Foreign Relations of the United States, 1948, Eastern Europe; The Soviet Union, Volume IV

740.00119 EW/11–448: Telegram

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

secret

Budapest, November 4, 1948—9 p. m.

1735. Rajk began our discussion this morning with statement that information had reached him that US Government intended terminate all action on restitution from Germany to Hungary and other nations on December 31 this year. He stated this very disturbing to Hungarian Government which had goods of great value at stake. He enquired whether I could give him any information on report.

I replied that so far as I knew no firm decision had been taken by US Government but that I was aware that US military authorities in Germany desirous “liquidating” burden of restitution arrangements this year.

Rajk then asked whether it was not possible for Hungary and US to find solution present strained relations. He said US still have considerable economic interests in Hungary and there are number outstanding problems for which some solution could be found, and that on other hand, Hungary extremely desirous resumption restitution since goods distrained Germany still vital Hungarian economy. He asked what could be done.

I replied that my government, I was sure, was always ready to listen to any serious proposal for betterment Hungarian-American relations but that as a purely personal view my government unwilling negotiate under duress and that essential first move would be withdrawal by Hungarian Government of its note October 13.¹

To my surprise Rajk admitted gravity of recent Hungarian step although he attempted defend it on grounds that it only possible reply to “brusque, unfriendly action” taken by US Government when during MAORT case I had, under instructions, informed him that conversations re restitution and other outstanding problems (Deptel 933, September 22) were indefinitely suspended. I pointed out to him that the US Government was not responsible for the worsening of relations by such actions as he claimed but rather that the deterioration began with the extraordinary Hungarian action in the MAORT case. I described for him briefly the inauguration of the “conversations” which sprang from my unofficial talks with his predecessor last spring and which had been continued without very much result until time of Danubian Conference² when Hungarians were given certain propositions upon which they undertook to get reaction their government. No reply had been given us up to time MAORT incident when conversations suspended. Meanwhile many of the problems susceptible of equitable solution had degenerated to point where they no longer capable of solution, i.e. Ford Motor Co. now sequestrated and MAORT while in effect completely nationalized.

Rajk did not deny force my arguments but indicated that Hungarian Government would be willing to withdraw note October 13 referred to above and give satisfaction on certain economic and other problems if US prepared to reconsider restitution. He said it seemed to him unfortunate that two nations could not settle their differences in friendly equitable manner in which I heartily concurred, adding, however, that I thought Hungarian Government could not expect that US alone should make concessions but that Hungarian Government must also make some. I suggested that if Hungarian Government wished again to make any proposals I would be glad to send them to my government. He then enquired whether it would be possible although not resuming “conversations” to have a purely informal exploratory talk between one of his technical assistants and one of mine at staff level. I replied that as I had stated before my government was always willing to listen to any proposal and that if Hungary serious and animated by good will which could be illustrated by some tangible proposal, even at the cost of what the Hungarians might consider some sacrifice, I believe my government would not wish to close door and I would be glad to designate officer to listen to any such proposal, but in the meantime would of course have to inform my government. He attempted to make point that it might be better if I would delay informing Washington until exploratory talk had disclosed if there was really possibility of resuming conversations looking to agreement, but I told him that this would be tantamount to resumption of conversations themselves which I not authorized undertake without further instructions.

Conservation was extremely friendly throughout and for the first time was at his request held entirely in French rather than through an interpreter.

It seems clear to me that Rajk is conscious of fact that note October 13 was a mistake and that Hungarian Government seriously concerned at prospect losing all remaining restitution. Although I am pessimistic as to possibilities obtaining any real satisfaction of our outstanding problems or of obtaining any eventual tangible settlement of our war damage claims, I did not feel in the circumstances that Department would wish to have me show a completely unyielding attitude. I do not believe that we have anything to lose in reality by informing the Hungarian Government that we are prepared to listen to any reasonable proposals they may wish to offer, making clear to them at same time that such proposals must be concrete. In unlikely event that we should be able to obtain some agreement, I would suggest that restitution be on such gradual schedule as to insure fulfillment. The thought has occurred to me further that the Department for other reasons may wish to authorize the resumption of some form of conversation or negotiations merely to gain time over the next two or three months. In view of fact that instructions with regard to reply to Hungarian note October 13 (Deptel 1071, November 3)³ are impending, I shall await Department’s views on present telegram before acting on such instructions if received in interim.⁴

Sent Department; repeated Berlin 106.

Chapin

1. Not printed; in it the Hungarian Government alleged that the American refusal to resume restitution deliveries from Germany to Hungary was a violation of the Hungarian peace treaty. The Hungarian Government threatened to ask for the recall of members of the Legation in Budapest dealing with war damage claims under the peace treaty unless the Hungarian restitution commission was readmitted to Germany.
2. Reference is to the Conference to Consider the Free Navigation of the Danube, held in Belgrade, July 30–August 18, 1948; for documentation on the conference, see pp. 593 ff.
3. Not printed.

4. In telegram 1092, November 12, to Budapest, the Department replied as follows:

   “Approve line taken conversation FonMin as reported ur 1735 Nov 4. In light his expressed attitude and comments ur 1746 Nov 5, believe our advantage defer short period delivery US note in order afford Hung Gov opportunity withdraw Oct 13 note and make concrete proposals for settlement outstanding economic problems. Feel strongly Hungs have placed selves on spot where continuance status quo progressively unfavorable them and that in circumstances we shld not take initiative further approaches.” (740.00119 EW/11–548)