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

864.50/6–1246

Memorandum of Conversation, by Mr. Leslie C. Tihany, Attached to the Division of Southern European Affairs²⁰

[Washington,] June 12, 1946.

Participants:	Foreign Minister Gyöngyösi;
	Minister to the US, Szegedy-Maszák;
	Counselor of Legation, Marik;
	Mr. Hickerson of EUR;21
	Mr. Barbour of SE;
	Mr. Tihany of EAI.

Part I

The Foreign Minister began his remarks by giving a brief summary of the political and economic situation in Hungary substantially as follows: For some time to come the political situation has been determined by the fact that at the end of the war Hungary was liberated by the Red Army. The population of Hungary is overwhelmingly pro-Western in its sympathies. The pro-Western elements, who amount to about sixty percent of the population, and which include the extremely individualistic peasantry, are anxious to preserve a middle-class form of living in Hungary. In this desire they are opposed by a minority consisting mostly of industrial workers, who are pro-Eastern in their sympathies and are not interested in the continuation of a middle-class Hungary. As a result of this split in Hungarian public opinion, the affairs of the country could be entrusted only to a coalition government. The elections held in November 1945 showed the will of the people in returning a majority of pro-Western bourgeois-minded elements. It is obvious that the Left cannot obtain a parliamentary majority through constitutional means in Hungary today. Nevertheless, the dynamic nature of the labor movement and the support that they are in a position to receive from the army of occupation might give them the upper hand in a political contest between the two opposing factions. Owing to the desperate economic situation of Hungary, a crisis appears to be imminent. Such a crisis could be utilized by the Left to achieve its political objectives.

The present crisis is due to certain economic factors. These factors arise from the Armistice Agreement of January 20, 1945²² which imposed exceptionally heavy economic obligations on Hungary. These economic obligations consist of reparations ($300,000,000) and restitution of property removed from the territory of the United Nations during the war. To these two factors one must add the impoverishment of Hungarian economy resulting from the removal of goods from Hungarian territory by the retreating German armies, and certain of the pre-war financial obligations of the Hungarian Government, especially toward the West. In addition to these economic burdens, certain difficulties of a political nature also contribute to the present desperate situation in Hungary. The most important of these factors is the fact that three million Hungarians today live outside the borders of the Hungarian state. The situation of these minorities is rapidly deteriorating. To mention only two examples, there are today 650,000 Hungarians living in the Czechoslovak Republic. The determination of the Czechoslovak Government to expel 300,000 persons of this minority and to deprive the remainder of all civil and property rights faces the Hungarian Government with a realization that the influx of these deportees would further contribute to the desperate economic situation of the country, and that the maltreatment of the remaining Hungarian minority in Czechoslovakia would further contribute to the rebirth of the chauvinistic attitude which contributed to cause Hungarian participation in the second World War on the German side. In Rumania the situation of the Hungarian minority is better. It must be noted, however, that in spite of the good intentions announced by the Groza Government and in spite of directives from above, the lower provincial authorities appear to be determined to mistreat and pauperize the Hungarian minority entrusted to their care. The Government of Hungary would therefore be extremely grateful if the Western Powers, especially the United States, would exert its political and moral influence to stop immediately the forced migrations, and to assure institutionally the enjoyment of human rights for Hungarian minorities outside the borders of the Hungarian state. The position of the Hungarian Government in this question may be summed up briefly as follows: Hungary is willing to receive its minorities now living in Czechoslovakia provided that these minorities are transferred together with the territories they inhabit. Should this not take place, the Hungarian Government insists on the safeguarding of minority rights for Hungarians living in Czechoslovakia. As for Rumania, the Hungarian Government proposes that a new frontier be drawn in such a manner as to leave an equal number of minorities on either side of the frontier.

The aim of the Hungarian Government is to prevent anarchy and chaos such as the factors outlined above are very likely to bring about unless checked in time. The majority party represented in the Hungarian Government placed great emphasis on the preservation of the bourgeois mode of living and of pro-Western middle-class Hungary. In order to achieve these aims the Hungarian Government would like to enlist the good offices of the United States, which by exerting its political, moral and economic influence, is perhaps alone in a position today to prevent a revolutionary upheaval in the Hungarian state and economy. The Hungarian Government respectfully suggests that economic aid to Hungary could take three forms:

(1) The restitution of displaced goods now located in the American zones of occupation in Germany and Austria. These displaced goods consist of the gold reserve of the Hungarian National Bank amounting to $32,000,000, rolling stock of the Hungarian state railroads, and ships belonging to Hungarian steamship companies,

(2) An increase in the amount of present UNRRA assistance to Hungary,

(3) The granting of a loan through the Export-Import Bank. Should the restitution of displaced goods prove to be impossible for the time being, the Hungarian Government would be grateful if these displaced goods could be made use of as collateral in connection with a loan to be extended to Hungary. If in connection with the proposed Export-Import Bank loan, economic considerations should not warrant the extension of such a loan to Hungary, would the United States Government be influenced by political considerations in this matter?

(4) An increase to $20,000,000 of the present $10,000,000 surplus property purchase credit.

Part II

Mr. Hickerson began his reply by stating that if Hungary today is occupied by the Bed Army it is due to the joint war effort, in which the United States and the USSR as allies brought about the common victory. The United States spent four years in developing this war effort and suffered one million casualties before victory could be achieved. The destruction of German industry, for example, was to a large extent due to the employ men t of planes manufactured in the United States and flown by American personnel. In reply to His Excellency’s suggestions Mr. Hickerson stated that in the political sphere the United States Government will do everything in its power to bring about a fair and reasonable settlement of outstanding issues at the forthcoming peace conference. Regarding the economic suggestions of the Foreign Minister, Mr. Hickerson asked whether in the matter of displaced goods the Hungarian Government has addressed a similar request for restitution to the USSR Government. (The Foreign Minister replied that the Hungarian Government has done so but has so far not received any reply at all.) Mr. Hickerson pointed out that the restitution of displaced goods is primarily an international problem, which can be decided only in concert with the allies of the United States. As far as a possible increase in UNRRA aid is concerned, Mr. Hickerson stressed that although 72½ percent of UNRRA costs are being met by the United States, UNRRA is nevertheless an international agency not under the control of the United States Government. He consequently suggested that the Hungarian Delegation would do well to discuss this problem with Mr. LaGuardia.²³ In the matter of an American loan to ex-satellites, Mr. Hickerson stated that the President and the Secretary are of the opinion that such a loan could be granted only on the condition that it be not used for paying reparations to another power. To the interjection of the Hungarian Minister to Washington to the effect that such a step is likely to produce a vicious circle Mr. Hickerson replied that certain other states, notably Finland, have been able to arrange this matter to the satisfaction of the United States Government. To a suggestion made by the Foreign Minister, namely that a loan be made nevertheless and that the utilization of this loan be controlled and supervised by United States representatives in Hungary, Mr. Hickerson replied that such a matter could be decided only on a higher level. He added that the Export-Import Bank has not received favorable indications concerning the ability of Hungary to repay within a specified time limit a putative loan such as suggested by the Foreign Minister. To the remark of the Foregn Minister suggesting that if the United States is not in a position to grant a loan to Hungary because of economic considerations, would it be possible to extend such a loan in view of existing political factors, such as the threat of an imminent political crisis in Hungary, Mr. Hickerson replied that the Export-Import Bank is not in a position to take into account political considerations. In reply to the Foreign Minister’s statement that the majority party in Hungary and indeed the majority of the Hungarian people wish to pursue a Western orientation, Mr. Hickerson replied that the United States asks for itself no rights or privileges in Hungary that are not also enjoyed by other powers, and that it holds firmly to an open door policy as regards Hungary. Concerning the political orientation of the Hungarian Government and the Hungarian people, Mr. Hickerson stated that such an orientation should not be exclusively Western, but rather Western, Eastern, Northern and Southern.

20. Most of the points covered in this conversation were also discussed the following day in a meeting which Foreign Minister Gyöngyösi and Minister Szegedy-Maszák had with Assistant Secretary of State Clayton and several other officers of the Department of State. The memorandum of that conversation (not printed) is filed separately under 864.50/6–1346.
21. John D. Hickerson, Deputy Director of the Office of European Affairs.
22. The armistice agreement between the United States, the United Kingdom, and the Soviet Union and Hungary, signed at Moscow, January 20, 1945; for text, see Department of State Executive Agreement Series No. 456, or 59 Stat. (pt. 2) 1321. For documentation regarding the negotiation of the armistice, see Foreign Relations, 1944, vol. iii, pp. 847 ff.
23. Fiorello H. La Guardia, Director General of the United Nations Relief and Rehabilitation Administration.