868.00/10–1050
Memorandum of Conversation, by the Officer in Charge of Balkan Affairs (Campbell)
| Participants: | Mr. Eugene E. Black, President of IBRD |
| Mr. Robert P. Joyce, S/P | |
| Mr. John C, Campbell, EE |
Prior to his interview with Ambassador Popovic today1 Mr. Black asked us to come to his office for a brief talk on his trip to Yugoslavia2 and inquire concerning developments on the question of financial assistance to Yugoslavia since the return of Ambassador Popovic to the US.
In recounting his conversations with Yugoslav officials Mr. Black said that he had first talked for four hours with Tito, to whom he had frankly given his views as to the possibility of IBRD loans to Yugoslavia. He told Tito that the IBRD probably would be able to Undertake a general program of credit assistance to Yugoslavia on a sound business basis if the Yugoslavs were willing to supply all the necessary information and to meet the terms which the Bank would have to require as creditor; the Yugoslav Government could, he said, incur loans only within the program agreed with the IBRD and obviously could not continue simultaneously to apply for dollar loans from the Eximbank. Mr. Black said that Tito had accepted these propositions as a proper basis for detailed discussions. There then took place long discussions between Mr. Black and a Yugoslav Committee headed by Kidric and including Milentije Popovic, Vladimir Popovic and Velebit. During these talks the Yugoslavs presented their proposals for $400 million in credits over a two-year period, explaining their specific plans for individual industries such as steel, petroleum, aluminum and electric power. On the last day of his visit Mr. Black presented his reaction to these Yugoslav proposals. He said that he did not believe that the Bank, in the light of the Yugoslav situation and prospects, could lend more than $200 million over a period of four years. He also said that he could not agree that the Yugoslav program as it stood, in particular the plans for heavy industries, was within the capacity of the country and that this program would have to be altered if the Bank were to undertake the responsibility of financing. The Yugoslavs were disappointed with Mr. Black’s reply, saying that these conditions would be very difficult to accept. After some further discussion they did concede that they might get along [Page 1465] with $350 million in three years but in any event could not accept the basic alteration of their industrial program. Mr. Black then told them that they had two alternatives: (1) they could work out a development and financing program with the Bank on a sound basis such as he had suggested and would be assured of the full cooperation of the Bank, which was an international institution and had no political purposes behind its lending activities; (2) they could forget about the Bank and go directly to the US Government, asking for more loans to meet their needs. Mr. Black said that he could not speak for the US Government but that he doubted whether they would be able to get from the US Government any such amount in loans as they were speaking of. The Yugoslavs suggested that there was a third alternative, that of relying entirely on their own resources and carrying on with their bare hands, picks and shovels. Mr. Black said that they might try that course but wondered what would happen to their standard of living, which they conceded to be the lowest in Eastern Europe, and to their position vis-à-vis the USSR. The Yugoslavs agreed that this third alternative contained dangers which they would not wish to contemplate.
Since no decision could be reached at Mr. Black’s meeting with the above group, they went directly to Tito to report the situation to him. Forty-five minutes later Tito and this group received Mr. Black for a final conversation. Mr. Black then repeated his views directly to Tito. The latter indicated that he found them on the whole reasonable and probably acceptable except for the one condition concerning Yugoslavia’s steel industry. Tito said that Yugoslavia had invested a good deal of money in it already and must carry on with it. Mr. Black held his ground, saying that this was just the type of unjustified rapid expansion of heavy industry which Yugoslavia could not afford. Tito finally admitted that his reasons for insisting on going ahead with his steel industry program were political. He said that his people had been promised a heavy industry and he evidently did not wish to face the political consequences, particularly from Russia, of an admission that this dream would not come true. During the conversation Mr. Black emphasized that the Bank would make every effort to give Yugoslavia the maximum credits which its situation permit; possibly, as the program went along, a larger total in loans might be extended. However, Mr. Black said, he did not wish to give the Yugoslavs any false hopes or to leave any illusions concerning the Bank’s position. Although the meeting ended inconclusively, Tito said that he would send a mission to negotiate further with the IBRD in Washington.
At a party given for Mr. Black that evening Ambassador Popovic, in a conversation with Mr. Rosen, made the remark that if the IBRD did not change its impossible demands and conditions the Yugoslavs [Page 1466] would drop the whole matter and would “break with the West”. At the airport next morning as Mr. Black was leaving, he told Velebit of Popovic’s remark, pointing out that this was not what he had understood from Tito to be the Yugoslav attitude. Velebit said that Mr. Black himself had heard what Tito had said and knew the Yugoslav position as it then was. Velebit indicated his own sharp disagreement with Popovic’s attitude and inferentially confirmed the strong impression which Mr. Black had received during the past week that a schism exists within the Yugoslav Government on this issue of assistance from the West. Mr. Black considers that Velebit, who obviously has a role of greater influence and importance than his position as Deputy Minister of Foreign Trade would indicate, represents the school which favors dealing with the West, and particularly with the IBRD, in a more or less, reasonable economic program. On the other side are the die-hards like Ambassador Popovic and Milentije Popovic who want to go ahead with the Communist Program at all costs; if they could get aid from the West, all right, but they would not make any concessions. Mr. Black believed that these men thought entirely in political terms and seemed incapable of understanding the position of the IBRD or the economic arguments which he had advanced. He felt that if the views represented by these men should win out, or if Ambassador Popovic should be in charge of further negotiations with the IBRD, there was no chance of getting anywhere, Mr. Black did not have any strong impression of where Kidric stood but thought that, like Tito, he was somewhere in the middle.
On the subject of the Yugoslav request to the US Government for grant aid to meet the food crisis, Mr. Black suggested that we take a very close look at the data supporting the Yugoslav request. He said that Rosen had got one of the Yugoslav economists to admit, of the $50 million worth of food they were asking for, half was to be handed over to collective farms; thus imported food was likely to be used to serve the political purposes of the regime and particularly its collectivization program at the expense of the independent peasantry.
We gave Mr. Black a short account of Ambassador Popovic’s recent visit to the Department and his description of the conversations with Mr. Black in Belgrade. We also told him that the Department had recently instructed Ambassador Allen to point out to Tito the difficulties of providing further credit assistance through the US Government and to say that we regard the IBRD as the logical place for the Yugoslav Government to go for primary assistance in its economic development.3 Mr. Black said that he believed that this was the right way to deal with the problem.
- Regarding Black’s conversation with Popović, see telegram 262, October 12, to Belgrade, p. 1469.↩
- For other reports on Black’s trip to Yugoslavia, see telegrams 278, September 25, from Belgrade, p. 1454, and 281, September 26, from Belgrade, p. 1455.↩
- See telegram 240, October 9, to Belgrade, p. 1460.↩