660H.6231/66
The Minister in Yugoslavia (Wilson) to the Secretary of State
[Received July 7.]
Sir: Referring to the Department’s circular telegram of June 17, 1936, I have the honor to report that Dr. Schacht, Minister for National Economy of the German Reich and President of the Reichsbank, [Page 500] concluded a two-day visit to Belgrade when he departed for Athens on the morning of June 13. He was accompanied by Dr. Reinhart, Balkan expert of the German Ministry of Economics, and Dr. Just the clearing expert of the Reichsbank. Dr. Schacht will also visit Sofia, Bucharest and Budapest.
The German Minister’s tour has been a subject of keen attention and speculation in the local and especially in the foreign press; and the latter seized the occasion to sound a warning that Dr. Schacht was launching an economic offensive directed toward bringing the Danubian and Balkan States under the economic wing of Germany, which would tend toward closer political relations. In spite of Dr. Schacht’s declarations that his visit was in no sense a political one and that he was an economist and not a politician I am in agreement with this view. It is my opinion that he is conducting an astute economic political policy designed to bring the States of Eastern and Southeastern Europe economically under German dominance and which will possibly eventuate in their political dependency.
As the Department is aware, German economic policy in the Danube and Balkan States has been to become heavily indebted through being a good customer and paying high prices; and then when pressed for payment to insist it could only be made in goods. There is no doubt in my mind, nor in the minds of those with whom I have discussed the subject, that the German Minister’s object here was to consolidate the position already attained and to urge the benefits of increasing the volume of trade between the two countries.
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Referring again to the Department’s confidential circular telegram of June 17, 1936, I have the honor to report that on several occasions I have had conversations with Mr. Stoyadinovitch, Prime Minister and Minister for Foreign Affairs, concerning the broad economic policy of the American Government which the Secretary of State has so frequently set forth in his speeches, and with special reference to the ultimate danger of bilateral commercial agreements such as Germany is now endeavoring to conclude with various Balkan and other countries. I have found Mr. Stoyadinovitch extremely well informed as to the present economic policy of the American Government, for he is not only a practical business man but has also long been a student of economic questions. He has also made long visits to the United States, one during the present presentation [sic], and is far more conversant with and interested in American affairs than are public men generally in this part of the world. Mr. Stoyadinovitch seemed willing to concede that the system of commercial agreements on the American line came closer to the ideal than did the bilateral agreements which are springing up in this part of the [Page 501] world. But the special geographic, economic, and even political situation of Yugoslavia made it necessary, he said, for that country to follow its present course.
A few days before the receipt of the Department’s above mentioned circular telegram I had a conversation on the same subject with Dr. Pilja, the newly appointed Assistant Minister for Foreign Affairs. Dr. Pilja had been previously an official at the Ministry of Industry and Commerce, and has only recently been promoted by Mr. Stoyadinovitch to the post of Assistant Minister for Foreign Affairs for the special purpose of dealing with economic and financial questions which come to that Ministry. Dr. Pilja represented the Ministry of Industry and Commerce on the Commission which prepared the decree for the control of imports (Legation’s telegrams Nos. 20 and 21 of June 13 and 17, respectively14). It was to discuss this question, which seems to me an indirect way of favoring economic relations with Germany to the detriment of the United States and certain other countries, that I called upon Dr. Pilja for the first time, and I took this occasion to try to explain to him also the broad policy concerning commercial agreements now being followed by the United States. I found him also surprisingly well informed concerning that policy and what has already been accomplished by the United States in putting it into practice. He repeated in general, however, the arguments of Mr. Stoyadinovitch and then went on at considerable length to explain why Yugoslavia had been obliged to issue the recent decree restricting imports.
He said it was unfortunate that the foreign and even the local press had persisted in seeing in this measure an instrument intended to favor commercial relations with Germany to the detriment of certain other countries, which, he insisted, was not the case. I am absolutely convinced, however, that in spite of his assertion, that this will be the actual effect of the control. With reference to articles of American origin which will be affected by the terms of the decree, Mr. Pilja stated quite clearly that if the United States wished to export American products to Yugoslavia it must make up its mind to import an approximate equivalent of Yugoslav products. When and if an equilibrium is attained, the restrictions against the American products in question will, as it may be said, automatically disappear. Last year, 1935, he stated, there was not much difference in the trade balance between the two countries—about 4,000,000 dinars; but the first four months of 1936 had shown a very great falling off of Yugoslav exports to the United States and an increase of American imports into Yugoslavia, so that a trade balance very unfavorable to Yugoslavia now exists. Under these conditions Yugoslavia, he added, could not [Page 502] continue to pay for American goods in foreign exchange and, therefore, had turned for the same articles to countries with which it had clearing agreements, and under present conditions it seemed that Germany would be the first beneficiary.
As a result of my conversation I am somewhat under the impression that Dr. Pilja himself, like many other Yugoslavs (Legation’s despatch No. 542 of June 23, 193615), fully realizes with some concern the danger of Yugoslavia becoming the economic and eventually, perhaps, the political satellite of Germany. But at the present time, and under present conditions, he sees no alternate course for his country.…
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It may be said, I think, that in so far as actual present results are considered, the visits of Dr. Schacht to Yugoslavia and other Danube countries have been from the German point of view successes, but I also believe that at the same time it has opened the eyes of many persons in the countries he visited to the dangers of the economic and, possibly, the political hegemony of Germany.
Respectfully yours,