was held by an Austrian, Dr.
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"~utschnecker. who had spent several years in Moscow.
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These Administrations are, to some extent, separate entities, each
headed by a Director-General. T ey are subject to some functional super-
vision by the previously described branches of the CA, but they are
directly responsible to the Director-General of USIA. Each has an internal
structure somewhat similar to that of the CA with technical, commercial,
and personnel sections and a sales and purchasing office (Ein- and
Verkaufstellen). The buying and selling offices, except that of the
Automotive Administration (Avtodelo -- see below), are located outside the
Trattnerhof building. This physical decentralization was introduced in
order to facilitate contacts with customers by relieving them of the
necessity of complying with the very strict security regulations as to passes
and so on, in effect in most parts of the Trattnerhof building. 11/
* Some sources indicate that these are part of the CA, but for analytical
clarity they are listed and examined here separately.
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The Production Administrations that have been identified are listed
below.12/:
a. Metallurgy Coal (Marten -- Martin steel) supervises and serves
13 enterprises manufacturing profiles, cables, band steel and iron, pre-
cision steel pipes, mining equipment, industrial knives, magnets, files,
wires, sheet metal, fittings, aluminum wire, and alloy and nonferrous -
compounds. The address of buying and selling agency is Brucknerstrasse 2. 13/
b. Machine Construction (Podyomnik -- elevator, crane) includes 24
enterprises manufacturing bridges, cranes, winches, steam boilers and
installations, elevators, oil drilling equipment, locomotives, tank and
freight cars, turbines, paper machinery, watch-making machinery, lathes,
saws, washing machines, armatures, steel bottles, oil burners, and kitchen
equipment..
c. Automotive and Fine Mechanics (Avtodelo -- automotive industry)
includes 9 enterprises manufacturing motors, diesel trucks, buses, lighting
equipment, and hunting cartridges.
d. Electrical Equipment (Kabel -- cable) includes 12 enterprises con-
stricting rectifiers, motors, compressors, generators, high- and low-tension
equipment, transformers, light bulbs, precision instruments, and optical
instruments.
e. Construction (Tsement -- cement) includes 21 enterprises producing
window panes, pipes, rods, porcelain stoves, chimneys, tiles, bathtubs, and
stone crushers. The address of buying and selling agency is on the
Argentinienstrasso. 14/
The assignment of responsiblity to one Administration for output
of an assortment of such rather unrelated categories of products is par-
ticularly notable in this case.
f. Chemicals (Kraska -- paint) includes 20 enterprises manufacturing
paints, asphalt, printing inks, technical oils, liquid soap, acids, hydrogen,
acetylene, pencils, gelatin, pharmaceuticals, and miscellaneous chemicals.
g. Light Industry (Letex -- textile) includes 19 enterprises making
silk, cloth, cotton and cellulose cloth, napkins, towels, table cloths, bed
sheets, flannel, worsteds, woolens, socks and stockings, rayon, and all
types of leather goods. The address of hying and selling agency is on the
Favoritenstrasse. 15/
h. Food (Vkus -- taste) includes 15 enterprises producing molasses,
spirits, sugar, rum, fats, and peanut butter.
i. Agriculture and Forestry (Les -- forest) includes 7 enterprises
manufacturing paper, barrels, and a variety of other wood products. The
address of buying and selling agency is Gusshausstrasse 30. 161
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The above list of categories of enterprises totals only 140 and
therefore may not be complete, inasmuch as the number of USIA enterprises
has generally been estimated to from 300 to 350.* An American Embassy
listing as of September 1952 totalled 324, of which, however, only 223 were
in actual operation. In earlier years the total was even higher. For
example, the Austrian Minister of Finance in August 1952 informed the
Austrian Parliament of 471 USIA enterprise listings of which 351 were com-
mercial, 100 agricultural, and 20 mixed. 17/ According to a very recent
Vienna newspaper statement in Die Presse,* 20 December 1953, the USIA
enterprises now total scarcely more than 280, with 8 having shut down in
early December and some 20 more expected to close "in the near future." 18/
4.. Retail Stores.
A widespread chain of retail stores operating in the Soviet Zone'of
Austria is included in the USIA structure. It is supervised by the Main
Administration of Retail Stores (ORT), which is located on the Favoriten-
strasse. 19/ It is directly subordinate to the CA.
In the last few years, ORT expanded its retail chain rapidly. It
includes now a total of over 200 stores throughout the Soviet Zone of Austria
and the Soviet Sector of Vienna. A nucleus of three stores was created in
1948 in central Vienna. 20/ Unlike the Red Army commissaries, which were
set up to serve only occupation personnel, the ORT stores were organized
ostensibly to serve only members of the KPOe. Since these stores offered
scarce consumer goods (meat and other items, tobacco) liquor, shoes, textiles,
and certain luxury items), they were designed to make KPOe membership ad-
vantageous and to solidify the Party. At about the same time, USIA canteens
and commissaries were established adjacent to'USIA enterprises to serve all
USIA employees irrespective of KPOe membership.
The rapid expansion of the ORT chain reflected a change in basic
Soviet policy which occurred in 1.950. It appeared. no longer realistic to run
the ORT stores in order to hold out an incentive for joining the KPOe, since
consumer goods were no longer scarce enough for this purpose. The Soviet
administration had to face new crucial problems, the solution of which, in
its opinion, would be facilitated by operating a considerable number of
such stores.
One of the most pressing problems was the chronic schilling shortage
due largely to the fact that USIA plants were required to export a good deal
of their output to the Soviet Bloc. These exports either were not paid for
at all, or they were compensated with shipments to Austria of soft goods.
The USIA plants, however, had to buy most of their material for schillings
in the local markets, 21/ since only a small fraction-was procurable in the
* It is possible that a'few industrial categoriess.with additional enter-
prises, may exist apart from those listed above. If this is the case,
however, such enterprises would probably be neither numerous nor important.
** An "independent" newspaper, with circulation of 40,000.
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Soviet Bloc. The Austrian workers, likewise, had to be paid in schillings.
The schilling shortage cause by these facts was aggravated by poor and
costly management in some USIA plants which even resulted in some failures.
Because Moscow apparently' was unwilling to resblve the problem by
means of subsidies, expansion of the ORT retail chain was considered the
desirable solution. The guiding mgtive for this decision was the con-
sideration that many retail stores operating with relatively low prices and
a large turnover would help to get more Schillings for USIA operations and,
in addition, help to dispose of the large influx of soft goods received for
exports to the Soviet Bloc. The wish to weaken non-Soviet Austrian
industry and commerce and to increase Soviet economic penetration probably
was also involved.
Although exact and complete identification of all USIA stores is very
difficult, if not impossible, the chain probably comprised over 200 by
1952. They exist ostensibly only in the Soviet Zone, but occasionally the
creation and operation of some elsewhere has been rumored. 22/ The con-
tinued operation of stores outside the Soviet Zone, however, would be very
difficult, since ORT stores have followed such practices as operating with-
out a license, selling illegally imported goods or monopoly items on which
taxes have not been paid, and defaulting on other taxes. 23/ The Austrian
government generally has been unable to take effective action against such
practices in the Soviet Zone.
The USIA stores generally operate in requisitioned or leased quarters.
A few are in property purchased by the USIA-CA. There are no "USIA" signs
on the store fronts, but they can be identified by the posted price lists,
which show lower prices for many items. 24/
As to the management of the stores, basic policy decisions regarding
their over-all functioning probably originate in Moscow. More detailed
policy is made by ORT and by the CCB, which probably handles procurement for
the stores. Managers are appointed by the CA, and presumably in most cases
are KPOe members, in accordance with Soviet practice. Although most members
are Austrians, some reportedly have been brought in from Czechoslovakia,
`Poland, and Hungary. 25/ The other store employees are recruited mainly by
the store managers from KPOe ranks, although some are undoubtedly planted by
'USIA-CA to attempt to preclude a recurrence of thefts of goods and embezzel-
ment of funds, of which there have been a number of reported instances.
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III. USIA Subordination to Moscow and Relationships with Other Soviet
Authorities in Austria.
1. Control by GUSIMZ.
USIA is directly subordinate to GUSIMZ (Glavnoe Upravleniye Sovetskogo
Imushchestva Zagranitsey pri Soyete Ministrov SSSR -- Main. Administration
of Soviet Property Abroad attached to the Council of Ministers USSR) as a
geographical subdivision of that Moscow organization. Organized in late
1945 or early 1946 as an adjunct of the Soviet Ministry of Foreign Trade,
GUSIMZ soon became a Special Main Administration and enjoyed a virtual
ministerial status because it was attached directly to the USSR Council
of Ministers. 26/ As its title indicates, it was set up to supervise Soviet
property and factories in foreign countries. In its early years GUSIMZ
was organized primarily on a functional basis with subidivisions to handle
specific commodities and industries irrespective of geographical location.
In early 1949, five Branch Administrations were created in Germany, Austria,
Hungary, Bulgaria, and Finland.
Although very little is known concerning the precise nature and
degree of GUSIMZ supervision of USIA, there are indications that such control
has been exercised closely and frequently. Policy directives from GUSIMZ
reportedly are sent regularly to USIA, probably via the Soviet Embassy in
Vienna.
Senior officials from GUSIMZ visit USIA from time to time. Thus, in
1951, Nikanorov, "of considerable importance" in GUSIMZ, visited Vienna for
several weeks. 27/ At the end of the same year an unidentified Moscow envoy
came to Vienna for about 6 months to investigate the entire USIA
organization. 28/ Furthermore, it has been reported that annual or semi-
annual inspections have been made by Moscow officials and that senior
USIA officials have been constantly recalled to Moscow for consultation and
briefing. 29/
This supervision extends even to relatively routin6 matters, az
evidenced by the report that occasional telegrams are.exchanged
between USIA and GUSIMZ by way of the normal postal channels concerning current N,
commercial transactions. 30/ The relationship may involve a considerable
centralization of policy in Moscow. USIA offi-cials, however, apparently do
function with some delegated authority. For example, trade-barter agree-
ments negotiated by the CCB chiefs with Satellite attaches allegedly are
not sent to Moscow for approval. 31/
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2. Control by Other Moscow Agencies.
Moscow supervision over USIA, however, pr.okably is not limited to
GUSIMZ. Presumably the production plans of USIA enterprises have been
reviewed in general terms by Gosplan and by top Communist Party organs. It
is also likely that USIA Production Administrations have received "assign-
ments" from Soviet Production Ministries, as has been the case in East
Germany (contacts, for example, between the former USSR Ministry of
Electrical Industry and SAG.* Kabel of USIG). 32/ Moreover, trading organ-
izations of the USSR, such as Techno-Export, may have communicated directly
with USIA .Production Adminstrations, in the same manner as they reportedly
did with SAG groups operating under USIG in East Germany. 33/
3. Relationships with Other Soviet Authorities Abroad.
a. Soviet Military Authorities in Vienna.
Official Liaison between USIA and the Soviet military' authorities
in Vienna has been carried on by the chief commercial representative of
the CA of USIA and the chief of the Economics Division of the Soviet Element
of the Allied Control Authority. 34/ Up to the autumn of 1952 the former
was actually the Deputy Director-General of USIA. Vornnov, who held this
position at that time, went to the USSR and may not have returned. His role
may have been taken over by a successor Deputy Director-General or by Lesnov,
Deputy for Commercial Matters. The representative of the Soviet Element, at
least until early 1953, was Colonel A.A. Nevzorov, Chief of the Economic
Division, 35/ located in the Imperial Hotel, Although outward relations
have been strictly correct, the military authorities allegedly have shown
a certain contempt for their "commercial" colleagues in USIA. 36/ Apart
from the official contacts, unofficial liaison has been maintained con-
tinuously by senior USIA officials and their military colleagues. Pre-
sumably this would include such officials as the Chief of the Coal, Oil,
and Electrical Section (Miroshin), the Chief of the Agriculture and Forestry
Branch (Mikhailov), and others. 37/
The Commercial Department of the Soviet Element in the Imperial
Hotel (Kaertnerring 8-10) issues transport permits and stamps all bills of
lading for exports from USIA enterprises whether they go to the East or to
the West. The bill of lading (Frachtbrief.) is made out by the Soviet
Transport and Dispatching Office. Shipments with such documentation are not
controlled by Austrian customs at the borders of the Soviet Zone but are
merely registered. 38/
* SAG (Staatliche or Sowjetische Aktiengesellschaft -- state-owned or Soviet-
owned company); USIG (Upravleniye Sovetskogo Imushchestva v Germano --
Administration of Soviet Property in Germany).
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Reportedly there has been no permanent liaison between USIA and
the Soviet political authorities in Vienna. The latter, however, have
exercised some supervision in local political matters, strikes and other
demonstrations, propaganda lines, and the like. 39/ In the broader sense,
high policy matters probably may often be checked with the Soviet High
Commissioner, who in early 1953 took over part of the functions previously
carried on by the Commander of the Soviet Occupation Forces: 40/
c. Satellite Trade Delegations in Vienna.
Purchase orders initiated by the Satellite trade delegations in
Vienna are usually transmitted to the CCB by letter or personal visit. In
the latter case the Satellite delegation often does not see the-CCB
Director-General but rather the Chief of the appropriate national desk.
However, if the CCB is taking the initiative and wishes to offer commodities
to the Satellite missions, the CCB Director-General usually sends a letter,
stating prices, delivery dates, and other offered terms.
If a purchase order originates with a Soviet trust or trade
organization in the USSR, it goes by telegram or letter to the Soviet Trade
Delegation in Vienna (located on. the Wohllebengasse). The latter, in turn,
communicates with the CCB by letter or by personal' visit. The relation-
ship reportedly is one of liaison rather than control in that the Trade Delega-
tion does not issue orders to USIA. or demand preferential treatment. 41/
d. Intrac.
Intrac, a trade agency controlled by the KPOe, has competed to a
certain extent with the CCB. Serving the primary purpose of providing funds
for the KPOe (thereby, of course, assisting Soviet penetration), Intrac
reportedly has actually become a serious rival of CCB vis-a-vis some of the
latter's trade relations with the Satellites and with the West. 42/
This curious, and yet characteristic, Soviet practice of develop-
ing several rival organizations which compete with and check up on each
other reportedly has produced considerable friction. For example, Andreyev,
the Deputy Director-General of the CCB (at least until late 1952) was
always particularly opposed to Intrac, as was his predecessor, Ossipov. 1?3/
One of the alleged reasons for USIA reluctance to collaborate
closely with Intrac is that USIA can earn more by dealing, when possible,
with small Austrian "bourgeois" firms, as well as with USIA enterprises.
Another reason is that such collaboration would permit Intrac (and the KPOe)
to spy on USIA activities. 44/ While the latter factor might conceivably have
security aspects, the bureaucratic motivation appears predominant.
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Intrac, on the other hand,, has been said to possess certain
advantages for negotiating deals, such as being more flexible than the
"cumbersome" USIA. It is also said to have more energetic officials. This
contention, however, is countered indirectly by the USIA argument, supported
after inspection by a special commission from Moscow in early 1952, that
Intrac was unreliable as to fulfillment of obligations. Another alleged
advantage of Intrac is that it is not hampered by the necessity of marketing
or bartering USIA products and that it is thus able frequently to bargain for
goods of better quality and better delivery terms in return for any kind of
Austrian goods, non-USIA as well as USIA. 45/ The'final point seems to be
the most convincing, although the extent of its applicability cannot be
judged.
In recent years the rivalry between the two agencies culminated
several times in complaints which reached Moscow. No clear-cut decision
apparently was handed down basically favoring one group or the other, nor
was such to be expected in view of Soviet practice.
In one' respect, however, Intrac seems to have a more important
role -- namely, as a procurement agent for the Satellites in many
instances. 46/ For example, it came reportedly to handle virtually all of
the delivery, by way of USIA, of nonferrous metals from, or by way of'.
Austria to the East. 47/
Both Intrac and USIA, of course, ultimately serve Soviet objec-
tives and have not operated entirely apart from each other. Thus USIA has
been required by Moscow to aid Intrac in its procurement role by providing
the necessary export licenses. Reportedly the procedure is that Intrac
first procures the materials and then resells to USIA, which ships them to
the East. Formerly USIA charged Intrac a commission of 10 percent, which
Moscow later reduced to .5 percent. 48/ Sometimes, however, USIA apparently
handles procurement matters directly.
In any event, the various indications of sharp rivalry between
the two organizations and distinct coolness of USIA officials toward their
counterparts in Intrac are significant., Such an atmosphere has somewhat
contradictory consequences. It may facilitate internal Soviet control,
but, on the other hand, it probably has led to inefficiency and waste.
Moreover, this rivalry could provide an entering wedge for penetration
from the non-Soviet outside.
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e. USIG in East Germany.*
Senior USIA officials frequently have stated according to report,
that East Germany "is our most important trading partner." 49/ This,
however, has been accompanied by expressions of disappointment at the rela-
tively small volume of interchange between USIA and East Germany in recent
years. Until 1947, USIA entered into direct agreements with USIG, its
sister organization in East Germany, but after 1947 such agreements have
been concluded within the framework of global -- that is, all-inclusive --
agreements between USIA and East Germany. In a formal sense, the East
German foreign trade authorities can issue or withhold the necessary import a
and export licenses, but in practice this very seldom happens with reference
to USIA-USIG trade, especially if pressure is exerted by USIG. 50/
The global ageeement concluded, after protracted and difficult
negotiations in March and April 1952, allegedly totalled 5 to 6 million
dollars (at the rate of 21.36 shillings per dollar), and was augmented by
an.Intrac-East Germany agreement for 1952 amounting to 18 million dollars.
Shipments from Austria, in both agreements, were to be predominantly metals
and other "hard" goods, with first priority assigned to steel rope for
Wismut A.G., the uranium mining organization in East Germany. 51/ Before
1952, USIA had entered into direct agreements with Wismut. Under the 1951
accord, USIA delivered millions of meters of insulated wire, bell wire,
special acid-resisting wire, special cables, small locomotives (secondhand),
special electric motors, several hundred tons pf nails, barracks, stoves,
and other items. 52/ These were paid for largely in cash. Prominent in
these transactions was an Austrian trader, Haselgruber, who procured for USIA
and dealt directly with an important Soviet Wismut official, Salimanov, who
subsequently defected. Since 1951, however, USIA reportedly has ceased
dealing with Haselgruber.**
* Although this report excludes analysis of the nature and statistics of
trade between USIA and the Satellites, a few general indications of USIA re-
lationships with East Germany seem pertinent.
** In the earlier period, when the CCB of USIA acted as a central buying
agency, it relied mainly on a few well-tried suppliers. Among the prominent
were the following: Handelshaus Haselgruber, Vienna; the Weinbaum Consortium,
Frankfurt-am-Main; Metalimport Trust of Zurich and Paris; Theodor Petrina,
an engineer; Egon Foeldi, who delivered copper and lead; and Frigaliment
Import G.m.b.H., St. Gallen, Switzerland. 53/
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IV. Interrelationships of CCB, Production Administrations, and Enterprises.*
The CCB, as previously indicated, exercises considerable control over
the purchasing and marketing operations of the production Administrations.
Initially, the CCB acted as a central buying agency for all of the Production
Administrations and their subordinate enterprises. Although the relation-
ship between the CCB and the sales and purchasing offices of the various
Production Administrations has not been entirely clear, the latter probably
have been required to carry on their operations within the framework of
instructions issued by the CCB. The Commercial Department of each Production
Administration apparently has had the job of adapting general CCB commercial
policies to the requirements and problems of the particular Adminstration in-
which it is located.
In practice, however, it appears that some USIA enterprises have handled
negotiations with the Soviet Bloc and with Western customers independently ofd
the CCB.. In the spring of 1952, for example, Western clearing deals arranged
independently by USIA enterprises reportedly were closely examined by senior of-
ficials of USIA, and it was determined that all USIA enterprises exporting to
the West should inform the CCB of the proposed arrangements. Even later, how-
ever, in practice some USIA concerns allegedly disregarded such procedures. 54/
The pattern of supervision of USIA enterprises is not uniform. Some
enterprises, such as the Wiener Lokomotivfabrik A.G., are managed exclusively
by Soviet officials, either Army official or civilian specialists. Other
plants, like the St. Poeltner Glanzstoffabrik, the Voith Turbinenfabrik, and
the Brunner Glasfabrik, are managed by Austrians. Much of their production is
allocated to the Austrian economy, but they operate under considerable Soviet
control in such matters as organization and marketing. Some USIA plants,
such as the Wiener Brueckenbau A.G., the Berndorfer Metallwarenfabrik, and a
few others operate with hardly any Soviet control at the plant level. Another
category of enterprises exists in which the main office and some plants of
the enterprise are in the Western Zones, with only one plant in the Soviet
Zone. 55/
Estimates concerning the percentage of Austria's industrial capacity
represented by USIA enterprises vary considerably. Early estimates ranged
as high as 30 percent for the Vienna metropolitan area and from 7 to 10 per-
cent for all Austria. The percentage, however, has been reduced since 19+5
as a result of expansion of Austria's industrial plants it the non-Soviet sec-
tors. These percentage estimates of total capacity, however, are misleading,
since USIA has had a monopoly or near monopoly in important fields of produc-
tion, such as petroleum, sulfuric acid, electric locomotives, flat glass, light
* This section does not attempt to present a detailed functional analysis
but is intended merely as a brief supplement to the previous organizational
analysis.
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bulbs, and rayon filament yarn. Furthermore, it also has controlled an
important share of the output of such products as turbines, railroad equip-
ment, heavy electrical equipment, paints, and soap. 56/
According to a very recent estimate made in December 1953, although some
of the larger USIA firms are still yielding a profit, USIA as a whole has
an annual deficit of from 180 million to 240 million schillings, or from
33 to 44 percent of the value of its total output. This estimate, however,
does not include the virtually autonomous SMV,whose total output of oil
(over 3 million tons annually) allegedly has practically balanced out* the
deficits. 58/ It is evident, nevertheless, that a considerable number of
USIA enterprises are in serious financial difficulties and have undergone
reorganizations. 59/ There have been many rumors and reports of, actual or
projected return of unprofitable enterprises to Austrian ownership, 60/ but
there is little' concrete and significant information on this matter.
* Even SMV, however, in spite of its sizable material contributions, has
reportedly suffered heavy financial losses in some of its test-drilling and
expansion projects. 57/
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Deputy Director-General of USIA
Deputy for Commercial Matters of USIA
Director-General of CCB
Deputy Director-General of CCB
Head of Transport Department in CCB
Specialist on Rumania in CCB
Specialist on Soviet Orders from USIA
Austrian Specialist on East Germany
in CCB
Chief Accountant of CCB
Chief Austrian Official of Market
Research Bureau in CCB
Head of Austrian Personnel Department
in CCB
Austrian Director of ORT
Soviet Commercial Director of
Metallurgy Administration
Austrian Director of Automotive
Administration
Austrian Director of Chemicals
Administration
Director-General of Agriculture and
Forestry Administration
K'rivoschein., Vladimir (formerly
a Deputy Director-General of USIG in
East Germany); October 1952*
Voronov, Konstantin G.; September 1952
Lesnov (fnu**); September 1952
Daderkin (Dederkin),, Alexander $.;
August 1952
Andreyev (Avdeyev)., Sergei P.;
September 1952
Georgievsky (fnu); September 1952
Yudanov (fnu); February 1951
Demidov (fnu); August 1952
Vanek,, Karl; September 1952
Sadovnikov (fnu); September 1952
Kogl (fnu); August 1952
Falusin (fnu); September 1952
Landerl (fnu); August 1952
Lipuchis (fnu); September 1952
Tobias (fnu); August 1952
Zerner (fnu); August 1952
Akadayev (fnu); September 1952
* The dates given in Appendix A refer to the latest date on which the
individual was known to hold the office indicated.
** "Fnu" indicates that the full name of the individual is unknown.
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IMPORTANT USIA ENTERPRISES SUPPLYING THE SOVIET BLOC*61/
J.M. Voith
Weiner Kabel and Metallwerke
Ariadne Draht and Kabelwerke
Egydier Stahl and Industrie Werke A.G.
Ybbsstahlwerke der Gebrueder Bohler and Co.
(the last two are of particular importance as suppliers of steel rope to
Wismut A.G.)
Mannesman-Trauzl A.G. (boring equipment for Rumania)
Wiener Bruckenbau - Eisenkonstruktions A.G. (cranes., etc., for Poland)
Oesterreichische Automobilfabrik A.G. (lorries for Bulgaria)
Raxwerke G.m.b.H. (freight cars and tank cars for the East)
Goertz Werke (precision instruments for the USSR)
Osram Werke (lamps, etc., for Poland)
Aeg-Union Elektrizitaetsgesellschaft
Siemens-Schuckertwerke A.G.
Wagner-Buro
Hiag-Werke
Donau Chemie A.G.
As of August 1952 and not necessarily complete.
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METHODOLOGY
25X1 X4ed
This report represents a correlation and analysis of field reports
Supplementary use was made of despatches from
the American Embassy in Vienna, and from USFA (US Forces in Austria) in-
telligence summaries. None of these field reports attempted to portray
and examine the USIA structure and operations in an organized and
methodical fashion; The composite picture was therefore developed from
many bits of information.
Similarly', no organizational chart was found in the available reports.
The chart presented here was prepared by correlation of the above field
reports, by analysis,, by deduction., and., to a certain extent., by analogy
with USIG in East Germany.
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GAPS IN INTELLIGENCE
A primary gap in intelligence on USIA is the lack of recent information
concerning organizational structure and key personnel. In general, intel-,
ligence on these matters carries up only to the autumn of 1952. The few
scattered reports received recently deal primarily with the financial
problems of some individual USIA enterprises. The recent evolution of Soviet_
organizations in the Satellites, especially USIG in East Germany, suggests
that widespread changes likewise may have occurred in Austria. Such a
conclusion might also be inferred from developments in Austria in recent
months at the top military and political control level. A few reports in
recent months have referred to rumors of reorganization of USIA "in the
near future," but no specific information has been obtained.
There is an important gap even in the pre-autumn 1952 intelligence.
This deficiency relates to the nature and methods of control over USIA
exercised by the Office of the Soviet High Commissioner and the other top
political and military authorities in Vienna and by GUSIMZ and other Soviet
agencies in Moscow. Very limited information was secured concerning this
subject.
Somewhat more information has been correlated with reference to the
internal structure and interrelationships of the subdivisions of USIA. Even
here, however, he covera:e is far from complete. A major area marked by
considerable uncertainty is the extent to which the Central Commercial
Bureau (CCB) actually controls the Production Administrations and individual
enterprises with regard to their contacts and negotiations with the West and
the Satellites. It is also not clear to what extent the Production
Administrations actually supervise the enterprises, especially the more
important ones. Another significant question is whether enterprises carry
on transactions without consulting USIA headquarters.
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Evaluations, following the classification entry and designated "Eval.,"
have the following significance.
A - Completely reliable
B - Usually reliable
C - Fairly reliable
D - Not usually reliable
E - Not reliable
F - Cannot be judged
Doc. - Documentary
1 -Confirmed by other sources
2 - Probably true
3 -
Possible true
4 -
Doubtful
5 -
Probably false
6 - Cannot be judged
"Documentary" refers to original documents of foreign governments
and organization; copies or translations of such documents by a staff
officer; or information extracted from such documents by a staff officer,
all of which will carry the field evaluation "Documentary" instead of a
numerical grade.
Evaluations not otherwise designated are those appearing on the cited
document; those designated "RR" are by the author of this report. No "RR"
evaluation is given when the author agrees with the evaluation on the cited
document.
25X1 A2g
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Cop NO.
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AD /RR 8 April 54
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