We have been considering future policy in Balkan Countries now occupied by the Red Army, namely Roumania, Bulgaria and Hungary.
Our objects in these countries must be- (1) To secure establishment of independent Governments;
(2) To protect our direct interests, and (3) To ameliorate the position of our own representatives.
2. The present position in all three respects is highly unsatisfactory. The Russians have refused to admit that the Yalta declaration on liberated territories is applicable to Roumania and Bulgaria where they genuinely appear to think that we have no right to interfere and it is highly improbable that we shall be able to broaden the Governments of these countries while the Red Army remains in Control. We do not think that to claim a better position on Control Commissions in Bulgaria and Hungary after the conclusion of hostilities with Germany, though we are entitled to this under the agreement reached at Moscow in October, would lead to any improvement.
3. There appear to be three possible courses of action- (A) In virtue of our right to play a bigger part in Control Commissions after termination of the German war we might put forward proposals for betterment of the status of our military missions on the offchance of the Soviet Government giving satisfaction in reality and not merely in words;
(B) We might withdraw our military missions altogether on the grounds that there was nothing further for them to do, leaving protection of our interests in the hands of political representatives with access to the Control Commissions through some form of Liaison Officers. This would probably have little practical effect upon our interests in Bulgaria or Hungary but it would certainly do so in Roumania where our Mission is able to give a measure of protection to oil and other commercial interests. It would also be an obvious confession of defeat;
(C) We might propose to the Russians that the time had come to discontinue armistice regimes in all three countries and to conclude peace treaties. This would, if the Russians agreed in principle, oblige them to reveal their policy in these countries.
It would in particular raise the question of armies of occupation and Russians would have to say whether they intend on one pretext or another to maintain permanent garrisons in these countries after peace had been concluded. We should then at least know where we stand. If peace were concluded we should be able to withdraw the military missions with a good grace and might be in a better position to intervene directly with local Governments for protection and advancement of our commercial and economic interests once normal diplomatic relations were resumed.
4. We have not come to any definite decision but are inclined to favour course (C) above. We are seeking the views of the State Department on the question of action on these lines.