Foreign Relations of the United States, 1950, Central and Eastern Europe; The Soviet Union, Volume IV

868.10/6–2150

Memorandum of Conversation, by Mr. Harry H. Bell of the Investment and Economic Development Staff

secret

[Washington,] June 21, 1950.

Participants:	Yugoslav Embassy: Mr. Vladimir Popovic, Ambassador
	Yugoslav Embassy: Mr. Milenko Filipovic, Economic Minister
	E—Mr. Willard L. Thorp
	EE—Mr. Charles W. Yost
	EE—Mr. Gustavus Tuckerman
	OFD—Mr. Leroy D. Stinebower
	ED—Mr. Harry H. Bell

The Yugoslav Ambassador referred to his recent interview with the Secretary regarding Yugoslavia’s need for long-term dollar financing from the I.B.R.D. and the Eximbank, and the Yugoslav desire for the Department’s support, particularly vis-à-vis the former institution.¹ The present visit to Mr. Thorp was in response to the Secretary’s suggestion.

The Ambassador then pointed out that the long-discussed I.B.R.D. loan was now being held up by the Bank’s insistence on a prior settlement of Yugoslavia’s pre-war foreign debts. Mr. Thorp replied that he understood that Mr. Black of the Bank had made a new and very conciliatory proposal, namely, that Yugoslavia make a firm commitment of the amounts it was prepared to set aside each year to meet the claims in question. Such a commitment, if in a reasonable amount, would be viewed by Mr. Black as an acceptable sign of good faith in lieu of actual settlement with the creditors. Mr. Black would also urge this view on the I.B.R.D. Board.²

Ambassador Popovic stated that this had been discussed by his Government, which was prepared to take a positive attitude to the Black proposal on certain conditions. Yugoslavia was ready to set aside from its budget $3.5 million annually for the foreign creditors provided that:

(1) I.B.R.D. would make a formal commitment to extend the loan already under discussion;

(2) I.B.R.D. would give general assurances regarding additional loans to Yugoslavia to be requested in the future;

(3) the U.S. would give its views on the prospects for future Eximbank loans, agreeing “in principle” to such loans;

(4) the U.S. would support Yugoslavia’s requests vis-à-vis I.B.R.D.;

(5) the U.S. would assist Yugoslavia in tapping loan possibilities from other countries, such as the U.K., France, and West Germany.

The Ambassador stated that the proposed set-aside for the creditors was inseparable from the commitments regarding future assistance, since the funds to meet the former would be derived from the increased earning power of the Yugoslav economy, which in turn would be stimulated by the incremental credits.

When Mr. Thorp asked how specifically the Yugoslavs were prepared to define and justify their requirements for further assistance, the Ambassador replied that they would first have to know our views “in principle”. They do not wish to prejudice their present loan negotiations by putting in new specific requests at this time.

Mr. Thorp pointed out that loans are not granted “in principle.” It is always necessary to have a complete picture before even agreeing “in principle” to a loan. The Yugoslav Government knows that we are in general in favor of loans to Yugoslavia when these can be justified. The question is, how much new debt can Yugoslavia service? We have no opposition “in principle” to further loans, but we cannot commit ourselves “in principle” to envisaging indefinite lending year-in-year-out.

Ambassador Popovic said he was gratified with this partial encouragement and asked how he should proceed. Mr. Thorp suggested the next step would be to meet with Mr. Gaston and Mr. Martin³ and himself to discuss more specifically the requirements and possibilities in the picture.

The Ambassador then said he also wanted to discuss his proposals with I.B.R.D., but would like to discuss figures, etc. further with Mr. Thorp before approaching I.B.R.D. Mr. Thorp pointed out he was not in a position to negotiate for I.B.R.D. In any case, Mr. Martin should be in on any such discussion. Therefore the joint meeting with Mr. Gaston and Mr. Martin should be held as soon as possible, preferably before the end of this week. This suggestion was agreeable to the Ambassador.⁴

In leaving, Ambassador Popovic expressed gratitude for U.S. assistance at Brussels and elsewhere in making the aluminum trio rolling mill available for Yugoslavia.⁵ He would also appreciate any assistance we could give in the matter of the current negotiations for a credit from Western Germany.⁶

[Harry H. Bell]

1. See the Secretary of State’s memorandum of conversation, supra.
2. IBRD Bank President Black’s views summarized here were contained in his letter of June 7 to Ambassador Popović, not printed, which followed their meeting of June 6. It was pointed out in Black’s letter as well as during a conversation between Tuckerman and A. S. G. Hoar, Assistant Loan Director of the IBRD, that Bank acceptance of the type of commitment by Yugoslavia outlined here would be contingent upon the determination by the IBRD Staff that the anticipated debt loan would be consistent with Yugoslavia’s economic position and prospects (memorandum of conversation by Tuckerman, June 20, 1950: 868.10/6–2050).
3. Edwin M. Martin, Director of the Office of European Regional Affairs.
4. Telegram 510, June 27, to Belgrade, not printed, reported that, at a meeting at the Export-Import Bank on June 23, Ambassador Popović had made an oral presentation of overall Yugoslav financial requirements. Three hundred million dollars would be required for full settlement of payment balances and implementation of priority plans for reconstruction and the raising of the standard of living. One hundred million dollars of this sum was expected from IBRD and Export-Import Bank loans during 1950 and 1951. The remainder was expected from Germany, Italy, France, and Britain (868.10/6–2750). Subsequently, telegram 63, July 22, to Belgrade, not printed, reported that on July 20 the Board of Directors of the Export-Import Bank of Washington approved the consideration of a credit to finance Yugoslavia’s current account dollar needs for the remainder of the year. The Bank had requested the National Advisory Council to give consideration to the credit, the amount of which was not specified (868.00/7–1850).
5. The mill under reference here was assigned to Yugoslavia by the Inter-Allied Reparation Agency as a portion of Yugoslavia’s share from German reparations.
6. Regarding the attitude of the United States toward Yugoslav-Federal commercial and credit negotiations, see footnote 6, supra.