868.00/3–651: Telegram
The Ambassador in Yugoslavia (Allen) to the Secretary of State 1
1230. Foreign Minister Kardelj asked me to come to see him tonight for urgent presentation of what he termed “crisis in Yugoslavian economy”. He said Yugoslavia was in pressing and immediate need of 30 million worth of raw materials, notably cotton, wool, heavy hides, iron and steel shapes, chemical raw materials and coke. Yugoslavian Government is endeavoring to obtain four million pounds sterling from UK and Kardelj requested 20 million from US, in grant or credit. He said Yugoslav light industry, particularly textile mills and shoe factories might have to begin closing in two weeks. Most serious result would be effect on new price and incentive policy recently instituted to encourage agricultural production. Without consumer goods produced by light industry, farmers would not sell their produce or increase planting. Additional trouble would arise from unemployment, thereby weakening Yugoslav ability to resist aggression.
I said I would report request to Washington but foresaw considerable difficulty in our continuing to meet urgent piecemeal requests of this nature. Kardelj said raw material needs were directly attributable to inability of Yugoslavia to export agricultural commodities because of drought and that present request was foreseen last fall when drought needs were presented to Department by Ambassador Popovich.
[Page 1746]I requested detailed explanation of needs. Kardelj said memorandum would be handed to Fowler tomorrow. I said Yugoslav Embassy in Washington would also need full instructions. Kardelj said these would be sent. I asked specific grounds on which memo request was based. Kardelj said maintenance of Yugoslav ability to resist aggression. Consequently he hoped MDAP might be source of funds.
I expressed personal opinion that it was not feasible for us to continue to meet recurring crisis in Yugoslav economy and that more basic long-range solution was necessary. Kardelj said Yugoslavian Government hoped to find basic solution through agreed formula for substantive collaboration with EPU and perhaps OEEC but that existing emergency could not be met through this means. He thought outright participation in OEEC might be feasible in year or two.
While I am convinced that eventually Yugoslavian Government will have to participate directly in Europe in economic and military organization, such collaboration will not be feasible for at least six to 12 months. Meanwhile there appears to be no alternative but to continue through cooperation of British and others, to sustain Yugoslavian economy sufficiently to maintain its military posture.
- Repeated to London and Paris.↩