8. Memorandum of Discussion at the 369th Meeting of the National Security Council0

[Here follow a paragraph listing the participants at the meeting and agenda item 1.]

2. U.S. Policy Toward the Soviet-Dominated Nations in Eastern Europe (NSC 5811; Memos for NSC from Executive Secretary, same subject, dated May 13 and 21, 1958; NSC Action No. 1914; NSC 5811/1)1

In briefing the Council General Cutler reminded the members that the paragraph in this policy (NSC 5811/1), relating to a proposal to normalize U.S. trade in non-strategic goods with the Soviet-dominated nations, had not been adopted by the Council but had been referred for further consideration by the President to the Secretary of State together with Annex C of the paper which spelled out in greater detail proposals by the Department of Commerce for stimulating American businessmen to engage in non-strategic trade with the Soviet satellites. The Secretary of State was now ready to inform the Council of the results of his further review of Paragraph 40 and Annex C. In the course of General Cutler’s briefing, the President took his place at the table as did Mr. Walter Williams representing the Secretary of Commerce. (A copy of General Cutler’s briefing note is filed in the Minutes of the Meeting and another is attached to this memorandum).2

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Secretary Dulles informed the Council that he was not at present in a position which would permit him to favor the proposal of the Department of Commerce to launch a considerable campaign designed to interest U.S. businessmen in trade with the satellite nations. In recent weeks the situation of the Soviet satellites had become so ambiguous that it now seemed wise to keep our trade program with them very closely under Washington policy control so that we could turn on or off the flow of trade with the satellites as circumstances dictated. We would not be in a position to regulate such trade if we had told our businessmen in advance to go ahead and engage in extensive trade with the Soviet-dominated states.

In explanation of his change of view, Secretary Dulles pointed out the likelihood that the Soviet Union was in the midst of reverting to the old Stalinist policy of harsh control of the Soviet satellites. This development was illustrated by the recent execution of the leaders of the Hungarian revolt. In connection with the latter event, said Secretary Dulles, the Yugoslav Ambassador had commented to him only yesterday that these executions in Budapest did not constitute the epilogue to the Hungarian revolt, but rather the prologue to something else.3 Thus, if the satellites are going to be even more completely dominated by the Soviet Union, this would not be an appropriate time for the U.S. to inaugurate and endorse a policy of increasing the volume of trade between the U.S. and the satellites.

Secretary Dulles went on to observe that this matter of U.S. trade with the satellites was related to Khrushchev’s proposal for greatly increased trade between the U.S. and the Soviet Union itself. In view of the present mood of the Soviet rulers, Secretary Dulles thought it would be idle to imagine that the U.S. could have one kind of policy with respect to U.S. trade with the U.S.S.R. and and another kind of policy for our trade with the Soviet satellites. Accordingly, Secretary Dulles suggested that it would be best for the Council to defer any decision on this matter until the present trend of the Kremlin’s policies towards the satellites was more fully developed and clarified. At the moment the Kremlin is taking a much tougher line and if we were to countenance a great surge of U.S. trade with the satellites, it might look as though this was our response to the Kremlin’s tougher line.

In the light of the Secretary’s views, General Cutler suggested the Council action on Paragraph 40 and Annex C be deferred until perhaps next eptember when the Council could again look at the problem.

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The President then stated with great emphasis that he had certain views on this subject which he wished to make known at this time. He insisted that we should do all we can to avoid Congressional strait jackets on trade with these satellite states. After all, the Executive Branch had very competent advice on this subject from several different agencies—the CFEP, the State Department, and the Department of Commerce. What we required was flexibility to study and to act on the problem of trade with the satellites on a case by case basis. The Soviets were in a position of being able to change their trade policies towards the satellites or anyone else by simply turning on or off the spigot. We in the U.S. certainly needed sufficient flexibility to permit us to maneuver. The existence of this necessary flexibility was jeopardized by the attitude of Congress in wishing to legislate against any trade with any Communist state.

In response to the views suggested by the Secretary of State and the President, General Cutler suggested that the language in the old Paragraph 40 be amended so that our encouragement of trade with the Soviet satellites should be implemented on a case by case basis and any increase to have the approval of the Secretary of State. The President said he agreed with the wisdom of General Cutler’s proposal but insisted that we could not encourage increased trade on even a case by case basis if the Congress insisted on legislation which forbade all trade with a Communist state.

General Cutler reminded the President that the kind of trade referred to in Paragraph 40 was trade in non-strategic goods and that there was no legislation which forbade the U.S. to engage in such trade even with Communist or Communist-dominated nations. Secretary Williams expressed agreement with General Cutler’s statement.

The President again complained about the attitude of Congress toward U.S. trade with Communist nations. He cited as an example the difficulties we encountered when the Danes proposed to acquire much-needed coal from Poland in return for building tankers for Poland. However, Secretary Dulles pointed out that in the instance the President cited, we had run afoul of the Battle Act4 which applied to Denmark. The present paragraph, he again pointed out, dealt only with trade in non-strategic goods. He added that he did not object to General Cutler’s proposals for amending the old Paragraph 40 but would also change one other phrase in that paragraph. The President then agreed to this proposed Council action. General Cutler made one further suggestion to [Page 37] put the bee on the CFEP rather than on the Secretary of State for approval of any increase in the volume of U.S. trade with any of the Soviet-dominated states.

General Cutler then suggested that the Council hear the views of the Department of Commerce on this subject. Secretary Williams said he would be happy to describe the views that had been current in his department on this subject. He said that he grasped the delicacy of the problem as it had been described by Secretary Dulles but Commerce had felt that if it were to be our policy to go ahead and normalize U.S. trade with the Soviet-dominated nations, some agency in the government had to engineer and promote such trade by providing guidance and the like to American businessmen. Commerce was the obvious agency to handle trade relations, subject only to a policy veto by the Secretary of State on political grounds. Apparently, however, these ws of the Commerce Department were no longer applicable if, as now seems to be the case, the Administration did not wish to generate any considerable increase in U.S. trade with the Soviet-dominated nations generally. Secretary Dulles confirmed Secretary Williams’ understanding of his changed position.

At this point the President changed the subject by turning to Mr. Allen Dulles and asking him if he knew when Premier Nagy had actually been executed. Mr. Dulles replied that to the best of their knowledge, it had happened quite recently. The President said that it had been his guess that Nagy had been executed five or six months ago. Mr. Dulles replied that his people in CIA had also thought of this possibility but that the best information at present was that the decision to try Nagy had been made at the recent Moscow Conference.5 The trial had actually begun at the end of May and lasted a fortnight. The President commented that if this were indeed the case, it made the affair look all the more ominous.

The National Security Council:6

Discussed an oral report by the Secretary of State on the foreign policy implications of expanding non-strategic trade with the Soviet-dominated nations for primarily political purposes (paragraph 40 and Annex C of NSC 5811), prepared pursuant to NSC Action No. 1914–b-(3).
Adopted, for insertion in NSC 5811/1, the following revision of paragraph 40 of NSC 5811 (while agreeing that Annex C of NSC 5811 should not be adopted for inclusion in NSC 5811/1);

“40. On a case-by-case basis as approved by the Council on Foreign Economic Policy, seek to establish between the United States and the dominated nations with which the United States has diplomatic relations, more normal economic relations thereby facilitating a gradual expansion of trade—consistent with ‘Basic National Security Policy’ (NSC 5810/1)7 and ‘U.S Economic Defense Policy’ (NSC 5704/3)*—when it would be a means of projecting influence and lessening the dominated nations’ economic ties with and dependence on the Soviet Union.

*“NSC Action No. 1865-c directed the review of this policy; cf. NSC 5810/1, paragraph 37.”

Note: The revision of paragraph 40 in b above, as approved by the President, subsequently circulated for insertion in all copies of NSC 5811/1.

3. Significant World Developments Affecting U.S. Security

As his first topic, the Director of Central Intelligence proceeded further to describe the trials and executions of the leaders of the Hungarian revolt. It seemed likely that Nagy had been hanged in Budapest on the night of June 16. General Maleter had been tried before a military tribunal. The civilian victims had been tried in a civilian court. Mr. Allen Dulles suggested that the trials were primarily designed as a move against Tito but one of the results had been a considerable weakening of Kadar’s position.

Secretary Dulles carefully inquired as to the reliability of the statement of the Director of Central Intelligence that the trials and the executions of the Hungarian leaders had been prescribed by Moscow. Mr. Allen Dulles repeated his view that while the information on this subject came from a journalist in a position to know and not from any official statement by the Soviet or Hungarian Governments, he nevertheless believed that it was the truth. Moreover, Mr. Allen Dulles believed that we should play up very hard the fact that the executions were ordered by Moscow. Secretary Dulles commented that the reaction in Europe to these executions had been very strong.

Mr. Allen Dulles then went on to sketch in the background of these trials and what the victims had done during the course of the Hungarian Revolution and afterwards. He pointed out that the Yugoslavs had received written assurance of respect for the asylum they had provided Nagy and others in the Yugoslav Embassy in Budapest.

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Mr. Allen Dulles reiterated his conviction that the signal for the executions had almost certainly come from Moscow. The Soviets must certainly have weighed the unfavorable world reaction which these executions would stimulate. Mr. Allen Dulles believed that the executions were intended as warnings first to Tito and thereafter to Gomulka. He thought it likely that in the sequel Kadar would drop out of the political picture quite soon. The reaction of the Hungarian people had been one of stunned and shocked silence.

Secretary Dulles said that he understood that Mr. Allen Dulles was now engaged in a study with State Department officials and CIA people to try to grasp the meaning of all these concurrent developments in the Soviet Bloc.8 Mr. Allen Dulles replied in the affirmative.

The Director of Central Intelligence next pointed out that there had apparently been called a sudden meeting in Moscow of the Central Committee of the Communist Party. This meeting was believed still to be going on and Mr. Dulles thought it of great significance. None of the most eminent Soviet leaders had appeared in public since June 12 for the reason that they were probably getting ready for this meeting.

Mr. Dulles speculated that the Central Committee meeting might deal with the new Seven Year Plan which was supposed to be unveiled before next July 1. The Central Committee meeting might also debate Khrushchev’s programs for the reorganization of Soviet industry and of Soviet agriculture. Khrushchev probably realizes that he is somewhat under fire with respect to both of these programs. There have been accusations that in supporting these programs Khrushchev is not behaving as an orthodox Marxist-Leninist. The Committee might also discuss problems in connection with the summit meeting and the implications of the executions in Hungary. There was even the possibility of a further purge such as that which had occurred last June.9 Mr. Dulles thought we would know more in a few days and again pointed out that CIA fficials were studying with officials from State and other departments the meaning and significance of all these inter-related developments in the Soviet Bloc. He felt that it was of special importance to watch what happened in Poland.

Secretary Dulles commented that a great many important things seemed to be going on concurrently in the Soviet Bloc. Taken together they seemed to point to a change in Soviet policy. On the other hand it was not easy to understand why the Soviets were proposing significant [Page 40] policy changes because normally one does not change policies unless things were actually going badly.

[Here follow the remainder of the briefing and the remaining agenda items.]

S. Everett Gleason
  1. Source: Eisenhower Library, Whitman File, NSC Records. Top Secret; Eyes Only. Prepared by Gleason on June 20.
  2. Regarding NSC 5811 and the May 13 and 21 memoranda, see footnote 1, Document 5. Regarding NSC Action No. 1914, see footnote 5, Document 5. NSC 5811/1 is printed as Document 6.
  3. Not printed.
  4. A memorandum of the conversation between Dulles and the Yugoslav Ambassador is in Department of State, Secretary’s Memoranda of Conversation: Lot 64 D 199.
  5. Reference is to the Mutual Defense Assistance Control Act of 1951 (P.L. 213), sponsored by Congressman Laurie C. Battle of Alabama and enacted October 26, 1951. It provided for the suspension of U.S. economic aid to nations supplying strategic materials to Communist countries. For text, see 65 Stat. 644.
  6. Presumably a reference to the meetings in Moscow of the Council for Mutual Economic Assistance (CMEA), May 20–23, and the Warsaw Pact’s Consultative Committee, May 24.
  7. Paragraphs a-b and the Note that follows constitute NSC Action No. 1927. (Department of State, S/S-NSC (Miscellaneous) Files: Lot 66 D 95, Records of Action by the National Security Council)
  8. NSC 5810/1, “Basic National Security Policy,” May 5, 1958, is scheduled for publication in volume III.
  9. Presumably a reference to SNIE 11–8–58, Document 48.
  10. Reference is to the announcement on July 3, 1957, by the Central Committee of the Communist Party of the Soviet Union of the dismissal from the Presidium the previous month of the “anti-party” group, which included Malenkov and Molotov among others.