860h.51/188: Telegram

The Minister in the Kingdom of the Serbs, Croats and Slovenes (Dodge) to the Secretary of State


26. Department’s no. 18, May 24, 4 p.m., Legation’s no. 25, May 27, 2 p.m. I have just received from the Minister of Finance a memorandum substantially as follows: [Page 1010]

Total loan $100,000,000 to $120,000,000.
First issue $25,000,000 to $30,000,000 up to $50,000,000, according to agreement, to be used for railways and other Government requirements, for redeeming paper dinars, and payment of debt to Standard Oil Co.
The Royal Government declares formally that the proceeds of the loan will not be used for the payment of debts to foreign governments.
The Yugoslav Minister at Washington has been instructed to get in touch with the World War Foreign Debt Commission for the purpose of settling upon a method for the payment of principal and interest Yugoslav debt to the United States. It goes without saying that the Royal Government recognizes the entire debt and interest and hopes that the American Government will agree to capitalizing the interest. To demand payment of this interest would be unjust since Great Britain and France have not [been] paid, and also in the light of the difficult situation resulting from the war. Payment from the loan of the interest on indebtedness would leave almost nothing for general needs and construction of the Adriatic railway would be impossible. The undertaking set forth in the former note (see Legation’s telegram no. 20 of May 23, 4 p.m., second paragraph) was made in expectation that the American Government, as also other foreign governments, would not demand the immediate payment of either debt or interest. The conclusion of an American loan is impossible if this payment be insisted upon.

The representative of Hallgarten and Co. is considering withdrawing his offer because of insufficient security.

Refer to Legation’s telegram no. 20 of May 23; the Minister of Finance has renewed verbally to me the assurance given in the fourth paragraph.