864.50/4–2847: Telegram

The Minister in Hungary (Schoenfeld) to the Secretary of State


695. According to translation in my possession of top secret note dated March 26 from Soviet Minister to Hungarian Government, Soviet Government demands repayment of three loans totalling 850 million pengö from Soviet Government to Hungary in 1945. Note says Governments agreed after war to fix dates and conditions of repayment [Page 297] and Soviet Government deems it desirable loans should be repaid this year in forint by converting pengö into forint through dollar at rate of May 2, 1945 when dollar was quoted at 280 pengö thus making amount to be paid Soviet Union 3,035,700 US dollars equivalent to 35.6 million forint.

This secret demand coupled with recent secret demand by Soviets on Hungarian Government to pay Soviet’s alleged Hungarian debts to German creditors, see Legation’s despatch 2697, March 51 in amount of 1600 million forint2 as well as ruthless pressure recently exerted on Hungarian General Credit Bank (Legation’s despatch 2994, April 251) to permit conversion of minority Soviets bank holdings into control through forced sale of Hungarian held share strongly suggest pattern of retaliation upon Hungary for accepting American economic aid and intentions to make such aid entirely ineffective. They also suggest increased difficulty of collecting American and other war claims by reducing Hungarian capacity to pay.

Loans of 850 million pengö first above-mentioned represented Hungarian currency seized as war booty in 1945 by Soviet troops at branches of Hungarian National Bank and in private banks in Hungary.

  1. Not printed.
  2. On May 14, Hungarian Minister Szegedy-Maszák called on Acting Chief of the Division of Southern European Affairs Barbour to discuss the Soviet demands under reference here. Szegedy-Maszák suggested that the United States authorize the American Legation in Budapest to make clear to the Hungarian Government that the United States did not accept the Soviet interpretation of German assets. Barbour promised to take the matter under consideration. (Memorandum of conversation by Barbour, May 15, 1947: 740.00119 EW/5–1547)
  3. Not printed.