740.00119 E.W./l 1–244: Telegram
The Acting Secretary of State to the Chargé in the Soviet Union (Kennan)
2584. Your 4011, Oct. 20. The Department has given careful consideration to the proposed reparation clause in the Hungarian armistice terms and is of the firm opinion that before the United States Government can give its consent to the terms as proposed it must make certain that every effort is made to assure that in carrying out these terms direct American interests will not be adversely affected.
In order to attain this end, you should present to the Commissariat for Foreign Affairs a close paraphrase of the following aide-mémoire:
“The early recovery and general economic stability of Europe is a matter of direct interest to the United States. This interest derives not only from American trade and financial relations with the European countries but also from the realization, which we are certain is shared by all the United Nations, of the grave effects which economic instability in Europe would have throughout the world.
If European economic stability is to be attained, many factors, some of which cannot now be evaluated, must be carefully coordinated. Among the most important of these factors are the policies and procedures adopted by the Allied Nations in collecting reparations from enemy countries.
The U.S. Government is of the opinion that the desired coordination can be attained by the adoption of either of the following proposals:
- A.
- To exclude from Article 13 of the proposed Hungarian armistice terms specific amounts of reparation payments, thus leaving this question open for decision on a tripartite basis at a later date when factors which it is impossible to evaluate now will make it possible to fix the amount of reparations which Hungary can pay. The U. S. Government would prefer, as it indicated in connection with the discussions regarding the Rumanian armistice terms, this solution of the reparations question; or
- B.
- To accept the provisions of Article 13 as now drafted which call for the payment by Hungary of a total reparation payment of 300 million United States dollars, 200 million of which will be paid to the Soviet Union, with the remainder to be paid to other Allied states claiming compensation against Hungary, provided: (A) the term of payment be extended to 6 years to bring it in line with the terms fixed in the Rumanian armistice; (B) in addition to the general arrangements for the Allied Control Commission, and in order to achieve a coordinated policy, a reparations section of the Allied Control Commission for Hungary should be set up on a tripartite basis composed of representatives of the three Allied countries signatory to the armistice. At some subsequent time, if necessity requires, there could be included on the membership of the section, representatives of other Allied governments having substantial reparations claims against Hungary with such voting power as may be decided upon by the three original members of the section.
In order to regulate reparation payments in such a manner as will not constitute too severe a burden on general European recovery and stability, this government believes that such reparation section of the Allied Control Commission should be guided in its work by the following principles:
- 1.
- In so far as possible, reparation payments should consist of goods to be used directly in the rehabilitation or reconstruction of the recipient country and the goods should not, unless in exceptional circumstances agreed to by the members of the reparation section, be exported to a third country.
- 2.
- Reparation deliveries out of current production should generally be valued on the basis of the prices of similar goods currently prevailing in world markets or if this basis of valuation is not feasible, on some other agreed equitable basis.
- 3.
- In order to minimize the possible adverse effects upon general European economic stability, reparation payments should be scheduled in such a way as to interfere as little as possible with normal trading relations.
In order to make provision for such tripartite reparation section, there is enclosed for the consideration of the Soviet Government a redraft of Article 13 and Annex E of the Hungarian armistice terms.
In expressing its firm desire for the adoption of either one of the above proposals, the Government of the United States of course recognizes fully the right of the Soviet Government to receive just compensation in the form of reparations for the damage done by enemy troops in the Soviet Union.
The United States Government expresses the hope that the Soviet Government, which undoubtedly has the same interest in European stability as the United States and other United Nations, will, in order to obtain this desired aim, agree to either one of the proposals outlined above.”
In presenting the aide-mémoire you should emphasize the direct interest of the United States in the rapid reestablishment of European economic stability and our desire to see that every effort is made to prevent factors which cannot be evaluated now from unduly disturbing the normal development of this stability. You should use, in your discretion, any or all of the arguments outlined in the Department’s 2438 Oct. 14, as to why we cannot consider accepting Article 13 as contained in the Soviet draft.
If the Soviet Government declines to accept either one of the proposals (A and B) set forth above, you should make it clear to them in writing that, while we will not withhold signature of the Hungarian armistice on behalf of the United States, we would specifically disassociate ourselves with respect to Article 13 and any annexes thereto. In pointing this out to the Soviet Government in your written communication it should be made clear that we reserve the full right at a future date to reopen the question of reparations in any or all of its aspects, if in our judgment the implementation of this reparation clause is having an adverse effect on general European stability. In [Page 924] presenting this written communication you should inform the Soviet Government that we may find it necessary to publish our reservation.
The redraft of Article 13 referred to above is given in the Department’s next following telegram.61 For reasons of security the paragraphs are given in the wrong order and should read as follows: 3, 2, 4, 1.
This message and the immediately following one are being repeated to London. The Chargé is being instructed to bring the views of the American Government on this question to the attention of the British Government and seek its support for these proposals. In your discretion you may discuss them with the British Ambassador.
- Infra. ↩