Foreign Relations of the United States, 1955–1957, Eastern Europe, Volume XXV

276. Operations Coordinating Board Report¹

Washington, November 20, 1957.

PROGRESS REPORT ON SOVIET SATELLITES IN EASTERN EUROPE

(NSC 5608/1, approved July 13, 1956 and NSC 5616/2, approved November 19, 1956)²

(Period Covered: From July 18, 1956 through November 20, 1957)

A. Summary of Operating Progress in Relation to Major NSC Objectives

1. Summary Evaluation.

a. Poland. Significant progress toward the weakening of Soviet domination of Poland has occurred since the establishment last October of the Gomulka regime. The trend toward internal freedom in Poland has been far more significant than anywhere else in Eastern Europe, including Yugoslavia. This is manifested particularly by the freedom of the Catholic Church to exist without serious government interference and the resultant prestige and powerful influence of Cardinal Wyszynski; the relative freedom of personal expression; the elimination of a number of barriers to communication with the West, including informal U.S. information and cultural activities; the substantial decollectivization in agriculture; limited experimentation with non-Marxist ideas in economic planning and management; and, perhaps most important, the elimination of the terror and diminution of the influence of the secret police. Poland has become an example of evolutionary progress which has had a great impact throughout Eastern Europe reaching into the USSR itself. This progress, toward both our general interim objectives outlined in paragraph 14 of NSC 5608/1 and our courses of action with respect to Poland outlined in paragraphs 11 through 14 of NSC 5616/2, was primarily due to internal factors, although U.S. official postures and programs have undoubtedly had some influence. The initial liberalization trend in Poland has been checked, and it has been made clear that the regime will not tolerate freedom of expression, public assembly, strikes, or other activity on a scale which might catalyze disaffected elements into actions which would ultimately threaten the regime. Initial popular enthusiasm for the Gomulka regime has apparently declined as evidenced by a growing attitude of indifference punctuated by an increasing number of indications of unrest and open manifestations of discontent. The economic situation in Poland remains critical. The ability of the Gomulka regime to maintain itself in power depends, to a major extent, upon whether it can effect any significant improvement in economic conditions; such improvement cannot be achieved without substantial foreign assistance or substantially increased trade with the Free World. To date there has been only limited success in reorienting Polish trade toward the West and in inducing other countries of Western Europe, particularly Great Britain and West Germany, to offer economic assistance and trade inducements (see Annex A.);³ but diplomatic efforts along these lines will be continued. The West German Republic has not yet extended aid to the Gomulka regime, and the possibilities of closer relations with Poland have been postponed due to Yugoslav recognition of East Germany. Unless the Poles have real hope for continuing economic assistance from sources other than the Soviet bloc, it is difficult for them to take the additional steps necessary to reorient their trade toward the West and to give them an alternative to complete dependence on Moscow. The problem is to determine, and make available, the U.S. and Free World assistance required to provide a justifiable basis for this hope.

b. Czechoslovakia. Little or no progress was registered in the achievement of U.S. objectives in Czechoslovakia in the period under review. Certain developments in Czechoslovakia in the last year have probably been in a direction favorable to long-run U.S. interests. Czechoslovakia is now open to American tourists, several thousand of whom have visited the country in the last year, and more Czechoslovak citizens are now being allowed to travel to the West on conducted tours and as participants in scientific and other international congresses. Our efforts to have more American artists perform in Czechoslovakia were hampered by the fingerprinting dispute, which gave the Czechs an excuse to cancel plans for a U.S. tour by the Czech Philharmonic and thereby to withhold Czechoslovak visas for the Cleveland Symphony’s trip to Czechoslovakia. The Czechoslovak authorities still jam our broadcasts and still forbid the importation and distribution of American newspapers, books, and films. The Czechoslovak secret police still are alert to suppress any such open displays of pro-Western views by writers, students and others as those now common in Poland.

c. Hungary. Progress in Hungary has, of course, been frustrated by forcible reassertion by the Soviets of their political and military control of the country, and by the resulting hard line taken by the Kadar regime toward the Hungarian population and toward the activities of the U.S. mission in Budapest.

d. Rumania. Little progress was registered in the achievement of U.S. objectives in Rumania in the period under review. Supply of hybrid seed corn to Rumania by an American firm had a telling effect on many Rumanians; visits of some 600 Rumanian-Americans as tourists also had a beneficial impact; and recently the Rumanians have accepted USIA’s Built in USA architectural exhibit. In general, however, the regime in Rumania, as in Czechoslovakia, still follows a generally Stalinist domestic line, but seeks to reduce discontent by a program of economic reorganization which aims to raise the standard of living.

e. Bulgaria and Albania. There has likewise been no significant progress in the achievement of our national objectives with respect to Bulgaria and Albania. The regimes of both countries continue to resist penetration by pro-Western or pro-American cultural influences. As with the regimes of Czechoslovakia and Rumania, they have followed Soviet policy very closely in making an occasional gesture favorable to increased East-West contacts and an end of the cold war, but they have not modified their Iron Curtain policies of jamming our broadcasts and keeping out American newspapers, books, and films. It may be desirable now to consider the advantages and disadvantages of the resumption of diplomatic relations with Bulgaria, and possibly also with Albania.

f. East-West Exchanges. Lifting of the fingerprinting requirement by Congress is an important step in facilitating East-West exchanges; there are indications that our opportunities in this field may now increase in most or all of the satellite countries. The number of Americans visiting Eastern Europe as members of official or unofficial exchange delegations and as tourists is increasing. The impact of these visits is a very beneficial one, and more such visits should be encouraged.

g. Policy Review. It is noted that the NSC Planning Board has scheduled a review early in 1958 of NSC 5608/1 and NSC 5616/2, pursuant to paragraph 24 of NSC 5616/2, which calls for such a review in the light of developments in the area as soon as these developments can be adequately assessed. OCB agrees that this review should be undertaken as soon as possible.

B. Major Operating Problems or Difficulties Facing the United States

2. Problems of Mounting Operations Under Existing Policy.⁴

a. While progress was made during this period in the orientation of U.S. psychological and political operations in accordance with national security policy (for example, the adoption of a series of radio policy papers on Eastern Europe), policy difficulties still exist for operating agencies. The central difficulty results from the problem of trying to straddle the contradiction between the traditional anticommunist posture of the United States and the interim NSC objective of encouraging the development of “national communism” as a positive first step in the evolution away from Soviet domination. A great deal has been learned about “national communism” during the past year. Developments in Poland, Hungary and Yugoslavia all have a bearing on determining a more precise definition of what is meant by this expression.

b. U.S. policy as presently conceived calls for a change within Eastern Europe through evolutionary means. The policy of evolution needs to be more precisely defined to prevent misinterpretation of the intent of NSC policy and to avoid contradictory operations.

c. Present policy does not give adequate consideration to the impact which the free countries of Western Europe could have on the evolutionary process of Eastern Europe, or to what the U.S. might do to increase this impact, including greater coordinated action within NATO. As a result, the scope and variety of operations which can be undertaken in this very important field are limited.

d. Some operating agencies have found that NSC 5608/1 and NSC 5616/2, and other NSC policies, do not give sufficient policy guidance for the development of operations involving Eastern Europe as they relate to the USSR, Yugoslavia and East Germany.

e. Some operating agencies have found U.S. policy toward Eastern Europe too diffuse. There are at least four different policy papers related to Eastern Europe, all of which have differing emphasis, differing objectives and sometimes even a different policy approach. It is recommended that consideration be given to developing a single policy paper for Eastern Europe which would include policy to guide diplomatic action, political action, psychological action, and economic action—in fact, all aspects of U.S. policy toward Eastern Europe. This would mean incorporating pertinent policies now found in separate papers. In view of the fact that conditions vary from country to country in Eastern Europe much more now than they did when NSC 5608/1 was approved, it is further recommended that consideration be given to developing separate policy papers for each of the East European countries in addition to the overall policy paper for the area as a whole.

3. Economic Aid to Poland. The granting of $95 million U.S. credits and PL 480 sales for local currency, plus loans from other Free World countries amounting to approximately $80 million, had a psychological influence by concretely demonstrating Free World interest in and concern for the welfare of the Polish people. It also added to Poland’s relatively independent status in the eyes of world public opinion. All these positive factors were circumscribed in the Polish mind, however, by what they felt was a limited quantity of aid and by the delays and difficulties surrounding the negotiations with the U.S. Economic aid has been of importance so far principally to assist in warding off the collapse of the Polish economy. The continuation of Gomulka’s middle-of-the-road policies depends in large part upon his acceptability to the Polish population, who, in turn, will be more willing to support him if there remains hope for improvement in the economic situation. Available information on economic conditions in Poland indicates that Polish needs for imports of grain and cotton cannot be entirely financed by the Poles themselves from the resources likely to be available to them within the next year or so without a severe readjustment of their import program and an increased dependence on the Soviet bloc. Despite a great effort the present housing construction program of the Gomulka regime cannot keep pace with the growing need in this area. There has been only a small improvement in availability of agricultural commodities, consumer goods and services. Without substantial outside financial assistance, this situation is unlikely to improve except in agricultural production which may be stimulated by increased private initiative. Advancement toward U.S. policy objectives in Poland is closely linked to an improvement in the Polish economic situation and its reorientation toward the West. It is not necessary for the U.S. to match the level of Soviet bloc economic aid to Poland to advance our objectives there; but rather to insure that our aid is timely and effective. The Polish requirements (presented in quantities) have not yet been fully evaluated. It is estimated that, in any event, their equivalent value will be considerably in excess of the amount which has tentatively been programmed under Title I of PL 480, namely, $100 million at CCC cost ($60 to $70 million at export market value), plus the maximum amount available under Section 401 of the Mutual Security Act, namely, $30 million. The tentative program, therefore, is of approximately the same magnitude as that provided under the earlier agreements. The Department of State has not yet requested allocation of the latter amount under Section 401 of the MSA pending further examination of the Polish request. The figures indicated above reflect the present limitations, as far as the U.S. is concerned, for two principal reasons: (1) Under PL 480, any amounts additional to those already reserved for Poland could only be obtained by disregarding high priority requirements of other countries or by securing additional PL 480 authority from the Congress, and (2) Section 401 of the Mutual Security Act stipulates that not more than $30 million of the funds available under this section may be allocated to any one nation in any one fiscal year.

4. Legislative Limitations on Economic Assistance to Communist Countries. Legal provisions limiting the source of funds available for loans to Poland seriously complicated and delayed the recent loan and PL 480 negotiations. The present negotiations with the Polish representatives are subject to the same legal limitations. The achievement of important policy objectives in Eastern Europe, through the provision under certain conditions of assistance to Communist countries, is restricted by the Battle Act and by sections of the Surplus Disposal Act and the Mutual Security Act. A bill has been proposed by Senator Kennedy (S. 2828) to authorize the President under certain conditions to permit loans, grants or other aid agreements with satellite countries, such as Poland, which are moving in the direction of increasing independence of [from] the Soviet Union. Possession by the Executive Branch of such discretionary authority would be useful not only in negotiations with Poland but in meeting new Polish-type developments in other Eastern European countries. The Department of State and other interested agencies are presently preparing comments on the Kennedy bill.

5. Restoration of Most-Favored-Nation Customs Rates to Polish Exports to the U.S. The Polish delegation to the recent economic talks requested the restoration of Most-Favored-Nation privileges for Polish exports to the U.S. The Council on Foreign Economic Policy (CFEP), in reviewing the question, reacted favorably to the Department’s proposal that MFN treatment be extended to Polish trade. Pursuant to the request of the CFEP, Congressional consultations were undertaken by the Department of State. It is desirable that the privileges should be granted to Poland. In the negotiations for repayment of our nationalization claims, the Czechs are also pressing for restoration of MFN treatment; their request is under review, but will probably be refused. Nevertheless, a continuing problem exists as a result of the restrictions on the President’s authority to determine when MFN rights may be restored.

7. Relations with the Kadar Regime in Hungary.

a. The U.S. considers that the Kadar regime was forcibly imposed on the Hungarian people by the Soviet Union and that it has followed a policy of terror and repression against the Hungarian population. We withdrew our newly-appointed Minister when the regime demanded that he either present his credentials or leave Hungary. We have limited social contacts with Hungarian representatives, and in the UN have supported a policy of neither accepting nor rejecting the credentials of the Hungarian delegation. We have successfully sponsored action in the UN for a condemnation of the repressive measures of the Kadar regime and of the role of the Soviets in suppressing Hungarian freedom. The UN Special Committee on Hungary completed an exhaustive report on the Hungarian revolution, which authoritatively described the course of events in Hungary. The Eleventh General Assembly, which was reconvened at our initiative to consider this document, endorsed it by an overwhelming majority and at the same time, again at our initiative, appointed Prince Wan of Thailand as Special UN Representative to take such steps as he deems appropriate to achieve the objectives of the UN in Hungary. We are continuing to support Prince Wan’s efforts to this end and expect further discussion of the Hungarian question during the current Twelfth General Assembly, on the provisional agenda of which the Hungarian item has already been entered.

b. The Hungarian regime has required that the staff of our Legation in Budapest be severely reduced and has continued to harass the operation of the Legation in other ways, including the arrest and imprisonment of local employees. It has also continued to attack us for having given refuge to Cardinal Mindszenty. The presence of the Cardinal in our Legation and the evident unwillingness of the Kadar regime to drop its charges against him are factors which complicate our relations with Hungary. No satisfactory solution to the problem raised by the Cardinal’s presence in the American Legation is apparent.

8. Possible Opening of New Diplomatic and Consular Offices in Eastern Europe.

a. The governments of Bulgaria and Albania have put out feelers for a resumption of diplomatic relations with the U.S. and appear ready to launch a propaganda campaign to show that obstructionism in the matter arises only from the American side. Resumptions of diplomatic relations would be in accord with NSC policy on the countries in question. Consequently, it would be desirable for the U.S. to arrive at a firm decision on the question in the near future. The Department of State would perhaps not need additional funds this fiscal year for this purpose, even if a favorable decision on the matter is taken in the near future, but the costs of running any new diplomatic missions in this area would have to be budgeted for in the FY 1959 budget now being prepared.

b. The same may be said for the costs of reopening a small consulate at Bratislava, Czechoslovakia, and perhaps one or more consulates in Poland. The Czechoslovak government asked us more than a year ago for permission to reopen Czechoslovak consulates in the United States, in exchange for which we would be allowed to reopen our Bratislava office, which has been closed since 1949. Embassy Prague has recommended that consideration be given to the reopening of the Bratislava office so that our coverage of developments in Slovakia might be increased. This matter has been shelved pending conclusion of economic negotiations currently in progress. It is complicated by the fact that the Czechoslovaks, when making the offer, desired to return to the situation existing prior to the time the consulates were closed rather than reopening offices on a one-to-one basis. When the consulates were closed the Czechoslovaks had offices in New York, Chicago, Cleveland, and Pittsburgh, whereas we had only the one office at Bratislava.

c. The Poles have given some indication that they may shortly approach us with an offer to open one or more consulates in Poland in exchange for permission from us to reopen Polish consulates here. Consular offices in Poland would be of great value in taking advantage of the new opportunities for cultural penetration now opening up to us in Poland. They would also be very useful in relieving Embassy Warsaw of some of the burden of the great increases in consular work resulting from the easing of Polish restrictions on emigration of Polish citizens and on repatriation of the sizeable body of our dual-nationals in Poland. There are indications that the Polish-American community would oppose the reestablishment of consulates much less strongly than before.

9. Negotiations for Settlement of Nationalization Claims in Eastern Europe.

a. Our efforts to induce the Czechoslovak Government to agree to a lump sum settlement of the compensation claims of American citizens who have lost property as a result of Czechoslovakia’s nationalization laws have not been successful. The negotiations have nevertheless been useful in narrowing the area of disagreement in this matter. The talks are still continuing. There is a strong possibility that at its next session Congress will pass legislation seizing $9 million in Czechoslovak frozen assets in the U.S. to compensate American claimants. The administration has withdrawn its opposition to the passage of a bill on this subject. Lawyers of the interested agencies are now preparing an administration bill to replace a private bill which has already been introduced. Passage of the bill would probably result in a breaking off of the negotiations with the Czechs for an agreed settlement and could worsen somewhat our overall relations with Czechoslovakia. In the meantime, however, we are anxious to continue the talks.

b. Exploratory talks with the Rumanians in October 1956 on the subject of war damage and nationalization claims have been without result. At present the U.S. holds about $23 million in Rumanian assets seized in accordance with PL 285.⁵ This sum is not expected to be sufficiently large to cover the valid claims.

c. On June 7, 1957, the Poles agreed in principle on the procedures to be followed in settling outstanding U.S. property claims against Poland. The agreement provided for eventual negotiations for a lump sum settlement with Poland. The U.S. Foreign Claims Settlement Commission is presently engaged in processing these claims.

Note: The latest pertinent National Intelligence Estimate is NIE 12–57 “Stability of the Soviet Satellite Structure,” dated Feb. 19, 1957.⁶ Preparation of a new estimate is scheduled to begin in January 1958. It is hoped this work can be expedited.

1. Source: Department of State, S/S–NSC Files: Lot 63 D 351, NSC 5608 Series. Secret. This progress report was discussed and concurred in by the OCB at its meeting of November 20. (Notes of OCB Meeting, November 20; ibid., OCB Files: Lot 62 D 430, OCB Notes) The NSC “noted” this report at its 349th meeting, December 24. (Eisenhower Library, Whitman File, NSC Records)
2. Documents 80 and 169.
3. Annex A, not printed, contains a table depicting foreign credits to Poland, November 1, 1956–November 1, 1957, and a table depicting Polish trade with the West, 1956.
4. According to a memorandum from Manning H. Williams of USIA to Frederick M. Dearborn, Jr., Consultant to the President, December 16, the language in this paragraph “was contributed chiefly . . . on the basis of actual operating difficulties” which were not spelled out in the report. Williams went on to state that paragraph 2 was meant to assure that new policy resulting from any review of policy provides an adequate base for the preparation of effective operational plans. (Eisenhower Library, Sp. Asst. for Nat. Sec. Affairs Records, Soviet Dominated Nations)
5. P.L. 285 (69 Stat. 562), approved August 9, 1955.
6. Document 234.