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

868.03/10–1950

Memorandum of Conversation, by the Secretary of State

secret

[Washington,] October 19, 1950.

Participants:	The Secretary
	Edvard Kardelj, Vice Premier and Foreign Minister of Yugoslavia1
	Vladimir Popovic, Ambassador of Yugoslavia
	Mirko Bruner, First Secretary of Yugoslav Embassy (interpreter)
	John C. Campbell, EE

Mr. Kardelj began by saying that he wished to discuss with me certain urgent problems now facing the Yugoslav Government. He referred first to the drought and the great damage which it had caused to the Yugoslav economy, and to the immediate danger of famine. He said that his government had taken certain steps to deal with the crisis and that the Yugoslav people would tighten their belts, but that nevertheless outside aid was necessary in order to avoid the danger of such a drop in living standards as would constitute a threat to the internal security of the state and would increase the chances that the Soviets could make trouble for Yugoslavia. Accordingly the Yugoslav Government had taken the decision to appeal to the US for a grant. Mr. Kardelj said that the need was in the neighborhood of $100 million, $55 million to $60 million for food and the remainder for raw materials which would ordinarily have been paid for with agriculutral exports which now could not be made. Import of these raw materials, he said, was necessary as well as imports of food in order to prevent too great a burden on the Yugoslav people. Mr. Kardelj said that Ambassador Popovic was ready to present the formal written request tomorrow and hoped that I would receive him for that purpose.²

Mr. Kardelj went on to mention the Yugoslav Five-Year Plan and the general economic situation. He said when the plan was adopted in 1947 the difficulties which had been encountered since the break with the USSR, principally the demands of defense and the reorientation of foreign trade, naturally were not foreseen, and that consequently the present situation presented great problems. The Yugoslav Government had made certain modifications of the plan to meet the new conditions, for example by extending the five-year period to six years. However considerable outside assistance would still be necessary. He said that it was essential that the Yugoslav Government go ahead with the plan both for economic and political reasons. It was important not to give substance to the Soviet propaganda theme that Yugoslavia could not succeed in its economic plans after breaking with Moscow. There was the additional factor that the projects had already been started and could not be abandoned. The Yugoslav Government had estimated the amount needed in loans and had so informed the US Government and the World Bank. Mr. Kardelj hoped that the US Government, directly or by using its influence with the World Bank, could take the necessary steps so that these loans could be granted.

I said first that I would be glad to see Ambassador Popovic tomorrow to receive the formal Yugoslav request for a grant. I then said that I wished to speak absolutely frankly and clearly on these subjects so that there would be no misunderstanding. As to food I said that we fully understood Yugoslavia’s critical situation and were giving urgent consideration to what we could do. I mentioned that US and Yugoslav officials were already in touch with each other in discussing the figures and the technical aspects of the problem. The big difficulty, I said, was the fact that there were no available funds. The Congress was the appropriate body to deal with such a request for grant aid. However, since Congress was not in session and since the need was urgent, the US Government was looking at all possible alternatives in order to provide some food assistance to Yugoslavia immediately.³ I said that on this question we wished to be helpful and would do all that we possibly could. I mentioned that the Yugoslavs also could do something to help by taking such steps, such as promptly providing information, as were necessary to meet the requirements of US laws, even if those requirements might seem to them foolish.

As to the request for money for raw materials, I said that we had been devoting our principal attention to the food question and that I was not sufficiently informed on the raw material request to be able to discuss it. I said that this was something which would have to be dealt with by the Congress if only for the conclusive reason that no money would be available anywhere else. I mentioned that any request to Congress would bring about a public debate and a discussion of the Yugoslav Government’s policies. Accordingly, the Yugoslav Government would help its own cause by putting relations with the US and with Yugoslavia’s Western neighbors on the best possible basis.

Turning to the question of loans I reminded Mr. Kardelj that I had spoken to him last year of some of the limitations in this regard and mentioned that Ambassador Allen had recently done likewise in a conversation with Marshal Tito.⁴ I said that we considered the Yugoslav economic development program to be too ambitious in that the requirements for foreign aid came to more than the Yugoslav economy could undertake. I said we did not feel that Yugoslavia would be able to service and amortize loans in the amount of $400 million, and that I believed Mr. Black felt likewise.

Mr. Kardelj said that he felt the US Government and the World Bank tended to consider Yugoslav requests too narrowly and only in economic terms. He believed that Yugoslavia could meet the payments on the loans requested if they were granted immediately and on a long-term basis, but even if there were some doubt about that, he continued, it was necessary to consider the political aspects. Yugoslavia, in keeping itself strong and defending its independence, was making a contribution to world peace and to the interests of other nations including the US. The USSR was engaged in building up the military strength of its satellites. To meet this threat, Mr. Kardelj continued, Yugoslavia had to remain strong militarily and economically. He said that the Yugoslav Government believed it wise not to request arms aid from the US in peacetime, since this was just the sort of move which the Soviets were looking for and would capitalize on in their propaganda. That decision meant that Yugoslavia had to use its own limited resources for building its defenses. Thus, while its request for outside aid had been put on the basis of economic needs, the defense needs were also a real factor in the picture.

I told Mr. Kardelj that I wished to make it clear that I agreed with what he said regarding the political importance of Yugoslavia’s determination to defend its independence. I said that there was no tendency on our part to minimize that factor. However, it was necessary to understand clearly the limitations on the granting of loans, and it was loans that we were talking about. The Banks in question, the World Bank and the Exim Bank, had to look at loan requests in terms of the possibilities of servicing and repayment. The Yugoslav Government should keep that clearly in mind. I suggested that they might better serve their own interests by reducing their total request to a point where a start could be made on financing their economy rather than by insisting on too high figures without result. It was better to do what was possible rather than to discuss indefinitely proposals that were impossible.

Mr. Kardelj wondered whether there might be some other sources of assistance in addition to the banks in question. He suggested that the Yugoslav Government might discuss with the Department what might be done, possibly through a grant if loans were not possible. I said that of course we would be ready to discuss any request they made, but that the question of a grant would present many difficulties; in any case it was something which would be up to Congress, the only place the money could come from.

Mr. Kardelj then referred to my earlier mention of Yugoslavia’s relations with neighboring countries, asking whether I had anything particular in mind. I referred, as an example, to the question of opening the railway from Salonika, which was of obvious interest to Yugoslavia.⁵ I said that such a development might more easily be accomplished if Yugoslavia was able to create a better atmosphere and more normal relations with Greece. Mr. Kardelj agreed that the opening of the railway was a matter of great importance. He said that Yugoslavia was ready to go ahead with it but that in every case it was the Greeks who were placing obstacles in the way of normal relations. I replied that it was rare in such cases that all the fault was on one side. I mentioned that the raising of the issue of minorities in Greece did not help matters, that this was the kind of question which could be left aside for the present. He said that Yugoslavia had raised this question only once when it was necessary for reasons involving public opinion since this was an issue on which the Cominform was making anti-Yugoslav propaganda; moreover Yugoslavia had not raised this matter as a condition precedent for the exchange of ministers and normalization of relations.

I commented that Yugoslavia’s relations with Italy seemed to have improved recently. He agreed that there had been improvement in some fields although there were still major unsolved problems. He said that if some of the other outstanding questions could be settled in a spirit of cooperation it might then be possible to deal with these major differences.

At the close of the conversation I told Mr. Kardelj that because of my respect for him and because I thought that frank and straightforward speaking was desirable to clarify matters, I had spoken very sincerely and openly with him and hoped that such an approach would provide a firm basis for further dealing with these problems. He said that he appreciated my attitude and also considered frankness and plain speaking the best possible basis for the continuing improvement of relations between the two countries, despite the differences in political and social systems, which the Yugoslav Government hoped to bring about.

We agreed that, in reply to questions from the press concerning this talk, Mr. Kardelj might say that we had covered a wide range of problems in Yugoslav-American relations and that, as might be expected, the question of the drought in Yugoslavia was prominent among the subjects discussed.

Dean Acheson

1. Foreign Minister Kardelj was in the United States as the Chairman of the Yugoslav Delegation to the Fifth General Assembly of the United Nations.
2. Ambassador Popović called on Secretary of State Acheson on October 20 to present a note of that date formally requesting United States assistance for drought relief. The Yugoslav note indicated that despite all Yugoslav Government efforts and the extreme limitation of consumption, there remained a loss amounting to $105 million that could be covered solely by extraordinary assistance from abroad. For the text of Ambassador Popović’s note, see Yugoslav Emergency Food Assistance Program, p. 7.
3. In a memorandum of October 20 to Assistant Secretary of State for Economic Affairs Thorp, not printed, Secretary of State Acheson stated that at the Cabinet meeting that morning he had mentioned the matter of needed Congressional action to provide funds for Yugoslavia. The Secretary apparently explained in general to the Cabinet what was being done to aid Yugoslavia as an emergency matter, subject to Presidential action. President Truman agreed that aid to Yugoslavia was an urgent matter which should be dealt with by a special session of Congress (Secretary’s Memoranda, Lot 53 D 444, Secretary’s Memoranda—October 1950).
4. See telegram 365, October 13, from Belgrade, p. 1469.
5. Telegram 1301, October 20, to Athens, repeated as 285 to Belgrade, not printed, suggested that the Greek Foreign Ministry be informally sounded out as to the possibility of early Greek cooperation with Yugoslavia in taking the necessary measures to reopen promptly the Salonika–Djevdjelija railroad as a route for the shipment of food supplies to Yugoslavia. It was to be made clear to the Yugoslav Government that the current press polemics over the Macedonian issue were anything but helpful to the Yugoslav interest in such matters as the Salonika rail route. It was hoped that both the Greek and the Yugoslav Governments could be persuaded to play down “public drumbeating” on the Macedonian issue and realize that common action on such matters as the Salonika route clearly served important interests for both countries (868.03/10–1750).