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

868.03/10–950: Telegram

The Secretary of State to the Embassy in Yugoslavia

secret   priority

Washington, October 9, 1950—5 p. m.

240. For the Ambassador. Fol call on Perkins Sept 29 Popovic saw Reinhardt¹ Sept 30, Yost Oct 2, O’Gara² Oct 3, reiterating line described Deptel 223 Sept 30³ re Black conversations and food needs. (Memos pouched.⁴) Call on O’Gara was, Popovic stated, to present formal request for US grant assistance meet effects drought⁵ in total amount $100 million, of which $50 million for food imports (food shipments needed begin Oct), $50 million for industrial raw materials Yugo wld otherwise have purchased with Agri exports. Dept’s response was that problem wld receive most serious, urgent and sympathetic consideration; that more specific response may be possible in about a week. Popovic was disabused his apparent misapprehension Admin cld advance funds now, arranging Congressional appropriation later. (See Handler’s Oct 2 Desp, NY Times Oct 3.) FYI only, Dept exploring possibilities use funds now available various sources other than Congress.

In view Popovic’s extreme position, especially his rptd attempts obtain US pressure on IBRD, and importance maximizing possibilities more reasonable Yugo viewpoint represented by Velebit (Deptel 223, Para 4), Dept considers now is time make clear to Tito US position on 1) food assistance and 2) other econ assistance; Re 2, that we have reached point where absolutely essential, if he expects any further assistance for economic development, that he cooperate particularly by scaling down excessive capital equipment imports resulting from excessive rate capital investment. Dept therefore suggests you seek immed audience with Tito and make oral statement along fol lines:

1. US Govt is aware of gravity drought situation confronting Yugo and resulting necessity large-scale food imports coming winter. In continuance our policy of assistance to Yugo, US giving urgent and sympathetic consideration assisting Yugovt to meet emergency domestic food and feed requirements.

In view limitations Yugo port, railroad and distribution facilities, immed start food shipments shld be made. As initial step in meeting Yugo’s food crisis, since only Dol funds now available Yugovt, apart its own Dol earnings, are $15 million credit recently authorized Eximbank, Dept prepared support Yugo request Eximbank for consideration of immed utilization portion this credit for urgent current account purchases, which wld make possible starting food pipeline immed.

As second step, US Govt is examining carefully further measures meet Yugo food requirements.

2. Re general question Econ assistance to Yugo critical point has now been reached. Until recently Yugovt has asked for loans from US on business basis, and US has through Eximbank made loans totalling $55 million on that basis. It has also approved West Ger credit for Yugo. Understanding was these loans wld help Yugo surmount difficulties of transfer of trade from East to West fol Cominform blockade and reach position where Fon payments cld be balanced.

Recently, however, entirely new situation has arisen as result of two factors: (1) Expansion of Yugo requests for credits, e.g., new request for $400 million and (2) effects of drought and consequent Yugo request for $100 million grant. US Govt must make clear at this point that it cannot possibly meet totality of these requests. As practical matter, it must be recognized that most urgent problem is food crisis, to solution of which both Govts shld give primary attention.

Salient point is, however, that in considered judgment of US Govt, credits being sought are appreciably greater than can be made available to Yugo under foreseeable circumstances. No amt persuading will convince lenders of Yugovt’s ability service any such figure as $400 million loans being sought through 1952. However, if Yugovt effects such changes of degree in its econ program as will enable Yugovt convince lenders its ability service additional debt, further economic assistance reasonable scale entirely within realm possibility. It is not question of opposition to Yugo’s industrialization but concern over whether program as presented is within economic capacity of country. In this connection, US Govt believes IBRD is logical place for Yugovt to go for primary assistance for economic development and that it should pursue this channel.

3. Yugovt may be assured that US understands and sympathizes with Yugo people at this critical time. US wishes to assist them, but Yugovt itself must have understanding of practical possibilities of assistance. For Example, it must take into account certain institutional facts (such as limitations on power of Executive branch of US Govt and attitude of Congress, which you shld explain in detail if necessary) and US public opinion, of greatest importance in event request made to Congress for food grant, possibly the only way grant cld be made. On basis mutual understanding problems facing both Govts it shld be possible for two countries to make maximum effort toward successfully meeting situation which involves interests of both.

Acheson

1. G. Frederick Reinhardt, Deputy Director of the Office of Eastern European Affairs.
2. John E. O’Gara, Deputy Assistant Secretary of State for Economic Affairs.
3. Not printed, but see footnote 3, p. 1456.
4. None printed.
5. A detailed review of the total loss caused to Yugoslav agriculture by the drought was presented in a Yugoslav Embassy memorandum dated October 3. For the text of that memorandum, see Yugoslav Emergency Food Assistance Program, prepared for the use of the House Committee on Foreign Affairs by the Department of State (Washington: Government Printing Office, 1950), pp. 10–14.