139. Telegram From the Embassy in Hungary to the Department of State1

1303. Subject: Annual Policy Assessment—Part I.2 Ref: (A) State 038338, (B) State 038356, (C) State 041169.3

1. U.S. interests in Hungary: Hungary is a small state with limited resources. Our direct bilateral economic, commercial, and consular interests here are modest. However, I believe Hungary is important to U.S. in context of U.S. relations with countries of Warsaw Pact. Interplay of internal developments between and among European Communist states is obviously important factor in long-term evolution of Communist world and its relationship with U.S. Hungary’s different economic system (NEM), political tactics it uses to secure acceptance of its policies, and its moderate approach to CSCE issues are factors contributing to improvement of lot of Hungarian people; they also have an impact on other Communist countries as well. We have an interest in seeing Hungary developing into a more independent entity, more responsive than ever to well-being and legitimate self-interest of its people. Hungary is located strategically in center of buffer states bordering USSR. Soviet forces stationed here, although presently outside scope of MBFR negotiations, are strategically related to military balance in Central Europe. Along with Hungarian forces they pose counter-weight to Western forces in Italy and, under certain circumstances, a potential threat to Yugoslavia and Romania. Hungary has taken an advanced position within the Warsaw Pact on CSCE and human rights and has been [garble—working?] actively to improve relations with U.S. Because of former it has been subject to criticism from its allies. As [Page 434] S/P forecast stresses (paras 6 and 9, reftel A), it is in U.S. interest to encourage continuation of these policies. Few would argue against view that it is in U.S. interests to nurture Hungarian awareness of and pride in its Western cultural heritage and to expand cooperation with West so that humanism, liberal ideas, and pluralistic ideals continue to permeate Hungarian society to detriment of Moscow influence. I believe that, to extent that Hungary develops profitable relations with U.S., its unquestioning responsiveness as a Soviet ally will be proportionately reduced. I estimate that, barring a sharp turndown in U.S.-Soviet relations, Hungary will continue to pursue relatively liberal policies over next few years as it has since 1975.

2. Overview: Over past two years Hungary has shown a noticeable interest in improving relations with U.S. Bilateral relations have progressed at a steady rate, reflecting pace and level that Hungary is prepared to accept in its special relationship with USSR. Improvement in our relations has been marked by signing of a cultural/scientific agreement, expansion of USIA activities, settlement of all outstanding financial obligations to U.S. (including payment by GOH of World War I flour debt and agreement on settling blocked forints account problem), a series of high-level visits by leaders of two countries, progress on a number of divided family cases, a constructive bilateral approach on CSCE, an agreement on reciprocal visa facilitation for diplomats and officials, removal of all internal travel restrictions on official Americans, and improving Embassy contacts with Hungarian counterparts. GOH strengthened its position in past year by improving somewhat its balance of trade, adroitly carrying off price rises on meat and other consumer items, and by tactfully ignoring letter of support sent by 34 Hungarians to Charter 77 signers. Dropping hard-liner and pro-Soviet Arpad Pullai from HSWP Secretariat during year also strengthened Kadar’s hand and was large step towards ensuring that his successor is likely to be someone of Kadar’s stripe. Despite this significant forward movement U.S.-Hungarian relations in the future will be conditioned by the following factors, most of them outside realm of bilateral relations.

(A) U.S.-Soviet relations: U.S. relations with Hungary are dependent on the state of relations between Moscow and Washington. If, for whatever reason (e.g. demise of Brezhnev, return to Cold War, etc.), U.S. relations with Soviet Union degenerate, U.S. relations with Hungary would also suffer, as testified to by current minor dampening during human rights debate and in aftermath of Secretary’s visit to Moscow.4

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(B) Human rights issue: Hungary has no dissident problem even remotely similar to that afflicting other EE countries. This derives as much from general support by intellectuals of Kadar’s policies as it does from Hungarian penchant for distinguishing themselves wherever possible from their WP allies. Kadar’s decision not to take action against a group of 34 intellectuals who signed a petition in support of Charter 77, however, seems to have caused some strain with his allies. At recent Sofia Conference of CP Secretaries Hungary was apparently criticized by several parties for its tolerant attitude towards dissent. Hungarians are wary of human rights issue. They fear that U.S. may push issue with USSR to point of hardening Soviet relations with U.S. 5 Reaction in Hungary to such an eventuality would be to detriment of Hungary’s relations with U.S. which Budapest has so assiduously cultivated for past two years.

(C) Implications of developments elsewhere in Eastern Europe: A Soviet decision to use force in post-Tito period to restore Moscow hegemony over Yugoslavia could not fail to have an impact in Hungary harmful to U.S.-Hungarian relations. This would be true particularly if, as in Czechoslovakia in 1968, Hungarian troops in token or in other form were asked to participate in the pacification of Yugoslavia. Even if only Soviet troops now stationed in Hungary were used in such an adventure in Yugoslavia, the atmosphere in Europe would be so poisoned that a turndown in U.S.-Hungarian relations would be inevitable.

U.S.-Hungarian relations might also be affected by developments in other Eastern European countries. Hungarians have been seriously worried over past months re course of events, particularly in Poland and, to lesser extent, in Czechoslovakia. Hungarian leadership is keenly aware that food riots or other widespread disorders in Poland, given Hungary’s Polish connection (1848 and 1956), could stimulate similar disorders in Hungary if economic situation were to deteriorate. Current plans for consumer income growth are relatively modest and reasona[Page 436]ble, but highly dependent on factors outside GOH control. Deteriorating economic conditions might force Hungary to trim radically its relatively liberal internal policies. Similar concern re dissidence in Czechoslovakia is prevalent, but I doubt to same degree as concern re Polish situation.

(D) Challenge to Soviet position in EE: It has long been recognized as an integral part of USG EE policy that in context of gradually increasing independence of these states, U.S. policy must be particularly circumspect in order that Moscow’s leadership does not become so alarmed as to lead to a destabilization as happened in 1956. Thus, U.S. policy must be cautious and conditioned by Budapest’s own estimate of the outer limits of Soviet tolerance of its activities.

3. Issues, objectives and courses of action: As S/P suggests in its trends paper, I assume that there will be substantial forward momentum in U.S. relations with Soviet Union. If there is, we should be able to take advantage of developing opportunities to resolve our three main problems, all of which require Department decision: (a) Crown, (b) USG property, and (c) MFN. Progress on these issues would have favorable impact on general course of U.S.-Hungarian relations.

(A) Crown: For over a year now, Hungarians have made known their growing expectation that Crown would soon be returned, tempering their approaches with tacit understanding that 1976 was an election year. I believe that USG should make a decision now to return the Crown to Hungary and that we should convey this decision to Hungarians in carefully conditioned language which would leave us an escape route in event of breakdown in East-West detente or some other unexpected but equally untoward event. Retention of Crown is now more of an obstacle than an asset in U.S.GOH relations and threatens to retard their further development.

(B) Property: Although GOH has indicated a willingness to undertake serious discussions to resolve property problem,6 USG has not been able to move forward with negotiation proposals because FBO failed to respond favorably to repeated Embassy requests for an assessment of property’s value. I believe it is essential to develop a coordinated USG position, one clearly designed to produce concrete results and based on a professional estimate of property values and many options open to us for settling our present and future needs. I am convinced that a favorable approach on Crown, as suggested above, [Page 437] would provide a climate of sufficient good will to bring about a resolution of this problem during period when modalities for return of Crown are being discussed. But we must move now on getting an FBO property assessment to take advantage of present climate.

(C) MFN: Ambiguity exists as to whether GOH can meet our requirement for assurances about liberal emigration policies. In very near future we should establish USG’s position concerning what it wants from GOH. We should then move at a deliberate pace to ferret out GOH intentions and capabilities. Depending on how situation develops, we may not wish to attempt to resolve this question until issues of Crown and U.S.-owned property in Budapest have been resolved or are well on way to resolution.

4. I strongly believe that bilateral relations with each Communist country should be left to find their own level. Attempts to establish priorities between countries can only have a stultifying effect on our relations in Eastern Europe. Decision should be made on basis of facts obtaining in each country, with Department interjecting during decision process any overriding factors which may in particular instance cause regional considerations to prevail over bilateral ones. Such a policy should allow USG to achieve greatest progress traffic will bear in each country. Moreover, dropping pecking order would not require U.S. to legitimize repressive regimes, since we would decide in “bilateral” context not to carry out any measures which in fact have that effect. It is bad enough already that consideration of Soviet attitudes already restricts our decision-making re Eastern European countries. We should not add to our troubles.

5. Courses of action:

(A) Political:

(1) Return Crown in manner likely to facilitate resolution of family reunification and property questions but without direct linkage.

(2) Encourage high-level exchanges between U.S. and Hungarian officials to include Foreign Minister Puja and Secretary.

(3) Monitor Hungarian CSCE implementation.

(4) Further expand contacts between Embassy and Hungarian organizations, including HSWP.

(B) Military:

(1) Attempt to induce Hungarian acceptance of invitations to field grade officers to visit army units in U.S. and, in reciprocal fashion, U.S. officers to visit Hungarian units.

(2) Solicit earlier advance notice and greater detail in notification of military maneuvers in Hungary. Seek to have Hungarian representatives attend Western maneuvers to which they are invited and to have GOH invite U.S. observers to Hungarian maneuvers.

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(C) Economic:

(1) Establish a U.S. position on what we require from GOH in way of MFN assurances on emigration policy.

(2) Continue to encourage exchange of senior economic policy officials, including Havasi and Biro, between U.S. and GOH.

(3) Promote exchange of views between American economists and officials and their Hungarian counterparts.

(4) Encourage expansion of American-Hungarian trade, business contacts, and joint ventures, with special attention to agriculture and livestock development.

(5) Undertake additional market-oriented reporting.

(6) Annual participation in one of Budapest trade fairs.

(7) Conclude double taxation agreement.

(8) Attempt to facilitate activities of U.S. businessmen in Hungary by seeking GOH cooperation in providing trade directories of potential contacts, getting GOH to agree to expand number of direct contacts with Hungarian firms, and by obtaining multiple entry visas for businessmen.

(D) Informational, cultural, and scientific:

(1) Continue building exchanges and cultural and scientific program in accordance with recently concluded Cultural/Scientific Agreement and program document.

(2) Continue to explain U.S. foreign policy to media leaders through regular briefings and distribution of background materials and policy statements.

(3) Expand program of distribution of information materials in political, cultural, academic, and economic fields.

(E) Consular:

(1) Continue present effort to resolve divided family cases by quiet diplomacy.

(2) Seek Hungarian agreement that multiple entry visas of one-year duration be issued to official personnel of each government whose duties require them to travel frequently on TDY to host countries.

(3) Where feasible, develop other proposals to facilitate visa issuance and eliminate or reduce visa fees.

(4) Where necessary, obtain GOH cooperation in protection and welfare services to American citizens.

(F) Administrative:

(1) Obtain FBO team immediately to advise on value and disposal of U.S. Government excess properties in Budapest.

(2) Begin negotiations, by early September at latest, for indemnification of UST for nationalized properties, resolution of squatter problem, [Page 439] and sale or other disposition of excess property in Budapest, obtaining in compensation buildings for Embassy needs.

(3) Make vigorous and persistent representations to GOH in order to obtain more responsive treatment from diplomatic service directorate to Embassy’s administrative needs, especially acquisition of rental of living quarters for Embassy staff.

  1. Source: National Archives, RG 59, Central Foreign Policy File, D770142–1140. Confidential; Priority.
  2. Parts II and III of the Annual Policy Assessment were transmitted in telegram 1361 from Budapest, April 27. (National Archives, RG 59, Central Foreign Policy File, D770147–0255)
  3. In telegram 38338 to all diplomatic posts, February 19, the Department forwarded the Policy Planning Staff’s FY 1979 Broad Trends forecast as general guidance to posts for preparing the Mission’s policy and resource assessment reports. (National Archives, RG 59, Central Foreign Policy File, D770060–0457) Telegram 38356 to all diplomatic posts, February 19, provided further guidance for annual policy and resource assessments. (National Archives, RG 59, Central Foreign Policy File, D770060–0449) In telegram 41169 to all European posts, February 24, Hartman further clarified the Bureau’s expectations with regard to the policy and resource assessment report. With regard to Eastern Europe, Hartman requested that posts give their views “on the overall approach the US should adopt in its relations” and whether there should be any differentiations between the countries and if so what those differentiations should be based on. (National Archives, RG 59, Central Foreign Policy File, D770063–1159)
  4. Vance traveled to Moscow March 27–30, and presented the Soviet leadership with a U.S. proposal for arms reduction. See Foreign Relations, 1977–1980, vol. VI, Soviet Union, Documents 16–23.
  5. In telegram 926 from Budapest, March 22, the Embassy reported that Hungarian officials were “increasingly concerned about future of detente in light of heavy stress laid by the President, Secretary Vance, and others on human rights issue” and that, in the Hungarian assessment, Soviet reaction to the administration human rights policy may spark a turndown in relations with West. (National Archives, RG 59, Central Foreign Policy File, D770098–0075) In telegram 989 from Budapest, March 25, the Embassy reported: “the emergence of a party line, without doubt emanating from Moscow, on Soviet views about future of detente and East-West relations.” Its Hungarian contacts, the Embassy concluded, paint a picture of a “grim, remarkably insecure, almost paranoid Soviet Party leadership, worried to death about what it perceives as a genuine threat or challenge to its power, and incredible as it may seem, believing that the U.S. stand on human rights is deliberate strategy designed to overthrow the Soviet regime.” (National Archives, RG 59, Central Foreign Policy File, D770103–0150)
  6. The U.S. Government owned several buildings in Budapest in excess of its needs and sought to sell them to the Hungarian Government while building modern office space for its staff. Washington also requested payment for property expropriated by the Hungarian Government.