STEPHEN D. KERTESZ - Between Russia and the West

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country Soviet military practice usually disregarded political affiliation, social position, or ethnic origin of captured people. They simply needed a certain number of prisoners, and anybody was good enough to fill the quota.

Deportation of politicians and other public figures happened without publicity or accusation of any sort. They were simply rounded up. This procedure of elimination was a warning to all persons in public life. Among those who suffered this fate was Count István Bethlen prime minister of Hungary between 1921 and 1931. He denounced Nazi ideas and anti-Jewish laws and in the Crown Council advocated armistice negotiations with the Soviet Union. A strongly anti-Nazi publicist, Iván Lajos was taken by the Germans to Mauthausen. Upon his return after the war he was one of the advocates of cooperation of the Danubian peoples. One day he informed me, enthusiastically, that he had discussed the various possibilities of Danubian cooperation with a Soviet captain who showed much interest. Shortly thereafter he disappeared. This too was the fate of Raoul Wallenberg, the courageous Swedish diplomat who saved thousands of lives during the deportations of Jews from Hungary. The Russians abducted him while attempting to return to Sweden.

The mass deportation of civilians and selected politicians was but one of the initial means to frighten the population into conformity with Soviet wishes. At first it was difficult to understand the apparently senseless Soviet behavior, which seemed harmful even to the Communist cause. After a while, it became obvious that behind these actions there had been an over-all plan. Abuses and atrocities were carried out to frighten the population and to weaken its moral and economic resistance. The Soviets did not care for popularity. They wanted servile submission; they preferred to be feared rather than loved. The abuses of the Red Army made the Russians and Communists unpopular but at the same time created a feeling of helplessness in all social classes. The creation of an atmosphere of fear and absolute personal insecurity was a necessary precondition for subsequent Soviet political actions supporting the Hungarian Communists.

One of the tasks of the newly organized Foreign Ministry was intervention with the Soviet authorities on behalf of civilians taken as war prisoners. This action began in Debrecen as early as March 1945 as part of the activities of the political division of the Foreign Ministry. A few weeks later when the ministry moved to Budapest, it became necessary to organize a special division for the prisoner of war cases. This division dealt mainly with requests for intervention

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from the relatives of deported civilians. In a few weeks tens of thousands of cases were registered in the files of the ministry. In such cases routine interventions were made with the Soviet authorities. They paid no attention to them. Because of the practical exclusion of the British and Americans from the business of the ACC, the Hungarians had no forum whatever to deal with Soviet violations and abuses of the armistice agreement. Hungarian sovereignty was reduced to a minimum. The diplomatic representatives of neutral powers were expelled at the outset of Soviet occupation. The country was isolated. The government could not renew diplomatic relations without permission of the ACC. This permission was in some cases delayed, in others refused. Usually the ACC did not even acknowledge these or any other notes. All travels abroad needed Soviet permission. Although Gyöngyösifollowed a policy of strict cooperation with the Soviet Union, the ACC seldom used the Foreign Ministry as a channel of communication with Hungarian authorities but intervened directly with various government agencies. The Foreign Ministry was informed later - if at all - through the Hungarian authorities of various Soviet demands and interventions. This practice made an integrated Hungarian policy toward the ACC and Red Army impossible. If the Foreign Ministry gave an unsatisfactory answer to a certain demand, they simply addressed the same demand to the prime minister or another government agency.

Soviet Economic Stranglehold

It would be impossible to appraise Hungary's enormous difficulties in the armistice period without considering what the Soviet occupation was doing to Hungary's economy. Without such understanding it would be difficult to comprehend why political and diplomatic questions were settled as they were. One of the fundamental problems in the armistice period was the fact that the Soviets were exploiting Hungary. At the same time the government's pressing task was to provide for the physical survival of the people. This situation gave the Soviets effective means for applying pressure.

The Soviets took the old principle of "la guerre doit nourrir la guerre" seriously, and the Red Army lived off the land. Besides carrying the legal burden of the armistice obligations, Hungary suffered through illegal seizures and large-scale looting. The Red Army seized a substantial part of Hungary's livestock, food supplies, means of transportation, currency, and industrial equipment. Safe-deposit

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boxes were forced open and their contents removed. Private homes, public warehouses, stores, government agencies, and banks were looted in the same way. Nor were the legations of neutral powers spared. The armistice agreement authorized the Red Army to issue currency to be redeemed by the Hungarian government, and the Soviet High Command was entitled to demand payments from the Hungarian government to cover the expenses of the occupation. The government had no money or any other means of meeting these and other financial obligations, including the expenditures of the ACC. Bank notes seized in financial institutions were given as a loan to the Hungarian government.

Desperate economic conditions notwithstanding, Hungary in 1945 had to begin reparation deliveries. The armistice agreement obliged the country over a period of six years to deliver commodities worth $200 million to the Soviet Union and $100 million to Yugoslavia and Czechoslovakia. The economic agreement between the USSR and the provisional Hungarian government pertained to the fulfillment of this obligation. This agreement, signed in June 1945 under Soviet threats, provided for deliveries of industrial equipment, vessels, grain, livestock, and other articles, to be made in equal installments annually during the period from January 20, 1945 through January 20, 1951. The Soviet dictated bilateral agreement defined the prices of the commodities and the conditions of delivery in such a way that it doubled and in some cases tripled the original amount of reparations. There was a five percent monthly penalty for delayed deliveries. At the Paris Conference Molotovsubmitted an amendment which extended the delivery time from six years to eight years, as Stalin promised to the Hungarian government delegation in April 1946. But an American proposal for the reduction of the reparation to be paid by Hungary from X300 million to X200 million was rejected at the Paris Conference.'_ The cost of the ACC and the occupation, added to the reparation burden, totaled some 60 percent of the state expenditure during the last four months of 1945 and amounted to almost 40 percent of the total expenditures during the first half of 1946. The Soviets received large deliveries of manufactured goods; they paid nothing for them, but the workmen who produced the goods and the supplies of raw materials had to be paid. Skyrocketing wages fomented inflation.

In the postwar months it was impossible to proceed with the assessment and collection of taxes. Enterprises and most private persons were looted and many factories dismantled; consequently, economic activity was slow to revive. Securing the necessary money for public

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administration, rehabilitation of factories, occupation costs, and reparation deliveries was mainly a problem of printing bank notes. As a result, Hungary experienced a record inflation which completely disintegrated its economic system. People bartered their belongings for subsistence. Stabilization was carried out with the help of the gold reserves of the Hungarian National Bank, returned to the Hungarian government by the American authorities. This gold reserve, taken into Germany by officials of the Hungarian National Bank in late 1944, rendered a great service to the country. Had it remained in Hungary, the Red Army would have seized it as war booty, according to its consistent practice. On August 1, 1946, the forint replaced the pengő as the new monetary unit. One forint was equivalent to 400,000 quadrillion pengő's (30 zeros.

Under Soviet pressure Hungary was compelled to conclude an economic cooperation agreement with the USSR for five years.11 Despite catastrophic economic conditions, the ACC and the Soviet government refused to consider reiterated American proposals aiming at inter-Allied assistance for Hungary. Moscow claimed that the working out of such a plan belonged exclusively to competence of the Hungarian government. l2

The Soviet interpretation of the Potsdam Agreement opened further possibilities for the conquest of the Hungarian economy. The Potsdam Conference granted to the Soviet Union the undefined category of "German assets" in Hungary as reparations, and the Soviets considered as German assets all properties and rights seized by the Germans during the occupation; they claimed that they had acquired only the net assets and credits, without any debts or liabilities whatsoever. All liabilities were left to the non-Soviet part owners and creditors. Moscow demanded from Hungary $240 million as equivalent to certain German claims in Hungary, whereas the much larger German debts to Hungary were considered null and void. After protracted negotiations the Soviets settled this part of their Potsdam claims for a lump sum of $45 million, together with certain concessions and privileges for Soviet-controlled enterprises in Hungary.

The combination of the Potsdam Agreement and the economic cooperation agreement assured a practically free hand to Russia in the Hungarian economy. Under these circumstances Hungary agreed to establish joint companies, with theoretically equal Soviet-Hungarian participation but actually under Soviet control. The manager in charge of the operation of each company invariably was a Soviet citizen. The Hungarian chairman was a mere front. Through these

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joint companies the Soviet Union controlled Hungarian aviation, river transportation, crude oil and petroleum-refining industries, the bauxite industry, and other connected industries and enterprises. In addition to the joint stock corporations, exclusively or overwhelmingly Soviet-owned enterprises were created with the help of the former German interests in the various industrial, commercial, and financial companies.13 In addition to such various devices, the shrewd use of Hungarian Soviet trade agreements diverted Hungarian goods from their usual markets and made commerce difficult with the West. Through the trade agreements Moscow arbitrarily determined the prices of both raw materials and finished products. Thus, during the armistice period the Hungarian economy was prepared for further integration with the USSR.

Diplomatic Interaction of East and West

Contacts between Russians and the Americans and British in Hungary were only a small segment of their target relationships. When representatives of the United States and Britain arrived in Hungary, they clearly based their policy on Allied unity and avoided taking a stand on any delicate political issue which might have antagonized the Soviets. Western policy was influenced by the military and political situation. At that time the English-speaking powers were still fighting the war, with the Soviets as allies, and were building, together with them, a new security organization on which the Western hopes for future peace and cooperation were based. Soviet military intervention against Japan was considered necessary. The Western powers were trying to work out ways of dealing with the liberated areas which would respect the rights of the peoples of these areas and also preserve the unity of the great powers. A few British and American statesmen and diplomats were skeptical during the whole period. Nevertheless, the leaders of American and British foreign policy decided that under the circumstances the attempt had to be made.

At the outset American and British goodwill toward Hungary was displayed mainly in the form of advice and friendly gestures, but there also were the humanitarian gifts badly needed in the impoverished country. One of the first American moves was a considerable gift of medicine to the Hungarian Red Cross. Later the United States granted loans totaling $30,000,000 for the purchase of surplus property.14

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UNRRA relief supplies were sent to Hungary at a value of over four million dollars.

Secretary Byrnes noted in his memoirs that his action at the Moscow Conference in December 1945 still stemmed from the hope that "the Soviet Union and the United States had a common purpose."l5 But Soviet reluctance to evacuate northern Iran, and Stalin's emphasis on rearmament in his speech on February 9, 1946, brought about in Washington a firmer attitude toward Moscow. When Soviet bad faith became altogether too conspicuous, American policy slowly underwent a change, and the American protests increased in number, became stronger in tone, and embraced a variety of political and economic problems. Schoenfeld's reports to Washington and the State Department's instructions to him in 1945-47,16 reflected a more assertive American attitude as time went on. British and American interest in Hungary was significant since it was the only Soviet-occupied country in which free elections took place and a coalition government survived. The Western powers welcomed the natural inclination of the Smallholder politicians to cooperate with the Western democracies and, in some cases, encouraged them to resist Communist demands and disregard the ruling of the ACC and Soviet policy. Requests for an official Hungarian memorandum on the country's economic plight and for landing rights of American aircraft in Hungary were cases in point.

The British and American missions consulted Hungarian economists and, in some instances, received privately copies of Hungarian memoranda addressed to the ACC on the country's economic conditions. Arthur Kárász, president of the Hungarian National Bank prepared a confidential memorandum to the British and American missions on the magnitude of the reparations burden and other factors which disintegrated the economy.'' As a result the Western powers possessed the data proving Hungary's catastrophic economic situation, and the American notes which proposed tripartite examination of Hungary's economy used realistic figures, but the Soviets denied their accuracy. Washington and London assumed that they could argue more forcefully in Moscow if the Hungarian government would send them an official note on the country's economic conditions. When I visited the British representative, Gascoigne in early 1946, he emphasized the importance of a direct communication from the Hungarian government to Britain on the country's economic plight and asked to express to the foreign minister their desire for an official note. I informed Gyöngyösiand returned to Gascoignewith his answer, suggesting that the annulment of the Pertinent ACC ruling -

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which banned such communication l8 - should precede the Hungarian note. When I gave this negative message to Gascoigne he almost lost his temper.

The American legation in Budapest requested similar information, and in June 1946, Acting Secretary of State Dean Acheson brought up the question to Prime Minister Nagy and complained that information had not been furnished on Hungary's economic conditions. Nagy replied that the Hungarian government was precluded to give such information by regulations issued by the ACC. The Americans promised to approach the ACC again in this matter.

The British and Americans might have scored a diplomatic point in Moscow with a Hungarian note, but the Soviets would have continued to deny the facts and would have retaliated in Hungary for violation of ACC rules. In such cases Western intervention with the ACC proved ineffective, and Western diplomatic steps in Moscow would not have changed the Kremlin's policy.

The case of landing rights for American aircraft in Hungary was a mote complicated affair. In February 1946 I was asked to go over to the American legation, where I met a group of diplomats, including Francis Deak, the American civil air attaché for Central Europe. He came from his headquarters in Bern, Switzerland and explained that the United States would like to obtain landing rights in Hungary for Pan American planes flying from Vienna through Budapest and Belgrade to the Middle East. He asked me to inform the foreign minister and, in case of favorable reaction, they would be interested in the size and facilities of the airports near Budapest. Gyöngyösiand other cabinet members, including Gerő, the minister of commerce and transportation, welcomed the idea of Hungary's participation in international ait traffic. The American legation dispatched a note to the Foreign Ministry requesting landing rights.

A Hungarian reply informed Schoenfeld that the government was prepared to consider favorably the landing rights for American aircraft and would be willing to begin technical negotiations, but during the armistice period was in no position to grant air traffic rights.

In early March, Deak visited Prime Minister Nagy who pointed out that the request for landing rights was the first indication of affirmative American interest in Hungary. He claimed that current negotiations with the Soviets for a civil aviation agreement would have taken a different course if the American proposal had been received sooner. Nagy stated that he and most members of his cabinet "will do everything in their power to render passage of designated United States air carrier through Hungary possible.''19

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Meanwhile the Hungarian-Soviet negotiations led to the conclusion of a civil aviation agreement on March 29. An American note to the Hungarian government pointed out that the agreement provided for the establishment of a jointly owned Hungarian-Soviet civil air transport company to participate in domestic international air traffic, and a protocol signed on the same day granted landing and operational rights on and over Hungarian territory to the civil air fleet of the Soviet Union without reciprocity. The American note remarked that the civil aviation agreement with the Soviet Union showed that the armistice regime did "not preclude the making of interim commercial agreements between Hungary and the governments represented on the ACC for Hungary."20

Since all airfields in Hungary were in Soviet hands, Gyöngyösiinformed Pushkin of the American request and the positive Hungarian reaction. The Soviet envoy blew his top, saying that the Americans have military purpose in mind with flights over Hungary, and vetoed any favorable Hungarian decision. The foreign minister instructed me to visit Schoenfeld to explain our predicament, and the American envoy reported to Washington my communication as follows:

Kertesz of FOROFF told me today FORMIN desired me to know privately and unofficially that Russians are taking very stiff opposition line re operational landing rights for American aircraft. Pushkin argues that inasmuch as it is unthinkable that Soviet aircraft would be granted such rights in American Zone in Germany or in Italy and since Russian aircraft have allegedly been shot down in American Zone, Soviet Government is not willing to permit aircraft to fly (presumably without Russian clearance in each case) in any zone under Soviet control. Pushkin reportedly added that American aircraft would not be permitted to fly operationally in areas such as Hungary within five hours flying time of Moscow.

Exchange of notes about landing rights continued between the American legation and the Foreign Ministry.21 Schoenfeld, in his report of June 6, suggested that during the visit of the Hungarian government delegation in Washington, the State Department emphasized American disappointment because of "denial of landing rights for American aircraft while we have refrained from pressing claims affecting American property and Hungarian obligations with reference thereto." Consequently, Acheson brought up the question to the Hungarian government delegation in June 1946,22 and the debate about landing rights continued. In this controversy the American negotiators assumed as a matter of course that the Soviet evacuation of Hungary was only a question of time.

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An aspect of Anglo-American policy in 1946 was to blame the Hungarian government for concessions made under Soviet-supported Communist pressure and to encourage Hungarians to resist. Ambassador Harriman's report from London on May 3, 1946, reminded that

late in March United States and British Governments instructed their representatives in Budapest that, if their opinions were sought, they might inform members of Hungarian Government that view of our two governments is that policy of maintaining coalition at all costs was of questionable wisdom and that continued concessions to a minority group would only end in the negation of people's mandate expressed at recent elections.

In the same report Harriman noted that the British are not in a position to offer to Prime Minister Nagy concrete assistance but are "in favor of doing anything possible to show interest in a real democratic regime and to encourage Smallholders to stand up to Communist minority."23 In line with this policy Gascoignepointed out time and again the shortcomings of Hungarian democracy, such as the lack of freedom of speech and guarantees of personal liberties and the abuses of the political police. Such preaching by the British representative to Smallholder leaders was not helpful because the Hungarian authorities had no power to improve the conditions he deplored. It was like condemning rape to people who were actual or potential victims of rape. The Smallholders were not afraid to stand up to the Communist party, but they had experiences with the Soviets who supported the Communists to the hilt and orchestrated their moves. Western diplomats understood intellectually Hungary's predicament, but because of their own frustrations they were inclined to put more blame on the leaders of the majority party than was justified. It was one thing to evaluate from the shelter of a diplomatic mission the Soviet and Communist abuses and the weaknesses of the Smallholder party and quite another to face the Soviet music not only as individuals but as the representatives of a downtrodden people. Schoenfeld was pessimistic in the autumn of 1945 about the possibility of free elections in Hungary. After the electoral defeat of Communists and victory of Smallholders, he overlooked the fact that in Soviet-ruled Hungary the parliamentary majority did not mean an increase of actual power. He and Gascoigneencouraged the Smallholder leaders to stand up and be counted but could not give effective assistance in crisis.

Not only foreign diplomats entertained unrealistic expectations. Some Hungarians, including myself, disagreed with the policy of

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concessions and suggested that the majority party must draw the line and reject further demands. Although this was not done, and Rakosi's "salami tactic" was slicing the majority party, retrospectively I believe that there was an instinctive shrewdness in the compliant policy of the Smallholder leaders. Qui habet tempus, habet vitam. They played for time in the hope that after the conclusion of peace Hungary would regain its sovereignty, the majority in parliament prevail, and true democracy develop. In case of an all-out Smallholder resistance to Soviet-supported Communist demands in 1946, a coup might have taken place much earlier than it did. Western verbal encouragement could not balance the Soviet military and political advantages which constituted the muscle of the Communist patty.

The situation was complicated by misunderstandings about the meaning of the Yalta Declaration on Liberated Europe, publicized in Hungary after the Soviet occupation. Many Hungarians were convinced that the three major powers made a pledge to them for free elections and a government responsive to the will of the people. In reality the Yalta Agreement was a diplomatic instrument and a policy declaration by the Big Three. Britain and the United States did not violate the pledge, and although they protested Soviet violations, they did not contemplate further steps. The average Hungarian, however, did not think in terms of legal niceties and diplomatic formulas and assumed that the Western powers were obligated to carry out the pledge even against Soviet opposition. Some people speculated that the British and Americans eventually would vote down the USSR in the ACC. The picture was further confused because the Soviet chairman of the ACC acted in the name of the British and Americans as well.

One of the public figures who overrated British and American power in Hungary was József Cardinal Mindszenty Archbishop of Esztergom and Primate of Hungary. I briefed him regularly about the persecution of Hungarians in Slovakia, part of which used to belong to his archdiocese. In turn he informed me of the steps he took or contemplated to take through ecclesiastical channels on behalf of the persecuted people. In view of his antagonistic relations with the government, the foreign minister suggested that I meet the cardinal secretly. I did not follow his advice; there were no secrets in postwar Hungary. The political police would have known of a "secret" meeting within hours. When I visited the cardinal in Esztergom, I did it as publicly as possible: I took one of the Foreign Ministry's automobiles, flying Hungarian colors, and a driver - probably a police agent.24 As I have known Mindszentysince the early 1920's, he talked

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freely with me and on one occasion told me he had sent memoranda and letters to the British and American missions and asked me to ascertain if they had received them. I did so and found the British and Americans perplexed; they did not know what to do with the cardinal's requests. Eventually, the American minister Schoenfeld replied on December 27, 1946, and stated:

It is noted that your letters of December 12 and December 18 touching on internal political problems of Hungary, requested the assistance of the United States Government in altering certain conditions which your Eminence deplores. In this connection you are of course aware of my Government's long standing policy of non interference in the internal affairs of other nations. This policy has proven over a long period of time and through many trying situations the best guarantee of spontaneous, vigorous and genuine democratic development. It will be clear to Your Eminence that it necessarily precludes action by this Legation which could properly be construed as interference in Hungarian domestic affairs or which lies outside the normal functions of diplomatic missions.25

Mindszentywas not the only one who misunderstood the role of the Western powers in Hungary. Since the United States was the strongest world power at the close of hostilities, some Hungarians were convinced that American strength would prevail diplomatically along the Danube sooner or later. In this spirit, some politicians thought it appropriate to ask for American support in connection with the rights pledged at Yalta. On these occasions the American attitude was most reserved. As Schoenfeld put it, Western representatives

were frequently sounded out as to how much help they would provide to the non-Communist political groups. When our invariable reply was that American diplomatic practice excluded the possibility of such interference in the internal political affairs of foreign countries, there was bewilderment at what seemed so unrealistic an attitude compared with that of the Russians.

Western diplomats, of course, were aware of Soviet violations of solemn agreements which affected the domestic affairs of Hungary, and the Western governments lodged protests in important cases. The United States invoked in notes addressed to Moscow the joint responsibility of the three victorious powers established by the Yalta Agreement and reaffirmed by the Potsdam Conference. Although the futility of diplomacy by protest notes was clear, London and Washington did not plan any other action. Under these circumstances Schoenfeld's invocation of the doctrine of non-interference in domestic

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affairs served as an appropriate diplomatic formula to camouflage the impotence of the Western powers in Russia's Europe. It was a curious coincidence that the Soviet government used a similar argument when it refused to participate in the tripartite undertaking in Hungary proposed by the United States on the basis of the Yalta Agreement. Thus, both East and West in the Aesopian language of diplomacy emphasized the sovereignty of powerless Hungary, though the reasons and purposes of such verbalizations were quite different. The wartime strategy and policy of the Allied powers determined the fate of Danubian Europe. The will of the Hungarian people expressed at free elections in the autumn of 1945 could not change the inexorable course of events.

Notes

STEPHEN D. KERTESZ - Between Russia and the West