868.10/4–1550: Telegram
The Secretary of State to the Embassy in Yugoslavia
300. Yugo reps finally began two weeks ago present data re 1950 econ prospects.
Four meetings reps Yugo, Eximbank, Dept confirm impression which has been growing since authorization second $20 mil XIM credit Mar 1, that Yugoslavs assume US will foot bill indefinitely somewhat regardless of amount. All available evidence strongly supports impression. No evidence at all, either in data presented, actions taken, or attitudes of reps that Yugo now seriously concerned about closing dol raw material gap soonest possible or about fact that limit to possibilities financing Yugo by credits fast being reached.
Estimated 1950 dol balance payments presented (which includes both raw materials and capital equipment) indicates deficit to be met by US of $30 mil after allowing for fol loans: (a) $2.7 mil IBRD timber equipment, (b) two already authorized $20 mil Eximbank loans, and (c) $12.0 mil contemplated IBRD loan. This estimated deficit $15 mil more than maximum remaining deficit estimated by NAG Staff after allowing for loans cited. Deficit due to heavy inclusion capital items from US and W. Germany. Details being pouched.
It must be emphasized that limit to Yugo ability assume additional dol debt being clearly in sight (its capacity to repay as threatening a factor as any to dol part IBRD loan allowed for above), it is impossible see how US could meet deficit cited with credit financing. It is necessary therefore (a) that Yugoslavs make every effort close dol raw material gap soonest possible and restrict capital imports to items which bring immed and substantial increase in exports, and (b) that they cooperate with US (1) by complying with actions suggested by us aimed at making ends meet and (2) by providing continuous flow sufficient info enable us fully appraise developing econ situation and make sure aim being reached. Both these requirements due us in light of responsibility US has undertaken. Furthermore, from Yugo viewpoint, meeting such requirements and closing dollar gap wld seem necessary in light their desire to prove that they can stand on own feet and are not dependent on Wall Street.
Four meetings referred to and recent Yugo action taken convince us neither these two requirements likely be met short of strong [Page 1399] démarche. Data presented entirely inadequate enable us evaluate relative essentiality to Yugo economy of raw material and capital import requirements causing $30 mil estimated deficit. Each meeting used by Yugs urgently press for almost immed disbursement entire remaining $11.5 mil for raw materials in second Eximbank credit, (i.e., $20 mil less sum of $3.5 mil already disbursed and maximum $5 mil considered for capital equipment.) Meanwhile have determined from our own sources that Yugs recently contracted for some $5 mil US crude oil and motor gas which they had intended getting and cld have got from UK under recent agreement, but switched in order increase capital equipment imports from UK.
Experience with Yugs in the negots over eleven months points up to the fol:
- (1)
- Depts, Eximbanks as well as IBRDs and IMFs experience that Yugs basically unwilling disclose guts present and prospective situation at any given time. Unwillingness persistent despite repeated clearcut detailed and fully understood statements.
- (2)
- Dept unable in past and more so now to gauge seriousness of situation, formulate assistance policy and action, and explain situation to five other agencies, members of NAC. Dept throughout has been subject to predictions of dire consequences if each Yugo request not met promptly. Impossible obtain support of other US agencies without thorough knowledge situation.
- (3)
- Reasons heretofore given by Yugs for reluctance establish direct informational and analytical channels with Emb in Belgrade no longer valid. Dept understands and sympathizes with Embs difficulties in establishing close relations with Yugo Ministries. While US Govt has limited info with which check certain Yugo data, process of obtaining info through Yugs in Washington is basically time-consuming and unsatisfactory, and has in fact been used as delaying tactic. It is evident that full meaning and impact our suggestions to Yugos here have not been transmitted to Gov. Washington can never have feel of true situation such as can be obtained on the spot on continuing frank and friendly basis.
- (4)
- Preceding factors necessitate new approach. Subject your concurrence, Dept and Eximbank ready to require that YuGov establish regular channels of info with Emb on whole range of econ and financial info necessary to true evaluation of Yugo external needs. (This now more technically feasible due most info and authority procure now centralized Min For Trade.) This requirement can, if necessary, be formulated as a condition of assistance being provided by Eximbank; in fact it derives from clear contractual language contained in credit agreements signed by Yugos with Eximbank. Friendly suggestions to this effect have so far been without result.
- (5)
- Dept ready consider additional staff for Emb necessary for this purpose, and to assist Emb through periodic visits by US officials to Yugo for specific purposes which can again be undertaken on the basis of contractual obligations cited. To initiate process Dept prepared send small team US officials soon. Such team wld assist in establishing basis collaboration and bring back US first results complete study, thereby relieve Emb of catching up on backlog.
- (6)
- Until and unless such full and frank informational and analytical possibilities are provided by YuGov to Emb, Eximbank and Dept disposed dole out funds under new credit of $20 mil in small amounts and slow stages. No other way left to US Gov to make sure it will not be faced with repeated frequent growing requests for additional dol assistance.
- (7)
- Wld appreciate soonest constructive comments and suggestions from you on above proposals.
UK Emb here has shown us FonOff instruction (1) that US be urged exploit Yugo present need in order obtain essential info re state economy by suggesting its unwillingness finance further unless YuGov willing receive two or three econ experts, great secrecy if necessary, and answer questions which might be put, and (2) that US be informed that UK prepared approach YuGov to ask for same info as US, UK also being one of Yugo’s principal creditors. Depts preliminary view is UK approach best be postponed until after satisfactory relations US established. Ur comments requested.