Foreign Relations of the United States, 1951, Europe: Political and Economic Developments, Volume IV, Part 2

No. 886

868.10/4–351: Telegram

The Secretary of State to the Embassy in the United Kingdom ¹

secret

Washington, April 6, 1951—7 p.m.

4571. For Yugo Econ Group.² Ref Embtels 5204 and 5243.³ Dept and ECA had informal talk IBRD Rep to ascertain status Yugo loan and obtain info requested reftels.⁴ Clearly understood informal talks in no sense negot and no commitments made. Results discussions supplied for your background info only and shld not be taken as IBRD position.

A. Status IBRD and Yugo Loan. Appears that IBRD will undertake long term credits to Yugo once satisfied that adequate arrangements being completed meet current deficits through fiscal 1952. Our best estimate is that Bank tentatively thinking magnitude this deficit $100 million which must be met by grant. Apparently immaterial to Bank where funds come from as long as contribution approximates $100 million. Once assured deficit will be met, technical matters, i.e. obtaining access to 18% funds, exchange of ltrs with YuGov, signing agreement, etc, wld require additional month. IBRD apparently prepared proceed when reasonably assured Exec Branches pertinent govts prepared to meet current deficit. It will not delay until legislative approval. Moreover, Bank will proceed on first $58 million in segments as countries authorize use of 18%. It does not plan to delay action until all countries involved have agreed to release 18% funds.

B. Bank Participation in London Talks. Brit Emb this week indicated interest having Bank Rep go London participate US–UK talks. Bank apparently prepared do so. Dept expressed view to both IBRD and BritEmb preferable first have US–UK (and possibly Fr) discuss question and reach agreement handling short-term deficit problem. IBRD cld participate, once these matters settled. Informed IBRD that question their participation wld be first order business London talks with idea that Bank if invited be informed in time for Rep depart by boat April 14. Decision invite and timing arrival IBRD will rest with US–UK group. Dept will await your communication this matter. Important thing is US–UK (and possible Fr) guidance to develop program to make available necessary grant money so Bank can act on loan. Conversations with third countries shld be planned and discussed against background of these countries additional loans through 18% IBRD funds. US view, however, that negots short-term contributions shld not be done jointly with negots various contributions IBRD loans since these are different in nature.

C. Current Bank Thinking Detailed Yugo Loan.

1. Bank contemplating $200 million capital loan, minus $50 million odd Yugo credits already negotiated Ger, Belg and Aust. Plans for $58 million well advanced with some equipment items already on order. IBRD hopes obtain Yugo assurance via exchange of ltrs no borrowing above $200 million ceiling. Believes Yugo also more receptive $200 million ceiling in view increasing unavailability additional sources capital equipment. IBRD believes it can guide use of all $200 million, especially in light of equipment shortages.

2. Re approach member countries on drawing first $58 million IBRD indicates Austria reply negative with rest still to answer. Feels Fr reasonably certain. Problem Ger contribution can be solved thru 18% contributions used via EPU, or second best, use of dols to buy DM.

3. Development projects for first $58 million worked out by Bank and YuGov. In view shortage imported capital goods essential these development plans, IBRD believes it can adequately assure adherence its development views.

4. Dept did not broach UK views (1) possibility Bank take over capital equipment loans already extended Yugo, (2) finance non-capital items imported for investment program, thus reducing current acct deficit. Re (1), if referring to unutilized Ger, Belg, Aust credits, see Para C [A]. Problem real incorporation these credits into single $200 million IBRD transaction considered of secondary importance now. Problem cld be discussed with Bank Reps in London or, if US–UK group consider urgent, by US here. If you refer to “take-over” other credits than these, pls specify. Re (2), IBRD very specific their definition, agreed with YuGov, on current acct items. We believe extremely unlikely this definition will permit significant shift current acct deficit to IBRD capital financing. In first instance, at any rate, US–UK group, with assistance from third countries, shld attempt resolve problem of meeting current acct deficit per this definition thru fiscal 1952.

D. Publicity re IBRD Participation shld be avoided. Essential avoid implication US–UK negotiating IBRD loan Yugo. Bank feels strongly that any “negots” must be between IBRD and Yugo and wants to avoid creating impression that it is acting with the US–UK in the absence of the Yugos. If questioned in London suggest answer that IBRD contemplating long-term development loan Yugo and informally joining UK–US technicians who have been studying short-term problem in a mutual appraisal of the long-term situation.

Acheson

1. Drafted by Malenbaum, Springsteen, and Labouisse and cleared with EUR, EE, and ECA.
2. Concerning the tripartite talks in London which dealt with the matter of economic aid to Yugoslavia and the U.S. delegation to these talks, referred to as the Yugoslavia Economic Group, see Document 870.
3. Telegrams 5204 of April 3 and 5243 of April 4 from London reported that British officials regarded as highly desirable an approach to the IBRD on the Yugoslav economic situation prior to consultations with other European countries. American officials in London for the forthcoming conversations with the British on the Yugoslav economic situation felt it would be unwise to approach the IBRD until agreement had been secured from other European countries. (398.14/4–351 and 398.14/4–451)
4. The memorandum of this conversation, which took place in the Department of State on April 4, is in file 868.10/4–351.