864.6363/11–1848
Memorandum by the Director of the Office of European Affairs (Hickerson) to the Under Secretary of State (Lovett)1
Subject: Hungarian Government’s action in taking over the management of the Hungarian-American Oil Company.
problem
In a decree issued on September 25, 1948, the Hungarian Government took over the management, including the control of all assets and rights, of the Hungarian-American Oil Company (MAORT) and the MAORT Gas Trading Company, American-owned subsidiaries of the Standard Oil Company. Article 1 of this decree stated that this action was taken in order “to prevent wilful sabotage of the production of crude oil … and … to secure undisturbed production”.
discussion
The action of the Hungarian Government in taking over the management of MAORT was preceded by the arrest of loyal Hungarian employes of MAORT and later, on September 18, by the arrest and temporary detention of Mr. Paul Ruedemann and Mr. George Bannantine, American officials of the Company, against all of whom allegations of industrial sabotage were made. Prior to their release on September 25, Messrs. Ruedemann and Bannantine were compelled under duress to copy and sign so-called “confessions” which were prepared by the Hungarian police and were wholly false. On the basis of these spurious statements and others extracted from the Hungarian employes, the Hungarians fabricated an elaborate case against MAORT and immediately publicized it widely in a “Grey Book” and through the officially-controlled press. The Hungarian employes of MAORT are to be brought to trial on November 26. Meanwhile, the Department has been in close touch with the officials of the Standard Oil Company (New Jersey) with a view to determining what action should be taken in the circumstances (1) to safeguard the American interests and rights concerned and (2) to protest and refute the false charges of sabotage made by the Hungarian Government.
conclusions
It is believed that we should instruct Legation Budapest to inform the Hungarian Government that we consider its action against MAORT wholly unwarranted and that we reserve all rights pertaining thereto and hold the Hungarian Government responsible for the [Page 392] continued operation of the Companies and for the value of the assets of the Companies. In addition, we should protest as false the “confessions” exacted by duress from Messrs. Ruedemann and Bannantine and, in this connection, enclose for the attention of the Hungarian Government a copy of a detailed memorandum prepared by SONJ, which reviews the history of the operation of MAORT and refutes the Hungarian allegations of sabotage. The text of our note and of the SONJ memorandum should be released to the press here following their delivery to the Hungarian Foreign Office by our Legation in Budapest.2
recommendations
It is recommended that you sign the attached telegram to Legation Budapest containing instructions for the delivery of the above-mentioned note and memorandum and that you approve the release of these documents to the press here following their receipt by the Hungarian Foreign Office.3
clearances
This proposed action has been cleared with EUR, OFD:EP, ITP:PED and CP, P:POS, and L/P.
attachment
Draft telegram to Legation Budapest.
- The source text is initialed by Under Secretary Lovett.↩
- The note under reference here and the enclosed memorandum entitled “Standard Oil Company (New Jersey) and Oil Production in Hungary by MAORT: 1931–1948” were delivered by the Legation in Budapest to the Hungarian Ministry for Foreign Affairs under date of November 30, 1948. For the text of the note, see Department of State Bulletin, December 12, 1948, p. 736.↩
- Telegram 1122, November 23, to Budapest, not printed (864.6363/11–1848).↩