Foreign Relations of the United States, 1949, Eastern Europe; The Soviet Union, Volume V

711.64/11–149

Department of State Policy Statement¹

secret

[Washington,] November 1, 1949.

Hungary

a. objectives

The long-range objectives of US policy toward Hungary are (1) the revival of an independent Hungarian state having freedom of association in its relations with other states; (2) the assurance to the Hungarian people of an opportunity to choose their own government, develop democratic institutions, and enjoy freely the fundamental human rights and liberties; (3) the eventual admission of an independent and democratic Hungary to membership in the United Nations, its inclusion in any organization for European economic cooperation, and its participation in any steps toward European political union; (4) the encouragement of friendly relations between Hungary and its Danubian neighbors and (5) the establishment of economic relations with Hungary on a basis which will insure non-discriminatory treatment and equal opportunity for US interests and those of other peace-loving states, promote active trade in accordance with ITO Charter principles, contribute to the development of a balanced and expanding Hungarian economy, and enable Hungary to participate effectively in the restoration of a peaceful, stable and prosperous European community.

As these objectives cannot be attained until a major shift in international relationships is brought about, US policy toward Hungary has also more immediate, limited goals under present conditions in eastern Europe. These objectives are: (1) the withdrawal of Soviet troops from Hungary through the earliest possible conclusion of an Austrian settlement; (2) the maintenance of US prestige; (3) the protection of American interests in Hungary and, where effective protection cannot be provided, the preparation of adequate legal grounds for ultimate redress; (4) the implementation of the provisions of the Peace Treaty with Hungary,² particularly those relating to human rights and freedoms; (5) the encouragement of the Hungarian people’s democratic aspirations and their faith in the values of western civilization; (6) the stimulation of widespread passive resistance to Communist ideology and to the consolidation of totalitarian rule; (7) the development of trade between Hungary and the western European countries along lines which will assist the latter to obtain products needed for their economic recovery and preserve economic ties between Hungary and the west but will not aid in building up Hungary’s war potential and thus indirectly Soviet military power.

b. policies

The problem of Hungary is part of the larger problems of Europe, the USSR, and eastern Europe. Hungary’s present relationships within this complex are influenced less by historical and geographic factors than by the circumstance that it has been divorced from its natural ties with the west and forced into the Soviet orbit, that it is still under virtual occupation by Soviet troops, and that the instruments of governmental power are firmly held by a Communist minority subservient to the USSR. US policy toward Hungary is therefore generally determined by US policy toward these areas. In carrying out our policies toward Hungary, we expect to continue to consult with the UK in all matters of common concern.

Our present efforts are designed (1) to keep open those channels whereby the US can most effectively influence the situation of the Hungarian people and the internal and external policies of the Hungarian Government; (2) to develop such economic relations with Hungary as we can adequately control in the interest of the European Recovery Program and the preservation of economic ties between Hungary and the west, without at the same time contributing substantially to the military potentials of Hungary and the USSR; (3) to oppose firmly by all available means further encroachments by the USSR and the Hungarian Communists upon US interests in Hungary and upon the rights, liberties, and resources of the Hungarian people; (4) to counteract anti-democratic propaganda, present a balanced view of American life and accurate news and interpretation of world developments, and make clear the contrast between the positive character of US objectives concerning the future of the Hungarian people within a reconstructed European community and the nature of the objectives of the Hungarian Communists and the USSR; and (5) to demonstrate to the USSR and the Hungarian Communists, by steady pressure and the general development of US policy in countering Soviet imperialism, that their domination of Hungary must ultimately be relaxed.

1. Political

The Soviet occupation forces have repeatedly intervened directly and indirectly in support of the Communist Party in Hungary. The Party and its collaborators, with this foreign support, have been enabled to impose totalitarian rule by subverting the government freely chosen by the majority, suppressing all open political opposition, and abridging human rights and freedoms in violation of the provisions of the Peace Treaty. The Hungarian Communist regime has sought to eliminate western, and particularly US, influence from Hungary. Officially, as well as through the controlled press and radio, it has vilified and falsified US motives and actions with respect to Hungary. It has systematically persecuted pro-western elements and impeded in every possible way the development of normal relations with the US and other western democracies.

At the same time, the regime has betrayed Hungarian independence and sovereignty by subjecting the country to Soviet interference and exploitation and has bound Hungary formally to the USSR and its other satellites by mutual aid and other treaties and by active participation in the Cominform. This artificial orientation of Hungary, though still not complete in its economic and social phases, is a significant feature of Hungary’s subjection to Soviet-Communist rule and may represent a preliminary step toward the ultimate incorporation of the Hungarian Republic in the USSR.

The US on appropriate occasions condemns those acts and policies of the Hungarian Communist regime or the Soviet authorities which violate international commitments, infringe Hungarian independence, impair the fundamental rights and freedoms of the Hungarian people, or undermine friendly relations between the peoples of Hungary and the US. While we realize that US statements and representations in this regard will not of themselves serve materially to improve conditions in Hungary, such expressions are of importance in recording and interpreting Soviet-Communist actions, alerting world opinion to the basic issues involved, and reassuring the Hungarian people of US interest in their welfare. Continued action along this line is also important as a foundation for more decisive measures which the US and other nations may at a later date wish to adopt in concert or through the UN.

The US continues to oppose the admission of Hungary to membership in the UN in the absence of satisfactory evidence that the Hungarian government is able and willing to fulfill the obligations set forth in the Charter of the UN. Its record of Peace Treaty violations indicates that it does not now meet the criteria for admission.³

Although we maintain diplomatic relations with the present Government of Hungary, we will periodically review the advisability of this relationship, keeping in mind the diminishing effectiveness of US representation in Budapest due to hostility and obstruction on the part of the Communist regime and the gradual drying up of sources of intelligence. For the present, however, we find it advantageous to continue diplomatic relations in order to avoid formalizing the arbitrary separation of eastern from western Europe, to obtain information on conditions in Hungary, to manifest our interest in the welfare of the Hungarian people, to take every practicable step to protect American interests there, and to exert every possible effort toward achieving our short-term objectives in Hungary.

In general, the Hungarian Government has shown no disposition to fulfill its obligations under the Treaty of Peace. While not anticipating that the attitude of the Hungarian Communist regime will improve in this regard, the US will continue, in concert with the UK, to press for the implementation of treaty provisions and to establish clearly for the record and for its propaganda value any violation or disregard by the Hungarian Government of its obligations. In this connection, the US, together with the UK and several of the Dominions, has formally charged the Hungarian Government with violating the human rights provisions of the Peace Treaty. We are, and intend to continue, pressing this case under the disputes procedures stipulated in the Treaty until responsibility for these violations is fixed upon the Hungarian regime or the effectiveness of the Treaty procedures in this regard is exhausted. The General Assembly of the UN, acting in support of the steps taken by the US and UK under the Peace Treaty, has expressed increased concern at the accusation against Hungary and the latter’s refusal to cooperate in any examination of the charges and has requested an advisory opinion from the International Court of Justice on certain points of fact and law relating to the dispute. It has also retained on its agenda the question of the observance of human rights and freedoms in Hungary. If the Peace Treaty procedures do not yield satisfactory results, we may carry our case to the General Assembly for substantive discussion and appropriate action.⁴

The importance of the Voice of America broadcasts to Hungary and of other phases of the information program has steadily increased in direct proportion to the growing control exercised by the Communist regime over the dissemination of ideas and information within Hungary and to the barriers placed by the government in the way of direct contact between the Hungarian people and the western world. At present, our broadcasts and the distribution by the Legation of the Radio Bulletin are the most effective instruments at hand for informing and influencing the Hungarian people and sustaining their democratic aspirations and their faith in the traditional values of western civilization.

We are not now in a position to anticipate the role of democratic Hungarian political exiles in any future establishment of an independent and democratic Hungary. However, we regard with interest and sympathy activities of these exiles, taken on their own initiative, which unite them on the basis of common devotion to the principles of democracy and freedom for such purposes as unofficial intelligence, mutual welfare, and encouragement of the Hungarian people in their passive resistance to Communism. On the other hand, we would not in existing circumstances view with favor any emigre activity directed toward the formation of a “government-in-exile.”

2. Economic

The condition and prospects of the Hungarian economy and the character of economic policies under the present Communist regime are now largely determined by the interests of the USSR. Hungarian economic activity has increasingly followed a discriminatory pattern in favor of eastern Europe, especially the USSR, and has become more and more restrictive where US and other western interests are concerned. This discrimination is particularly evident in the commercial agreements concluded by Hungary with the USSR and the eastern satellite states and in the arrangements respecting the formation and operation of the Hungarian-Soviet joint companies whereby special privileges have been granted to the USSR in such matters as taxation, transfer of profits, guarantees against loss, and extraterritorial privileges. American property interests in Hungary have not only been subjected to discriminatory treatment as compared with Soviet interests but have also suffered from the increasing control imposed by the Hungarian Government over all phases of industrial and business management and operation. In addition many American-owned properties and interests have been lost to their owners without compensation through outright expropriation pursuant to nationalization and land reform measures, transfer to the USSR as “German” assets, sudden imposition of excessive taxes intended to induce bankruptcy, false charges of “economic sabotage”, or through simple seizure of premises.

In the case of discrimination and illegal transfers to the USSR, we have attempted and will continue to attempt whenever feasible to use the terms of the Treaty of Peace to protect the American interests involved. We will also continue to publicize the imperialistic methods and aims of the USSR as evidenced in the Soviet penetration and exploitation of the Hungarian economy. In cases of loss to American owners of property through expropriation, the payment of prompt, adequate and effective compensation has been and will continue to be demanded. However, if the Hungarian Government continues to be dilatory in meeting American claims, there is little possibility of our exerting effective pressure. With respect to interference with the rights of American owners and resultant financial loss through the imposition of controls over management, we have found it impossible to invoke the terms of the Treaty of Peace. These controls have taken the form of price fixing, production quotas, wage controls, allocation of raw materials and products, manipulation of taxes, and forced placement of governmental personnel in managerial positions. We expect to formulate any protests to the Hungarian Government against its interference with the management rights of American owners on a basis which will leave the American owner with a supportable claim to title and will enable him to hold the Hungarian Government responsible for all losses or injuries to the property occurring during the period of its control. In the matter of American claims under the Peace Treaty for damages arising from the war, the Hungarian Government has shown no disposition to institute appropriate measures for the settlement of such cases. However, we should overlook no appropriate opportunity to press for action in this regard.

Despite Hungary’s position as a Soviet satellite and non-participant in ERP, we wish to encourage the expansion of regular commercial relations between Hungary and the western European countries in the interest of the rapid economic recovery of western Europe. Negotiations are currently under way, however, to secure agreement of OEEC countries to withhold from export to Hungary certain specified strategic goods. Trade between the US and Hungary has never been of major importance from the US point of view, and strict control is being exercised to insure that the goods exported to Hungary shall not jeopardize US security objectives with regard to eastern Europe.⁵ The application of such controls is technically inconsistent with most favored nation treatment stipulated in the 1925 Treaty of Friendship, Commerce, and Navigation between the US and Hungary; however, security reasons require our regulating the export of goods to Hungary as long as that country permits its economy to be dominated and its policies toward other states determined by the USSR. To the extent that these controls apply to goods in short supply they are also required by the US obligation to give priority to the needs of ERP participants.

Since the Communist political coup of May–June 1947,⁶ US Government credits have not been available to Hungary. The Department cannot formally object to the extension of private loans to Hungary by American lenders but, if consulted, would seek to discourage such loans indirectly by pointing out the captive character of the Hungarian economy and other factors which might prejudice the soundness of such transactions from the viewpoint of the lenders. The US is continuing to hold, under the terms of Article 29 of the Treaty of Peace, Hungarian funds and assets which were blocked or vested here during the war. It is the intention of the US to continue to maintain the present status of these assets until there is further clarification of the outlook for the settlement of US claims against Hungary.

General restitution to Hungary from the US Zone of Germany, which has been suspended since April 1948,⁷ will shortly be completed in fulfillment of Article 30 of the Treaty of Peace. All pending claims have now been carefully screened for strict conformance to standards of eligibility as defined in the provisions of Article 30, and restitution will not be made of those goods for which the US does not grant export permits to countries under Soviet domination. Restitution will also not be made of captured enemy material or of property which is claimed independently by refugee nationals or non-nationals of Hungary.

On two occasions, first in 1946 upon its own initiative and again in 1948 at the request of the Hungarian Government, the US entered into discussions with the Hungarian Government with a view to the conclusion of a civil air agreement. The outcome in both instances was completely unsuccessful and reflected Hungary’s conformity to Soviet policy, which aims at the exclusion of US aircraft from eastern Europe, but at the same time seeks the right for the USSR or its satellites to operate in the air space of other countries. The US will seek, in cooperation with other western countries, to restrict the civil air operations of the USSR and its satellites, including Hungary, to their own orbit, except for occasional flights to western Europe when the quid pro quo involves advantages to the western European states concerned.⁸

c. relations with other states

Hungary’s foreign relations and policy are determined in all important respects by the aims and policy of the USSR, and its relations with the other Soviet satellite states are along the lines of the close collaboration dictated by the USSR. This collaboration has been directed consistently toward the objectives of hastening the communization of eastern Europe and of establishing, by means of a network of “mutual aid” pacts, discriminatory economic agreements, and cultural pacts and the Cominform, a European Communist bloc through which the USSR can broaden and intensify its cold war against the US and the democracies of western Europe. There is every reason to assume that the USSR will continue to dominate that country in the furtherance of Soviet interests and will seek to preserve the usurpation of power by the Communist minority, which has demonstrated its complete subservience to the USSR.

The conclusion of an Austrian settlement,⁹ providing for the withdrawal from Austria of Soviet occupation forces and the full restoration of Austrian independence and sovereignty, would directly affect the situation of Hungary and place the US and other western Powers in a more favorable position as regards Hungary. At present, the USSR is in military occupation of eastern Austria, thereby sealing off Hungary from direct access to western Europe. It is also exercising the right granted it under the Treaty of Peace with Hungary to keep armed forces in Hungarian territory for the maintenance of the “lines of communication” of the Soviet Army with the Soviet zone in Austria. Withdrawal of these forces accordingly depends upon the conclusion of an Austrian treaty. An Austrian settlement, by opening a door to Hungary from the west and bringing about the withdrawal of the Soviet troops in Hungary, would probably have a definitely favorable psychological effect on the Hungarian people. From the point of view of our Hungarian policy, this probability would warrant continued efforts by the US to bring an early Austrian settlement. At the same time, it should be recognized as equally probable that the conclusion of an Austrian settlement would fail to effect any immediate substantial change in Hungary’s relationship to the USSR. The state and party apparatus of internal Communist rule would remain. There would remain also the threat of Soviet armed intervention in support of the Communist minority, for despite the withdrawal from Hungary, Soviet troops would stand on the Hungarian frontier and could conveniently re-enter the country on “invitation” by the puppet government, perhaps under the terms of the Treaty of Mutual Aid and Assistance between Hungary and the Soviet Union.¹⁰

The most significant current aspect of Hungary’s participation in the Cominform is the steadily widening rift which has developed between the Hungarian Government and Communist Party on the one hand and the Yugoslav Government and Communist Party on the other over the heresy of Marshal Tito. We should observe closely all evidences that this schism between national Communist bodies may, in the case of Hungary as well as of the other eastern European satellites, also extend across national boundaries and manifest itself within the national party organization. Such manifestations of disunity, which have also appeared recently within the Communist hierarchy in Hungary, are likely to be symptomatic of serious strains and weaknesses in the Soviet-Communist front which we may wish to aggravate and exploit.

d. policy evaluation

The USSR, by the forcible establishment of a tightly-controlled bloc of eastern European states, has extended its military and political frontiers virtually to the borders of western Europe. While the features of Communist rule under Soviet direction vary somewhat from state to state within this orbit, the over-all pattern is one of great uniformity in such major characteristics as the tested subservience of the ruling Communist clique to the USSR, ideological conformity, the coordination of military and police organizations with those of the USSR, revolutionary economic changes and Soviet economic penetration, and the repression of human rights and freedoms.

It is this basic physical fact of the expansion of Soviet military and political power over a vast area of Europe and the uniform conditions which the USSR has imposed therein which places our Hungarian policy in a derivative relationship to our European and Soviet policies. It follows, accordingly, that the success of our Hungarian policy is linked with, and, so far as our long-range objectives are concerned, dependent upon, the effective implementation of those major policies which bear directly on such fundamental issues as the withdrawal of Soviet armies from Europe, the Atlantic Pact and the Military Assistance Program, the ERP, western European economic and political union, an Austrian settlement, the future of Germany, the conflict of democratic and Communist ideologies, and the unbalance of power on the European continent. The peripheral location of Hungary with respect to eastern and central Europe may, nevertheless, afford opportunities for promoting the instability of the Communist regime, retarding the process of communization, and undermining Soviet influence.

Several other problems must be reckoned with in the development of US policy toward Hungary:

There is a growing, if not overtly demonstrated, revival of anti-Semitic feeling in Hungary. The upsurge of this feeling, while attributed partially to the remaining influence of Nazi doctrines, is also ascribed to the fact that many Hungarian Jews have aligned themselves with the Communists and accepted positions in the political police. Moreover, it is a fact that the Communist Party leadership is itself largely Jewish. On the other hand, the Party, through its policy of absorbing former rank and file members of the Hungarian Arrow Cross (Nazi) Party, harbors a considerable anti-Semitic element. This problem could have tragic results for Hungary and the cause of democracy if, upon Hungary’s liberation from the Soviet yoke, the Jewish community as a whole were forced again into the role of scapegoat.

The new order imposed on Hungary has resulted in the virtual destruction of the social structure of the country and consequently is without any organic equilibrium. The Communist regime has reduced the bourgeoisie, never very strong, to subservience, has ruthlessly liquidated the remnants of the landed ruling class, and has purged the peasantry of all its leaders who were unwilling to abandon their fundamental principles and traditions. The fear generated throughout Hungary by Communist methods, to the extent that it is not dispelled by outside democratic influence, tends to stimulate the population to right or left extremism. It may well lead to the danger of a violent and repressive rightist counter-revolution if the Communist grip is broken. Any such development would not only involve the continued political and economic subjection of the peasant masses, in whose character lies the real hope of Hungarian democracy, but would also greatly complicate the problem of democratic and peaceful development in the entire Danubian area.

A further problem is that of eventual union or federation of the states of eastern Europe. Such a union or federation can serve constructive purposes and prevent renewed nationalist rivalries and conflicts only if it is based on truly democratic principles and enlists the support of the peasant populations. Real unity cannot be imposed by Soviet-Communist pressure from outside and above. The possibility of eastern European federation under conditions calculated to make it an effective instrument of Soviet policy, as well as the possibility of the ultimate incorporation of the satellite states into the USSR, must, however, be reckoned with.

Finally, there is the problem of qualified leadership. The longer Soviet and Communist rule endures in Hungary, the greater this problem will become. Hungary has successively passed through a period of authoritarian rule between World Wars I and II, the sweeping Nazi purges of 1944, and the even more drastic purges carried out by the Communists. This process, and especially its present phase, has taken heavy toll of democratic leadership in Hungary. In these circumstances, US policy may increasingly be concerned to find ways of assisting the preservation and development of this important human resource against the day of Hungary’s liberation.

1. For a definition of Department of State Policy Statements, see footnote 1 to the Policy Statement on Romania, January 14, 1949, p. 521.
2. For the text of the Treaty of Peace with Hungary, signed at Paris, February 10, 1947, see Department of State, Treaties and Other International Acts Series (TIAS) No. 1651.
3. For documentation on the attitude of the United States toward the application for membership in the United Nations by Hungary and other Communist-dominated Balkan states, see vol. ii, pp. 291 ff;
4. For documentation on the efforts of the United States to assure fulfillment of the terms of the Treaties of Peace with Bulgaria, Hungary, and Romania, particularly the human rights provisions, See pp. 223 ff.
5. For additional documentation regarding United States policy on trade with the Soviet Union and Eastern Europe, see pp. 61 ff.
6. For documentation on the attitude of the United States toward the Communist overthrow of the government of Prime Minister Ferenc Nagy in May–June 1947, see Foreign Relations, 1947, vol. iv, pp. 299 ff.
7. For documentation on the policy of the United States with respect to reparations and restitution from Germany, see ibid., 1948, vol. ii, pp. 703 ff.
8. For additional documentation regarding United States civil aviation policy toward the Soviet Union and Eastern Europe, see pp. 184 ff.
9. For documentation on the negotiations carried on during 1949 for an Austrian State Treaty, see vol. iii, pp. 1066.
10. The treaty was signed in Moscow on February 18, 1948.