Foreign Relations of the United States: Diplomatic Papers, 1944, The British Commonwealth and Europe, Volume III

740.00119 E.W./10–2144

Memorandum of Conversation, by the Associate Chief of the Division of Financial and Monetary Affairs (Luthringer)

[Washington,] October 21, 1944.

Participants:	A–A—Mr. Acheson45
	EUR—Mr. Matthews46
	ECA—Mr. Haley47
	Mr. Hiss48
	SE—Mr. Cannon49
	FMA—Mr. Luthringer
	EE—Mr. Durbrow50

A meeting attended by those listed above was held in Mr. Acheson’s office on October 19 to consider the question of how far this Government should go in the negotiations concerning the Hungarian armistice terms in opposing the Soviet reparations demands on Hungary. The Russians are proposing that Hungary agree to pay $400,000,000 which would be “payable over five years in commodities, machine equipment, river craft, grain, livestock, etc.” The Department has already instructed Mr. Harriman at Moscow to oppose these terms strongly and has suggested the general and specific grounds for such opposition. In reply Mr. Harriman has indicated that he thought a strong stand should be taken but stated that there was little use in arguing the question with the Russian negotiators unless he was authorized to carry opposition to the extent of refusing to sign the proposed agreement. The purpose of the meeting was to decide whether opposition should be carried to that extreme.

The following decisions were reached:

1. Our Embassy at Moscow should be instructed to oppose the naming of a specific amount of reparations in the armistice terms and should be authorized to inform the Soviet Government that if it did not yield on this point, the United States would sign the armistice terms only with a specific reservation with regard to Article 13, the reparations article. It was not considered advisable, however, to push opposition to the point of not signing at all.

2. It was agreed that opposition should be based on general principles, such as the excessiveness of the demands from the standpoint of the effect on the Hungarian economy and the claims of other United Nations, the United States’ interest in seeing a speedy restoration of international trade on a liberal basis, and America’s interests in Hungary both in the investment and trading sense. It was decided, however, that in expressing these views the possible effects on the American oil investments should not be made a specific basis of the objections.

3. There should be no departure from our general position of not objecting to payments in kind to a position of suggesting to the Soviet that in the case of oil reparations should be paid in cash acquired by sale of the oil through American owned distributing channels in Europe. It was agreed that the Embassy should, rather, stress our belief that reparations should consist primarily of goods to be used directly in reconstruction in the recipient countries and should not be re-exported.

(In his memorandum of October 12, 1944,⁵¹ Mr. Loftus of the Petroleum Division suggests that an arrangement for payments in cash should have been advocated by the Department in connection with the Rumanian Armistice negotiations in order to protect the American interests in the petroleum distributing system in Europe. He further suggests that failure to do so raises serious questions as to whether the Department properly discharged its duty with regard to protection of American property when it assented to the Rumanian Armistice terms.)⁵²

4. The Embassy should not re-open the question of Rumanian reparations while discussing Hungarian reparations in an attempt to have extended to the former any reservations it might make with regard to the latter. This was based largely on the feeling that our case was much stronger in the case of Hungary than in the case of Rumania and that such a move would further complicate the Hungarian negotiations.

45. Dean Acheson, Assistant Secretary of State.
46. H. Freeman Matthews, Deputy Director of the Office of European Affairs.
47. Bernard Francis Haley, Director of the Office of Economic Affairs.
48. Donald Hiss, Deputy Director of the Office of Economic Affairs.
49. Cavendish W. Cannon, Chief of the Division of Southern European Affairs.
50. Elbridge Durbrow, Assistant Chief of the Division of Eastern European Affairs.
51. Memorandum not found in Department files.
52. In a memorandum of October 26, 1944, Mr. Loftus noted that this parenthetical paragraph “does not correctly state my position, which was that unless there were fairly clear evidence that oil products would he used directly in Russian reconstruction it would be preferable for the oil content of the aggregate reparations liability to be paid in cash or free foreign exchange, since in such case the legitimate benefits to Russia would be the same and the incidental damage to American property interests would be very much less”. (740.00119 E.W./10–2644)