No. 22
Memorandum Prepared by the Staff of the Legation in Hungary1


A. What can we hope to accomplish in Hungary?

We can maintain a spirit of opposition and passive resistance to the present regime which will prevent Moscow from putting any real trust in Hungary or have any confidence in the stability of the government or loyalty of the armed forces in case of war.
We can not hope to build up a resistance movement or other type of active opposition which might overthrow the present regime in any foreseeable future.
Under present circumstances, we can not hope for a successful defection from Moscow, a la Tito. If following an Austrian peace treaty, Soviet troops were withdrawn from Austria, Hungary and Rumania, the possibility of fostering a Titoist movement could be re-examined.

B. How do we do it?

A careful analysis of the local situation does not reveal any new methods or new agencies which would substantially improve the efficiency of our operations. Therefore our objective should be to continue our efforts to improve our present methods based primarily on the Voice of America. Our primary appeals should be addressed to:

Hungarian nationalism and sense of Western identity, which are the basis of liberation hopes.
The deep religious feeling of the general public, both Catholic and Protestant.
The working class with its strong Social Democratic tradition.
The peasants who are bitterly opposed to collectivization and government control of their every activity.
The Youth which appear to be surprisingly resistant to Communist propaganda.

Hungary: Situation and Outlook

Hungary is currently in the grip of serious political and economic crises in the sense that its origins are in Prague and Moscow and not primarily in Hungary. Until the Slansky trial, it appeared that the Hungarian Communist Party would work out the current phase of the endemic struggle for power in a more or less peaceful manner. Rakosi’s position as uncontested leader seemed to be accepted by Moscow and Gero was reduced from a rival for leadership to merely one—although perhaps still the most influential one—of the small group of lieutenants who ran the Party and Government under Rakosi’s leadership. Istvan Hidas had risen rapidly in the influence and appeared to be the heir apparent. It seemed likely that a Party Congress would be held early in 1953 to revise the Party Statutes and organization in line with the decisions of the 19th Party Congress in Moscow,2 and to confirm and formalize the new power relations which had developed.

The injection of the issue of anti-semitism into the picture through the Slansky trial and the Moscow doctors plot has had particularly serious repercussions in Hungary because of the predominance of persons of Jewish origin in the top ranks of the Party, Secret Police, Army and Foreign Office. On Moscow’s insistence the following have already been removed from office and probably arrested: Politburo member and head of the Planning Office Zoltan Vas; head of the Secret Police, Gabor Peter and several of his top aides; Minister of Justice Desci; Deputy Minister of Defense, General Nogradi; and probably other Generals, and several leaders of the Jewish community. It seems likely that this purge will spread both up and down as one person implicates another. The only thing which may check it is the inability to provide replacements for all the Jews in the Hungarian regime.

Thus the prospects for the coming year must be frightening for Rakosi and his associates.

The economic crisis is no less serious than the political one. While the two are not yet directly linked it appears inevitable that they will become so.

The economic difficulties arise from two separate sets of causes. First, there are the almost insuperable difficulties of fulfilling the overambitious five year plan. Signs of trouble appeared during 1952, particularly in connection with export deliveries to Moscow and the satellites. The desperate efforts made in the final quarter [Page 46] to fulfill the plan for 1952 were apparently too much of a strain both mechanically and personally. Stocks of raw materials were used up without thought of the future, maintenance was neglected and manpower was exhausted physically and morally. The result has been a bad slump since the beginning of the year, affecting chiefly the key steel and coal industries. Repercussions in other branches of industry are already visible. Accentuating this crisis is the food shortage resulting from the crop failure of 1952. While it would be an exaggeration to speak of famine, the situation is serious, particularly in the rural districts where crop surrender decrees were brutally enforced leaving the peasants without any reserves for seed or their own food supply. Lack of feed and fodder is creating a critical situation for livestock, the effects of which will extend far into the future. But the most serious aspect of the agricultural crisis is not the crop failure and the food shortage resulting therefrom, but the growing evidence of a breakdown in the agricultural plan. Fall plowing and sowing were not completed and it is doubtful if the deficiencies can be made up this spring. Most significant, the failures were worst in the collective and State farms and in the all important machine tractor stations. The latter, after falling down on their plowing and sowing plans in the fall, are being accused of neglecting their winter overhaul and maintenance plans. This, of course, forecasts difficulties in the spring planting. An early spring may save the situation but all the elements for a real disaster are present.

The economic crisis, both in its industrial and agricultural aspects, appears to be basically one of morale. The regime has exhausted the reservoir of public acquiescence, to say nothing of good will. The people are no longer moved by the time worn propaganda appeals designed to get more work out of them. Work offers and work competitions have become “burocratic” which means they exist mainly on paper. The feasibility of the Plan is being defended in the press—which means it is being questioned.

Judging from the example of the Soviet Union, which generally is slavishly followed in Hungary, the answer to the morale breakdown will be terrorism. This means a series of mass trials covering the economic field from top to bottom in which the charges will be “wrecking”, sabotage, criminal negligence, etc. etc., with the United States being the responsible instigator in the background. It is at this stage that the two crises, political and economic, will be linked and reinforce and support each other. Titoism, Zionism and bourgeois right wing Social Democratism will be blamed for the economic breakdown, as in the Slansky trial.

Left to his own devices, Rakosi might revise the Plan to provide more consumers goods, develop food production and check the [Page 47] downward trend of the standard of living. Since the war he has followed a policy of gradualism or “salami” tactics, using brute force and terror only when necessary. But it is doubtful whether the Soviet Union will permit such a revision. More likely, terror and suppression will be used extensively for some time to come and only the blessing of unusually good crop weather will in the better years relieve the lot of the hapless Hungarians. The long range trend will be toward a lower standard of living and a widening gulf between the regime and its subjects.


The Hungarian Army is now at a strength of 185,000, including an estimated 10,000 men in the Air Force. In addition to the Army there are the following fully and partially trained (militarily) personnel available in the Security Forces: State Security Authority—20,000; Frontier Guards—15,000, giving a total of 220,000 men available on M Day. The number of reserves available is difficult to assess. There are a certain number of soldiers who have been inducted and trained since the beginning of the current increase in strength. This number is estimated at a minimum of 150,000. All these men have been trained on Soviet weapons and in Soviet tactics. In addition it is estimated that there are another 400,000 soldiers from the last war that are battle trained and could be used in an emergency. These men, however, have not as yet been trained under the current conditions. The mobilization potential is therefore estimated at 550,000 exclusive of the current strength of the army.

The Sovietization of the Hungarian Army is practically 100%. The uniforms and insignia follow Soviet patterns. The weapons, although some of the small arms may be manufactured in Hungary, are all standard Soviet type (in certain cases as with other satellites, the Hungarians are being equipped with older type Soviet arms, while the Soviets make use of the new developments). All training is believed to be along the line of Soviet doctrine and it is firmly believed that Soviet advisors are found in all the principal directorates of the Ministry of Defense, schools, and at least in Corps and Division Headquarters. The higher level schools for staff and command are located in Russia and many officers of lower grade attend other schools in that country.

Although it is dangerous to assess the value of an army about which so little is actually known the following is believed to be fairly accurate and to represent a fair estimate. This is the writer’s appreciation and is not necessarily concurred in by the Department of the Army.

[Page 48]

“The Hungarian Army is not at present capable of conducting a major campaign alone”.

The following factors were used in arriving at the above statement.

Despite its apparent mobilization strength, the army does not possess enough equipment to present this strength as a balanced force.
Many of the senior commanders are political appointees and lack the experience and knowledge to command effectively a large force.
There is a serious lack of competently trained staff officers.
There is a shortage of trained instructors and technicians.
Overall morale of the army is only fair and no estimate can be made of the reactions of the individual when confronted with actual war against the Western powers.

It should be noted, however, that all the above factors are such that they can be corrected in time. It is the opinion of this office that the Hungarian army is presently undergoing a consolidation phase. The strength is such that it cannot be increased without putting a severe strain on the industrial economy or until the administrative and logistic sides of the picture are brought into equality with the tactical side. When this consolidation phase is completed it may be expected that the above factors will have been partly removed and the Hungarian army will present itself as a fighting force to be reckoned with strongly. This does not mean that the present Hungarian army should be underestimated, but simply that at the moment while it would be of value to the Soviets as additional troops, the value of them lies mainly in their numerical strength rather than their ability.

Economic Defense

The Battle Act3 and other export control measures are aimed at denying to the Soviet Bloc strategic materials and other commodities which might serve to increase the Soviets’ war potential. To a large extent those measures have been successful, but important leaks still occur through black market channels. Blackmarketeers are usually paid in dollars or Swiss francs. Therefore, any measures which reduce the net dollar earnings of the Soviet Bloc will decrease its ability to buy strategic materials.

To this end, the following measures are proposed:

The requirement of licenses for US imports from Soviet Bloc countries. In this way the United States could restrict such imports to essential items, a practice which the Soviet Bloc has employed [Page 49] for some time. Non-essentials, such as embroidered blouses and stemware, might then be imported from non-Stalinist countries, increasing their dollar earnings.
Pressure on Hungary and other Soviet Bloc countries to pay their debts to the United States.
A new approach to the Hungarian Government requesting compensation to American nationals for property nationalized by Hungary and for death, personal injury, deprivation of liberty and property damage sustained by American citizens in Hungary during World War II (Legdes 325 Nov. 19, 19524).

Import controls could be used for bargaining purposes; e.g., the United States could offer to license the import of certain non-essential Hungarian goods in exchange for a Hungarian commitment to pay claims and debts to the U.S., Sweden, Switzerland and France, for example, collect for their claims against Hungary by deducting a certain percentage of the proceeds of Hungarian exports to their countries.

Previous suggestions for reducing Hungary’s dollar earnings were made in Legation despatch No. 53, July 25, 1952.5 In this connection it should be noted that AJDC remittances to Hungary ceased last month and that Hungary’s dollar income from IKKA and gift parcels is believed to have declined substantially in the past year. If import controls on commodities from the Soviet Bloc were introduced, there would be no need to consider the withholding or suspension of consular invoices on certain Hungarian goods, as was suggested in the Legation’s despatch. The same grounds—presumption of dumping and forced labor—might be used, if some justification, other than the fact that import controls are practiced by the Soviet Bloc, is considered necessary.

Possible Repercussions. The action proposed will annoy the Soviet Bloc and may provoke retaliatory measures. There can hardly be a reply in kind, since the Stalinist countries already exercise import controls. A break in diplomatic relations for this reason is unlikely. In Hungary, there might be additional harassment of the Legation, a demand for further reduction of its personnel and/or a stop to forint withdrawals against Hungary’s War Surplus Property debt to the United States. The latter move would increase the cost of operating the Legation by about $250,000 annually. However, the Legation has accumulated a reserve of forints sufficient for three months’ operations, and the effects of the stoppage of forint withdrawals would not be felt for that period of time. Also, the Hungarian Government might very well choose to continue paying in forints rather than face the prospect of paying in dollars later—or [Page 50] might be persuaded to resume forint payments in exchange for certain import licensing concessions. If, as the Legation believes, other U.S. missions in the Soviet sphere are not currently drawing local currency under a similar arrangement, they would not be affected.

On the whole, the probable repercussions appear moderate in relation to the substantial benefits that would be derived from denying so many millions of dollars to the Soviet Bloc and increasing American bargaining power through the use of import controls as trading material.

  1. Transmitted in despatch 512 from Budapest, Feb. 19, in anticipation of Ravndal’s departure on Mar. 5 for consultations with officers of the Department of State. Ravndal returned to Budapest on Apr. 12.
  2. The 19th Party Congress opened on Oct. 5 in Moscow.
  3. Reference is to the Mutual Defense Assistance Control Act of 1951, P.L. 82–213 (65 Stat. 644), Oct. 26, 1951.
  4. Not found in Department of State files.
  5. Not printed. (764.56/7–2552)