360. Memorandum of Conversation1


  • The President’s Meeting with General Secretary Karoly Grosz of Hungary


  • U.S.

    • The President
    • Secretary of State George P. Shultz
    • Secretary of Treasury James A. Baker, III
    • Secretary of Commerce C. William Verity
    • Kenneth M. Duberstein, Chief of Staff
    • M. B. Oglesby, Deputy Chief of Staff
    • Marlin Fitzwater, Assistant to the President for Press Relations
    • Colin L. Powell, Assistant to the President for National Security Affairs
    • John C. Whitehead, Deputy Secretary of State
    • Charles Z. Wick, Director, USIA
    • Ambassador Mark Palmer
    • Rozanne L. Ridgway, Assistant Secretary of State for European/Canadian Affairs
    • Nelson C. Ledsky (Notetaker)
    • Rudolf V. Perina (Notetaker)
    • Laszlo Szimonisz (Interpreter)
  • Hungary

    • General Secretary Karoly Grosz
    • Ilona Tatai, Member, Politburo, Hungarian Socialist Workers’ Party
    • Laszlo Kapolyi, Government Commissioner, Ministry of Industry
    • Ference Bartha, President, Hungarian National Bank
    • Laszlo Kovacs, Deputy Minister of Foreign Affairs
    • Vencel Hazi, Ambassador to the U.S.
    • Istvan Pataki, Counselor, Hungarian Embassy
    • Victor Polgar, First Secretary, Hungary Embassy (Interpreter)

After three waves of press passed through the Oval Office, the President said he wished to make a few remarks in the minute or two that the two men had privately before joining others in the Cabinet Room. He said that the General Secretary’s visit marked a decade of progress in U.S.-Hungarian relations. The international climate was favorable to further progress in relations and to implementation of the reforms under discussion in Hungary. The President said that General Secretary Grosz had the opportunity to become a great leader by making Hungary prosperous. Other Eastern and Central European countries were ready to follow in Hungary’s footsteps.

The President went on to say that one point which he wished to stress privately was the importance of human rights. Failure to pursue reform in this area would restrain progress which could be achieved in bilateral relations. The United States was ready to work with Hungary to improve relations and hoped this would be possible.

General Secretary Grosz responded that he was gratified by the President’s words. He said he wished to assure the President privately that an organic part of the Hungarian reform program was to expand human rights to the maximum extent possible. This issue will not disturb bilateral cooperation. General Secretary Grosz asked the President to support Hungary’s goals in this spirit.

The President said we shall be supporting Hungary’s goals.

General Secretary Grosz went on to say that the President had performed a deed of historic importance by recognizing the great opportunity of the times. Hungary wished to make best use of this opportunity [Page 1151] which the President and General Secretary Gorbachev had created. Hungary had taken it upon itself to cooperate on all matters of interest.

The President said that we appreciated that and would cooperate and be helpful also.

The General Secretary said that those words meant a lot to Hungary. The gestures which the United States had shown to Hungary went beyond Hungary’s borders in significance.

The President then suggested that he and the General Secretary join others in the Cabinet Room.

After greeting other members of the party in the Cabinet Room, the President said that the recent Hungarian Party Conference and reforms had received much attention in the West. We were impressed by Hungary’s willingness to accept new ideas and its commitment to implementing major reforms. Measures to open the Hungarian economy to private sector activity should provide a sound basis for economic growth. We also welcomed Hungary’s decision to implement an IMF stabilization and reform program.

The President went on to say that, to be successful, economic reform must be coupled with political reform. A greater role for Parliament and increased freedom of travel were positive first steps. We hoped Hungary would continue to move forward toward greater economic and political freedoms. The President said he would be interested in hearing how Hungary planned to develop reform and what the next major steps would be.

General Secretary Grosz responded that he was grateful for the opportunity of this visit and of meeting the President. The last similar visit had been 42 years ago, and at that time the U.S. and Hungary had discussed a World War II peace treaty. Hungary wanted to develop relations further. The General Secretary said he wished in particular to thank the President for the congratulatory message which he received after becoming General Secretary. It was clearly more than just a personal gesture. It was an endorsement of the policies on which he (Grosz) was working.

General Secretary Grosz said he wished to use the visit to get acquainted with how America saw the world and what America’s plans were. He wished to see the achievements of the American people and learn the methods used to achieve such results. He felt Hungary could learn a lot from the United States.

The General Secretary went on to say that, on behalf of all the people of Hungary, he wished to express appreciation to the President for his policies of peace and progress. These were of historic importance. Even the first handshake with General Secretary Gorbachev had significance. Hungary also appreciated the approach of the United States which took [Page 1152] into account the interests of small and medium-sized nations. This was a modern approach which served the interests of all humanity. Hungary was happy to join this effort and would participate to make dialogue more effective and productive.

The General Secretary then turned to the Hungarian reform program, noting that even a few days in the United States had convinced him that Hungary had taken the right approach in reforming its economy. He said that economic reform had to include reform of political organs. This would include reform in the area of human rights. The government would do everything possible to allow Hungarians to become acquainted with the world, and it would welcome to Hungary all those who wished to become acquainted with Hungary. Freedom of travel for Hungarians was being implemented, and last year the country had twice as many tourists as its population.

General Secretary Grosz went on to say that Hungary wished to modernize its economy, to strengthen free market forces. Economic cooperation with the West was important to helping put this into effect. Hungary was counting on cooperation with American business and financial organizations. It realized that this was only possible on the basis of mutual interest, but it wished to learn how best to proceed. Some things had been started. A management institute was being developed in Hungary at which American business experts would be teaching. The General Secretary said he wished to see more Hungarian people receive education in the United States. These were long-term efforts to help Hungary reach its goal and make progress.

The General Secretary said he was aware of the responsibility that Hungary’s success or failure would have implications beyond its borders. These would not be decisive, but they would influence Eastern Europe. Hungary was thus dedicated to seeing its reform program through. It appreciated the support up to now extended by the United States. The support was greater than in the past, but not as great as Hungary would like to see in the future.

The General Secretary concluded by thanking the President for sending to Budapest such a marvelous Ambassador who was doing so much to strengthen cooperation between the two countries. He thanked the President for patience in listening to his remarks.

The President said he had listened with enjoyment. What the General Secretary had said was also what Americans believed. The President said that the United States was a unique country because it had in its population members of almost every nationality and every country in the world. It was truly a melting pot. This had helped us to recognize that there was no need for hostility among peoples. People did not start wars; governments did. He had told General Secretary Gorbachev in their first meeting that the United States and the Soviet Union did not [Page 1153] mistrust each other because they were armed; rather, they were armed because they mistrusted each other. The main purpose of our countries should be to eliminate such mistrust.

The President said he had met a group of young people before going to Moscow. Half had been Americans and half Soviets, and it was not possible to tell the difference. He had told them that if all the young people in the world could get to know each other, there would be no more wars. They all applauded. Those of us who are older, the President continued, should try for the same goal. The United States was ready to cooperate in this.

Turning to bilateral relations, the President said that both the United States and Hungary could be pleased with how far they have come and with the prospects for the future. Experts from both sides had had two good meetings on counter-terrorism, and there was a solid record of cooperation in this area. Hungary hosted the first regional training program on narcotics interdiction, which the President said he had heard was quite successful. The President said he was impressed by the number of visitors and students we had exchanged, but he hoped even more could be done in people-to-people exchanges.

Turning to economic cooperation, the President said that this was good, though we would certainly like to expand our exports to Hungary and were also interested in increasing joint ventures and investments. He noted that a great man had once said that countries become great by importing people and money. The President said he was pleased to say that the U.S. had approved the export to Hungary of American passenger and cargo aircraft to help modernize the Hungarian fleet. Other economic issues had already been discussed in the General Secretary’s other meetings. The U.S. would try to be helpful, but not everything could be done at once.

The General Secretary said this was true. With regard to the President’s comments about human contacts, General Secretary Grosz said that Hungary was counting very much on expatriate Hungarians who had become American citizens. He had met many of these during his visit; many had reached great heights in American business and scientific life. These were people who had good ideas and thoughts about increasing contacts and could be helpful in many areas. One of Hungary’s problems was not knowing all the opportunities which existed in America, and many Americans did not know much about Hungary and opportunities there. Hungarian-Americans could be very helpful in overcoming these barriers.

The General Secretary said that U.S.-Hungarian trade had increased, and it was becoming apparent that the only limits to it would be “our own limits.” The U.S. market was very demanding, but this was good because it provided incentive to Hungarian firms for better output. The [Page 1154] discussion with Secretary Verity had shown the willingness of the U.S. side to increase cooperation. The General Secretary said he was also grateful for the President’s words. Still, greater opportunities could be opened up. There were things which still hindered economic cooperation. They could not be eliminated overnight but, in the spirit of Secretary Baker’s support of free trade, more could be done to dismantle artificial obstacles.

The President said that the U.S. had taken the lead in trying to bring about free and fair trade in the world. Hungary would find us cooperative in this regard.

The General Secretary thanked the President for these words, which he said were of great significance to Hungary.

Turning to General Secretary Grosz’s remarks about Hungarian-Americans, the President said that one of the first things which many Americans do when meeting new acquaintances was to describe their national or ethnic background. If they aren’t first generation, some Americans have many diverse countries in their background. The President said he himself had three nationalities to mention in his background.

The General Secretary said he had had an opportunity during his visit to meet Governor Dukakis, whom he had invited to visit Hungary. The Governor had mentioned that his wife was one quarter Hungarian.

The President quipped that this would not persuade him to vote for the Governor.

The General Secretary responded that he did not wish to interfere in internal American affairs.

Secretary Shultz said he hoped the Governor would have plenty of time after the election for a trip to Hungary.

The President said that, with reference to the Soviet Union, his meetings with General Secretary Gorbachev had indeed helped to improve the East-West climate. He had been personally impressed by the friendliness of the Soviet people and of the crowds in the street. This had shown that our two peoples can get along. We still have differences, but progress had been made in human rights, arms control, resolution of regional conflicts, and on bilateral issues. The INF Treaty marked the first time that the Soviets had been willing to destroy weapons which they already possessed.2 The President noted that he had perhaps irritated General Secretary Gorbachev by repeating to him a number of times the one Russian phrase which he knew: Doveryai no proveryai (Trust but verify). In the human rights field, we recognized [Page 1155] that there were changes in Soviet practices but more needed to be done. As progress is made, this will strengthen feelings of friendship among American people toward the Soviet Union.

The President said that now the two sides were working to reduce their arsenals of intercontinental ballistic missiles. He had stated a number of times that a nuclear war cannot be won and must never be fought. He had been pleased to hear Foreign Minister Shevardnadze say the same thing during the Washington Summit. The President concluded by saying that in the Vienna CSCE meeting, we hoped agreement could be reached as soon as possible, but we were willing to stay in Vienna as long as necessary to obtain a balanced agreement, including a satisfactory outcome on human rights.

At this point, the President noted that it was time to proceed to lunch, and the General Secretary thanked the President for the opportunity of the discussion.

The luncheon opened with an exchange of anecdotes about Margaret Thatcher. The President began with a Mrs. Thatcher quip from a recent Economic Summit, followed by stories from General Secretary Grosz and Secretary Shultz about Mrs. Thatcher’s recent visit to Hungary.

The President then asked about Romania, inquiring whether the Hungarian government was having difficulty with its neighbor. General Secretary Grosz acknowledged that there were difficulties between the two countries. He fell silent at this point, however, and did not to continue on this topic.

The President then told a story he said came from his days in Hollywood. The director of one of his pictures had been an American of Hungarian origin, who inquired one day whether anyone knew the recipe for a Romanian omelette. The recipe was easy, said the director, one begins by stealing 12 eggs.

This led to a story told by Mr. Kapolyi. He said that several years ago at a CEMA meeting, General Secretary Kadar had given a speech, during which he said that when the Hungarians arrived in central Europe and took up residence in an area settled by Romanians, their Romanian neighbors had stolen 50 horses. After the speech, Ceausescu rose and asked if Kadar really wanted to have that story recorded in the official minutes. Kadar answered that, no, he did not insist that his remarks be officially recorded. Later in the the same meeting, Kadar told another story about a Romanian theft of Hungarian property, and again Ceausescu rose and asked to have the remarks expunged from the official record. Kadar quickly agreed. Finally, during Kadar’s concluding statement, there was yet a third reference to a Romanian theft of Hungarian property at the time the Hungarians settled in Europe. Ceausescu demanded the floor again and said angrily that, when the [Page 1156] Hungarians came to eastern Europe, there were no Romanians present. Kadar rose immediately and insisted that Ceausescu’s remarks be recorded in the official records.

The President said this was a remarkable story on several counts, and historical anecdotes of this kind would be hard for any American to tell. We were still a young nation, with a very short history. Recently, a group of veterans had come to the White House. One member of the group was a General van Fleet, who is 96 years old. General van Fleet recalled to the President that both his father and grandfather had been military men, and that his grandfather’s military service had occurred during the American Revolution, or 200 year ago. In other words, three generations of van Fleets had spanned the entire length of American history.

General Secretary Grosz said that one could not find such a family in Hungary. Part of the reason was that there had been so much inter-marriage and mixing of populations in central and Eastern Europe. The Hungarians lived on a plain, and armies marched back and forth across the country. It was almost impossible to tell who was a Hungarian. There were still many who carried true Hungarian names, but one could question how these names had been acquired.

General Secretary Grosz continued that the only people in Europe, with whom the Hungarians had ethnic ties, were the Finns. The story goes that as the tribes crossed central Asia into Europe, they came to a fork in the road. There were two arrows: one said north, the other said middle. Those who could not read marched north and became Finns. The others became the Hungarians. General Secretary Grosz said he had recently visited Finland, and he could attest to the fact that all Finns could now read and write very well. Indeed, this was an extremely prosperous people, who had been able to restructure their entire economy in a period of just over eight years.

Secretary Shultz agreed. Income per capita in Finland was near the top of the pile. The Finns were also an extremely flexible people, who adapted well to changing circumstances. Secretary Shultz recalled that he had been in Helsinki last year3 and needed to get to Moscow the next day. When his party received word that the Moscow airport was closed because of snow, his Finnish hosts produced a train within a half hour, and he and his party boarded the train and traveled to Moscow in time to meet their scheduled appointments.

[Page 1157]

General Secretary Grosz acknowledged the flexibility of the Finns, a people he looked up to with great respect. Finland proves that a country need not be large in order to be successful.

Secretary Shultz agreed. All a country needed, to be successful, is to get itself integrated into the world economy. The Finns have done an exceedingly good job of achieving this in the post-war period.

General Secretary Grosz said that one of the keys to Finland’s success was that English and German were taught in all Finnish schools. No one could graduate from a Finnish high school without speaking one of these two languages. This in turn was the kind of intellectual capital which enabled Finland to integrate itself so well into the world’s economy.

At the same time, language skills were a major problem for Hungary. Only five percent of all Hungarians spoke a second language. General Secretary Grosz said that legislation would go into effect in 1990, which would specify that no one could enter a Hungarian university without having mastered at least one foreign language. This desire to expand language skills explained why the Hungarian government supported language camps and other summer language activities for young people. Hungary also wanted an expanded US-Hungarian university exchange program. It wanted to invite professors from the United States to teach in Hungary, and to have Hungarian teachers travel to the United States to learn English. General Secretary Grosz said he was pursuing such programs through direct contact with the Association of American Universities.

Director Wick said that USIA worked on a regular basis with this Association and would be pleased to assist the Hungarian government in developing exchange programs.

Secretary of Commerce Verity noted that an important management training institute had been organized in Hungary along American lines. Ambassador Palmer added that university exchange programs of all types existed in Hungary. There are now some 21 American universities in the country, and about 4000 students travel yearly to Hungary to study.

The President said this was all extremely impressive. He himself was constantly amazed by how quickly refugee groups were absorbed in this country, and how swiftly children prosper in the US educational environment. He then told several stories of how specific Vietnamese refugee children had performed brilliantly in America, winning scholarships and top honors in just a few years.

General Secretary Grosz acknowledged that this was true. In his own country, Chinese students, who had come to study, had done extremely well. They lived modestly and studied very hard.

[Page 1158]

President Reagan said that all this proved how much smaller and smaller the world was becoming, and how much more important it was for us all to live together cooperatively.

This led General Secretary Grosz to suggest that the US Government lend support to an idea which he was developing. The Hungarian government hoped to arrange for camps in Hungary where US Jewish children, Hungarian and Israeli young people could come together and become friendly over the course of a summer.

The President said he thought this a wonderful idea, to which we would lend whatever support we could.

General Secretary Grosz then said that perhaps we could spend a few moments talking seriously about Romania. He said, the situation in that country made all Hungarians nervous. There were two and a half million Hungarians living in Romania under a government whose behavior is more and more erratic. It is difficult to understand the logic of the Romanian decision to destroy some 8000 villages and relocate their inhabitants.

The President said that policies of this kind stem from governments, not ordinary people. In this regard, a book by a Romanian defector had left a deep impression. General Secretary Grosz noted he had heard about this book, which is about to be translated into Hungarian. President Reagan continued that the book described the Romanian dictatorship and the repression and terror under which most people in that country must live.

Director Wick asked the General Secretary if he had ever heard what the Romanian people had used for light before they had candles. After a second of silence, the Director said the answer was simple, “the Romanians had used electricity.”

General Secretary Grosz acknowledged that it was difficult to understand Ceausescu. He said that at the recent Warsaw Pact meeting he had tried to talk to Ceausescu, but the conversation got nowhere. He had also written an official letter asking about the internal situation in Romania. Ceausescu had not responded.

The President then asked if one could explain why Ceausescu wanted to destroy existing villages. General Secretary Grosz said that, as far as he knew, some 13,000 villages were involved. The stated objective of this program is to free up some 700,000 acres of land for additional agriculture, while moving the population of these villages into the cities to work in industry. The actual result of this program was the creation of some 6,500 refugees, most of whom have crossed from Romania to Hungary. The Hungarian government believes there are some 12,000 more potential refugees. The problems seem endless. Many Hungarians and some Romanians leave without their families. Most come with only a few essentials. The burden for Hungary is very great, and, Grosz said, he saw no way out of the situation.

[Page 1159]

The conversation then moved on to the Soviet Union, with the President recalling that both he and the Hungarian General Secretary had recently met with Gorbachev. The President asked if the Hungarian leader would be willing to give his appraisal of the Soviet leader and his policies.

General Secretary Grosz said he would be pleased to make some general comments, but asked that his remarks be treated as confidential. First, he said, he could not be objective, because he had known the Soviet leader for a long time. Indeed, he had known him well before he became a national leader. Over the years as the two men had maintained contact with one another, Gorbachev had always been courageous and resolute. He was a man determined to see his ideas put into use. Thus far, over the past three years, Gorbachev has been successful in communicating his ideas and energy to the Soviet people. Gorbachev is a man who wants to move ahead quickly. At the same time, he is well aware of the dangers and of the opposition he faces. His task is to manage progress, and not lose his balance. The recent Party Conference was a victory for Gorbachev, and the leadership in Moscow seems more united than before.

General Secretary Grosz continued by saying that he had spoken to General Secretary Gorbachev this month in Warsaw, and Gorbachev seemed optimistic that he will have his long-term strategy in place by 1990. Gorbachev also readily admitted that when he came into office three years ago, he did not realize the depth of the problems he faced. What he saw at that time was only the tip of the iceberg.

General Secretary Grosz suggested that Gorbachev wants to work with the United States toward a new detente relationship. Grosz said that Gorbachev was happy that he (Grosz) had been invited to Washington and had decided to travel across the United States.

The task ahead for both superpowers, General Secretary Grosz said, was to eliminate miscalculations, so that the two parts of the world no longer entertained foolish thoughts about one another. Grosz added that he had had talked with Gorbachev on this subject, and he was certain Gorbachev was sincere in his desire to lower prejudices within his own country toward the United States.

General Secretary Grosz said he had also talked to Gorbachev at great length about Hungarian foreign policy and its domestic reform program. Gorbachev had encouraged Grosz to proceed with reforms and promised to do what he could to assist, though acknowledging the limited Soviet resources available at present. Grosz commented in this connection that the socialist system today was not capable of functioning effectively. It needed new political thinking. It needed a new economic system. It was much more difficult for the Soviet Union to make adjustments, given its size, than for Hungary. Hungary was [Page 1160] also closer to Western Europe and to other societies undergoing rapid change. Moreover, it was more imperative for small countries to adapt to what is going on around them. They are forced to remain open to other intellectual tendencies and schools.

General Secretary Grosz insisted that what happens in the Soviet Union is important for Hungary, for the United States and for all other countries in the world. Grosz said he was familiar with the debate in the United States as to whether it was better to have a stronger or a weaker Soviet Union. Grosz said he subscribed to the view that a stronger Soviet Union was in the interest of every country. Such a Soviet Union would be a better partner for the United States and a more productive member of the world community.

The President expressed agreement with the analysis General Secretary Grosz had presented. He said he shared the same feelings about General Secretary Gorbachev, who was a man clearly different from previous Soviet leaders. There was no question about his sincerity in trying to bring about change. His problem was that the structure of the Soviet Union simply did not work. In every government, the bureaucracy can get out of hand. There is no question that in the Soviet Union Gorbachev is faced with a bureaucracy which opposes efforts at reform.

General Secretary Grosz interrupted at this point to say that he had a slightly different view of the problem, and asked the President’s permission to explain. In Grosz’ opinion, the Soviet bureaucracy did not fear or oppose Gorbachev, but simply did not understand what the Soviet leader was trying to achieve. Grosz indicated that he had many personal friends inside the Soviet bureaucracy. He had asked many of these friends why they were not helping their leader. The answer he invariably received was that the bureaucrats did not understand how to help. The gap between leaders and bureaucrats is enormous, and it will take a great deal of time before the ideas which Gorbachev has can spread downward through the bureaucracy. In a sense, the Soviet leader has to become a traveling preacher, explaining his way of thinking to the people. One could not forget that things had been moving in the Soviet Union in a swift direction for more than 70 years. Change will take time. The Soviets claim, for example, that they wish to organize joint ventures. The Hungarians have tried several such ventures with the Soviets, but have had great difficulty in making them succeed. There are huge problems—exchange rates, pricing, organizational structure. The Soviets have simply not instituted processes that will allow joint ventures to work.

General Secretary Grosz said that the Hungarians would keep trying. Together with the West Germans, several new joint projects with the Soviet Union were under consideration. At the same time, Grosz [Page 1161] insisted, Hungary wanted to work more closely with the United States. Hungary wanted American corporations to come to Hungary. They can sell shares of stock to Hungarians for their Hungarian operations and give us either a majority or a minority share. For our part of the world, this would be a near revolution. But this is what we are prepared to do with the United States, and this quite frankly, said Grosz, is what the Soviet Union needs to do as well.

The President said he would like to call on Secretary Baker, who could perhaps pose questions in somewhat greater detail about General Secretary Grosz’ economic ideas. Secretary Baker pointed to the references the General Secretary had made to administrative problems of various kinds, and wondered whether the Hungarian leader could explain more clearly what was involved.

General Secretary Grosz said he had nothing terribly specific in mind. There was a variety of administrative problems in dealing with the United States. There were, for example, quota systems with respect to textiles and other products. There were also COCOM restrictions. Grosz said he could understand the problem with respect to the transfer of strategic goods, but the United States was controlling products that were available, admittedly at higher prices, from other sources on the world market. There was also the OPIC decision which we wonder why Congress took.

Secretary Baker said we were sometimes equally puzzled as to why the Congress takes the actions it does.

General Secretary Grosz said that he did not wish to complain. He was very grateful, especially to Secretary Verity, for what he had done for US-Hungarian trade. He had also just been on the West Coast, where he had talked to many people about trade. Real trade possibilities seemed to exist, and the Hungarians hoped to set up a trade representative on the West Coast, who might also provide some consular services. Some time ago, Grosz continued, we were told that this kind of a combination office was not possible. Now I have been told that perhaps it is feasible. Hungary certainly hopes it is, because this is the kind of West Coast office the Hungarians need.

Secretary Verity said this matter would be given our immediate attention. He noted that the General Secretary had made such a good impression in the United States that his policies were being referred to in the US press as “Glasgrosz”.

The luncheon concluded at this point, after an exchange of Soviet jokes, and the President wishing the General Secretary a successful visit and a safe return to Budapest.

  1. Source: Reagan Library, Rudolf Perina Files, Presidential Meeting with PM Groz Hungary 7/27/1988 (6). Secret. The meeting took place in the Oval Office, the Cabinet Room, and the Residence.
  2. December 8, 1987.
  3. April 12–13, 1987.