864.51/5–246: Telegram
The Minister in Hungary (Schoenfeld) to the Secretary of State
urgent
[Received May 3—2:10 p.m.]
818. Paris 1981 April 24, 6 p.m. to Dept, repeated to Moscow as 139.94 I attach little significance to FonMin Gordon’s opinion that granting Ex-Im loan to Hungary would have important local political effect. Local situation has altered since mid February (my 330, February 15 repeated Moscow as 84, London as 91, Bucharest as 114 [14], Belgrade as 11, Sofia as 5 and Warsaw as 2) when limited American economic assistance held promise of contributing appreciably to Hungary’s ability to remain economically independent of USSR until Soviet-American understanding re eastern Europe could be reached.
Present day Hungary is virtually Soviet economic colony in hands of Communist minority whose principal objective appears to be collaboration with Russia apart from fact that some of their leading economic functionaries are widely thought to be lining their own pockets. It can no longer be said that those in control of Hungarian Govt are determined to maintain economic autonomy. Supply Minister Bárányos is almost only exception in resisting Soviet penetration and is politically ineffective. Gordon himself places momentary expediency and personal safety above other considerations. Prime Minister Nagy’s frequent expression of devotion to Soviet Hungarian collaboration during past few weeks noticeably since his return from Moscow cannot be explained by Soviet pressure alone, but suggests that he also has deemed expedient at least tactical surrender to Russophile elements which surround him (mytel 486, March 995).
Military occupation has doubtless been major element in rapid growth of Soviet domination of Hungary and non-Marxist elements remain confident that vast majority Hungarians desire and will assert their independence when and if substantially all occupation forces are withdrawn. While military occupation remains important factor in Hungarian situation, it will become less significant the longer it lasts and the more complete Communist entrenchment becomes.
It is still my view that Hungarian rehabilitation is essential to enduring peace and that for this purpose (my 657, April 995) Hungary will require all kinds of imports. It is now clear, however, that with [Page 294] possible exception of limited help given on humanitarian grounds (my 400, February 26, repeated to Moscow as 10596) unilateral American assistance would make relatively little contribution to Hungary’s rehabilitation because Soviet imposed economic burdens would neutralize its beneficial effects. Moreover, their policies during past few months warrant expectation (paragraph 5 my 810, April 30;97 repeated Paris as 115 and Moscow as 189) that key Hungarian officials in control of country’s economy would not hesitate to divert American aid to benefit of USSR at expense of their own country.
Consideration should also be given to Hungarian Governments failure (my 91, April 22 to Paris; repeated to Dept as 748) to show goodwill in protection of American interests, notwithstanding Articles 12 and 13 of armistice.
In short it is my present view, formulated without benefit of knowledge re latest developments at Paris on question of Hungary’s occupation, that since Hungarian Government discarded virtually all pretense of political and economic independence, Soviet penetration can no longer be combatted by direct American-Hungarian action. Further, Hungary is no longer in position to make good on any commitments it might be ready to make in behalf of its own rehabilitation as a condition of American assistance. Hungary’s rehabilitation and its adherence to UN objectives are now principally a Soviet matter and must be treated as an element in overall American-Soviet relations. It follows that further American assistance to Hungary, whether by way of loans or restitution, should be predicated on Soviet-American understanding, and that if it is undertaken upon basis of such understanding, it will have to include close supervision of use of American funds and supplies within this country.
Repeated Paris for Secretary and Embassy as 118, Moscow as 191, London as 210 Bucharest as 39, Belgrade as 23, Sofia as 11 and Warsaw as 5.
- Not printed; in it the American Ambassador in Paris, Jefferson Caffery, reported on discussions that he and his Minister-Counselor had had with Hungarian Finance Minister Gordon, who was in Paris as the head of a mission for the purchase of surplus property from American authorities. Gordon had inquired about the possibility of obtaining for Hungary an Export-Import Bank loan of $10 million. (864.24/4–2446)↩
- Not printed.↩
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- Not printed, but see footnote 92, p. 292.↩