864.51/2–1546
Memorandum of Conversation, by Mr. Edward G. Posniak of the Division of Investment and Economic Development
| Participants: | Mr. Alexander Szasz, Economic Adviser of the Hungarian Legation |
| ED—Mr. Fetter25 | |
| ED—Mr. Posniak |
Mr. Szasz, Economic Adviser of the Legation of Hungary and member of the Hungarian National Bank, came to discuss with Mr. Fetter the possibilities of U.S. economic assistance to Hungary. Mr. Fetter advised him that it was extremely doubtful whether any Eximbank reconstruction loan could be extended to Hungary under the present circumstances, at least until the reparations question was settled. It was suggested that there might be a possibility of a short-term Eximbank credit to finance U.S. cotton imports to Hungary. Mr. Szasz stated that the U.S.S.R. had agreed to deliver to Hungary 30 million tons of cotton, which took care of the capacity of the Hungarian textile mills. Thus he felt there was probably no room for cotton imports from the U.S.
Mr. Szasz inquired as to the possibility of an Eximbank loan for raw materials other than cotton, in particular hides and wool. Mr. Fetter pointed out that neither commodity was one that the U.S. customarily exported. Furthermore, such a loan would have to be a short-term credit based on the assurance of repayment in dollar exchange through processing and export of the raw materials. Mr. Szasz felt that Hungary at this time could not assure repayment under these circumstances and inquired whether the Eximbank could instead retain title to the products shipped. Mr. Fetter explained that such a procedure was not customary and would be difficult to arrange in view of the legal and other complications involved.
In response to Mr. Fetter’s inquiry as to the present economic conditions in Hungary, Mr. Szasz presented a copy of a confidential memorandum which was submitted by the Hungarian Government to the Allied Control Commission in Budapest in December 1945 and which contains a full statement of the present economic situation in Hungary.26
Mr. Szasz explained Hungary’s current critical condition, especially with regard to food, as arising in part from the presence of a Russian army of occupation of 700,000 men in a country with a population of [Page 262] about 8 million. In addition reparations to the U.S.S.R. include agricultural products, although their delivery has been temporarily suspended. Mr. Szasz also mentioned that Hungary’s current barter arrangements with Poland, Rumania, and Austria are not functioning satisfactorily due to the scarcity of Hungarian exports and the difficulties of transportation.
[On February 21, 1946, a note was delivered to the Soviet Government regarding the failure to bring about revisions in the procedures of the Allied Control Commissions for Bulgaria, Hungary, and Rumania. Instructions for the delivery of this note were contained in telegram 295, February 15, 1946, to Moscow, page 74. For text of the Soviet note of March 22, 1946, rejecting the American representations, see telegram 940, March 25, from Moscow, page 89.]