800.24/2–946: Telegram

The Minister in Hungary (Schoenfeld) to the Secretary of State

secret
priority

273. My 22 December 4 to American Embassy Paris for Virden, repeated Department as 1024.19 This relates to Department’s economic policy toward Hungary with immediate reference to desirability of extending credit to Hungarian Government for procurement of surplus army property.

Department is aware that the Communist minority in Hungary which is pressing for Soviet Hungarian economic collaboration continues to make effective use of argument that Western Powers including America are disinterested in this country’s welfare and that therefore Hungary’s survival depends only on Soviet good will. Those resisting exclusive Soviet orientation of Hungarian economy cannot effectively refute Communist allegations as long as alleged American policy of aloofness continues, despite fact that numerically they represent vast majority of population. In my view, success of continued Soviet efforts to gain monopolistic control of Hungarian economy will depend in part, on degree of interest shown by US in Hungarian economy during immediate future.

American policies to participate in rehabilitation of Hungary only in cooperation with other powers and to provide assistance only if USSR gives assurance that such assistance will not be offset by increasing Russian removals from Hungary, should in my opinion be reexamined since they enable USSR to exclude US from Hungary by declining to cooperate in rehabilitation or provide required guarantees. Despite several assurances, ACC’s request for report on Hungarian economic situation, for example, was never forwarded to Hungarian Government (my 94, January 17, 1946 repeated to London as 26 and Moscow as 1920).

I recognize that eventually US and Soviet will probably reach [Page 257] agreement regarding southeastern Europe but fear that by that time horse will have been stolen.

In my opinion, American interests require that US take advantage of every opportunity to foster Hungarian cooperation in preventing development of Soviet monopoly in Hungary especially when such encouragement can be given at little cost to US and without compromising American principles. Surplus army stocks currently being disposed in Europe at large financial loss to American taxpayers provide such an opportunity. An announcement at this time that Foreign Liquidation Commission is prepared to discuss with Hungarian Government credit terms for procurement of surplus army properties would unquestionably have important bearing on current Soviet-Hungarian negotiations directed toward creation of Soviet controlled companies in Hungary possessing both express and implied monopolistic privileges in more important industrial fields. (My 267 February 8 repeated Moscow as 65, London 7221). Moreover such credit would enable Hungary to procure supplies perhaps more urgently needed here than in any other European country.

Repeated Moscow 66, London 74 and Paris for Virden 30.

Schoenfeld
  1. Not printed; it stated that Hungary had been left virtually without transportation by the German occupation and urgently needed motor transport. It recalled that Secretary Byrnes had advised that surplus military trucks and equipment be made available to Hungary on credit and asked what credit terms could be made available for the procurement by Hungary of 1000 surplus military trucks (800.24/12–445). John C. Virden was Central Field Commissioner for Europe, Office of the Foreign Liquidation Commissioner.
  2. Not printed.
  3. Not printed.