Foreign Relations of the United States, 1977–1980, Volume XX, Eastern Europe

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

Budapest, January 16, 1980, 1226Z

214. Subject: US Goals, Objectives and Resource Management (GORM) for FY 1982: Ambassador’s Policy Statement. Ref: A. CERP 0001, B. State 310299.²

1. (C)-entire text.

2. Present state of relations: At the beginning of 1980, U.S. policy toward Eastern Europe is undergoing its stiffest test since the issuance of PD–21 in September 1977.³ The Department is addressing the issue of what our policy would be in light of the response of Eastern Europe to the Iranian and Afghan crises and the convincing display of the power of the Soviet Union these two crises provoked to impose discipline on the Governments of Eastern Europe on issues of crucial importance to the Soviets. I endorse the Department’s preliminary position as outlined in State 9408.⁴

3. The differentiated policy called for in PD–21 will be particularly difficult to maintain at a time of East-West tension and polarization. I do not expect the Hungarian regime to adopt positions distinctive from those of the Soviet Union on Iran and particularly on Afghanistan. The Hungarians are well aware of the high price the subservience of their foreign policy to Soviet goals and propaganda will exact, if not in terms of specific issues in our relations, then in the overall deterioration in the East-West climate, to which Hungary is particularly vulnerable. The delay in ratification of SALT II makes the immediate outlook for East-West relations even more bleak.

4. Up to the time of these crises, we achieved step-by-step progress in our bilateral relations with Hungary. We have:

—Successfully concluded the program document to the cultural and scientific exchange agreement⁵ and secured a satisfactory site for our first major independent cultural exhibit in Hungary.

—Deepened our economic cooperation through an EXIM/National Bank Agreement, a Double Taxation Agreement,⁶ a successful first meeting of our Joint Economic and Commercial Committee, and implementation of a bilateral MTN agreement.⁷

—Continued to urge the GOH to resolve outstanding family reunification problem cases, which have been kept to a minimum.

—Made progress toward a property settlement; and

—Maintained a high level political dialogue through successful visits: Codels O’Neill, Brademan, and Vanik and Assistant Secretary Vest to Hungary and Deputy Prime Minister Huszar to the United States.⁸ Further substantial (although unspectacular) progress on such projects as the provision of Consular services to increasing numbers of Americans and Hungarians, markedly increased distribution of ICA materials, and the opening of offices in Budapest by Dow Chemical and an American bank underlined our growing practical interaction with Hungary and consequent decrease in Hungary’s dependence on the Soviet Union.

5. We still have problems: Some family reunification cases persist in spite of our general success in this area; a serious dispute over patent rights or the violation of them; slow development of our share of the Hungarian market following the extension of MFN; too slow progress in our property negotiations; discouragingly limited contact with Party officials; and above all at this time, unacceptable criticism in the Hungarian media of the U.S. and our policies reflecting a comprehensive identification with Soviet policies.

6. The Hungarian regime, for its own reasons, continued to follow policies which will redound to our long-term benefit; an international approach to economic problems, including economic reform; toleration of limited internal dissidence and criticism; and reasonably settled church/state relations which permit, inter alia, increased interaction with American religious institutions.

7. The next two years: It is not possible at this time to predict how long the deterioration in East-West relations will last, but this trend will undoubtedly dominate our relations with Hungary for the first part of this period. We should expect our ability to make progress in bilateral relations with Hungary will be affected even though the Hungarians have already told us that they hope the present international scene will not hurt our bilateral relations.

8. We should take into account other specific developments which may also have some influence on our policies:

A. Party Congress: The Hungarian Party Congress will be held in March.⁹ The outlook is that the leading political personality in Hungary, Janos Kadar, will remain in power and that his policies, most notably economic reform and relatively relaxed domestic policies, will be reaffirmed and continued. The main themes of Hungary’s foreign policies, including its loyal support of the USSR, will also be reaffirmed. If the examination of Hungarian policy which will take place at the Congress results in any major changes leading away from internal liberalization or produces such changes in the Hungarian relationship with the Soviet Union as an increased military role for Hungary within the Warsaw Pact, our policies will need reassessment. In this regard, we should examine the Hungarian posture in case instability develops in Eastern Europe as a result of some crucial development such as Tito’s death.

B. Economics: Hungary is attempting both economic reform and stabilization at the same time. Reform opens up possibilities which we should be alert to pursue to increase Hungary’s integration into the West and encourage its development of a decentralized and market oriented economy. Trade and possible membership in the IMF are obvious areas of possible cooperation. Stabilization means that the Hungarian regime will be less capable of responding to the needs of the Hungarian people for a better standard of living. Both elements introduce elements of potential political instability into a overall stable situation. For the foreseeable future, Hungary will be following a policy of relative economic austerity, which will hamper our efforts to increase our exports and may undercut to some extent the political acceptance by the Hungarian people of the present regime.

C. CSCE: The Madrid Conference is scheduled for November. On balance, I believe we should continue to plan to consult with the Hungarians to explore areas of cooperation which are in the U.S. national interest. At the same time, we should clear up a few lingering aspects of our relations which date from the past: remove personnel ceilings on our respective Embassies and agree on the issuance of multiple-entry visas for businessmen. We welcome the Hesburgh Commission’s mandate to examine the INA and hope that the present section 212 (a) 28 will be rewritten to permit more flexibility, thereby reducing both a political irritant as well as our Consular work load.

D. Complexion of relations: With the signing of the Trade Agreement in 1978 and implementation of the steps which flowed from this development (EXIM facilities, for example) the emphasis on economic relations has shifted to practical hard work directed toward increased trade and economic cooperation. Implementation rather than striking new advances is what we should expect. On the other hand, we should be able to look forward to cooperation in the cultural field to an extent unprecedented since the end of the war now that we have established the framework. The new result of these two developments is that the emphasis in our current work may shift from economic to cultural.

9. Political work will continue to be difficult. A dialogue through high level visits remains our best tool here. In this connection, the desire of Kadar to visit the U.S. must be addressed after the elections of November 1980. This may be the dominant issue in our relations in 1981.

10. Our highest administrative priority will be a property settlement. For the first time in several years an administrative issue may well be at the forefront of our relations.

11. Hungary in a regional and global context: Global issues—Iran, Afghanistan, SALT II—are bound to have an adverse effect on our relations with Hungary and may eventually dominate them if the present downward trend in the East-West climate continues. I expect Hungary to remain in the middle of the Eastern European pack. They will try hard to preserve the progress they have made with the U.S. in the economic field, because it is in their long term interest as well as ours. At the same time they will continue to identify closely with the Soviet Union, with some nuances which are not really that important to us, but of some significance to the more “progressive” elements in the society. The Hungarians would not want to risk a sharp Soviet reaction which would sweep away completely the relative economic independence they have worked so hard to achieve.

12. Resources: The nature of our relationship with Hungary has changed substantially over the past two years, but the resources of the Embassy have not kept up with this change, especially in personnel. We have greatly expanded our ICA work and have prospects of an even greater expansion in cultural exchanges. We need an additional person in the field. Both our political and economic work have increased to the point where with existing staff we can handle little more than day-to-day operational work. We do not have the resources to report in depth on significant developments affecting Hungarian internal economic and political policies, as well as our bilateral relations. We are forced practically to ignore analysis of the highly significant labor and religious scenes. We need an additional political officer and an additional economic officer if we are to more than scratch the surface in our analysis of Hungarian political, social and economic developments.

Kaiser

1. Source: National Archives, RG 59, Central Foreign Policy File, D800032–0785. Confidential. Sent for information to Belgrade, East Berlin, Bucharest, Moscow, Prague, Sofia, Warsaw, and USNATO.
2. In telegram 310299 to all diplomatic posts, December 1, 1979, the Department updated the reporting requirements for the Embassies’ annual review sent to Washington, effective beginning fiscal year 1982. The Department reported that annual reports were no longer required unless certain conditions warranted such a report. Among those conditions: “the Ambassador or Bureau believes [a report] necessary, including a change in circumstances affecting relations with that country.” (National Archives, RG 59, Central Foreign Policy File, [no film number])
3. See Document 16.
4. In telegram 9408 to USNATO and Bonn, January 12, the Department provided initial guidance on United States policy toward Eastern Europe in the wake of the Soviet invasion of Afghanistan. (National Archives, RG 59, Central Foreign Policy File, D800021–0454) See Document 36 and footnote 6 thereto.
5. The “Agreement between the Government of the United States of American and the Government of the Hungarian People’s Republic on Cooperation in Culture, Education, Science and Technology” went in effect May 21, 1979. (30 UST 1502)
6. The United States and Hungary signed an exchange of notes on the “Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income” in Washington on February 12. The Senate approved the agreement on July 9 and President Carter signed the instrument of ratification on August 7. (Carter Library, White House Central Files, Countries, Box CO–30, CO 67, 1/20/77–1/20/81) The agreement entered into force September 18, 1979. (30 UST 6357)
7. Telegram 6432 from Budapest, December 28, 1979, reported that the United States-Hungarian Tariff Agreement went into effect January 1, 1980. (National Archives, RG 59, Central Foreign Policy File, D790596–0235)
8. See Document 166 for a memorandum of conversation between Huszar and Brzezinski.
9. See Document 168.