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

864.51/11–846

The Hungarian Minister (Szegedy-Maszák) to the Director of the Office of European Affairs (Matthews)⁹¹

Washington, November 8, 1946.

Dear Mr. Matthews: In the course of our recent conversation on possible American economic assistance for Hungary,⁹² you kindly suggested to me that I take up the matter with Mr. Thorp and Mr. Ness.⁹³

I now wish to inform you that after discussing the matter with Mr. Thorp in brief, I had occasion to submit more detailed plans to Mr. Ness.⁹⁴ In quite an informal discussion with him, I outlined to Mr. Ness the types of credit lines which I at present consider the most important ones for Hungary in case the Export-Import Bank would be ready to negotiate loans. These are the following:

1. Establishment of a credit line for carrying out an agricultural rehabilitation program.

At the time when the termination of the activities of UNRRA had not yet been decided, the Hungarian Government filed a request with UNRRA for the carrying out of an agricultural rehabilitation program in Hungary. The Hungarian Government would have undertaken to repay the money to be invested by UNRRA in terms of agricultural products which UNRRA would have been able to use in its relief program in Europe. The early termination of the activities of UNRRA have excluded the adoption of such a plan by UNRRA. The Hungarian Government therefore desires to carry out a similar program by negotiating a loan for this purpose.

The carrying out of such a program would result not merely in the rehabilitation of Hungarian agriculture, but an increase in Hungarian agricultural production would also contribute in a positive way toward alleviating the European food supply problem.

The Hungarian Government feels certain that such a program would increase the agricultural output of the country to an extent which would enable Hungary to export already in the forthcoming years considerable quantities of agricultural products. These could be sold for convertible foreign exchange, thus rendering possible a relatively quick amortization of the loan. The sale of the commodities produced under this plan would serve to a considerable extent the purpose of reestablishing Hungary’s normal trade relations under the auspices of free trade.

2. Establishment of a credit line for the purpose of purchasing domestic surplus materials from the War Assets Administration.

In this connection, I should like to point out that although the Hungarian Purchasing Commission had entered into firm contracts with the European Field Commissioner of the Foreign Liquidation Commission for almost the entire amount of the $15,000,000 credit line established for the purchase of overseas surpluses, a deficiency of about $5,000,000 worth of goods occurred when actual deliveries were to take place. Since there is very little likelihood of being able to replace this deficiency with other overseas surpluses, and since Hungary is very anxious to be able to use up the entire credit line for actual deliveries, I feel that domestic surpluses might be considered in order to make up the overseas deficiency. This could be a starting point for the negotiation of a loan for domestic surpluses which Hungary would be very much interested to purchase in quantities even exceeding the value of the $5,000,000 referred to above.

We agreed with Mr. Ness that these conversations are being carried on quite informally, without creating any prejudice against official steps to be taken. Mr. Ness, not having had access to the record of the conversation which I previously had with you, indicated that before going into further details he would first like to get in touch with you and confirm the information given to him by me. May I respectfully request you, therefore, kindly to give further consideration to this subject.

I remain [etc.]

Aladár Szegedy Maszák

91. The Hungarian Minister left this letter with the Assistant Chief of the Division of Southern European Affairs (Barbour) during a call to the Department on November 15. According to Barbour’s memorandum of conversation of the meeting, dated November 18 (not printed), Szegedy-Maszák discussed the two proposals made in his letter and made the point that in his view the Hungarian Government would be in a position to permit American observers to oversee the distribution and end use of rehabilitation supplies purchased under the proposed credit. The Minister felt that for internal Hungarian political reasons, the Soviet authorities would find it difficult to refuse to allow the entry of such observers. (864.51/11–1846)
92. Szegedy-Maszák had called on Matthews on October 30, primarily to discuss the outcome of the Paris Peace Conference deliberations on the Hungarian Peace Treaty. Matthews’ memorandum of conversation of the meeting is not printed. (864.00/10–3046)
93. Willard L. Thorp, Assistant Secretary of State for Economic Affairs, and Norman T. Ness, Director of the Office of Financial and Development Policy.
94. Szegedy-Maszák’s meeting with Ness took place on November 6.