109. Memorandum From the Executive Secretary of the Department of State (Battle) to Secretary of State Rusk0
YUGOSLAV PAPER FOR NSC
Attached as Annex A1 is Mr. Hamilton’s memorandum of November 7 to you recommending that the U.S. should stop all aid to Yugoslavia except P.L. 480. At Annex D is EUR–Mr. Tyler’s memorandum of November 14 setting forth the political implications of such termination of aid to Yugoslavia. At Annex B is EUR–Mr. Tyler’s review of U.S. policy and assistance programs to Yugoslavia. Annex B includes EUR’s recommendation that, in addition to P.L. 480 assistance, the U.S. should provide development grant assistance in the amount of $2.8 million for FY 62 and development loans in the magnitude of $15 million or $20 million. At Annex C is a memorandum to Mr. Hamilton from his staff along similar lines except that it recommends development loan funds be limited to $2 million. Annex E is Ambassador Kennan’s most recent expression of views.
[Page 235]A summary of the conflicting recommendations follows.
Mr. Hamilton believes there is no justification from an economic point of view for development grants or development loans in any magnitude. He argues that the development grant funds (spent primarily to support U.S. technicians in Yugoslavia and the training of Yugoslavs in the U.S.) are of little economic significance and desperately needed in newer and much less developed countries where an amount of $2.8 million would make a highly significant contribution to development. While he believes that there is a political value attached to bringing these Yugoslav personnel to the U.S., he does not consider this of sufficient importance relative to the usefulness of this money in other areas. He notes that less than one hundred U.S. technicians were sent to Yugoslavia last year under this program and that only three hundred Yugoslavs came here. He observes that Ambassador Kennan recommends that no new technical assistance contracts of this kind be entered into this year.
With regard to development loan funds, Mr. Hamilton reasons that other sources of credit are available, that the small amount which the U.S. might make available would not be decisive, and that the need for these funds is incomparably greater in other countries. EUR believes that over the next few years our assistance activities should be phased out and our development lending be replaced by private commercial credits. It recommends, however, that we avoid actions which it feels might be interpreted as abrupt or vindictive.
Mr. Hamilton and EUR agree in the wisdom of continuing P.L. 480 assistance.
The NSC Record of Actions also requested that the Department’s recommendations “should rest on a review and restatement of U.S. policy toward” Yugoslavia.2 EUR’s proposed review and restatement is Annex B. EUR’s political analysis of Mr. Hamilton’s recommendations (Annex D) reasons that termination of all U.S. aid to Yugoslavia at this time (other than P.L. 480) would lead the Yugoslav regime to react strongly to the implied pressures of the U.S. action and would seriously prejudice our relations with that country. It also states that such action would be regarded as a basic change in U.S. policy towards Yugoslavia and might influence other Western countries and private trading interests to take similar action.3
- Source: Department of State, S–S/NSC Files: Lot 70 D 265, NSC Misc. Secret.↩
- Annexes A–D are not printed. Annex E is telegram 757, Document 108.↩
- NSC Record of Action No. 2439, Document 46.↩
- According to a November 16 memorandum by Battle, attached to the source text, Secretary Rusk requested further study of actions on Yugoslavia.↩
- Printed from a copy that bears this typed signature. G.R. Olsen signed for Battle.↩