661.6431/10–3145: Telegram
The Secretary of State to the Representative in Hungary (Schoenfeld)
685. In Dept’s view essential point in any proposed revision of Soviet-Hungarian economic collaboration agreement is the actual effect of operations of joint companies on US treaty rights and on opportunities for countries other than USSR to share on equal basis in trade and other economic relations with Hungary. Revised version of agreement which did not safeguard those rights and opportunities would naturally be looked upon here with inquietude, whether or not assets of joint companies are to be limited, in the beginning, to pre-1938 German assets in Hungary. It is nevertheless recognized that Hungarians, under pressure from Soviets, may have finally to ratify agreement in some form and that Nagy proposals (reMistel 841 Oct 3168) represent reasonable attempt on their part to obtain more favorable terms. It is apparent in case of Soviet-Rumanian collaboration agreement that joint companies set up in Rumania are in position, partly because of important assets turned over to them by Rumania Govt, to dominate and even to monopolize respective fields of enterprise.
Pending receipt of further info on revision of present text of agreement, Dept would prefer that you make no statement on proposed changes communicated to you by Varga (urtel 841) to Hungarian officials or party leaders. Basic US views are already known to both Soviet and Hungarian Govts.
For your info, although Soviet reply (Moscow’s 3735 Nov 2 to Dept rptd to you as 55) ignores our proposal of tripartite consultation on program of economic rehabilitation for Hungary, Dept is giving consideration to possible concrete measures by which US might undertake to assist economic recovery of Hungary either as part of common program with participation of other Allied Govts (reurtel 840 Oct 31) or as direct US-Hungarian arrangement.
- Not printed; it reported that on October 31, Istvan Varga had called upon Schoenfeld on behalf of Fernec Nagy, Hungarian Minister of Reconstruction and General President of the Smallholders Party. Nagy believed that the Soviet authorities would accept a revised version of the Soviet-Hungarian economic collaboration agreement which contained fewer concessions to the USSR. Specifically, Nagy proposed that the joint Russian-Hungarian companies would receive only those assets which were awarded to the USSR by the Potsdam agreement, with the further limitation that the joint companies would receive German shares in only those Hungarian companies in which the majority ownership was German. Assets acquired by Germany after 1938 would be disregarded. (661.6431/10–3145)↩