Reparation Policy with reference to Rumania and Hungary
 
                                      SUMMARY
 
     I.   The Armistice Terms for Rumania and Hungary 
fix the total reparations to be paid in each case at 
$300,000,000, payable in kind over A period of six years.
 
     II.  In spite of American and British opposition, 
the Soviet Government has insisted that: 1. The amount 
of reparations be fixed in the Armistice Terms rather than 
left to future determination. 2. Reparations be valued on a 
1938 basis rather than on the basis of prices prevailing at 
the time of delivery. 3. There be no restrictions on the right 
of reparation-receiving countries to re-export goods received 
on reparations account. 4. There be no special reparations
section of the Allied Control Commission to supervise the 
execution of the reparations program.
 
     III. In the Rumanian armistice negotiations the discussion 
centered largely on point 1 and the United States signed the 
Armistice Agreement with an oral reservation that it did not 
consider that the reparations article established any precedent. 
In the Hungarian Armistice negotiations all four points-have 
been discussed and the Soviet Government declined to recede 
on any of them. In view of the Soviet Governments entire un-
willingness to agree to a reparations section of the Allied Con-
trol Commission which would supervise the execution of the 
Hungarian red stations program, Ambassador Harriman has 
been instructed to sign the Armistice Agreement only with a
written reservation which may be made public.
 
     IV. In spite of the fact that the Rumanian Armistice Terms 
contain no provision for labor services as reparations, the 
Soviet authorities in Rumania have announced and are under-
stood to be implementing a program of drafting Rumanians of 
German descent for labor service in the Soviet Union. The De-
partment is presently considering disassociating the United States
Government from the Soviet action.