Reference Dominions Office telegram D.1599 [1] and immediately
following telegrams [2] and New Zealand No. 286 [3] to the
Dominions Office. Peace Treaty with Italy.

We are advising Dominions Office that you will deal with these
questions in person. Following are our comments, which we have not
communicated to Dominions Office;

I. General Considerations
(i) We cannot forget Fascist Italy's record as an aggressor since
1935 and as an enemy which cost many Australian lives. This
suggests Italy should lose her colonial empire and any other
territories to which she has no just claim. In deciding any
disputed claims to the latter Italy's position as a former enemy
must be fully weighed. It should be remembered that if Italy is
conceded a position as a trustee state she will have a seat on the
Trusteeship Council.

(ii) Our general interest in Italy's future is to see established
a genuinely democratic regime capable of eliminating all Fascist
remnants and of improving living standards for the mass of the
Italian people. The tasks of such a democratic reconstruction must
naturally fall mainly on the Italian people themselves. To this
end it is essential that apart from economic assistance there
should be no prolonging of direct Allied influence in Italian
internal affairs. On our understanding of the Atlantic Charter it
should be a matter for the Italian people themselves as to whether
they will 'look to the West' or to the East. (See telegram
D.1600). The Political and strategic consequences in the
Mediterranean of their 'looking East' however, must be weighed
especially if the 'last resort' in paragraph 4 D.1601 were
adopted. [4]

(iii) As a measure likely to assist towards her democratic
progress we agree that Italy should be given early opportunity of
membership in the United Nations and encouraged to participate in
other international agreements.

II. Reference D.1599, 1600 and 1601. Italian Colonies Following
are points for consideration:

(i) Trusteeship provisions of the Charter should extend to the
whole Italian colonial empire. Italy's bad record in colonial
administration gives her little claim to consideration as a
trustee for any of her former colonies. Moreover suggestion that
Tripolitania should be an Italian trust territory overlooks
economic liability on Italy's already exhausted economy.

(ii) Consideration of possible Soviet claims to share in
administration of trust territories might take account of interest
in trusteeship displayed by Russians and their experience in
administration of dependent peoples. Assumption by Russia of
international responsibilities under the Charter in field of
welfare in addition to security functions already undertaken in
principle might lessen danger of Soviet isolationism. On the other
hand Russians have no experience in African problems. More
important, any extension of Russian authority into African
territory might complicate the strategic picture in the
Mediterranean and Middle East. Australia has always had vital
interest in British strategic position in this area.

(iii) Formation of a Greater Somalia together with Cyrenaica as
British trust territories may invite criticism of disproportionate
British gains and veiled imperialism.

(iv) It might be preferable to place Italian territories under
direct trusteeship of United Nations in accordance with Article 81
of Charter. New Hebrides is a poor example of international
administration and not a fair test. Failure in Danzig was due to
external political factors and not a condemnation of principle of
international administration. Main requisite for success would be
in each case undivided responsibility of Administrator to
Trusteeship Council. Three United Nations trusteeships might be
created, Eritrea, Italian Somaliland and Libya. In the two latter
cases there would be good grounds for selection of a British
subject as Administrator. Special problems mentioned by United
Kingdom are economic co-ordination in Somalia and strategic
importance of Libya. These could be met by measures for sub-
regional co-ordination between all Somalia territories, and by
creation of a designated strategic area within Libya, for which
United Kingdom would be obvious choice as trustee to Security
Council. [5]

III. Draft Heads for Peace Treaty with Italy
Following are our comments on summary of Dominions Office
proposals in D.1603:

(1) Proposals outlined in paragraph 2(a), (b) and (c) seem
satisfactory. [6]

(2) Paragraph 2(d) Trieste and Venezia Giulia. We suggest the
following considerations are important:

(a) Italy was an original partner in the Axis aggression while
Yugoslavia armies suffered some half a million casualties in the
Allied cause and with little equipment held down considerable
German and Axis Forces.

(b) The settlement of 1920 and subsequent Italian seizure of Fiume
imposed a long standing injustice on Yugoslavia.

(c) A settlement following strict ethnic lines would leave mixed
populations on either side and would deny Yugoslavia and Central
Europe a vital outlet to the Adriatic in Trieste.

(3) Bearing in mind that one claimant is likely to be dissatisfied
whatever the solution we favour Yugoslavia's claim to most of
Venezia Giulia and to Istria as proposed.

(4) As to the city of Trieste, we recognise its predominantly
Italian character but are very mindful of its great economic
importance to Yugoslavia and Central Europe generally. While
difficulties are involved in International administration we
suggest that international supervision over a joint Italian-
Yugoslav administrative authority for Trieste might be considered.

We favour the proposal that it should be made a free port with
free communications access to Central Europe.

(5) Whatever the precise frontiers agreed on, it seems important
that to minimise possible future difficulties, there should be
complete as possible transfers of population and strict safeguards
for any minority rights.

(6) We think it important that there should be no delay in
reaching a final disposition of this area. Prolongation of Allied
Military Government has already induced considerable friction and
it is most desirable that genuinely representative civil
administration, based on institutions freely chosen in accordance
with local popular wishes, should function as soon as possible.