Foreign Relations of the United States, 1946, Eastern Europe, The Soviet Union, Volume VI

864.50/4–2346: Telegram

The Ambassador in the Soviet Union ( Smith ) to the Secretary of State

restricted

Moscow , April 23, 1946—2 p.m.
[Received 8:46 p.m.]

1302. ReEmbs 629 March 3.⁸² To Kennan’s letter of March 2 addressed to Molotov re economic situation of Hungary Vyshinski replied on April 21. Text in translation follows:

1. The fulfillment by Hungary of its reparations obligations and the presence of occupation troops in Hungary do not and cannot exercise any serious influence on the economic situation of the country. In 1945 Hungary was to have delivered reparations to the Soviet Union to the value of 33.5 million dollars but actually delivered goods to the value of only 10.5 million dollars. Hungary has not yet begun reparations deliveries to Yugoslavia and Czechoslovakia although she was supposed to have delivered goods to these countries in 1945 to the value of 17.5 million dollars. All Hungarian deliveries of grain crops for the needs of the Soviet occupation troops do not exceed 3 percent of the total grain output of the country in 1945. These deliveries were made in planned fashion and the Soviet Command in Hungary has neither carried out nor is carrying out any requisitions. There has been no interference by the occupation authorities in Hungary’s economic affairs. Therefore, the Soviet Government cannot agree to the statement contained in your letter that the situation which has been created in Hungary was caused in very considerable degree by the overburdening of the country with reparations, requisitions, the maintenance of very large occupational forces and the interference of the occupational authorities in economic affairs since this statement is entirely without foundation.

2. The real reasons for the severe economic and financial situation in Hungary are the expenditures incurred by her in the war against the United Nations and the ravaging of the country by the Germans and former Hungarian rulers.

3. It should be noted that one of the main reasons for the difficult economic situation in Hungary at the present time is the fact that a large quantity of Hungarian property and valuables continues to this day to remain in the American Zone of occupation on the territory of Austria and Southern Germany where this property was shipped by the Salaszy⁸³ government during the period of the advance of the troops of the Red Army. Practically the entire gold reserve of Hungary, railway rolling stock, the automobile transport, the most valuable plant and factory equipment, pedigreed cattle, horses, and also stocks of raw materials and food are in the territory of Austria and Southern Germany occupied by the American troops. The value of all this property according to preliminary estimates of the Hungarian Government is about 3 billion dollars which exceeds 10 times the total sum of reparations from Hungary, the payment of which as is known was scheduled for 6 years and has now been extended to 8 years.

4. The Soviet Government also cannot agree with the statement that the Government of the US has had very small opportunity to facilitate the reconstruction of Hungary or at any rate exercise influence on the course of economic life in that country. In the opinion of the Soviet Government, the return to Hungary of the Hungarian property mentioned above which is located in the zones of deployment of the American troops in Austria and Germany might exercise a very effective positive influence on the economic condition of Hungary. Nevertheless, the Government of the US has thus far given the Hungarian Government no reply to its repeated communications requesting the return of this property.

5. The Chairman of the Allied Control Commission in Hungary has systematically informed the representatives of the US and Great Britain concerning the course of Hungary’s fulfillment of its reparations obligations and also concerning Hungary’s economic and financial difficulties.

6. The Chairman of the Control Commission is willing to acquaint himself with such considerations as may be advanced by the representatives of the US and Great Britain concerning Hungary’s economic situation. The Soviet Government however cannot accept the proposal of the US Government that the representatives of the Soviet Union, the US and Great Britain in the Control Commission jointly work out a plan for the economic reconstruction of Hungary inasmuch as the working out of such plan falls within the competence of the Hungarian Government.

7. I shall be grateful to you, Mr. Chargé d’Affaires, for bringing the above to the attention of the Government of the USA.

Sent Department 1302, repeated Paris for Secretary⁸⁴ 102, London 207A, Budapest 33.

Smith

82. Not printed; it reported the delivery of letter of March 2 from Kennan to Molotov, p. 265.
83. Ferenc Szálasi, Hungarian Premier from October 1944, and subsequently “Leader of the Hungarian Nation” until his flight from Hungary in the spring of 1945.
84. The Secretary of State was in Paris from April 23 to May 16 for the meetings of the Council of Foreign Ministers.