868.00–FA/12–1551
The Officer in Charge of Balkan Affairs (Campbell) to George W. Lawson, Jr., of the Bureau of the Budget
My Dear Mr. Lawson: The following statement may be of assistance to you in your judgment on the question of the amount of United States aid needed for Yugoslavia in fiscal year 1953.
The principal objectives of United States policy toward Yugoslavia, as approved by the National Security Council, are to exploit the Tito–Stalin break and to maintain the strategic and political advantages which the United States gains from Yugoslavia’s continued independence. Our policies have accordingly been directed toward strengthening Yugoslavia’s capacity to resist Cominform pressures and possible aggression. United States economic aid in fiscal year 1951 was directed largely toward preventing a critical food shortage and assisting Yugoslavia to meet its balance of payments deficit. United States economic aid in fiscal year 1952, along with that of the United Kingdom and France, was directed primarily toward meeting the balance of payments deficit, including the extraordinary addition to the deficit resulting from the import of common-use items needed for the armed forces and the defense industries. This additional deficit was only very roughly estimated by the tripartite London report of June 19511 as a part of the total foreign aid requirement of $125 million. From the information now available it is clear that it will be substantially higher than the $50 million then estimated if the Yugoslav defense effort is to proceed at the level desired in terms of United States strategic and political objectives. We do not wish that level to drop in fiscal year 1953 for lack of outside aid.
It is necessary that the Yugoslav military establishment continue to be built up, as a counter measure to the expansion of the satellite armies by the USSR and the resulting increased threat to Yugoslavia and the general Western defense position in that area, not only by the acquisition of military end-items through MDAP but also through Yugoslavia’s own defense program. It is important to the United States that the Yugoslav defense effort be sustained in fiscal year 1953 by outside aid for the importation of common-use items, over and above the aid required to cover the normal trade deficit, in a volume at least as great as in fiscal year 1952. Accordingly, [Page 1872] the Department of State believes that provision should be made for sufficient United States economic aid in fiscal year 1953 to cover these special requirements. The originally estimated $55 million total for all purposes would prove insufficient to meet these requirements and at the same time, in line with our existing policy objectives, to prevent deterioration of the civilian economy. Taking into consideration the possibility that the United Kingdom and France will not be able to bear 35% of the aid program as they are this year, the Department regards the estimate of $100 million submitted by ECA as realistic.2
Sincerely yours,
- This is a reference to the Final Report of the Tripartite Official Conversations Concerning Economic Aid to Yugoslavia, Document 906.↩
- When Lawson wrote a letter to W. Averell Harriman on December 17 concerning this subject, Merchant responded with a letter to Lawson (through Ohly) on December 19, the text of which is a slightly more detailed version of the letter printed here. The conclusion of Merchant’s letter was the same in its support of the $100 million estimate submitted by the ECA. (768.5–MSP/12–1751↩