868.00/3–2351
Memorandum by George E. Truesdell of the Office of Eastern European Affairs1
Memorandum of Consultation With the Foreign Relations Committee, House of Representatives, Concerning the Use of MDAP Funds for Raw Materials Assistance to Yugoslavia
Mr. George W. Perkins, Assistant Secretary of State for Economic [European] Affairs, and Mr. Paul Porter, Deputy Administrator, Economic Cooperation Administration, accompanied by General S.L. Scott of the Department of Defense, Mr. Theodore Tannenwald of the office of Mr. Averell Harriman, Mr. Ben Brown, Department of State and Mr. George E. Truesdell, Department of State, comprised the administration group undertaking the consultations.
Mr. Mike Mansfield was acting chairman of this meeting of the Foreign Relations Committee. Members present included:
Mr. Laurie C. Battle
Mr. Omar Burleson
Mr. Charles A. Eaton
Mr. Chester M. Merrow
Mr. Walter H. Judd
Mr. Perkins explained the nature of his visit to the Committee and stated that it was his desire to consult with the Committee before any action was taken by the President and before the President notified the Congress of his intention to use MDAP funds for Yugoslavia. He said that the economic problem in Yugoslavia had been intensified by a drought but there would be such economic problems in Yugoslavia whether or not a drought had occurred. He said that the Department has been investigating the economic conditions in Yugoslavia and that this investigation was continuing. He said that the problem had been divided into two parts. As to the longer term problem it was hoped to present a connected story at the time of presentation of the new Foreign Assistance Act and [Page 1766] mentioned that the IBRD was considering providing the needed capital to place the Yugoslav economy on a going basis. As to the current problem, approximately $70 million of assistance was needed for items which the Yugoslavs apparently could not finance from their own resources. He said that the British Government was expected to extend a credit to Yugoslavia this week in the amount of four million pounds and it was hoped that other European countries could assist by funding current overdrafts and debts. It is believed this action by the British and European countries should leave a balance of approximately $30 million for United States assistance under the MDAP.
Mr. Perkins explained that the Yugoslav problem was one of obtaining raw materials, a substantial part of which was needed for the armed forces. He said that any commodities furnished would be of types requested for the Yugoslav military establishment and the quantities would be within the total military needs and that $100 million of imports are required by the Yugoslav military establishment during the current year which amount is approximately one-third of total Yugoslav imports for that period. It was stated that it would be necessary to revise the bilateral agreement previously concluded with Yugoslavia in connection with food assistance provided under the MDAP. Mr. Perkins advised that it would be necessary to send some further personnel to Yugoslavia to observe and advise concerning this program and that it was hoped to establish a mission for this purpose, the vanguard of which would be sent to Yugoslavia in the near future to obtain the data required. Mr. Perkins went on to say that the NATO was now being consulted and that the President would make a finding and notify the Congress as required under Section 408(c) of the MDA Act. He said that the United States would purchase the raw materials but at this time it is impossible to say exactly what they would be and that the aid would be in the nature of a grant.
Mr. Perkins explained that the aid to the military would of course liberate other Yugoslav financial resources for the purchase of commodities which could be used by the civilian population. He said that consumer commodities were greatly needed in Yugoslavia and that in effect this program would be a double approach, first to help the military and second to help the general economy.
In response to a question Mr. Perkins stated that he did not believe that the Yugoslavs would be attacked this spring. A question was asked if India could furnish to Yugoslavia any of the items needed in return for the wheat to be provided by the United States. In response Mr. Perkins stated that India was outside of his sphere of operations and that he was not in a position to answer although [Page 1767] he did say that some items such as jute were on the Yugoslav requirements list.
Questioned as to whether or not this was a one-shot operation Mr. Perkins replied in the negative saying that it was expected to again approach the Congress for further aid for the next fiscal year. He said that of course the IBRD would handle any capital needs for a long range program. Mr. Perkins stated in reply to another question that among the other European countries interested were the Belgians, the French and the Dutch.
Mr. Perkins was asked concerning the relationship between Yugoslavia and the Soviet Satellites in Eastern Europe and in reply stated that it was not believed that the Satellites themselves were in a position to overrun Yugoslavia.
Mr. Perkins stated that our interests in Yugoslavia were very great since Yugoslavia was most important to our strategic interests. In response to a question as to the continuing needs of Yugoslavia Mr. Perkins stated that according to Yugoslav estimates aid in the amount of approximately $70 million would be needed in the second and third quarter of this year and thereafter further needs would be on a descending scale.
Questioned concerning our judgment as to whether other European countries would provide assistance, Mr. Perkins stated that we were not reasonably sure at this time although every effort would be made to induce them to do so. Mr. Perkins stated that none of the total of $30 million to be utilized would be for foodstuffs. He stated that the Yugoslav Government had asked for grant assistance. There was some discussion concerning counterpart funds in return for the aid to be rendered. Mr. Perkins stated that it was not usual to ask for counterpart for MDAP aid but that counterpart would be furnished to take care of the administrative expenses of this Government in Yugoslavia.
Mr. Judd asked concerning the urgency of the program, in reply to which Mr. Perkins stated his belief that the Yugoslavs could not hold out until the fall. He said that in his judgment Yugoslavia could get out of the red in the next three years.
Mr. Mansfield inquired concerning Yugoslav funds frozen in the United States and was advised that all previously frozen Yugoslav funds had been released at the time of the Claims Settlement. Mr. Mansfield then asked if the Department could furnish to him information concerning what Yugoslav funds had been frozen before the Claims Settlement. In reply to a further question by Mr. Mansfield as to why it would not be possible to provide this assistance on a loan basis Mr. Perkins stated that the Yugoslavs were already in a greatly over-extended credit position which made it most difficult for further credits to be granted by European countries.
[Page 1768]Mr. Mansfield then read a prepared questionnaire concerning the legality of furnishing this assistance to Yugoslavia under Section 408(c) of the MDA Act. It was agreed that a formal legal opinion on the law would be furnished to the Committee.
Mr. Mansfield then raised the question on the religious situation in Yugoslavia stating in measured terms that nothing was being done. He said that unless reforms were forthcoming soon it would be very difficult to get a bill through Congress providing any aid to Yugoslavia.
Mr. Judd expressed his opinion that economic recovery in Yugoslavia could not be accomplished until changes were made in Yugoslavia.
Mr. Judd also questioned the apparent failure of the Department to set up a dinar fund to provide food for needy persons. A statement concerning the latter is being furnished to the Committee staff.
- Attached to the source text, in addition to several statements prepared in the Department of State concerning Yugoslav funds frozen in the United States and provisions for feeding needy persons under the Yugoslav aid program, was a covering memorandum by Truesdell. For the published account of the testimony of Perkins, Truesdell, et al., before the Foreign Affairs Committee on March 22, see U.S. House of Representatives, Committee on Foreign Affairs, Selected Executive Session Hearings of the Committee, 1951–56, vol. XV, European Problems (Washington, 1980), pp. 7 ff.↩