860H.5034/2–2647: Telegram

The Chargé in Yugoslavia (Cabot) to the Secretary of State


180. Deptel 86, February 19.1 Embassy agrees little likelihood early Foreign Office reply and feels settlement procedures when announced will not include negotiation or participation representatives US interests in formulas for valuation and payments. Yugoslav Govt apparently wishes to present owners with dinar bonds whose worth would be problematical, whose nominal value would represent fractional part US holdings in Yugoslavia, whose date of issuance would make impossible any accounting of basis on which they were computed. Following facts constitute present highly unsatisfactory situation:

Embassy unable obtain list all nationalized firms or US property interests affected by or before nationalization law. Foreign Office has merely acknowledged receipt never answered Embassy’s notes: (a) requesting Yugoslav claims procedure; (b) filing claim for Socony Vacuum; (c) reserving rights of all US interests concerned; (d) requesting either list of nationalized firms or designation of an official possessing list for informal information.
Embassy unable obtain list fines, penalties or confiscations levied [apparent omission] US interests or their representatives for war profits, enemy collaboration (both Axis and Chetnik Ustashi etc.) or illegal activities of obvious character. As such fines deductible from value nationalized firms they may be substantial.
Claims settlement procedures will doubtless be barred from reopening cases decided by Yugoslav courts (see Embdesps 199, January 14 and 269, March 14, 19462).
Evidence accumulating no inventories made for nationalized and confiscated firms when taken over by govt and their property now being consolidated or mixed with state enterprises (see Embrep 15, February 123). Thus efforts even if attempted to determine property values remaining after liberation will be frustrated.
No representatives US interests of which Embassy aware have been permitted visit properties since present govt has intervened or nationalized them.
Re individual claims US citizens or representatives have almost without exception been unable to secure property or settlement because of inability of lawyers adequately to protect their clients interests and dilatory tactics by a judiciary and administrative authorities wholly dependent on will of Communist Govt. Lawyers representing foreign interests (e.g. Socony Vacuum Novi Sad Electric Company) frequently arrested and entire bar today so terrorized or subservient no possibility presentation independent case.

No new information re total value US claims.

Other govts whose nationals have substantial Yugoslav property interests have been no more successful in obtaining settlement or negotiations re their claims so far as Embassy aware.

Apparent from recent British experience that Yugoslav Govt had no serious intention establishing mixed commission or negotiations for settlement foreign property claims.

It is to be emphasized that Yugoslav Govt has never denied principle compensation but has procrastinated and continues to do so.

In Embassy’s view issuance press statement unaccompanied by specific and practical counter measures will be ineffective in inducing Yugoslav negotiations and may actually result in further postponement announcement settlement procedures because of Yugoslav phobia against publicly bowing foreign pressure.

Basic purpose this procrastination appears to Embassy to be Yugoslav intention to clear all its US claims in which Yugoslav citizens are beneficiaries before instituting any settlement procedures viz. Velebit’s recent attempts unblock frozen accounts leaving US without any bargaining power. Embassy has incontrovertible proof Yugoslav Govt has been pressing its Consular officers abroad expedite all outstanding Yugoslav claims. Yugoslav Consuls are granted wide [Page 771] powers, and according to authentications by Embassy’s Consular Section, at least 1000 cases handled exclusively by Foreign Office under law for protection Yugoslav property abroad currently involved.

Embassy strongly feels this purpose must be met squarely and urgently recommends introduction legislation as proposed paragraph 6, Embtel 141, February 15: (a) to block Yugoslav assets in US until settlement reached; (b) to pay US claims from these assets if negotiated settlement cannot be reached; (c) to establish commission to pass on US claims; (d) to permit blocking all financial transactions between US and Yugoslavia except under license. Alternative method to (c) might involve submittal to World Court ad hoc international arbitration.

Nationalization law contains possibilities negotiating satisfactory settlement but in Embassy’s view Yugoslavia will not negotiate unless compelled to do so. Embassy convinced no course other than that recommended above possesses sufficient effectiveness to assure legitimate negotiations with hope of mutually satisfactory settlement.

  1. Not printed; it asked the Embassy’s views on the procedures to be adopted for negotiating the settlement of American claims for properties nationalized in Yugoslavia. The Yugoslav Foreign Ministry had not replied to previous American requests for the initiation of negotiations to settle these claims. (860H.5031/2–1947)
  2. Neither printed.
  3. Not printed.