Foreign Relations of the United States, 1969–1976, Volume XXIX, Eastern Europe; Eastern Mediterranean, 1969–1972

113. Memorandum From C. Fred Bergsten of the National Security Council Staff to the Presidentʼs Assistant for National Security Affairs (Kissinger)¹

Washington, February 8, 1971.

SUBJECT

• Hungarian Indication of Interest in Membership in the International Monetary Fund

Hungary has just renewed its indication of interest in the International Monetary Fund. The Hungarians had been pursuing the possibility of Fund membership prior to the invasion of Czechoslovakia but ceased doing so immediately thereafter.

The specific Hungarian step is a request that the IMF send an official to Budapest, without specifying why. The Fund plans to send the head of its European department, a middle-level official in the Fund hierarchy. He will make the trip without fanfare in early May. Hungary has made no formal request for membership, and will presumably evaluate the discussions with the Fund official before making a decision on whether to do so.

Next to Yugoslavia, Hungary has gone much further in liberalizing its domestic economy than any other Communist country. It is particularly anxious for economic contacts with the West, toward which IMF membership would be a giant step. As I informed you earlier, Romania has also repeatedly indicated an interest in Fund membership and plans to move in that direction as soon as it works out terms with the Soviets on which it will feel able to first join the Comecon Bank of Eastern Europe—of which Hungary is already a member.

IMF membership would be an extremely important step for any Eastern European country. (None is now a member, except Yugoslavia. Czechoslovakia was expelled in 1949—and Cuba in 1961.) Such membership would require disclosure of data and consultations with the Western world which could only have a dramatic effect in opening the economies—and therefore overall societies—of the countries in question, as in fact has happened in Yugoslavia. I therefore regard it as greatly in our interest to see these countries become members of the Fund.

Treasury and even State take a fairly hard-nosed position on the issue, however. They would require that any Communist country accept immediately all responsibilities of Fund membership, which might be very hard for some of them without unacceptable political repercussions from the Soviets. In addition, the agencies would even try to link settlement of some of our outstanding bilateral financial claims with these countries for our support of their IMF membership, which could easily kill the whole deal.

No action is needed now. At some point during the next six to twelve months, however, we may have to determine a U.S. position on IMF applications by Hungary and/or Romania. I will continue my efforts to soften the agenciesʼ positions on the issue, on the assumption that you agree that it would be in the U.S. interest for them to join the Fund (and the World Bank, which goes along with Fund membership). Please let me know if you have any views on the subject.

1. Source: National Archives, Nixon Presidential Materials, NSC Files, Box 693, Country Files—Europe, Hungary, Vol. I. Confidential. Sent for information. A copy was sent to Sonnenfeldt.