ACTIVITIES OF UBIA

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP83-00415R013400020007-3
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 46
• Document Creation Date: December 22, 2016
• Document Release Date: August 31, 2012
• Sequence Number: 7
• Publication Date: November 17, 1952
• Content Type: REPORT

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A. STATUS
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I1ubordination to MOSCOW
elations with U,S.I.G. I 3
elations with the Soviet Military
Authorities in VIENNA 4
Relations with the Soviet Political
Authorities in VIIiNNA ' 5
Means of Communication with 'the Satellite
1
Coun.ries:
a) the D.D.R.
b) CSR and Hungary
Relations with the KPOE
Liaison
1 Free-ing of KPOE Imports
New KPOE Printing Press
KPOE Cell in the CCB
The "Konjunktur Bureau"
1
1
1
?
6
7
8
9
10
11
12
13
B. INTRA
r
Its Functions, Personalities, etc. 14
Relations between U.S,I,A. e:nd II;TRAC 17
,
Activities of UTRAO 1
Eastern Procurement Agent' 22
Aluminium Deliveries to CSR 24
Trade with East generally 27
,
Trade with the D.L.R. 29
Trade with other Satellites 31
C. U.S.I.A./EAST BLOC TRADE
1
The Present Main Function of the CCB 36
The Former Procurement Func-hon 38
, ,
Reasons for the Change of Function
1 Efficacy of Westrn ContrOls 42
Reorganisation of the CCB ' 43
O.S.I.A./Satellite Barter Agreements 44
Secrecy of the Agreements 45
Method of Negotiation. 46
50
Execution of the Agreements
Ut
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CONTENTS l(contd.)
Disposal of Barter Goods
on the Austrian Market
.CTS.I.A. Exports and Austrian Trade
Returns
Relations wi:th Satellite Trad
1Zepresentatives
The D.D.R.
Priority Treatment
The Present Agreement
?WISTAUTH A.G.
Poland
Hungary
Czechoslovakia
Roumania
Bulgaria
U.S.S.R.
D. U.S.I.A./WEST TRADE
Restrictions to Western
Trade
Paragraph
51
52
53
56
57
63
69
70
72
73
74
76
79
81
E. PROCUREMENT OF RAW MATERIALS
[
1
The Principle of Refusal to Buy for
the East 90
1
Exceptions to the Principle
'4'USCENEWTRANS 93
1
I:C?TRAC 94
Pr' curement for the U.S.I.A. dpneerns 95
he Procurement Agencies 97
.he OA Departments 98
The COB 102
1
rormer COB Suppliers 104
The U.S.I.A. Concerns 105
Priority Considerations in the,
Procurement of Raw Materials, 107
Coverage of Raw Material Requirements 108
Tdead 110-
1
.0opper 112
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(iii)
CONTENTS (contd.)
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G. THE RETAIL STORES
Disposal Agency of U.S.I.A.'s
Barter Goods 131
The Ccntral Direction of the tores 13
Free Import of Foodstuffs 133
The "KUS" Stores 134 .
Difficulty in Disposing of Cetain
Goods 136
H. THE U.S.I.A. CONCERNS
The Political Aspect 1 137
Future Soviet Policy towards U.S.I.A. 140
The Most Important U.S.I.A. 06ncerns 144
The DDSG and SMV 14
Administration of the Concerni 146
? ? " 1 i
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AUSTRIA
Econo7lic
USIA
A. STATUS
Subordination to MOSCOW
1. U.S,I.A. is an independent commrcial organisation
directly responsible to the "Central Administration of Soviet
Property Abroad" in MOSCOW. Only in matters of local and
minor importance is it in any wry subordnate to the Soviet
Military and Political Authorities in Austria.
2. The'ASCOW "Central Administration" exercises its
authority over U.S.I.A. by the following means:-
1 I
'a) Policy directives are sent regularly to
,
probably via the U.S.S.R. EimbassY in VItNNA. I
b) 'Senior officials from MCSCOCi also visit VIENNA
. LI
,from time to time. Thus, in-1951, a certain
I 1
ll'IKANOROW (fnu), who appeared to be a man of
,considerable importance in ithe "Central Admini-
I
stration", visited VIEKNA or several weeks.
He was followed at the end of 1951 by another
MOSCOW envoy (name unknown) who spent close on
'
six months investigating the entire U.S.I.A. se
up on the spot.
I I
c) Senior U.S.I.A. officials are constantly being
I ,
recalled to MOSCOW .for consultation and briefing.
Once or twice a year stric and efficient controis
'1 II
I 1
of U.S.I.A.'s activities are carried out by
Special inspectors from MOJCOW. il -
Occasional telegrams "en clair" are exchangedil
between the "Cehr41 4dministration". and U.S.T,A,,
, ? ? 1 ,
,
I 1 II'4
via the nrmal .postal channels, concerning current
ommertf4htrari'sic-4o . .1
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S I AU' 14
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Relations with U.I.G.
3. U.S.I.A. has no direct relations to-day with U.S.I.G.,
its sister organisation in the D.D.R., which is also directly
subordinate to the MOSCOW "Central Administration". Until
1947 it entered into direct barter agreements with U.S.I.G.
Since 1947 these agreements have been concluded within the
fraziework of global barter agreements between U.S.I.A. and
the D.D.R., under which the D.D.R. Foreign Trade Authorities
have the sole right to issue, or withhold, the necessary import
and export licences. In practice licences are very seldom
withheld in respect of U.S.I.A./U.S.I.G. trade, and always
granted in the end if U.:3.1.G. exercises the necessary preSsure.
Relations with the Soviet Military Authorities in VIENNA
4. The Soviet Military AuthoritieS in VIENNA have a
certain contempt for their "commercial" colleagues in U.S.I .A.
However, outward relations are strictly correct. Official
I ?
liaison is maintained via the heads of the Economic Department
in the Hotel Imperial, VITTNA, and of the Commercial Depai4-
ment of U.S.I.A.'s Central Administration (CA) in the Trattnerhof.
At present the latter is Konstantin G. (7)R.ONOW, who is however
on leave in the U.S.S.R., and who may not return to Austria.
There is also continuous unofficial liaison between the senior
U.S.I.A. officials and their military cblleagues of the Soviet
High Commission.
Relations with the Soviet Political AutSorities in VIENNA
5 . There is no permanent liaison oetween U.S.I.A. ana
the Soviet Political Authorities in VNNA. However, the
latter have a certain authority over U.S.I.A. in local political
matters, and will issue directives to the Director-General of
U.S.I.A., KRIDOSCHEIN (nu), concerning such matters as local
strikes, demonstrations, propaganda lines, etc. These
instructions are handed on immediately to the Cultural Depart-
ment of U.S.I.A., which moved recently from the Trattnerhof to
Gusshausstrasse 30, and which deals with all propaganda matters. c.1;
The/
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The senior Austrian official of this Cultural Department is
STUCKLER (fnu), the former official liaison officer between
U.S.I.A. land the KPOE.
Means of Communication with the Satellite Countries
6. The D.D.R. Until recently comunications between
U.S.I.A. and the D.D.R. (including U.S.IG.) were effected
by the normal post. This meant that all communications were
subjected to the VIENNA censorship. It also resulted in at
?
least one in every five letters going astray. The suggestion
that communications should be maintained via MOSCOW was ener-
getically turned down by the Soviet DireCtor-General of U.S.i.A.
on the grounds that an even greater percentage of the communi-
cations would go astray in KOSCOW, where bureaucratic officials,
not understanding the nature of them, woUld consider it their
duty to hold them back. Of the two evils the normal postal
service was considered the leas. Attempts were then made to
enlist the co-operation of the Czechs wi-k a view to using tne
Czech diplomatic bag from BERLIY via PRAG-UE to VIENNA. 7tiow
ever, the Czechs refused to co-operate. 2inally U.S.I.A.
managed to obtain the assistance of the Soviet Military Autho-
rities in VIENNA and, for the past six JIOnths, there has been
a. regular weekly military courier service between VIENNA and
the D.D.R. available to U.S.I.A.
7. C.S.R. and Hungary. The U.S.I.A. Central Commercial
Bureau (COB) has had a teleprinter service with PRAGUE and
BUDAPEST for the past year. Attempts to establish similar
services with BERLIN and BUCHAREST have to date failed. Con-
siderable difficulty was experienced in establishing the
BUDAPEST service as U.S.I.A.'s rival INTRAC (see below) tried
to prevent U.S.I.A. from obtaining the BUDAPEST numbers, with
a view to ensuring that all communications between U.S.I.A.
and BUDAPEST were effected via INTRAC. Finally U.S.I.A. was
obliged to send its own envoy to BUDAPEST to obtain the numbers
on the spot. Relatio7s/
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Relations with the KPOE
8. Relations between U.S.I.A. and the KPO2 are anthing
but good. The senior Soviet U.S.I.A. officials have the
utmost contempt for the local KPOE officials, and do their
utmost to disaseociate themselves frOm them. They resent
the latters' attempts to give them advice (on such matters
as the choice of Austrian personnel for U.S.I.A., proparranda,
etc), and are particularly averse to their obtaining any
insight into their activities.
Liaison
9. Liaison between U.S.I.A. and the KPOE is maintained
by a special KPOE official who has his office in the Trattnerhof.
Until 1st July, 1952, this post was filledby STUCKLER (fnu),
the new Austrian director of the Cultural Department. It is
to-day held by VAIDA (fnu).
Freeing
10.
official
of
In
is
KPOE Imports
practice the main task of this KPOE liaison
to obtain, via U.S.I.A., the free import of all
goods ordered from abroad by the KPOE and/or GLOBUS. U.S.I.A.
automatically "frees" such imports, its Director-General signing
the necessary authority as a matter of course. The KPO and
GLOEUS import in this way mainly printing presses, films, etc.
,
from the D.D.R. At one time the KPOE imported a number of
cars, but this has now stopped. U.S.I.A. charged a commission
for "freeing" the cars, but otherwise does not charge commissions
on KPOE and GLOBUS imports. These iraports are, incidentally,
kept strictly secret.
New KPOE Printing Press
11. The imported printing presses are required for a new
[
KPOE printing press at BADEN near VITA, which is being equipped
with the most modern machinery. The Soviet Militaey Authorities
are interested in this printing press and there is already a
certain conflict between them and the KPOE concerning its use.
KP E/
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KPOE Cell in the COB
12. There is a KPOE cell in the Central Commercial
Bureau of U.S.I.A., to which about 22 out of the total 81
Austrian employees belong. (In practice U.S.I.A. does not
insist upon employing exclusively ComMunists). Head of 'the
CCB KPOE cell is a Dr. LOEWY (Thu) from the "Konjunktur-Bureau"
(Market Research Bureau). ?the/ active members of the Cell
include:
Franz JAKL, the "HausVerwalter" (Administrator Of the
Building)
Friedrich IISCER, Assistant to the Austrian Commercial
Director.
The Konjunktur-Bureau
13. . The "Konjunktur-I;ureau" (Market Research Bureau), to
which Dr. LOEWY, head of the CCB KPOE cell, belongs, is a
centre of Soviet economic espionage against Western Austria.
The Bureau is completely isolated frOm the rest of the COB.
,
It has a picked staff of economic exPfei-ts, Chosen for (inter
alia) their excellent contacts with West Austrian industry.
Its staff includes:-
Dr. LOEWY
FIALKA (Thu), who worked for 10-15 years with SCHOELLE-
BAYER, a former Nazi BLECIIKMANN
FALLENBUCHL
Fri. POLLAK, secretary.
The Bureau gathers the most detailed and accurate information
on Austrian economy, including detailed reports on the various
branches of Austrian industry; on the situations prevailing in
West Austrian factaries, etc., the orders on which they are
working, their raw material and other problems, labour con-
ditions, etc.; on American economic policy in Austria, the
effects of it, the official Austrian reaction to it, etc., etc.
At least once a month the Bureau brings out its own report,
based on the information collected. ? This report is some 50-60
pages long, and is now produced Only in Russian, althou,gh
earlier there used to be a German translation. The reports
have a distribution of approximately 40 copies, of which several
go to MOSCOW. The only persons in.th.e CCB who are on the
distribution/
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-distribution list are the Director-General, his Deputy, and
the Head Accountant (a Russian named SPAK). Formerly the
Austrian Commercial Director, Dr. Alfred HUTSCHNECKER, used
to receive a copy, but this is no longer allowed.
B. INTRAC
The most interesting aspect of U.S.I,A./KPOE
relations is the connection between U.S.I.A. and INTRAC,
1
Its Function, Personalities, etc.
14. INTRAC, which belongs to,1 and is controlled by, the
KPOE, exists solely to earn funds for the KPOE by meahs of its
trading activities. All INTRAC profits are paid over to the
KPOE. Every day the monies at the firm's disposal (except
for a small sum to cover working expenses) are taken lby car
to an unknown destination where they are made available to
the KPOE. (U.S.I.A. itself never makes payments to the K202).
15.
The most important personalities behind INTRAC are:-
a) Paul KESSLER who, although officially only Chief
of Personnel, is the real "aminence grise". Ie
is a convinced Communist.
b) Stephan KAUANN, the Vice-President of OEBEG.
c) Jenb DESSER.
The others, including FUERST, are of little importance.
Recently FUERST has been participating in conferences between
INTRC and U.S.I.A., a fact wich led to the Soviet DiFector-
General enquiring into the identity, of 'the stranger". No
INTRAC official enjoys the confidence of the Soviet U..1.A.
officials.
16. INTRAC employs permanent representatives in various
West European countries. These include STERN of the AIGLO-
AUSTRIAN TRADIG CO. in LONDON, andiErich BIRNBACH and Kurt
BETTELHEIM of the HOBRO set-up in ZURICH and the MERCANTA set-
up in BRUSSELS.
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Relations between between U.3.I.A. and 1-7TRAC
17. The relations between and INTRAC have always
been rxtremely bad, and therc, have bee'n incessant fightslbetween
them. Added to the existing Entipaty of the U.S.I.A. Sav,iet
personnel -owards the KPOE is the fact that in many rests
IITTRAC is a serious business rival to The Deputy
Director-General of the U.S.I.A. COE, Sergei Petrovitch
AWDEjEW, who is at present on leave in MOSCOW, has always been
particularly opposed to INTRAC, :iWD.TEW inherited his dislike
of INTRAC from his predecessor, Sergei PETROVITCH OSSI1DOW.
The more important reasons why U.S.I.A. is opposed to close
collaboration with MTRAC are:-
a) can earn more i it works together With
small Austrian "bourgeois" firms;
b) close collaboration withIINTRC would mean the
latter (and therefore th ::POE) obtaining insight
into
The only
the fact
posal of
Satellite customers, on the Austrian home market.
interest which tho Soviets have in collaboration is
that I:TRAC is semetimes ablL to assist in the dis-
the goods, which U.S,I.. reCeives as barter from its
18. Relations between the two wei-e so bad that at the end
of 1951 INTRAC appealed to the General Secretariat of the KPOE
for assistance in improving the situ4tion. The General
Secretariat thereupon sent a strong p'rotest to-MOSCOW, painting
out that U.S.I.A. used other ff_i'zis, giving INTRAC little' or no
business, and that as a result =RAC earned too little, the
KPOE suffering from a corresponding lack of funds.
19. MOSCOW replied by sending a special commission to
VIENNA to investigate the situation On the spot. This investi-
gation resulted in a victory for the Soviet U.S.I.A. officials,
who were able to defend their attitude by proving that INTRAC
was unreliable, did not fulfil its oli;:,atios, was incompetent,
etc.
Despite/ 10
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20. Despite the outcome of this investigation the fight
continued until finally Paul KESSLER persuaded the General
Secretariat of the KPOE to send another protest to MOSCOW.
This was successfUl, and ;OSCOW has now issued instructions
that U.S.I.A, must give INTRAC preferential treatment. Those
instructions, which reached VIENNA about March, 1952, were so
forcefully worded that the Soviet U.S.I.A. officials have
been obliged to act on them. But they do so with great
reluctance, still regarding INTRAC as a rival, and also with
the old suspicion and mistrust.
21. The Soviet officials believe that II4TRLC
will not retain this preferential position vis-?is
for long. INTRAC is making the mistake of trying to exploit
it too much, by attaching conditions to its transactions which
earn it more profits, but which are strongly opposed to U.S.I.A.
interests. Thus, it insists that its own forwarding agents,
EXPRESS, should be used as forwarders, sometimes even as
recipient of the purchase price. This over-zealous exploi-
tation of the privileged position which it has won, combined
with the inefficiency and inexperience of its ,officials, will
probably in time give the Soviet U.S.I.A. officials the ammu-
nition with which to shoot down their trading rival.
Activities of INTRAC
Eastern Procurement Agent
22. One result of INTRAC's viCtory over U.S.I.A. is that
it has acquired to-day a monopoly position in the delivery,
via U.S.I.A., of non-ferrous metals from, or via Austria, to
the East.
23. It should be stressed hero that in principle U.S.I.A.
neither buys itself, nor assists o hers to buy, raw materials
for the East. The overall policy1of the Soviets is that
U.S.I.A. exists to serve exclusively its own undertakin0.
I
No such overall policy guides the activities of I-:,TRA8, the 11
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only purpose of which is to earn money for the KPOE by
egaging in as many remunerative deals as possible. Con-
sequently I7TRAC is to-day acting aS a procurement agent of
raw materials on behalf of.the Satellites. Under the -lew
:40SCOW instructions U.S.I.A. is obliged to assist IZTRAC
to play this rOle by supplying the necessary export licences
In practice there are usually two contracts. I22RAC first
procures the materials, and then resells to U.S.I.A. which
delivers to the East. For these services U.S.I.A. charges
INTRAC a commission of 5%. Formerly, before the new
instructions, it charged 10%.
iZOSCOW
A1uminium Deliveries to CSR
24. INTRAC has started this new rOle of procurement
agent by delivering aluminium from RANS HOFEN to the Czechs.
Five hundred tons were delivered at the end of June, 1952,
and another five hundred tons are due for delivery. The
Poles are also. trying to obtain hAli OFEN aluminium via
INTRAC, but no definite agreement has yet been reached.
???
25. The main intermediary used by INTRAC in the Czech
aluminium deal was the notorious Czech procurement agent
Josef CREI:ER of TRACO:T, ZURICH, whese VIENNA representative
is KAISER (Thu).
26. For its rOle in providing the necessary licence for
the export of the first fiie hundred tons of aluminium to
the CSR, the U.S.I.A. COB received a commission of 1,200,000
Austrian Schillings, of which it ag/Led to pay 400,000 to
'DIRAC. It met this commitment by making INTRAC accnt
? I
textiles bought by U.S.I.A. for 400,000 Schillings, but which
INTRAC could sell for only about 18,000
Trade with East generally
? , ? .
rivalry with) U.S.I.A.,
the East, and is indeed
U.S.I.A. The reasons
I
for/
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27. , INTRAC, similarly to (and in
has very active trade relations with
in many respects more successful thin
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for this are:-
I
a) INTRAC as an organisatipn is far more "flexible"
than the "cumbersome- U.S.I.A.;
1 .
b) its officials are more energetic, and are always
travelling round in Search of new businelss;
c) it is not bound to supply U.S.I.A. goods, and
can therefore obtain better quality goods, better
delivery terms, etc.
28. Part of this eastern trade is carried out quite
legally within the framework of AUstrian trade agreements with
the East, payment being effected Over the Austrian clearing.
However, the greater part is to-dsy effected via U.S.I.A.,
which alone can supply the necessary export licences:
Trade with the D.D.R.
29. INTRAC has a global barter agreement with the D.D.R.
for the year 1952, the value of which is estimated at 18 million
dollars. The great part of this agreement is likely to be
carried out via, and with the assistance of, U.S.I.A. Under
it IITTRAC is delivering considerable quantities of zketals.
To date, however, the deliveries have been very one-Sided,
=RAC doing most of them and receiving little or nothing in
return.
30. For its D.D.R. INTRAC uSes the VIENNA firm of WAGNER,
a new firm founded at the beginning of 1952, the directors of
which are Kurt ME1-ASSL (formerly ,of YERX) and REICH l(fnu).
On the D.D.R. side the contracting office is the DEUT3CHE
WAREN VERTRIEB (DWV), which is a subsidiary of DIA. All
trade between Austria and the D.D.R. must go over the DWV,
which for all practical purposes is a D.D.R. fort of ITRAC.
It is very closely associated with INTRAC, representatives
of which sit permanently in its offices. DIA itself is no
longer competent in Austrian/D.D.R. trade.
Trade/
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Trade with other Satellites
31. Apart from its barter agreement with the D.D.R
INTRAC has the closest trade relaticns with the other Satellite
countries. These have been established largely as the rosult
of INTRAC being appointed official representative of the
various Satellite monopoly trading companies. This fact is
another point of friction with U.S.I.A.
32. IYTRAC is representative of almost all the Hungarian
State Monopoly trading Concerns, of ,hundreds of D.D.R. Foncerns,
and of most of the Polish State i:ionopolies. The Poles have
always been strong supporters of the "Party Line", and there-
fore had good relations with INTRAC, 90% of Polish coal
deliveries to Austria are effected via I-.:TRAC. During the
1951/52 winter, when there was an acute coal shortage in
1
Austria, 'the compatent Austrian Ministry even legalised Polish/
INTRAC coal deals by subsequently issuing import licences in
respect of coal delivered by the Poles to I:TRAC.
33. INTRAC buys considerable quantities of textiles from
Hungary which, after importation and, "release" by U.S.I.A.,
are placed on the Austrian home market as U.S.I.A. products.
The firm of ALTMANN of Salzgries 16, VIENNA, assists in this
by disguising the origin of the textiles. ALTMANN wors very
closely with the LTEX Department of U.S.I.A. Managing
Director of the firm is Frau Dr. JELINEK, a sister of Friedl
FUERNERG, t!le secretar:y-general of the KPOE.
34. On the other hand INTRAC's 'ela-tions are not atl all
good with the Czechs, who do not like them and do not wish to
do business with them, Paul IAESSLER is always trying to
remedy this situation, travelling constantly to PRAGUE, land
trying to bring Party pressure, to bear on the Czechs.
only success to date has been to induce the Czechs to agree
to the appointment of an INTR2X man, Dr. JELINEK, the brother-
in-law of the KPOE secretary-general, FUERNBERG, as a director
of/
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of OMNIPOL in VIENNA. However, since this appointment the
Czechs scarcely use OMNIPOL.
35. INTRAC also has close contacts with Roumania and.
Bulgaria, but no very successful business ensues. It should
again be stressed that, in all except its Austrian clearing
deals with the Satellites, INTRAC is obliged to use U.S.I.A.
for its import and export licences, paying U.S.I.A. a 5%
(formerly 10%) commission.
C. U.S.I.A./EAST BLOC TRADE
The Present Main Function of the CCB
36. Ninety per cent of the activities of the U.S,I.A.
Central Commercial Bureau (CCB) are concentrated to-day on
trade between the U.S.I.A. Concerns and the East Bloc,
37. This fact represents a radical change in the main
function of the CCB, whic?1 occurred in the summer of 1951.
The Former Procurement Function
38. Theoretically the main
twofold:-
functions of the COB are
a) the sale of Soviet boTty goods in Austria;
(There are still considerable quantities of these
which have not been realised, and still a special
department in the Car to deal with them.)
b) the handling of the entire foreign trade of U.S.:
39. Originally the CCB interpreted its foreign trade
function as buying raw materials required by the U.S.I.A,
Concerns abroad, and particularly in the West, The QB acted
as a central buying agency on behalf of the Concerns, and in
particular bought large quantities of copper, lead, etc, in
the West.
40.
Simultaneously MOSCOW .12.as been pressing for the past
C!',fr!HrT 919,
II
i tkrree/
1
,I.1:: i-J:'''' '' A i i f.'t 1
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three and a half years for an intens4ication of trade between
and the Eaat Bloc, and hag issued constant warnings
and throats concerning thc failure to carry out this function.
41. The reasons for the failure pf the CCB to carry out
this function until the summer of 195l are varied. First,
there were the difficulties encountered in negotiating with
the East Bloc trade representatives who, with the exception
of the Poles, have always been most unco-operative. Secondly,
there was the importance attached by the CCB to its rnle as
central procurement agent of essential raw materials, the
fact that it then had the financial means to carry out this
procurement rOle and, most important, :the further fact that
Western controls did not then make the fulfilment of this r.nle
impracticable.
Reasons for the Chanr:e of Function
Efficacy of Western Controls
42. The reasons for the radical change, which took place
during the summer of 1951, are again varied. Constant pressure
from MOSCOW to intensify eastern trade played a part; as did
the fact that the CCB was owed vast a7unts by the
Concerns and did not have the monies t.o buy raw materials,.
However, the decisive factor was the growing efficacy of west-
ern controls, which gradually rendered the procurement function
impracticable. It reached a point where 90% of the procurewent
'deals concluded by the OCB turned out to be "Luftgeschfte",
[
with corresponding losses of time, monies, energies, and the
'failure to procure the essential goods, Since the beginning
of 1952 the NB has bought no raw materials whatsoever inthe
West on behalf of the U.S.I,A. Concern, It has indeed Com-
pletely given up its procurement function in favour of the
-negotiation and execution of global barter agreements with the
Satellite countries.
? 1
?
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Reorganisation/
1
? i -
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F
11 110:11:NIL
i '
I
S iLY
Reorganisation of the CCB
43. With this change in the in function of the CCB there
were corresponding changes in persoYmel and organisation.
large number of young Soviet commerlcial experts (in fact most
of them are little more than students with MOSCOW commercial
training) were drafted to the CCB, rand individual departments
were set up for each of the Satellite countries. The senior
personnel of these departments norrAally consisted of tiro of
the young Soviet commercial experte, but recently a third
Austrian official has been assigned to most of the depart-
ments,' There is no U.S.S.R. Department. However, 'Very
recently, a certain DEMIDOW (fnu), who formerly worked with
the D.D.R. Department, has been reoved to a special Office,
where he works alone exclusively on Soviet orders.
U.S.I.A./Satellite Barter AgreemenLts
44. These young Soviet officials immediately embarked upon
intensive negotiations with each of the Satellites, aS a result
of ,!_hich global barter agreements have now been concluded with
all of them.
Secrecy of the Agreements
45. These agreements, in Russian language with no trans-
lations, are regarded as highly secret, and are kept In safes
which are sealed every night. Tlie main reason for ths secrecy
is the fear that the Austrians, who also have thdr Official
trade agreements with the Satelli-tes, might get to know :the
details of the U.S.I.A. agreements, and use these when negotiat-
ing their own agreements. There is also the natural desire to
keep the contents of the agreements from the West.
Method of Negotiation
46. In the negotiation of the agreements the COB appears
to have full and independent authority. It is not known that
instructions are received from MOSCOW, nor that the agreements
have to fit in with any general East Bloc trading policy and
plans/
17
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plans. The CCB negotiators are merely concerned to dispose
of U.S.I.A. finished products on the most favourable terms,
and to receive in exchange raw :,:aterials required by the U.3 ,I.:
Concerns and other goods which the COB can sell for cash on the
Austrian home market. The CCB obtains full particulars of
available U.S.I.A. finished products from the U.S.I.A. ,Central
Administration (CA) while it is usually informed directly by
the Concerns of their raw material requirements.
47. The agreements
are negotiated in VIENNA. At rte
negotiations the CCL is usually represented by its Deputy
Director-General, S. P. AWDEJEW, and the Soviet head of the
Satellite Department concerned, Austrian employees of these
departments are no longer allowed to attend. On the Satellite
side, the representative is normally the commercial attache in
VIENITA.
48. Throughout tne negotiations the CCB keeps the CA fully
informed of the course which they are taking, while the
Satellite commercial attaches regularly report home and,recuest
instructions. The agreemen-t, when, finally agreed and signed
by the CCB and Satellite representatives, always contain a
clause to the effect that they are conditional upon ratifi-
cation by the Director-General of the U.S.I.A. CA on the one
side, and the Satellite Ministry eZ :Foreign Trade on the other.
The ratification by the Director-General of the CA.is amere
formality, and is normally obtained within a matter of hours.
There is no question of sending the agreements back to iOSCOW
for approval.
49. Occasionally if the Satellites insist upon receiving
goods which U.S.I.A. cannot supply, the CCB will obtain ,these
goods from the U.S.S.R. or some other Satellite. However,
U.S.I.A. no longer supplies gooas obtained from non-U.S I.A.
1
Austrian Concerns, although it sometimes resorted to this
practice formerly.
Execution/
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Cita
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Execution of the Agreements
50. Once the global agreements'have been signed, their
execution depends or demF.nds made '610 the CCB by the Satellites
or the U.S.I.A. Concerns. Thus, i Poland puts in a demand
1
for electrical equipment covered by the U.S.I.A./Polish agree-
ment, the CCB will place an order flor thecquipment with the
Concern which manufactures it, entering into a con-
tract with the Concern and itself playing the Concern fer the
goods. Similarly, if a U.S.I.A. Cioncern asks the CCB for
zinc sheets, the CCB will obtain the zinc from Poland Under the
U.S.I.A./7olish agreement, and then sell it to the Coneerns
There is no question of Poland delivering its quota of zinc
under the agreement to the CCB, and thelatter then distribut-
ing it to the U.S.I.A. Concerns according to certain priorities
The CCB will not obtain the zinc until it has receivedia firm
request for it from a Concern and entered into a contract to
supply it.
Disposal of U.S.I.A. Barter Goods on the Austrian riarket
51. The barter goods which the CCB receives from the
Satellites, and which are not required by the U.S.I.A. Concerns,
used to be sold to various Austrian firms, who disposed of
them on the Austrian home market. The most important of
these intermediaries were the VIENA firms of ALTMANN (textile3),
SCHUSS, and VER (typewriters, et.). These three firms
would take over large quantities o U.S.I.A.'s barter goods,
while numerous other firms took smL1 quantities. With time,
H
however, the Austrian Authoritiesnave taken action aginst
,1
those firms (for buying up goods imported into Austria without
?
import licences and seeking to seli them on the home market
,
as Austrian products), in several Cases confiscating the goods.
L
circumstances the CCB now 11sells its barter
the U.S.I.!? retail stored.
In these
goods to
U.S.I.A. Exports and Austrian Trade Returns
52. None of the U.S.I.A. expo4.ts and imports under these
g01;1/ / ( a
itd:4:1 illi
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global barter agreements with the East figure in the Austrian
trade returns. On the other hand, a certain number of U.:3.1.A.
Concerns export directly to Eastern customers via the Austrian
clearing, and outside the U.S.I.A. barter agreements. Such
exports do appear in the Austrian trade returns.
Relations with Satellite Trade Representatives
53. As indicated above, the greatest difficulties are
experienced with the Satellite commercial attaches in the
negotiation of the global barter agreements. The only excep-
tion is with the Poles, with whom relations have always been
the easiest and most successful. The reason for this is that
the Poles have always shown greater "political understanding'.
In practice this means that they are prepared to work together
with U.S.I.A. for political reasons, even though it is against
their commercial interests to do so - i.e. they will buy at
dearer prices from U.S.I.A. instead ol at cheaper prices from
outside Austrian firms. The other Satellite trade representa-
tives have not sown this "political understanding", placing
commercial interests first, and preferring tobuy cheaper from
outside Austrian firms-.
54. Particular offenders in this respect have been the
Roumanians. At the instigation of U.S.I.A. the former Eoumanian
trade representative in VIENNA was removed. However, his
successor is no more co-operative. Almost as difficult are
the Hungarians, Czechs and Bulgarians. Relations with the
Czechs are not improved by thq.fact that their local trade
representative, SaHVIED,._R (fnu), is a young workman, who under-
stands nothing about trade and must refer everything to RAGUE.
The Hungarian representative, SOLTI (fnu), a conceited little
Jewish accountant, is also extremely difficult. The Pore,
HAENDLER (fnu), is the only "reasonable'l representative.
55. The lack of co-operation by the Satellite representa-
tives is reflectOd in the protracted negotiations, at which they d
rpfuRp/
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e 2i))1ii2/20181/3?10: LCIA-RDP83-00415R013400020007-3
p UI,82 OFFICIALS ONLY.
.18'7
refuse to discuss, much less conclude, new agreeMents
differences connected with Past deafs have been settled to
their satisfaction.
The D D.R.
Priority Treatment
56. It appears that the D.D.R. enjoys priority over the N
other Satellites in its trading refations with U.S.I.A. This
is reflected in frequent statements by senior Soviet U.S.I.A.
officials to the effect thattthe D.D.R. is our most important
trading partner", and in repeated expressions of disappointment
at the small volume of the U.S.I.A:/D.D.R. global barter agree-
ment. Furtaermore, the COB D.D.R; Department is larger than
the other Satellite departments, arid has two (instead of one)
Austrian "Referents".
Tile Present Agreemert
57. The present agreement has a volume of 5-6 million
dollars (at the 21.36 rate of exchamge), as opposed to the
18 million dollar INTRAC/D.D.R. aireement. It was concluded
in Narch/April, 1952, after protracted and difficult negotia-
tions. The main difficulty was that U.S.I.A. was in default
under the previous agreement, as a result of the inability of
U.S.I.A. Concerns to fulfil their commitments. Finally, the
balance owing to the D.D.R. under the old agreement, about
$400,000, was carried forward into the new agreement.
58. The agreement is divided into two parts: the first
and larger deals with the requirements and barter products of
U.S.I.G. and its Concerns, the second with those of the D.D.R.
Concerns. The recent return of some 60 U.S.I.G. Concerns to
the D.D.R. has given rise to innumerable accounting and other
problems. A U.S.I.A. official is at present in the D.D.R.
trying to sort out these complications.
59. The manner in which the division of the agreeent is
adhered/ 021
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50X1-HUM
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t-?
-19-
adhered to in practice (as also the relations existing between
U.S.I.A. and U.S.I.G.) is indicated by the fact that U.S.I.G.
refuses to deliver to U.S.I.A. until it has obtained from the'
latter an equivalent amount of goods ,required by its owni Con-
, ?
cerns. In other words, there is no offsetting of
deliveries against U.S.I.A, deliveries to the D.D.R. Concerns.
60. Under the present agreement is delivering
to the D.D.R. various "hard" goods. A first pri.ority is
steel rope for WISMUTH A.G. manufactured by the EGYDIER and
YBBS Steel Works.. Other deliveries include all types
of piping, metals, etc. In return U.S.I.A. obtains mainly
chemicals, photographic articles, typewriters, calculating
machines, etc.
61. Formerly U.S.I.A. .obtained goods for the D.D.R. from
such non-U.S.I.A. firms as SCHOEIILR :4,ECKMANN. As indicated
above this practi.ce has now ceased, and it delivers exclusively
U.S.I.A. goods.
62. During the first four months of the present agreement
U.S.I.A. has .delivered goods to the value of $800,000 (15 million
Schillings) to the D.D.R., and received nothing in return,
This is one of the factors responsible for the present acute
schilling shortage.
?qIS1',-.U2H. A.G.
63. Until 1952 U.S.I.A, entered into direct agreeffents
with WISLJITH A.G. in addition to the global D.D.R. bArter agree-
ments. In 1951 GISWTH A.G. bought goods to a value of 120
million schillings from U.S.I.A. Thee goods were paid for in
cash, WISAJTH arranging for the transfer of the schillings to the
Soviet :ilitary Bank in VILNA via -1\10SC0W.
64. As these agreements were a very welcome source of schil-
lings for U.S.I.A., the latter has tried every means to conclude
an agreement for 1952. However WISU H has turned down those ci2
overtures/
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t.,
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a
A 4 r (4= '1
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overtures on the grounds that it has no
schilling funds.
further Austrian
65. Under the 1951 U.S.I.A./WISMUTH agreement, U.S.I.A.
delivered millions of metres of insillated wire, bell wire,
special acid-resisting wire, special cables, small locomotives
(secondhand), special electric motors (proof against short-
circuiting from rain and lightning), several hundredtons of
,nails (a very important article), stop-watches, barracks,
1
stoves, etc.
66. To carry out this agreement, U.S.I.A. enlisted the
services of the notorious 11:31,GRUi;ER, who procured some of the
:
goods (particularly the special electric motors) from Western
Germany. HASLGRUBER also used to dral direct with WISLUTH A.G.,
negotiating personally with DirectorrGEmeral SAL:L_ANOW cbefore
his defection) and later with his successor Colonel SYYRLOW.
1
He delivered various goods including large quantities ()I copper
and copper wire. During 1950/51 U.S.I.A. transacted deals to
1
a value of 150 million schillings with 1::1ASLGRUEER, most of the
goods being delivered to WISMUTH.
67. Since 1951 the U.S.I.A. COB has ceased dealing with
1
HASLGRUBR. Serious rows arose betren them as a resul-t of
EASLGRUBER defaulting on two controls for the delivery of 1,000
tons c_ copper and 1,000 tons of lead, and being extremely
reluctant to pay the penalties for default'which the contracts
1
envisaged. He further fell into dilfavour with U.S.I.A. for
supplying inferior quality goods - in particular tool joints for
the SLIV. ,
68. However, HASLGRUBER is sti1 in with the Soviet.1: . At
the moment he is setting Up and .equipiping a large, rolling-mill
in the Soviet Zone which, when completed, he has arranged to
place at the disposal of the Soviets.
Pon/
i,C99 !IR
ENPI
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Poland
69. As indicated above trade relations between U.S.I.A.
and Poland are good. U.S.I.A. supplies Poland with ?SRAM
lamps and other goods for the electrical industry, with cranes
(manufactured by the WIENER BRUC.A.ELLY.U) and other harbour equip-
ment (WAGNER-iIIRO). It obtains in return coal, zinc, industrial
spirit, and some chemicals. It has considerable difficulty in
disposing of the spirit on the Austrian home market as the
Austrian Government has a monopoly in respect of this comodity.
Hungary
70.
Relations with Hungary have always been bad. Eungary
insists on supplying barter goods which U.S.I.A. has the greatest
difficulty in selling (tinned foods, etc.). The qualityof
Hungarian goods is also very bad. Furthermore, there have been
undoubted cases of sabotage on the Hungarian side - e.g. sub-
stitution of stones, tiles, etc. for goods ordered.
71. Hungary delivers mainly products of tae light industry,
electric meters, sewing-machines, shoes, sweets, etc. It is
now delivering, with great reluctance, a certain quantity of
drawn steel pipes. The Hungarians receive from U.S.I.A.
important "hard" goods, and in particular machines, also some
chemicals.
Czechoslovakia
?
72. Relations with Czechoslovakia arealso bad.
supplies constructional ironwork and cmrtain chemicals. It
receives in return tyres (particularly ,for Austrian Fiat) and
boring equipment for the petroleum indlistry, formerly obtained
with the greatest difficulty from the Wiest. In 1951 the pa
supplied_ the entire S-viV requirements of, casings, tubing, pipe
line. and tool joints. It is believed that the 1952 requirement
t ? are/
1.1
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ororrr froiriot
t,
rt I ?
?-,1 V
,
-22-
are also covered in the. new (present) agreement. The CSR
also deliver, diesel ziotors for boring equipment manufactured
-
by :JAYNESLY-TR2,U7.1.,. T-;.-2se, Loyever, are of inferior
quality to the motors preiously procured in the West'I ' Further
1 -
Czech deliveries include large quantities of lwn M01711.041 which
I
are the cause of serious competition with the U.S.I..1 firm of
1
HOFHERR L 6HRLNT7, which manufactures identical machines.
1
However, the latter 's protests to he CCB have been in vain.
1
Roumania
73.
Relations are most unsatislfactory, and there is:
virtually no excan[.,.c of goods, despite repeated attempts to
bring one about, and the global agreement :.ow signed. The
main reason is that the Rouillanians prefer, for commercial
reasons, to bypass and deal directly with cheaper
1 ?
non-U.S.I,A. Austrian firms. :iowever, U.S.I.A, delivers boring
equipment, manufactured by , for whi h the
CSR supplies the diesel motors.
Bulgaria
74. Relation's are not satisfactory. In desperation U.S.T._L,
finally sold its 33 locomotives to Bulgaria at a very cheap price
(estimated 1,300,000 Schillins each). The sale was clompleted
in Larch, 1952, however, U.S.I.A, reckons that it will take a
good two years before the Dule;arians pay for them. This is
another factor contributing to U.S..A.'s present schilling
shortage. U.S.T.A. also delivers large quantities of Motor
lorries, manufactured by the OESTERKCHISCIE AUTMOBIBFLBRIK,
for which the CSR supplies the tyres. ....;ulgaria delivers many
thousands of tons of pyrite, to U.3,I,A.
75.
Before the U.S.I,A, locomotlives were sold to Bulgaria,
the Turks were
to sell on the grounds that the Turks were building "strategic
railways/
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vary interested :in them, but the Soviets1 refused
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-
LA Y
railways", and the Soviets had no wish to supply locomotives
for them, The Soviets wel'e even morel scared that the loco-
motives might find their way, via intemediaries, to Yugoslavia
It is a cardinal point of Soviet policry to ensure that no U:S.I
goods ever reach Yugoslavia, no matter' what the circumstances.
The Soviets will immediately intervene and stop deals, if they
suspect that Yugoslavia may be the final destination of the goods.
U.S .S .R .
76. Generally speaking U.S.I.A. does much more trade with
the Satellites than with the U.S.S.R. itself, with which it has
no global agreement.
77. However, the U.S.S.R. places a certain number of orders
with U.S.I.A. Concerns, mainly for cables, steel ropes, cement
and a certain quantity of precision instruments. These orders
are always given *immediate priority over all other work.
78. On the otaerlhand the U.S.S.R. will usually step in and
itself supply top priority recuiremelyts of U.S.I.A. Concerns if
U.S.I.A. is unable to obtain these elsewhere. Thus, it lhas
delivered equipment for the petroleum industry, while many U.S.I.A.
Concerns have Soviet machinery. It also delivers special
steels. Once it even tried to deliver Donetz coal, which was
sold on the Austrian home market via he INTRAC firth of OTEN
TURNI. T:lowever, owing to excessive 4eight charges, this scheme
was found impracticable.
D. U.S,I.A./WBST TRADE
79. U.S.I.A. does a very considerable trade with the West.
This takes the form mainly of direct transactions between
U.S.I.A. Concerns and western customers, effected over the
Austrian clearing.
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80. The alying and Selling Agencies of the CA Departments
engage in Western trade to a far lesser extent. On the other
hand, the CCB to-day does no business whatsoever with the West.
Restrictions on Western Trade
81. With the exceptions next mentioned, the Soviets are
in no way opposed to this Western trade. As a matter of
cardinal policy, however, they have forbidden all trade with
Yugoslavia, and, except in very special cases, where permits
must first be obtained, with Spain, Greece and Turkey. They
have also forbidden the export of certain goods to the West,
no matter how profitable their sale might be. These restricted
goods include all types of boring equipment and rails. Recently
the Sovicts intervened to prevent an export of steel bottles to
the West, but finally gave way when the exportin3 Concern pointed
out that the stopping of the deal might prejudice its official
allocation of raw materials. There is no restricted list as
such. Each case is dealt with on its merits, MOSCOW having
the final say if the U.S.I.A. Director-General is not prepared
to take the responsibility.
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E. PROCVR ',TNT Ri,V1 wATERIALS
The Principle of Refusal t
90.
Buy for the East
It is a common fallacy to believe that V,S,I,f1. acts
as a procurement agent of raw materials on behalf of tlae Eastern
Bloc. In principle U.S.I.A. buys no strategic or othermaterials
for the U.S.S.R. or its Satellites. Its attitude is that it
? 1 , ?
exists to serve its own undertakings and not the Satellites,
who should fend for themselves.
91.
Thus, the Czechs to-day are suffering from a shortage
of pyrites for which they are prepared to pay premium ,prices.
They recently asked U.S.I.A. to help them to obtain itl but
U.S.I.A. refused, even though it had a potential supplier (see
para.150below).
92.
assist eastern
the Satellites
licences.
Similarly, in principle U.S.I.A, is not prepared to
procurement agents to deliver raw materials to
via Austria, by granting the necessary export
If procurement agents request this service
refuses, offering to buy the materials for its own Concerns, but
usually at prices in which the proctfroments agents are not
interested.
Exceptions/
0.2-7
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i, CHO
**4
Exceptions to the
JUSCNNEWTRANS
TVInciAT
93.. There are certain exceptionsi to this general principle.
One, which belongs to. :the, past, is thie rele at one time played
by U.S.I.A.'s so-called foryvairdding agents, JUSCHDWTR:y;S1 as
proeuremerr6 agent for, theCechsr,. Ie latter. bought corsiderable
quantities of raw material via .U$C;-.TEWTRAWS, which. succeeded
in obtaining -the necessary export lic?nces from U,SII,A by
clisEuisiPg the deals in SI,IC4 4 way th,?.t the Director-General of
the COB notnot recogniseltheir true riature when. giving his
consent to-them. This was not, however, approved ;policy'.
JUS(JHNEWTRNS was acting Orlits own iqitiative with the ole
object of earning money. When the Sqviets finally discovered
the extent of this "illicit" .traffic 74hey were extremely 4ngry,
put an endl to it immediately, ,and sacked a number of the ,
offending jUSCHNEWTRANS officials.
INTRAC
94- Apother exception to the general principle is the
privileged ,position which INTRAC has aphieved as a prDcurement
agent on behalf of the Satellites, with the assistance of ,U.S.I.A.
wbich.provides the export licences, Tilowever, as indicatpd
,above, these INTRAC procurement deals Fe only tolerated 4s a
result of pressure from MOSCOW, which 4.s anxious to see IN2RAC
earning monies for the KPOE. If it w9re not for this pressure,
would definitely not assist iq the deals, which are
largely against its commercial interes S.
.Procurement for the Concerns ,
95. The procurement by of, raw materials required
by its own Concerns is an extremely complex subject as a result
of the lack,of organisation of, and co-ordination between, the
various departments and agencies concerned,
96.
Each individual department or agency is olely
concerncld/ 3 .>
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concerned to further its own narrow interests, without con-
sidering the interests of U.S.I.A. as a whole. Each is
concerned to show a profit, or otherwise justify its existence,
even at the expense of the others. There are constant
rivalries and fights between them, an irresponsible overlapping
of functions, and a complete lack of co-ordination. To
remedy this state ofaffairs the heads of departments etc,
are summoned from time to time to meetings, at which they are
addressed by the Director-General or his Deputy on theiimpor-
tance of serving the general interest, etc., but these,
admonitions have little or no effect.
The Procurement Agencies
97. The following U.S.I.A. agencies are competent-to
procure raw materials:-
a) the buying and selling agencies ("Ein- und
Verkaufstellen") of the various main depart-
ments of U.S.I.A.'s CA, which administer
the U.S.I.A. Concerns;
b) the CCB;
c) the Concerns themselves.
The CA Departments
98. Each of the main CA Departmtents has its own bLqing
and selling agency which, with the eixception of that belopging
to AUTOVLO, have their office outride the Trattnerhe
1
reason for this is to facilitate traffic with c1ustomer4lb
1
avoiding the necessity for the ilatter to comply with the yery
1 , 1
strict regulationsas to,passes, etc. prevailing in the ,Troattnprr
I 1
hof. Tius, the buying and selling agency of MARTEN (ertal,lrgY
i .
and Coal) is at Bruc1-nerstrasse2i oT ZEMENT (Bpilding,,T4ter.ialq)
I
in the Argentinienstrassei. oT LETEXJI4ght IndustrY) in the
Favoritenrtrasse; of, LESS Agriculture) at Gusspa,ug?st,r4409.,,30,,
etc.
99. Ihese bwi7g and
ments are competent to b
4.1
selling agencies of the CA rt-
raw mater evired by the.r
MA" Warr- Vir
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a
I.
I.
!. i 102.
I Thporetically the CCB alone is competent to handle
1, foreign trade. Under thisparticularlunction it, used to act
as a central buying agency on b4Lalf.ofiall the U.S.I.A. Con-
cerns, and purchase large quantitiee,of,raw materials (parti-
cularly copper and. lead) in the West_on,their behalf. As
, ... 1
reported,above, since the sulmmer '4,1951 the COB has given up
this buying ,function, mainly begause,ye. tern controls became po
i
S:CIF( RONiH.T i P' i ,. ;Ifj.-64.enti(
I, : ,
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Concerns. Strictly speaking they should confine their buying
activities to the Austrian hal-17e market as theoretically the
CCB alone is competent to handle foreign trade. However, in
practice this original concept is not strictly adhered to, and
on occasions these agencies buy abroad independently of the
CCB. In particular MATEZ, PODJOLYIK (achine Construction)
and to a lesser extent Z=NT buy raw materials abroad as well
as on the home market.
100. These buying and selling agencies are not allowed to
build up reserves of raw materials for their Concerns. They
are only entitled to buy current requi.rements, which means in
principle requirements for one quarter, or, with special per-
mission, for two quarters.
(They have to submit quarterly statements and, if
at the end of any quarter they have too large reserves
Of raw materials, they will sell off stocks, fre-
tuently at a los, and sometimes even buy them back
again at higher prices a few days later. VIENNA
dealers not infrequently buy raw materials from one
agsncy and sell then at a profit to anrher
101. The CA Departments are financed by a 10% commission
received from their Concerns on all goods sold. If a Depart-
ment's buying and selling agency has nqt the funds available to
purchase an urgently required raw mate4ia1, the CA Director-
-
General wil, if he thinks fit instruct the Soviet Military
Bank to make the funds available.
The CCB.
1
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tio Se OFFICIALS ONLY
efficient as as to render it impracticable. To-day the CCB
buys no copper, lead, or any ot,ler raw material on behalf
of the Concerns in the West.
103. The CCB does, however, procure considerable,
quantities of raw materials on behalf of the Concerns from
the East under its global barter agreements with the,
Satellites. Thus, all zinc requirements are
1
covered by Poland, all its pyrites requirements by Bulgaria.
FormeF, COB Suppliers
104. In the days when the CCB acted as a central buying
agency it relied mainly on a few well-tried suppliers.
These included:-
, , 1
The HAYDELSHAUS HAS;GRUB411, VIENNA
The WEINBAU CONSORTIUM, .FRANKFURT-am-MAIN
Eng. Theodor PETRINA , I ,
Egon FOELDI, who delivered large quantities of, co:pper,
' 1 and lead in 948/49
METALIMPORT TRUST of ZUR;CH and PARIS,
I !
. FRIGALIMENT IMPORT G.m.b.H., ST. GALLEN, Switzerland.
1 , 1
Some, if not all, of these procurement agents a.re probably still
1 , ,
in touch with U.S.I.A. Concerns tlemselves,_or the buying and,
selling agencies of the CA Departments.
The U.S.I.A, Concerns
105. From the outset the individri U.S.I.A.,Concern.s.have
sought to cover their own raw material requirements directly,
bypassing both their CA Departments and the CCB, if they, felt
they could procure the materials op more favourable terms on
their own. This practice continues to-day, and many ofthe
Concerns buy on their own, both on the home market an abroad,
if they have the necessary connections and opportunities. They
,
normally prefer to do this, as it fives them an opportunity to
assert their independence vis-a-vi? the U,S.I.A, central
agencies.
At/
Orf
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S- f%kr 011 1.41
t': UT hi t1:1"
At the moment there is an .cute shortage of sphillings,
with the result that both, the CA DeRartments and the Concerns
usually; have not the moniesavaila4e to buy the raw materials
they require.. If. a Concern is buying directly and it has
not the .funds, it applies to the Solaet Military Bank for
,
them, ,The latter will always refu9e this application in the
first place. The matter is then relferred to the CA Director-
General,. who will instruct the Sovieit Lilitary Bank to make
the funds available if he deems fit.
Priorit.Considerations the ,,procurement of Raw Materials
107. .The following two factors are of paramount importance
in enlisting the CA Director-General's intervention with the
Military Bank to obtain funds for raw materials:-
a) proof that the raw materials are required for
the fulfilment of a Soviet or other important
eastern order;
proof that, if the raw materials are not forth-
coming, the Concern involved will be forced to
stop work or, possibly, to dismiss some of its
employees.
Coverage of Raw Material RIquirementc
108. Despite these finacial and orrganisational difficulties,
U.S.I.A.'s raw material requirements are almost always covered.
There have been no crises yet resulting in Concerns closing
down-, reducing their staffs, or failing to carry out important
eastern orders. When such crises thFeaten, the U.S.S.R will
always step in as a last resort and Elert them. A case in
point was the supply of ships' plates. by the U.S.S-.R, to the
DDSG on an occasion when it was impossible to obtain them else-
where, and the reduction of staff, if not closing down of ship-
yards, seemed inevitable. On another occasion, in 1950, the
U.S.S.R. supplied casings to the SMV to overcome a temporary
.crisis.
109.
Most of U,S.I.A.'s raw material requirements (copper,
r
lead/ 37
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lead, etc.) etc,) are covered on the Austrian home market by pur-
chases made, via intermediaries, by the Concerns themselves or
I I
the buying and selling agencies of their CA Departments. An
'
important exception is zinc, which, as stated above, comes
from Poland.
Lead
.110. Itis difficult to estimati the lead requirements
of the U.S.I.A. Concerns, as these vary greatly according, to
1
the orders placed with them. Receltly large orders for lead
cable have been placed by MOSCOW, -d the annual requirements
may be estimated at anything between ten and twenty thousand
tons.
111. This lead is bought exclusively on the Austrian home
1
market. The main supplier is the BLEIBERGE BERGWERKUNC
1
(BBU), Carinthia. , The main intermeIdiary procurement agent
is Engineer Otto PLOSS of VIENNA, who has supplied thousands
i h
of tons of lead over the past four years. His official job
1 , 1-7
isproprietorofacn-repaL:workshop, The lead is obtained
by various Austrian firms, with the assistance of U.S.]: A
I . 1
buying up lead scrap and sending it te the BBU in Carinthia
, . 1 H H
for processing. As a result of secret arrangements with its
directors the BBU returns more processed lead than the :Original
1 Hll ..1;1
scrap supplied. Payment is, made in 1 schillings.1 The contract
? , , , ? l! ,
is made between U.S.,I.A and the BBU.,r the former figuring as
1 1 1 II
the deliverer of the scrap. bought up by the intermediary.
I!
CSLI-J-91
112.
The annual copper requirements of U.S.I.A, Concerns.
11:-' ,'117714[Y
,
may be estimated at between 4.5 arid ? thousand 7tcon5, Tbe
ill
main supplier is the BRIXLEGG cepper:processing.works in
, [u
Tirol. Georg ZUGMAYER & SOHNE of WaDEGG also stIpply a small
-I i
quantity. There is no main intermeliary procurement agent,
! , I
I pi II 7e .,
but dozens of them, whe1 1at lL-ty 'is not even known -t,o
S
JI
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U.S.I.A. They turn up from time to'time.and state that they
are in a position to divert a delivery of, say, 120 tons from
BRIXLEGG to Western Germany. Another source of copper is the
purchase, via intermediaries, of a ip.rt of the official allo-
cations of copper to so-called reputable West Austrian Concerns. 50X1-HUM
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G. THE U.S.I.A. RET-IL STOR'iS
Disposal Agency of Barter Goods
131. The number of U.S.I.A. Retail Stores is still steadily
rising. The reason for their alfriost mushroom appearance is
that to-day they offer almost -the[ only possibility f9r,dis-
posing of U.S.I.A.'s barter goods, and thereby for earning
Austrian schillings. As indicated above, the Austrian firms
which U.S.I.A. formerly used for disposing of its barter goods
have recently been largely scared off by Austrian police action.
The Central Direction of the Stores
132. The Central Direction ofithe Retail Stores is the
U.S.I.A. agency "ORT", which has its offices in the Favoriten-
strasse, and is directly subordinate to the CA. Theoretically
ORT exists to look after the needs of U.S.I.A. workers and
employees. However, as is well-nown, any Austrian can buy
to-day at a U.S.I.A. Retail Storl.
Zre'9/
17
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Free Import of Foodstuffs
133. In addition to the U.S.I.A. barter goods bought
from the CCB, the etail Stores import considerable quan-
tities of foodstuffs (Portuguese sardines, oranges, etc.).
?rom abroad via ORT.. The CCB autpmatically frees these
imports without charging any commission for its services.
The "WKUS" Stores
134. In addition to the ORT Retail Stores, the buying
.and selling agency of the Foodstuffs Department of the, CA
.("WKUS") has a certain number of slops, which are also,
intended to supply the needs of u.q.I.A, workers and ,
employees. Originally WKUS had ablout twelve arthese ,
shops, but to-day they are gradually being closed down,.
Their goods have always been slightly more expensive than
those of the ORT Retail Stores.
1
135. The theoretic function of ItiKUS is to buy any
foodstuffs which U.S.I.A. may require, and also to buy
and sell on behalf of certain oat the U.S.I.A. soap factories,
the supervision of which is divided between WhUS and KRASRA
(the Chemical Department). However, as noted above, ORT
also buys foodstuffs on behalf of its Retail Stores. On
the other hand, any offers of foodstuffs which reach the
COB are automatically handed on to WKUS and not to ORT.
Difficully of DispaLag of Certain Goods
136. Considerable difficulty is experienced ip disposing
of certain of U.S.I.A.'s barter goods via the Retail Stores,
owing to the difficulty of passing off goods, cle?,rly of
foreign manufacture, as U.S.I.A. products. These diff-
culties are always uppermost ip the minds of the CCB
negotiators when settling the barterigoods which their
Satellite customers are to deliver under the global-barter
agreements.
Goods which are most affXicult to dispose of
include;/
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include: cameras, typewriters, calculating machines, etc.
These ccoe largely from the D.D.R. Goods which are QOM-
paratively easy to spose of, and which come mainly from
Hungary, are textiles, shoes, sweets, etc.
H. THE U.S.I.A. CONCERNS
The Political Aspect
137. In any attempt to assess Soviet administration of the
U.S.I.A. Concerns it is essential to realise the importance
which the Soviets attach to presenting them to the world as
models of superior Communist methods and principle.
138. There must be no unemployed in U.S.I.A. Concerns,
no strikes or other labour troubles. The U.S.I.A. worker
or employee must be given the feeling that he is better off
than his comrades in non-U.S.I.A. firms. Either he must be
better paid, or receive greater amenities in the form of
cheap goods to be bought in the Retail Stores, etc. No
matter how unprofitable a Concern may be, it must neither
close down, nor dismiss any of its .staff. In no circum-
stances must situations arise where a stoppage of work
becoiaes inevitable.
I
139. In point of fact it is alyst certain that, taken
as a whole, U.S.I.A. runs at a losse and that .from tii 10 time
MOSCOW must step in to provide funds or materials to keep the
Concerns going. The important point is that to date.1140qCOW
has always been prepared toi do this, in order to keep alive
, 1
the fiction of U.S.I.A.'s superiority.
1 ,
1
,
Future Soviet Policy towards U SlIn
140. At the ead of 4r950 the the? Director-eneral 14 the
:
COB, SEVCONKOs(fnu)L informed one his senior aesistaata
:SECRET CONTI-a
IL & i
tiFFrIAIS. 1 AO'
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in strictest confidence that he must accustom himself to the
idea of having to liquidate U.S.I.A. and to leave Austria.
141. Since then there has not been the slightest indi-
cation that the Soviets are entertaining any ideas of giving
U p U.S.I.A. On the contrary, the general attitude of the
senior Soviet U.S.I.A. officials has been, and is, that
U.S.I.A. is a permanency.
142. This general attitude may be seen in:-
a) the manner in which the Soviet officials laugh
if there is ever any talk of a possible Austrian
Treaty;
jo) remarks dropped from time to time concerning
future activities and plans, which reveal that
the Soviet officials are corsidering situations
several years hence;
c) the reorganisation of the CCB in 1951 with the
engagement of additional Soviet staff, and recent
remarks that the change and development of the
CCB's function over the past year has necessi-
tated a further reorganisation this coming winter;
d) the definite concern which tha senior Soviet
officials have shown to avoid the worst viola-
tions of Austrian law, and consequent friction
with the Austrian Authorities, by suppressing
those illicit practices (no matter how profitable
they have been to U.S.I.A.) which have most
irritated the Austrians;
e) the granting from time to time of requests for
new machinery, etc., submitted by various Concerns
to the CA;
f) the. absence of any suggestion of handing back
certain of the U.S.I.A. Concerns to the Austrians,
and particularly those running at a loss.
143. It. is frequently stated that ,the ruthless manner in
which the Soviets seek to exploit some, of the U.S.I.A. Concerns
(and particularly the SMV), is an indipation that their funda-
mental policy is to obtain the maximum ,out of them in the
shortest time, before handing them back to Austria. It should
,
be stressed, however, that the, attempt to obtain maximum ...esults .
in the/ tg
II
. I ,
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in the Shortest possible time is the guiding principle of
all Soviet policy and methods to-day. In the U.S.S.R. itself
this same exploital .n will be found; the objective being
to get the maximum out of everybodT and everything, regardless
of effects on the future. It is equally to be found in the
Satellite countries. In brief, would be a mistake to
conclude that any ruthless exploi4tion of the U.S.I.A. Concerns
necessarily means that the Soviets are trying to "despoil"
them before handing them back.
The Most Important U.S.I.A. Concerns
144. In Soviet eyes the most important U.S.I.A.
are those which supply the East. These include:-
J. M. VOITH
WIENER KABEL UND KETALLWE KE
ARIADNE I)RAHT UND KE
EGYDIER STAHL UND IIDUSTRD WERKE A.G.
YBESSTAHLWERff.L DER GEBRUD R BOHLER & Co.
(The last two are of particular importance
as suppliers of steel rope to WISUTH A.G.)
MANNES.LA1;-TRAUZL. A.G. (Boring equipment for Roumaria)
WIENER BRUCKENBAU- U. EIStFKONSTRUKTIONS A.CT" (Cranes,
etc. for ?-land)
OESTERRBIC:ISCL AUTOMOBI:FABRIK A.G.(Lorriee for Bultaa-4
RAXWERKE G.m.b.H. (Waggons and tank waggons for the East)
GOERTZ WERKE (Precision instruments for the U.S.S.R.)
OSRAM WERK (Lamps, etc. for Poland)
AEG-UNION EIEKTRIZITAETS4ZELLSCHAFT
SIEEENS-SCHUCKERTWERKE A.G
Concerns
WAG-iER-BIRO
HIAG-WERKE
DONAU CHEMIE A.G.
The DDSG and SMV
145. Both the DDSG and SMV are naturally also of et
importance to the Soviets. However, although theoretically
subordinate to the Director-Genera of the CA, they both enjoy
almost complete autonomy, and are onsequently not regarded as
ordinary U.S.I.A. Concerns.
Administration of the Concerns
146. Within the CA there are various main Departments under
which/ XI
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ri2.',71T111.
n tr.vv
-43-
which the U.S.I.A. Concerns are grouped. These Departments
administer the Concerns subordinate to them, the Director-
General of each Con ern being directly responsible to tne
i_ead of his appropriate CA Department.
147. There are, however, a few doncerns which have been
made directly subordinate to the CCA. These include:- '
a) EISEN UND STAL A.. (-11STAG) and its subsidiary
HEEHAPEL HEINE EISLILUND EISENWARE:, GROSS-
HA:DLUNG A.G.;
b) the VILNNA representation of RAABKARCHER Coal;
- c) various depOts such as ENgERST:LD and FLRNORN-
GASSE 53.
All "free market" imports pass through the latter.
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