864.5034/5–1347: Telegram
The Secretary of State to the Legation in Hungary
583. In general, US attitude toward nationalization programs in foreign countries is that such measures fall within national jurisdiction govt concerned. In so far as nationalization may be extended US properties in foreign states, this Govt would insist prompt, adequate [Page 301] and effective compensation US owners. US would maintain, further, that nationalization cannot substantively alter existing obligations to US Govt or US nationals on part foreign govt or its nationals and that such obligations must be duly discharged.
Dept feels, however, that foregoing considerations have no clear application as basis US representations in connection proposed nationalization Hung banks (urtel 780 May 121), since in present case (1) compensable US interests are minor and (2) there is no evidence that nationalization of Hung banks per se would directly result any adverse change Hung attitude toward obligations to US. In this connection, US extended cotton credits Czechoslovakia and other countries which had already nationalized sectors their economy. Moreover, as Hung Govt is guarantor recent US cotton credit, complete Govt control presumably would not prejudice guarantee. Any US threat, express or implied, to withhold relief if nationalization takes place deemed inadvisable as being more hurtful than helpful democratic cause Hung. Possibility must also be considered that formal US representations, especially if based on weak ground, might precipitate new political crisis (urtel 791 May 131) at most inopportune time.
In light foregoing, Dept believes any US action present situation must be of limited and informal character and suggests salient point to be made in circumstances is that proposed nationalization would inevitably extend and consolidate control exercised by pro-Soviet elements over Hung economy and bind Hungary more closely to Soviet Union—a development counter to will majority Hung people.
Dept accordingly requests that, in your discretion, you approach FonMin informally indicating US concern over effects nationalization along lines preceding paragraph. You should add that US general attitude concerning nationalization (para 1) holds only on condition all foreign enterprises nationalized without discrimination. Please report any efforts Soviets to avoid nationalization German assets which give Soviets interest in banks.