840.50 Recovery/8–747: Telegram
The Ambassador in Yugoslavia (Cannon) to the Secretary of State
891. Soviet response to Marshall Plan1 which has been to speed the pace and clarify the extent of their economic plans in this area makes essential a reappraisal and clearer definition of our basic commercial policy towards Yugoslavia. Embassy earnestly hopes Department will give this important matter immediate consideration.
References have recently appeared to Molotov2 Plan or Russian attitude as a negative approach to European reconstruction or as [Page 835] period of waiting for US economic crisis and breakdown efforts European states for self-help. On contrary it seems to Embassy that positive elements of Soviet plan pursued long before Marshall Plan announced and now greatly augmented are far more significant as promoting a divided Europe and separate regional organization eastern European states. These divisive elements apparent from character trade agreements policy and from pattern general economic developments.
Although some corroboratory details may be lacking, Embassy assumes Yugoslav position typical if somewhat more advanced. Yugoslavia now has commercial agreements 17 countries, with British, Italian, Turkish and Argentine negotiations under way. But core of this commercial network is treaties friendship, collaboration and mutual aid or long-term economic treaties as distinguished from more limited 1–year trade agreements signed with west. Yugoslavia has signed these full economic, treaties only with eastern Europe: Russia, Albania, Czechoslovakia, Poland, Hungary, Bulgaria and conclusion with Rumania expected soon.3 Terms these full treaties never made public but all information points probability they provide for political cultural, military collaboration and wide range economic cooperation including establishment joint companies and linked economic enterprises.
Moreover, both pace and character eastern European commercial organization seems to have changed since beginning of 1947. Last year Yugoslav trade agreements were comparatively well distributed between western and eastern Europe and performance agreement obligations appeared reasonably faithful. In past 6 months, Yugoslavia has signed important new agreements with Russia, Czechoslovakia, Poland, Hungary, Bulgaria, and lesser agreements with Russian zone in Germany, Albania and Finland. During this period only Yugoslav agreement of any significance outside established Soviet bloc was Swedish. Agreement activity with western Europe limited to extending time for fulfillment existing agreements. Western European representatives here are almost unanimous in complaints of Yugoslav noncompliance with trade commitments. Yugoslavs have refused to ship, [Page 836] delayed shipments or altered price/quality ratio prohibitively. Particularly vehement these criticisms have been Belgians, Dutch, French and Swiss. Although Yugoslavs have pressed British for trade agreement, they have delayed extending minimum indispensable facilities pending further development regional relationships and tangible evidence as to degrees of export promises will materialize.
Thus, long before announcement Marshall Plan, two trends could be noted Yugoslav commercial policy: (1) development and intensification economic relations within Soviet bloc by full scale economic treaties; (2) establishment facade lesser agreements with west which have remained largely unfulfilled.
Department will appreciate savagery of repressive measures re Yugoslav security limits information to occasional glimpses of behind scenes regional development and compels their interpretation more as clues than full picture. Following developments indicate additional approaches exclusive eastern European organization: (1) Danubian railroad transport conference held Belgrade last December; (2) development network Soviet satellite aviation routes and companies such as Soviet-Yugoslav JUSTA;4 (3) Moscow Communication Conference June, 1947, for satellites; (4) Rumanian-Yugoslav agreements re development hydroelectric potential at Iron Gates, Danubian navigation and Carpathian waterway commerce; (5) mixed Soviet satellite Danube navigation corporations such as Soviet-Yugoslav JUSPAD,5 and refusal Soviets and satellites to concede any rights on Danube to nonriparian states; (6) establishment Yugoslav-Albanian mixed companies in banking, foreign trade, railroads, shipping, electric power, minerals and petroleum and extension by Yugoslavia of subsidy to Albania which amounted to 10% more than all Albania’s own revenues; (7) establishment Yugoslav-Hungarian-USSR aluminum production and marketing cartel;6 (8) regional exchanges labor technicians and training. Soviet, Hungarian, Czechoslovak, Polish and Soviet zone Germany experts now working and instructing in Yugoslavia.
In none of these developments have western European states been invited to participate. Embassy knows of no official of any government in eastern Europe with exception now chastened Czechoslovaks, who in past 2 years has devoted himself in any public statement to a [Page 837] general European economic viewpoint as distinguished from an eastern Europe.
Recent Yugoslav–USSR, Czechoslovak–USSR and Albanian–USSR long-term economic treaties besides obvious timing as psychological reply to Marshall Plan have capped affirmative process by illustrating public Soviet underwriting for those installations and supplies which region could not provide from own present resources.
Main distinction between Marshall and “Molotov Plan” is not that former constitutes interference with national sovereignty as Soviet ventriloquists maintain but that it does not. “Molotov Plan” proceeds on broad front of cultural, political and military organization aimed at producing an integrated regional society under complete Russian control.
In Embassy’s view best answer to charge that Marshall Plan will promote division in Europe is a review of the exclusive economic separatism that the “Molotov Plan” has been developing in eastern Europe for past 18 months.
Embassy feels two basic conclusions justified by this review: (1) USSR and its satellites not only uninterested in common effort restore all European recovery but actively pursuing policy designed to produce maximum economic strength in eastern Europe and minimum vitality in western Europe; (2) little chance future participation eastern Europe in any genuine attempt for general European cooperation since adherence in good faith would require abandonment Soviet plan now being systematically intensified.
These conclusions involve two high and urgent policy matters. First, extent to which German industrial capacity will be permitted to manufacture for the satellite bloc with all its implications of adding strategical strength this area. View arrival here bizonal trade delegation for commercial agreement, this decision pressing. Second, as broad decision as possible on US commercial policy toward the eastern division of Europe that the “Molotov Plan” has created, and specifically and urgently as to whether Embassy should encourage and US Government will permit exports to Yugoslavia and Soviet bloc under:
(a) Nondiscriminatory program limited, if at all, only to provision that no credits shall be advanced; (b) selective program which for example might impose no obstacles export consumers goods but exclude developmental or capital goods exports; (c) controlled program which would prevent export goods which would increase Yugoslav and bloc’s war potential.
Military Attaché requests foregoing be released to War Department.
- For documentation regarding the European Recovery Program, the plans for which were first enunciated by Secretary of State Marshall in his speech made on the occasion of commencement exercises at Harvard University on June 5, see volume iii .↩
- Vyacheslav Mihailovich Molotov, Minister for Foreign Affairs of the Soviet Union.↩
- Reference here is to the Soviet-Yugoslav Treaty of Friendship, Cooperation and Mutual Assistance of April 11, 1945, and the Soviet-Yugoslav agreement on economic collaboration of June 8, 1946, the Albania-Yugoslav Treaty of Friendship and Mutual Assistance of July 9, 1946, the Albanian-Yugoslav agreement on economic cooperation of July 1, 1946, and the Albanian-Yugoslav agreement of November 27, 1946, regarding the coordination of economic plans, unification of currencies, and establishment of a customs union, the Czechoslovak-Yugoslav Treaty of Friendship and Mutual Assistance of May 9, 1946, the Polish-Yugoslav Treaty of Friendship and Mutual Assistance of March 18, 1946, and the Hungarian-Yugoslav agreement regarding long-term trade of July 24, 1947. Later in 1947, Yugoslavia concluded Treaties of Friendship, Cooperation and Mutual Assistance not only with Rumania (December 19, 1947), but also with Bulgaria (November 7, 1947) and with Hungary (December 8, 1947).↩
- The Yugoslav-Soviet Civil Air Transport Joint Stock Company (JUSTA) was established by an agreement of February 4, 1947 between the two countries.↩
- The Yugoslav-Soviet Danubian Shipping Joint Stock Company was established by an agreement of February 4, 1947 between the two countries.↩
- Hungarian aluminum production was in the hands of a Soviet-Hungarian joint stock company for bauxite-aluminum. By an agreement of May 11, 1947, Hungary and Yugoslavia undertook to cooperate in the production of aluminum.↩