Warsaw Pact Intervention in the Third World

UNFULFILLED PROMISED
LANDS: MISSED POTENTIALS
IN RELATIONS BETWEEN
HUNGARY AND THE
COUNTRIES OF THE MIDDLE
EAST, 1955–75

This chapter focuses on Hungary's relations with the countries of the Middle East.¹ We chose to focus on this region, since it had the most intense diplomatic and commercial relations with Hungary compared with other countries of the ‘Third World’ in this era due to its geographical proximity and its historical links.

The ‘Third World’ in general, and the Middle East in particular, was never a region of strategic concern for Hungary, but its importance increased in the second half of the 1950s. There were a number of reasons for this. Firstly, the Middle East became important for Hungary – a member of the Soviet bloc – once the significance of the region for Moscow started to increase. Secondly, the diplomatic isolation of the country following the crushing of the 1956 Revolution meant that the Hungarian Government needed any possible political support to have the so-called ‘Hungarian question’ removed from the United Nations General Assembly's agenda. Thirdly, commercial relations with the countries in the Middle East meant potential sources of hard currency, which Hungary badly needed throughout the Cold War era. As Hungary needed trading partners to address its imbalance in trade and the resulting outflow of currency, these states were plausible trading candidates.²

In major works covering Hungary's history and foreign policy in the twentieth century, the Middle Eastern dimension has only marginal emphasis. Ignác Romsics mentions the Middle East as part of the Third World in connection with the country's diplomatic isolation during the post-1956 years.³ Mihály Fülöp and Péter Sipos do not go into much more detail either; they also emphasize the Middle Eastern countries as potential partners, which could be used to put an end to the suspension of Hungary's UN membership after the revolution.⁴ We found the same limited approach regarding Middle Eastern relations in the book edited by Ferenc Gazdag and J. László Kiss.⁵ Academic works dealing with diplomatic relations between Hungary and the Middle East are very hard to come by. László J. Nagy's work is one of the few exceptions; building on archival research, Nagy highlights interesting diplomatic dynamics between Hungary, the Soviet bloc and the Middle East.⁶ A Cold War International History Project (CWIHP) e-Dossier by Békés, Nagy and Vékony gives a somewhat broader insight to this topic.⁷ A number of thematic works cover our topic from a certain point of view: Attila Mong mentions Middle Eastern relations with regard to Hungary's accumulation of international debt⁸ and Pál Germuska focuses on military cooperation and exports,⁹ whereas Gábor Búr analyses relations between Hungary and states of the Non-Aligned Movement.¹⁰ We also relied on memoirs and books of former foreign ministers Endre Sík and Frigyes Puja. Besides the secondary literature, we also used primary-source documents from the Hungarian National Archives. These are mainly reports for the Hungarian Socialist Workers' Party (HSWP) Political Committee, and various documents from the Hungarian Ministry of Foreign Affairs.

Most Middle Eastern countries were former colonies, and as such were suspicious of Western governments. Some countries in the region aligned themselves with the Western alliance, such as the kingdoms of the Gulf, Israel and Iran before 1979. Others – such as Egypt, Syria, Libya and Iraq – leaned towards the Soviet bloc. These so-called ‘friendly states’ had closer relations with the Soviet bloc, and, as a result, with Hungary. However, these states guarded their hard-won independence passionately. Despite the fact that nationalist Arab regimes, and even the Israeli Government, adopted many measures that were part of socialist ideology – such as a centrally controlled judiciary and legislative bodies; the nationalization of key industries; and a state-interventionist attitude, increasing welfare services, etc. – they did not adopt a communist system and they never considered joining the Soviet bloc.¹¹ Besides, their disregard for human rights and social freedoms meant recurring conflicts with Western governments. According to Adeed Dawisha, Arab nationalists never intended to adopt the Western liberal democratic model either but rather one that suited their nationalist agenda and political survival.¹² This, paired with suspicion of former colonial powers and their Western allies, pushed a number of Arab regimes towards the Soviet bloc. Furthermore, even though these nationalist regimes did not adopt communism, most of the time they allowed the functioning of local communist parties.

As a Soviet bloc country small in size and population, Hungary was destined to play a secondary role in regional politics; however, it often played the role of a mediator whenever the Soviets could not or did not want to get involved in a primary capacity. These rare occasions increased the standing of Hungary within the Soviet bloc, and as such increased its government's room for manoeuvre. They also enabled Hungary to enhance its position in the Middle East, which was very helpful when commercial links needed to be managed and developed. After all, the countries of the region became trading partners with Budapest and in such a role they provided Hungary with much-needed hard currency, which was always in short supply during the Cold War. However, despite the fact that during the 1950s and 1960s prospects appeared very promising, political and commercial relations with Middle Eastern states could never occupy a vital position in Hungary's foreign-relations portfolio. The countries of the region lacked the level of financial and economic resources to become major strategic partners for Hungary. As Búr points out, although commercial relations played an increasingly important role between Hungary and Middle Eastern countries, they were dwarfed by the former's commercial ties within the Soviet bloc and to other European countries.¹³ The only exception to this trend was trade in military hardware. Military exports to the region not only led to the blossoming of a marginalized industry in Hungary, but it also led to the institutional development of the Warsaw Pact and the Council for Mutual Economic Assistance (CMEA).

Hungary's relations with the Middle Eastern region were not significant in the postwar years until Stalin's death in March 1953. After World War II, the short-lived Hungarian coalition government sent Viktor Csornoky as envoy to lead the legation in Cairo in 1947, only to be recalled to Budapest after the communists took power in Budapest the following year.¹⁴ After the departure of Csornoky, diplomatic relations were lowered to the chargé level, but bilateral commercial ties with Egypt remained active. After 1948, in line with the Zhdanov Doctrine, according to which there was no possible third way between the West and the Soviet bloc, relations of the latter with Middle Eastern countries were negligible.¹⁵ The region, where decolonization was gradually taking place but where in the late 1940s and early 1950s there was still considerable British and French influence, was regarded as part of the Western sphere of influence.¹⁶ In those years, Hungary did not stand out from the rest of the Soviet bloc in its relations there.

Yet, in 1952, the Hungarian Government served as mediator between Egypt and the People's Republic of China (PRC). As is known, prior to its recognition of the PRC in 1954, Egypt had recognized the rival Kuomintang regime based in Taiwan. Since Cairo wanted to establish diplomatic and trade relations with Communist China, it asked for Hungarian assistance. To this effect, in 1952 an Egyptian delegation led by Gamel Salem, a member of the Revolutionary Committee in Egypt – a small executive group made up of the leading figures of the Free Officers Movement – visited Budapest. This meeting was the first step on the road to Egypt's recognition of the PRC, and thus trade between the two countries began to flourish in the following years. This example shows how even a smaller satellite of Moscow could play a mediating role in certain cases; as Hungary remained in the background in this case meetings between the two parties did not draw much attention. On a number of occasions, Hungary did not shy away from playing similar roles in order to improve its international standing.¹⁷

After Stalin's death, one of the main directions of the newly emerging dynamic in Soviet foreign policy was penetration into the Third Word states. Communist Party of the Soviet Union (CPSU) Central Committee (CC) First Secretary Nikita Khrushchev introduced the ‘doctrine of active foreign policy’, by which the other members of the Soviet bloc were encouraged by Moscow to play a more proactive role in international politics.¹⁸ While this policy had been promoted by Moscow since as early as the spring of 1954, in early January 1956 – hardly a month before the Twentieth Congress of the CPSU, at the most important summit meeting of the Soviet bloc leaders since Stalin's death – Khrushchev presented his vision in a spectacular way. ‘It is true that the Soviet Union is the great force of our camp’, he declared, ‘but if we organized our work in a more flexible way, the Soviet Union would not always have to be the first to take action. In certain situations one or another country of peoples’ democracy could take action and then the Soviet Union would support that country. There are issues in which the countries of peoples' democracies could take action better [than the Soviet Union].’¹⁹

This strategy, and the doctrine of active foreign policy, became an effective model for cooperation amongst the states of the Soviet bloc in the field of foreign policy – especially from the mid-1960s up to the collapse of the communist regimes in East-Central Europe.²⁰ Thus, from the mid-1950s onwards, Moscow encouraged its allies to use their international reputations, with Soviet support, to the benefit of the Eastern bloc in the international area. The allies had to promote the success of Soviet goals in Europe, and even more so in the Third World – especially in Asia, the Arab states and Latin America.²¹ While in Europe priority was given to the development of economic relations with the Western European states, in the Third World the main objective was to facilitate Soviet economic and political penetration, and thereby lasting influence.²² This included assignments to build intensive political and economic links with the newly emerging independent countries of Africa and Asia. At Soviet initiative, Hungarian foreign policy in the region became somewhat more active after 1953, and the reorientation of the bloc's attitude towards the Middle East began to be especially visible from 1955 onwards. This new policy line towards the countries of the region was based on some of the shared values elaborated on above. As mentioned, nationalism was the main ideology of the region's regimes at that time. Soviet bloc leaders had high hopes for Arab nationalism, which had many left-leaning and internationalist dynamics. And the fact that communist parties had a legal status in most of these countries also helped to improve relations between the Soviet bloc and the ‘friendly’ states of the region.

The crushing of the Hungarian Revolution, which coincided with the Suez Crisis in October–November 1956, isolated Hungary internationally. After the Soviet intervention on 4 November and the installment of the Kádár government, the Hungarian question was put on the agenda of the UN General Assembly (UNGA) and the country's UN membership was suspended. The UNGA discussed the situation in Hungary at its session every year until December 1962, and adopted resolutions condemning the Soviet intervention. Under the circumstances, the Hungarian question should have been on the agenda for a few months, maybe even a few years, but certainly not until the early 1960s. From the mid-1950s onwards, however, one of the main aims of US foreign policy was to arrest the development of Soviet influence in the Third World and to correspondingly increase the American presence there. For the USA, the Hungarian question represented low-hanging fruit that it did not want to waste. In the 1950s, it was still not clear that the communist system was not viable in the long term. Keeping the 1956 Revolution on the UN agenda for many years, Washington was able to use it as a propaganda tool against Moscow, repeatedly condemning the Kremlin's aggressive policies towards its own allies and its communist ideology as well. The UNGA, which now included a great number of newly independent Third World countries, provided an ideal arena for this propaganda campaign; therefore, the Americans kept the Hungarian question on the agenda as a device with this political objective up until 1962.²³

The majority of the countries in the Middle East condemned both the Soviet intervention in Hungary and the Western military campaign against Egypt in 1956. The role of Egyptian leaders themselves regarding the revolution could be best described as ambivalent. Gamal Abdel Nasser, a capricious Soviet ally, took advantage of the Hungarian Revolution in his dealings with the Soviet leadership. According to Yevgeny Primakov, a Soviet Arabist (and a later Russian foreign and then prime minister) who had long worked as a Soviet journalist in the region, Nasser had ordered the redistribution of a US-made pamphlet written in Arabic, which described the Soviet intervention as a ‘bloody action’.²⁴ It is highly likely that this was a demonstration of independence on the part of the Egyptian Government vis-á-vis Moscow. During a meeting with a high-level Hungarian delegation in August 1957, however, Nasser was very friendly and he promised support for the Kádár regime at the UN too. During this meeting, he mentioned the hypocrisy of Western powers who regularly intervened in the Middle East but yet condemned the Soviet intervention.²⁵

This meeting was part of Budapest's diplomatic offensive to convince Third World nations to support the removal of the Hungarian question from the UNGA's agenda. This offensive had started earlier in 1957, when a goodwill mission led by a deputy foreign minister visited several non-aligned countries, including Egypt, Sudan and Syria.²⁶ Unable to convince the USA and its allies to abandon their agenda, Budapest wanted to convince individual member states to vote against keeping the Hungarian question on the agenda of the General Assembly. While Hungary managed to drum up support from some friendly countries, eventually it was Washington and Budapest that secretly agreed that the USA would request the removal of the Hungarian question in December 1962 in return for an amnesty granted to the political prisoners of the 1956 Revolution. As a result, as early as 1964, a memorandum by McGeorge Bundy, the national security advisor of US President Lyndon Johnson, was of the opinion that Hungary had achieved the greatest results amongst the Soviet bloc countries in de-Stalinizing the communist system.²⁷ Again, we can see that relations with Middle Eastern countries had some potential, but these were never actually put to the test.

Hungary's room for manoeuvre expanded considerably after the ending of its diplomatic isolation in 1963. Following the secret agreement with the USA, Hungary no longer needed the direct diplomatic support of the Third World countries in the UN, and as a result, the country's diplomacy could focus on other interests. Naturally, foreign relations needed to be aligned with the general policy of Moscow, but this did not mean that Hungarian foreign policy slavishly followed the Soviet line. By this time, the country clearly had its own set of interests – including a gradual opening to the West, especially in the economic field. On the other hand, Moscow, while regularly giving advice to bloc country officials as general guidance, from the early 1960s onwards the individual countries enjoyed considerable flexibility in forming their own foreign policies within this framework. Relations with the Soviet Union were maintained through a number of channels, and the diplomatic missions played an important role in bilateral communication. János Kádár and other leaders regularly met the Soviet ambassador in Budapest, who usually briefed them on international issues. The Hungarian Embassy in Moscow was also responsible for this communication.²⁸

A good example for this is an embassy report from 1967 on the briefing that Soviet foreign ministry officials gave to diplomats of the Soviet bloc. According to the report, the Soviet Union was interested in Arab unity. Progressive or ‘friendly’ countries (Egypt, Syria, Iraq, Algeria, Yemen) should enjoy closer cooperation, but this should not interfere with the wider unity of the Arab countries. Thus, the Soviet Union was not interested in military cooperation between ‘friendly’ Arab states. The main reason for this was that Moscow regarded the Arab League as an essentially anti-imperialist bloc, even if some members were openly Western-leaning. According to the report, Moscow was also worried that China might choose to take a more active approach in the region. To prevent this from happening, Moscow deemed it necessary to strengthen political and economic ties with Middle Eastern nations. It realized that ‘friendly’ Arab countries might not want to adopt the Soviet development model, which focused on heavy industry. Soviet diplomats therefore indicated that allied countries, Hungary included, could play a role in helping ‘friendly’ Arab governments to design their own socialist-style development model. This was in line with the post-Stalinist approach that accepted the existence of ‘various roads to Socialism’. It becomes clear from this report that by 1967, Moscow realized that the Soviet model was not universally applicable in every country.²⁹ By its stepping back and allowing allied countries to advise friendly Arab regimes, Hungary and other bloc members could play a more active role in promoting the communist model in a more flexible manner than before.

The main goal of the Kádár regime was building a special model of ‘consumer’ or ‘goulash’ socialism, and for this it needed to continually increase the standard of living of its subjects. A more comfortable life in return for forgetting about the two weeks of freedom during the revolution in 1956 – this was an unwritten deal between the regime and the Hungarian population, and it was also the basis of the legitimacy of communist rule in Hungary until 1989. As a result, the leadership actively looked for any trading partners outside the Soviet bloc who showed an interest in buying Hungarian export products for hard currency – and the Middle Eastern countries were amongst them. In this sense, Hungary had, by the early 1960s, already adopted a policy very similar to the one later devised under the leadership of CPSU General Secretary Leonid Brezhnev, which emphasized commercial relations based on economic rationality and on mutual benefits. Ideology played a secondary role in this sense. The Hungarian government did not hesitate to set up relations with states that were not openly friendly towards the Soviet bloc. In this respect, we can place the Middle Eastern countries in three main groups. Firstly, the group of ‘friendly’ or ‘progressive’ countries, mentioned earlier, contained states with close political, military and commercial ties to Moscow and other Eastern bloc governments. Secondly, there were countries such as Morocco or Lebanon that were not openly friendly; there was no closer political and military cooperation with them, but commercial relations were active. The third group consisted of states that were closely allied to the Western bloc, which allegiance restricted relations both politically and commercially. Naturally, these groups were permeable, as the case of Egypt during the 1960s and 1970s clearly demonstrates. We also need to point out that this grouping can be somewhat simplifying. For instance, even though diplomatic relations of the Soviet bloc states with Israel were cut off after the 1967 war,³⁰ this did not mean that some commercial ties did not remain in place. Bilateral commercial ties were, in fact, managed through the Israeli Communist Party even after the Six Day War.

Hungary's relations with Israel were somewhat different from those of other bloc countries. This was due to the fact that the Hungarian Jewish community survived the Holocaust in much greater numbers than in other countries of the region. Within the bloc, only the Soviet Union itself had a larger Jewish community. After the end of World War II, Jewish Holocaust survivors left Hungary in large numbers to Palestine and, later, to Israel. After the full communist takeover in 1948, this emigration was stopped. The government claimed that the Jewish community was not persecuted in Hungary; education at the prestigious rabbinical seminary in Budapest was maintained even during the most brutal Stalinist times. After 1956, during the Kádár era, the government again allowed a number of Jewish citizens to leave the country for Israel.³¹ As a result, there was continuous pressure on the Hungarian Government to issue travel documents for those Jewish Hungarians who wanted to leave. Due to these facts, relations between the two states were already strained in the second part of the 1950s, but diplomatic relations were not yet cut. Budapest decided to use those Hungarian Jews who wanted to emigrate to Israel as bargaining chips in bilateral relations. Thus, until 1967, it was still possible for Hungarian Jews to legally make the aliyah – that is, to emigrate to Israel on religious grounds.

However, if Hungarian Jews wanted to perform the aliyah, they needed to leave behind most of their belongings, which, as a result, were vested to the Hungarian state. To solve this problem, the Israeli legation smuggled out jewellery and other precious belongings of emigrating Jews in diplomatic pouches. After the Hungarian Government found out about this practice, it stopped the process of allowing Jews to leave the country in September 1958.³² Hungary held lengthy secret negotiations about this matter with Israel. The Hungarian Government demanded a compensation of US$3 million for the losses caused in exchange for restarting the issuing of permits for Jews to leave the country. Thanks to secret meetings between foreign ministers Golda Meir and Endre Sík, an agreement was negotiated according to which Israel paid US$1.5 million broken down into smaller instalments. In exchange, Hungary resumed the issuing of permits but only on a case-by-case basis, effectively creating a bottleneck in the process.³³

Stalin's initial hope that Israel would become friendly towards the Soviet bloc did not materialize, as the Jewish state aligned itself increasingly with Western countries. Even in the 1950s, when the USA was still hesitant about giving it stronger support, the Israeli Government was already leaning towards the West. As far as Hungarian interests were concerned, the West-leaning Israeli Government supported the resolutions condemning the 1956 Hungarian question at the UN, which complicated bilateral relations.

During the 1960s, Hungary's relations with the Soviet Union were based on the principle of constructive loyalty. Therefore, Hungary cut off diplomatic relations with Israel after the Six Day War in 1967, in compliance with Moscow's general line.³⁴ Nevertheless, some commercial ties remained, which were managed in cooperation with the Israeli Communist Party (ICP) throughout the coming decades. This link to the ICP was so important after the Six Day War that an ICP shell-company, called Eximis, took over the management of bilateral commercial relations even though this meant some problems for trade due to the company's inexperience.³⁵ The ICP was put in a monopolistic position not only in the field of the trade in goods but of that in services as well. According to a Foreign Ministry proposal in 1981, all tourism-related business activities between the two countries had to be organized through the auspices of the ICP.³⁶ Thus, the Hungarian Government indirectly supported the ICP since in many instances the Party found itself in dire financial situations. To avoid bankruptcy, the ICP regularly reached out to communist parties in the Soviet bloc, and Hungary was no exception. At the end of the 1960s and the beginning of the 1970s, the Hungarian Government supported the ICP by providing it aid to a total value of US$13,000, given in financial assets and in kind. In 1971, Hungary offered a further US$5,000 to help the ICP.³⁷ The relationship with the ICP involved a mix of ideological and economic necessities. Hungary wanted to profit from trade with Israel, but it preferred to manage these relations through the institutions of the ICP even if this meant a bottleneck in trade and some lost deals in the process.

Hungary needed to play a delicate balancing act with regard to Israel. The government needed hard currency in order to modernize its economy and sustain the growth in living standards. Tourism from Israel and trade with Israeli companies meant a tangible source of foreign currency. The problem was that Budapest could not afford to lose the goodwill of other ‘friendly’ governments in the region. Throughout this period, Egypt, Syria and Iraq became increasingly important for Hungary. Trade with these countries grew, and the Hungarian Government could not afford to lose these trading partners. As a result, relations with Israel played only a minor role during these years; Hungary's Jewish community could not serve as a bridge between the two countries. The potential from trade and tourism could be only partly exploited, which could be blamed in large part on the frosty and eventually non-existent diplomatic relations after 1967. Hungary had to sacrifice close Israeli relations in order to remain in line with bloc policy on the one hand, and to secure lucrative trade deals with friendly Arab states on the other.

Since Hungary needed to maintain good relations with Middle Eastern countries, it did not hesitate to recognize the Palestine Liberation Organization (PLO). An organization led by Yasser Arafat, in 1975, the PLO opened an office in Budapest.³⁸ Hungary was sympathetic towards the PLO from an ideological aspect as well: the country regarded it as an anti-imperialist organization fighting the oppression of a Western-leaning Israeli Government.³⁹ After it established official relations with the PLO, Arafat visited Hungary several times during the 1970s and 1980s and relations were cordial.

In 1975, an aeroplane belonging to the Hungarian airline MALÉV was downed on its way to Beirut, Lebanon. To this day, it remains unclear who shot it down. There are speculations that MALÉV planes were used to deliver weapons to friendly regimes, and as a result Israel did so after a number of secret warnings to the Hungarian Government. Thus far, no archival evidence has been accessible that sheds light on the fate of this aircraft. Perhaps this could be an interesting subject for future research.

After the 1956 Revolution, the newly instated Kádár regime had to earn popular legitimacy. To gain public support, the government embarked on a strategy to gradually increase living standards. This required a reorientation of the economy, one that specifically focused more on the production of consumer goods – a task requiring a delicate balancing act. Full employment needed to be sustained in an economy dominated by state-owned enterprises, but new dimensions were also required as far as production was concerned. This problem was exacerbated by the challenge of balancing a budget with a trade deficit, reaching HUF20.083 million (Hungarian Forints) between 1955 and 1975.⁴⁰

The main source of this deficit was Hungary's unbalanced commercial relations with Western countries, as the country required imports of advanced technologies that were not available in the Soviet bloc. This deficit needed to be balanced. On one hand, this led to the accumulation of foreign financial debt;⁴¹ on the other hand, the government was continuously looking for new export markets outside the Soviet bloc. The countries of the Middle Eastern region were ideally positioned in this latter sense for a number of reasons: most of them were former colonies, and as such they had rather underdeveloped economies. Relative geographical proximity was also a positive factor. This meant opportunities for bloc countries, including Hungary.⁴² As the socialist, planned economy of Hungary became increasingly uncompetitive compared to the free-market economies of Western Europe, manufactured products with a high degree of added value, such as machinery, could not be sold to those countries in high volumes. Since these products offered the highest profit, it was natural that Hungary was desperately looking for foreign customers who could pay for these export goods in the hard currency that it was chronically lacking.

The only problem was that the countries of the Middle East region had financial and economic difficulties themselves, especially before the first oil crisis of 1973. This is why creative solutions needed to be found to overcome this problem. One of the options was to strike barter agreements. However, such agreements led to further challenges. Firstly, they did not deliver the much-needed foreign currency for Hungary. In return for Hungarian goods, these countries ‘paid’ with what they could – mostly unprocessed agricultural products, such as cotton. In order to obtain some financial profit and the desired convertible currency, Hungary regularly re-exported these goods on the world market. This resulted in additional transportation costs, which led to a downward push on the prices. A number of bilateral relationships grew strained as a consequence, including the ones with Egypt and Morocco.⁴³ In order to avoid such situations, the Hungarian Government tried to set up bilateral clearing agreements with its trading partners. But due to the difficult financial situation of the newly independent countries, they often required pre-financing, which led to Hungary providing commercial credit to ‘friendly’ regimes in the region. This created a paradoxical outcome. According to one Foreign Ministry memorandum from 1965, the financial situation of some countries deteriorated to such a degree that the debt limit on these loans needed to be increased due to high demand.⁴⁴ This illustrates the main characteristics of these bilateral trade relationships. They were commercial contacts between countries with relatively weak finances. Therefore, they could not compare with the importance of the close commercial links that existed within the Soviet bloc, and, more crucially, they could never substitute for Hungary's trade relations with Western countries, the source of its chronic trade deficit. Hungary needed Western products to cover the demand for consumer goods on the one hand, and to access much needed modern technology for its own products on the other. The Middle Eastern countries could not offer any of these things, but only mainly raw materials and agricultural products. Commercial relations with the Middle East thus never became significant.

During the 1960s, when the Hungarian economy's weaknesses had not yet surfaced, providing loans for international trading partners seemed reasonable as this was common practice. Not providing commercial credit would have meant some missed deals on the one hand, as other bloc countries also provided similar arrangements for Middle Eastern customers. On the other hand, it would have also laid bare the weaknesses of the Hungarian economy, which was highly undesirable for the regime. If one looks at the trade balance in the 1960s, it becomes clear that while the economy performed reasonably well in that decade, its trade balance was positive only in 1961 and 1966. As such, Hungary was eager to increase trade not only with ‘friendly’ states but also with countries outside this group. Naturally, the bipolar setup and Hungary's position within the Soviet bloc limited trade with countries allied to Western nations, such as the monarchies of the Persian Gulf. Nevertheless, countries that were not openly ‘friendly’ also counted as potential commercial partners. A good example for this could be Morocco. Despite the fact that it was not a ‘friendly’ country during the Cold War, commercial relations were so active that it was one of the five most significant trading partners of Hungary in the region.⁴⁵ In 1963, goods with a total value of HUF85.8 million were traded, with a surplus of HUF6.4 million – crucially, in hard currency.⁴⁶ Although bilateral trade relations in ordinary products represented a tangible source of income, these were still not enough to address Hungary's overall long-term trade deficit. This is why the country needed export goods that were in high demand and that could have a high markup.⁴⁷ For Hungary, these were the so-called ‘special goods’: the code name for military products in Eastern bloc jargon, generally used even in top-secret documents.

For many countries in the Middle East, the second half of the twentieth century was marred by a number of military conflicts. This was the case especially with those in the vicinity of Israel. Successive regional wars with Israel meant that there was a constant demand for military hardware from Arab countries.

Egypt was the first country of the region to try and set up military cooperation with Hungary. In 1948, Egyptian Foreign Minister Ahmed Kashb conducted exploratory talks with Hungarian envoy Csornoky about possible weapons export to the country. In 1955, there was another round of negotiations between Egyptian and Hungarian officials in Egypt, but neither of these produced any tangible results.⁴⁸

Arab defeat in the Six Day War of 1967 led to greater demand for military equipment from Arab governments, who wanted to match Israel. This was an opportunity for Hungary. During the first two decades of the postwar era, the military sector had played only a minor role in Hungarian industry. As János Kádár observed, exports of military equipment were mainly conducted by the Soviet Union and Czechoslovakia, with Hungary playing only a secondary role even in 1967.⁴⁹ Furthermore, most of the Hungarian weaponry and military equipment were obtained from the Soviet Union. Only a very marginal number of military products were developed domestically, as the majority of them were produced by using Soviet technology under licence agreements. However, as the Soviet Union could not fulfil the demand from ‘friendly’ Arab nations, Hungary and other allied countries had the opportunity to fill this gap with their own products.

The increase in Hungary's overall military exports between 1966 and 1970 was 60 per cent. During these four years, the country managed to sell military hardware to the United Arab Republic for £4.2 million, to Syria for £2.9 million and to Iraq for US$100,000.⁵⁰ And this was only the beginning. From 1970 onwards, its once-minor military industry became one of the engines of Hungary's exports to countries outside the Soviet bloc. Between 1971 and 1975, Iraq became the major destination for Hungarian military exports, with an overall value of US$57.6 million. This relationship meant an increase in exports from US$1.9 million in 1971 to US$25.6 million in 1975. Syria and Egypt were also important business partners, with overall receipts of US$15 million and US$10.2 million respectively, but exports to these countries decreased significantly after 1972. Hungary also managed to export weaponry to the Arab Emirate of Dubai and to Lebanon through Bulgaria, with an overall value of US$3.6 million. These deals added up to more than 94 per cent of Hungary's military exports to non-Soviet bloc states in the first half of the 1970s.⁵¹

This military relationship between Hungary and the countries of the Middle East was not without its challenges. One of the main problems was that in many cases the countries of the Warsaw Pact offered military equipment that were substitutes for, rather than complements of, each other. As a result, Hungary and other bloc countries were acting as each others' rivals instead of being partners in dealing with Middle Eastern customers. Because of this rivalry, their Middle Eastern partners could negotiate individual deals via bilateral channels – and, in the process, they often managed to push prices down. Therefore, during a 1972 CMEA meeting, Hungarian politicians initiated a closer coordination within the Warsaw Pact in order to avoid such competition amongst the allies.⁵²

Naturally, the Soviet Union was the best positioned in this rivalry, since it provided its allied states with military technology, in return for which these countries' companies needed to pay a licensing fee that increased the cost of production.⁵³ Besides, the Soviet Union usually offered a special ‘political’ price for non-Eastern bloc ‘friendly’ states that was usually 20–25 per cent lower than the official price. Other bloc countries found it very hard to compete under such conditions. As a result, the military products of Hungarian and other bloc country companies were at a competitive disadvantage. This was furthered when Moscow announced in 1972 that any military exports produced under Soviet licence agreements were to be subject to an additional 10 per cent licence fee. Naturally, this pushed export prices even higher, and eventually its allies managed to convince Moscow to postpone the collecting of these licence fees until 1 January 1976.⁵⁴ This disadvantage vis-á-vis the Soviet defence industry had a number of effects. Firstly, it meant an incentive for Hungary to specialize and come up with products developed domestically, since there was no need to pay the licensing fees in these cases. Secondly, when it came to heavy weaponry, Hungary sold products that did not represent the high end of Eastern bloc technology. Nevertheless, when the Soviet industry could not fulfil the increasing demand from Arab countries, allied states could profit from this. For example, when Moscow could not execute a delivery of locators to the Egyptian military, it gave permission to the Hungarians to develop production capacities in order to deliver these products.⁵⁵ As a result, Hungary not only secured additional investment in military communication engineering, but could also specialize in this field in the following years.

This initiative was presented during the aforementioned CMEA meeting, on 19 April 1972, held in Moscow. According to the proposition presented by Péter Vályi, Hungary's deputy prime minister, CMEA member states should create a platform that would enable multilateral coordination regarding deliveries of special goods to developing countries. The aim was to enable member states to better manage their inventories and to close the door on possible competition between themselves for customers, which could depress agreed prices. Although at first rejected, this initiative eventually also led to the specialization in research and development of military technologies within CMEA and the Warsaw Pact. Member states agreed to focus their military industries on certain areas. They also agreed to cooperate vis-á-vis third parties when selling military hardware. As a result, demand for weapons from Middle Eastern countries contributed to closer cooperation within CMEA.⁵⁶ In reality, however, the Warsaw Pact and CMEA member states could never fully develop an effective multilateral approach and coordination in this lucrative sector. As a result, commercial relations as far as military hardware was concerned remained mostly bilateral.

Satisfying the needs of some Arab governments, such as Egypt, often proved to be challenging for Hungary. As a member of CMEA and the Soviet bloc, its economy was coordinated by prearranged plans. However, demand from Middle Eastern trading partners changed dynamically – which is not surprising, given the tumultuous history of the region. This problem clearly showed the limits and challenges that planned economies faced in the world market, and Hungary was no exception. As produced quantities were predefined in plans, it was extremely hard to fulfil the ever-changing needs of foreign business partners. Another obstacle concerning military trade stemmed from obligations according to which the Warsaw Pact always enjoyed priority over world-market deals. The Hungarian Government approached these difficulties with reasonable creativity. One way of ‘opening’ this bottleneck was to dip into the reserves of the army and the people's militia. With this step, the government could kill two birds with one stone. It managed to react somewhat more flexibly to certain requests on the one hand, and it also enabled the military to refresh its strategic inventories on the other.⁵⁷

But the Hungarian Government was not always in a position to deliver what ‘friendly’ Arab states requested. In his report to the Politburo of the HSWP in 1969, Minister of Defence Lajos Czinege reported that Hungary was not able to deliver many of the requested anti-aircraft guns and related radar equipment because the country either did not produce these or simply did not have enough of them available for export. Trade in military hardware also meant further financial burdens for the country in the short run, as these deals required similar commercial-credit arrangements as ordinary trade deals. Hungary and other bloc countries needed to pre-finance these deals, with clients fulfilling their obligations only at later dates. Nevertheless, Hungary did not have a choice: if it wanted to profit from the export of weapons, it needed to play according to the rules of this game. Arab trading partners, such as Egypt and Syria, did not hesitate to exploit their position, and they were aware of their favourable position vis-á-vis other members of the Soviet bloc. It seems that Hungary needed its Arab partners more than they needed Hungary. The assertive style of the Egyptian negotiators betrays this uneven interdependence in favour of Arab regimes and the limits of friendship between Hungary and Middle Eastern states in a report to the politburo by Defence Minister Czinege in 1969.⁵⁸ In the report, the staff of the Cairo Embassy described ‘the exasperated and negative comments’ made by leading Egyptian politicians to the embassy staff.⁵⁹ Egyptian negotiators did not try to hide their dissatisfaction, and made clear threats as well. They indicated that if the Hungarian leadership did not fulfil their requests, it would have consequences for the bilateral relations between the two countries. These remarks reveal the vulnerability of Hungary in this rather asymmetrically interdependent relationship.

Hungary, as part of the Soviet bloc, had limited relations with the Middle Eastern countries in the 1950s. After its revolution of 1956 and ensuing diplomatic isolation until 1963, the countries of that region gained special significance as the Hungarian Government wanted to convince those states to vote against keeping the Hungarian question on the United Nations' agenda. Nevertheless, in the end it was a secret deal with the USA, rather than the goodwill of Middle Eastern or other governments, that broke the international isolation. Thus, Middle Eastern countries never played a strategically significant role in Hungary's foreign policy.

After 1963, the country's room for manoeuvre increased significantly. The Soviet Union allowed its allied countries to devise their own foreign policy – even if those policies had to be very much in line with Moscow's general guidance, in the framework of the ‘doctrine of active foreign policy’. Hungary used this expanded, but still limited, room for a semi-autonomous foreign policy to further the Kádár regime's legitimacy by increasing the living standards of its population. This system, which has become known as ‘consumer’ or ‘goulash’ socialism, required the introduction of consumer goods that relied on Western products and technology. This led to an increase in Hungary's trade deficit vis-à-vis Western economies, which left it in constant need of hard currency.

To address this problem, Hungary needed export markets for its goods, and countries of the Middle East were promising markets for them. According to Frigyes Puja, Hungarian foreign minister between 1973 and 1983, the Middle Eastern countries constituted the largest market for Hungarian machinery and industrial products outside of the Soviet bloc.⁶⁰ This, however, was still only a drop in the ocean. Although the Middle Eastern countries became significant trading partners for Hungary, their position was not comparable with that of its traditional regional trading partners. As a result, Hungarian foreign policy of the post-1963 era was based on a national interest rooted in the problematic legitimacy of the regime and its ensuing economic realities. As a result, Hungary often found itself competing with other Soviet bloc countries in finding markets for its export products. Even though Warsaw Pact countries were supposed to be allies, they often became each others' competitors. This development sheds light on the limits of cooperation between supposed allies and partners within the Soviet bloc, and further demonstrates the fact that this alliance was one of compulsion – even for the leaders of those regimes. Hungary's foreign policy towards countries of the Middle East could thus be characterized as the country pursuing its national interest based on domestic political and subsequent economic determinants within the limited framework defined by Moscow.

Nevertheless, commercial relations were active in the civilian sector, and in the military one too. This led to an increase in exports, in both ordinary and ‘special’ goods. By exporting arms to Arab regimes, the Hungarian Government managed to develop its own military industry, which became a strategic asset in its desperate attempts to narrow the trade deficit that the country had accumulated vis-a-vis Western states. Without additional demand from Middle Eastern states, the Hungarian military industry could never have flourished in the way that it did from the middle of the 1960s onwards.

Even though Arab-nationalist ideology had some common features with that of the Eastern European socialist countries, there was clearly a cleavage between the two. Many Middle Eastern countries were suspicious of the West due to its colonial influence, and this pushed several Arab states towards the Soviet bloc. However, the Arab regimes, having only recently become independent, were not willing to adopt the Soviet model. Therefore, while relations between the members of the Warsaw Pact and ‘friendly’ Middle Eastern states were indeed special in their character, in reality those countries were never ready to join the Soviet bloc. This was manifested by their occasional persecution of local communist parties if domestic politics necessitated it. These events were criticized in diplomatic, but rarely in official, circles. This asymmetry defined Hungary's attitude towards the countries of the Middle East, including Israel. As it had one of the most open economies in the Soviet bloc, it was extremely reliant on foreign trade and it was also in constant need of hard currency – it therefore badly needed trading partners.

Hungary tried to reap the benefits of this openness by promoting trade in both ordinary and ‘special’ (military) goods. But these relations had limited prospects. Middle Eastern countries were themselves in a dire financial situation, and, as a result, commercial relations with them could never really address the problem of Hungary's constant trade deficit. This led to the eventual entry of the country into the International Monetary Fund and the World Bank in 1982, to which the Soviet Union had previously objected on several occasions since 1967 but eventually had to accept. Nevertheless, the 20 years between 1955 and 1975 were characterized by increasingly active diplomatic and commercial relations between Hungary and the countries of the Middle East, with military cooperation becoming steadily more important. On the margin of these relations, Hungary admitted a number of students to its universities, mostly from ‘friendly’ countries in the region. Many of these students chose to stay in Hungary after their studies, and now form a major part of the small but vibrant Muslim community in the country.⁶¹

Relations between Hungary and the Middle East started to develop in a promising manner in the 1950s, but due to the limited possibilities in trade and other complications in their relationship, the full potential of such relations was never actually realized. One testimony to the eventually decreasing importance of Middle Eastern Arab regimes is the fact that relations between Hungary and Israel started to thaw as the country's economic situation deteriorated during the 1970s and 1980s. The gradual rapprochement between Israel and Hungary between 1987 and 1989, culminating in the re-establishment of diplomatic relations in 1989, signalled a new era: in the midst of its political transition to democracy, Hungary now cared little about the feelings of governments of the unfulfilled ‘promised lands’ of the Arab world.

Table A.1 Hungary's foreign trade with some Middle Eastern countries (million convertible Forints)

Source: ‘Külkereskedelem’ [Foreign trade], Volume 12, Issue 3 (1968), p. 112. Available at https://adtplus.arcanum.hu/hu/view/Kulkereskedelem_1968/?queryEgyiptom&pg=139&layout=s (accessed 2017.02.10).

Table A.2 Hungary's overall foreign trade (million convertible Forints)

Source: Tamás Csató, ‘Külkereskedelem’ [Foreign trade], in István Kollega Tarsoly,. Babits Kiadó (eds), Magyarország a XX. században [Hungary in the 20th century] (Szekszárd, 1996–2000). Available at http://mek.oszk.hu/02100/02185/html/362.html (accessed October 2017).

1.In this chapter, we intend to use a wider interpretation of the Middle East. The approach we use covers a much larger area than normally envisaged – dealing with a region that stretches from Morocco to Iran. We are not, however, going to treat Turkey as part of the Middle East because that country was part of NATO and, as such, had insignificant relations with Hungary. Also, the group of countries that we are going to cover does not include Somalia or Mauritania. Thus, the states with which this chapter deals are those that the World Bank and other institutions call the ‘MENA’ region – that is, the Middle East and North Africa.

2.Hard currency meant any convertible foreign currency. Those of the Soviet bloc, including the Soviet Union itself, were not convertible to Western currencies.

3.Ignác Romsics, Magyarország története a XX. században [History of Hungary in the 20th century] (Budapest, 2010), pp. 512–13.

4.Mihály Fülöp and Péter Sipos, Magyarország külpolitikája a XX. században [The foreign policy of Hungary in the 20th century] (Budapest, 1998), pp. 429–35.

5.Ferenc Gazdag and J. László Kiss, Magyar külpolitika a 20. században [Hungarian foreign policy in the 20th century] (Budapest, 2004).

6.László J. Nagy, Magyarország és az arab térség – Kapcsolatok, vélemények, álláspontos 1947–1975 [Hungary and the Arab World – Connections, opinions, standpoints 1947–1975] (Szeged, 2006).

9.Pál Germuska, ‘A közel-keleti magyar haditechnikai export kezdetei’ [The beginning of exports of military hardware to the Middle East], in M. János Rainer and Éva Standeisky (eds), ÉVKÖNYV XI. 2003. Magyarország a jelenkorban [Almanac XI. 2003. Hungary in the present day (Budapest, 2003), pp. 79–91; Pál Germuska, Vörös Arzenál [Red Arsenal] (Budapest, 2010).

10.Gábor Búr, ‘Hungarian Diplomacy and the Non-Aligned Movement in the Cold War’, in István Majoros, Zolta´n Maruzsa and Oliver Rathkolb (eds), O¨sterreich und Ungarn im Kalten Krieg [Austria and Hungary during the Cold War] (Vienna, Budapest, 2010), pp. 353–72.

11.Even though nationalist Arab governments conducted land reform, nationalized companies from key industries, and were not believers in the separation of powers, they never went as far as Soviet bloc countries did. They did not wish to exert total social control or to nationalize or directly coordinate the whole economy. For instance, private merchants in the souks were left to conduct their traditional business and non-strategic private enterprise was also able to compete on the market.

13.Búr writes on non-aligned countries in general. According to him, trade from 1966 to 1970 between Hungary and non-aligned states represented no more than 1.5 per cent of all the Hungarian trade activities. Bearing in mind that most Middle Eastern countries were part of the Non-Aligned Movement, we can safely state that trade relations between Hungary and the Middle East could never cross a certain threshold. See Búr, ‘Hungarian Diplomacy and the Non-Aligned Movement’, p. 372.

14.Csornoky was the son-in-law of the president of the republic, Zoltán Tildy. He was executed in December 1948 after a Stalinist show trial on treason charges. His arrest was used to force Tildy to resign as president.

15.Andrei Zhdanov was the main ideologue of the Soviet Union who introduced this new theory about the existence of two camps, the peace-loving Eastern and the US-led imperialist one, at the founding conference of the Cominform in September 1947.

18.While the term ‘active foreign policy’ had been used in confidential as well as public documents since 1954, it was coined as a doctrine by Csaba Békés. See Csaba Békés: ‘The Warsaw Pact and the Helsinki process, 1965–1970’, in Wilfried Loth and Georges-Henri Soutou (eds), The Making of Détente: Eastern and Western Europe in the Cold War, 1965–75 (London–New York, 2007), p. 201.

19.Speech of N. S. Khrushchev at the meeting of the European socialist countries' leaders, Moscow, 4 January 1956, Magyar Nemzeti Levéltár – Országos Levéltár [Hungarian National Archives; hereafter, MNL-OL], M-KS-276. f.-62/84. ő.e., quoted in Csaba Békés, ‘Cold War, Détente and the Soviet Bloc. The Evolution of intra-bloc Foreign Policy Coordination, 1953–1975’, in Mark Kramer and Vit Smetana (eds), Imposing, Maintaining and Tearing open the Iron Curtain: The Cold War and East-Central Europe, 1945–1989 (Lanham, MD, 2014), p. 251.

20.Csaba Békés, ‘East Central Europe, 1953 1956’, in Melvyn Leffler and Odd Arne Westad (eds), The Cambridge History of the Cold War, vol. 1 (Cambridge, 2010), p. 342.

21.For the text of a complex policy paper on the future role of the Soviet bloc in world policy, prepared by the Soviet Foreign Ministry for the summit meeting of European Communist leaders in Moscow in early January 1956, see Csaba Békés, Malcolm Byrne and János M. Rainer (eds), The 1956 Hungarian Revolution. A history in documents (Budapest–New York, 2002), pp. 106–13.

23.Csaba Békés, The 1956 Hungarian Revolution and World Politics, Cold War International History Project Working Paper No. 16, Woodrow Wilson International Center for Scholars (Washington, DC, September 1996), p. 24.

25.MNL-OL, Küm, XIX-J-1-j, Egyiptom Tük, 1957. 5.d. 5/b–004399/1. Visit of a Hungarian government delegation to Egypt. Cairo, 26 September 1957. Report by the ambassador (excerpts). The visit took place between 5 and 28 September. Published in Hungarian in Nagy, Magyarország és az arab térség.

27.Memorandum from the President's Special Assistant for National Security (Bundy) to President Lyndon Johnson, 14 April 1964. Foreign Relations of the United States, 1964–1968, vol. XVII (Washington, DC, 1996), p. 301.

28.Meetings between communist parties were also significant channels of communication not just between Budapest and Moscow but also with other countries of the Soviet bloc and the Middle East, as we shall examine later.

29.MNL-OL, XIX-J-1-j-SZU-1001684/1967. Also see Alessandro Iandolo, ‘The Rise and Fall of the “Soviet Model of Development” in West Africa, 1957–64’, Cold War History 12 (4) (2012), pp. 683–704.

31.Josef Govrin, ‘Egyszerre csak egy lépés: Izraeli–magyar kapcsolatok, 1967–1989’ [One step at a time: Israeli-Hungarian relations, 1967–1989] Nemzet és Biztonság [Nation and Security] (2009).

33.Endre Sík, Bem rakparti évek [Years in the Bem embankment] (Budapest, 1970), pp. 189–92.

34.On Hungarian foreign policy in the Kádár era, see Csaba Békés, ‘Hungarian foreign policy in the Soviet alliance system, 1968–1989’, Foreign Policy Review (Budapest), vol. 3, no. 1 (2004), pp. 87–127. Available at http://www.coldwar.hu/html/en/publications/foreign_policy.html (accessed October 2017).

39.Foreign Ministry memorandum on the Palestine Liberation Movement in 1970 (Excerpts) (10 August 1970) Source: MNL–OL, Küm, XIX-J-1-j, Palesztina Tük 1971. 72. d. 001302/8. The state of the Palestine Liberation Organization (excerpts) Budapest 10 August 1970. Foreign Ministry analysis. Published in Hungarian in Nagy, Magyarország és az arab térség.

40.Tamás Csató, ‘Külkereskedelem’ [Foreign trade], in István Kollega Tarsoly,. Babits Kiadó (eds), Magyarország a XX. században [Hungary in the 20th century] (Szekszárd, 1996–2000). Available at http://mek.oszk.hu/02100/02185/html/362.html (accessed October 2017).

42.The chapter by Przemysław Gasztold in this volume comes to a similar conclusion: Poland's African foreign policy was also motivated by economic profit.

45.Imports from Morocco were mainly raw materials: unprocessed agricultural products such as phosphate, animal feed, rice and exotic fruits. In return, Hungary's main export goods were various types of machinery and components used in food processing, mining, electric infrastructure, etc. Besides, during the 1970s there was an increase in the export of textiles, chemical and pharmaceutical goods. Mátyás Domonkos, A magyar-arab gazdasági kapcsolatok [Hungarian-Arab Economic Relations] in Külgazdaság, Vol. 18, No. 2 (1974), pp. 95–101.

46.This figure can be broken down: out of this number, exports represented HUF46.1 million and imports numbered HUF39.7 million. For more information on bilateral trade relations and figures, see MNL–OL, Küm, XIX J-1-j, Arab országok, Tük, 1965. 111. d. IV-14. This document is also available in the e-Dossier by Békés, Nagy and Vékony: ‘Bittersweet Friendships’.

47.A markup is the difference between the cost of production and the selling price. This is effectively the part of the price that will be pure profit. The higher the markup, the more profit one can realize. Manufactured goods usually have a higher markup than raw materials or unprocessed agricultural products.

50.Germuska ‘A közel-keleti magyar haditechnikai export kezdetei’, pp. 79–91.

58.MNL–OL, M-KS 288. f. 5/501 ő-KS 288. F. 5/501. This document is also available in the e-Dossier by Békés, J. Nagy and Vékony: ‘Bittersweet Friendships’.

60.Frigyes Puja, Magyar külpolitika [Hungarian foreign policy] (Budapest, 1980), p. 121.

61.For an in-depth assessment of the Hungarian Muslim community, see L. Csicsmann and Daniel Vékony, ‘Muslims in Hungary: A Bridge Between East and West?’ in J. Bures (ed.), Muslims in Visegrad (Prague, 2011), pp. 57–72.