Foreign Relations of the United States, 1948, Western Europe, Volume III

860S.00/7–2948: Telegram

The Secretary of State to the United States Political Adviser (Joyce), at Trieste

Washington, July 29, 1948—8 p. m.

379. Following is text note of July 28 from Yugo Govt to SC re administration US–UK Zone FTT:¹

Govt Yugoslavia has honour draw following to attention SC, which in accordance Art 21 para I and Art 2 Annex VI of Treaty Peace with Italy, assures territorial integrity and independence FTT.

Govt Yugoslavia has addressed several notes to US and UK re consistent acts of violations of clauses Treaty re FTT on part of Allied Military Command, respectively on part US and UK Govts. Yugo duly informed SC of one of these notes, dated April 12, 1948, No. 49735, addressed to Govts of US and UK.²

From facts disclosed in aforementioned notes, intention of AMC to infringe on independence FTT has become quite clear. In recent period, AMC undertook measures which were further breach of Treaty and which placed independence FTT in jeopardy.

In Article 21 of treaty Allied and Associated Powers, as well as Italy, recognized independence of FTT. This independence was placed under assurance of SC.

In accordance with Article 24, para 4, Annex VI of Treaty, economic union or associations of exclusive character with any state are incompatible with status of FTT. This provision of the Permanent Statute can and, therefore, in accordance Article 2, Annex VII, of the Treaty of Peace, must be applied during Provisional Regime as well.

This also stated in decision of Conference of Foreign Ministers in Moscow, dated April 22, 1947. Therein it is explicitly stressed that solution of questions of budget, balance of payments, currency, customs, and other financial and economic questions concerning FTT the economic independence of the FTT should be provided for in accordance provisions of Permanent Statute, particularly para 4 Article 24 of Permanent Statute—all this being applicable also for period of validity of instrument for Provisional Regime of FTT.

In accordance Article 11, Annex VII of Treaty Italian lira shall continue be legal tender in FTT pending establishment separate currency regime. Italy thereby obliged conclude treaty with Allied Military Command, as well as with Military Administration Yugoslav Army, which would insure supply of liras and foreign currencies to FTT and which would not violate conditions Article 21 of Treaty and Article 24, para 4, of Permanent Statute, to which Italy also bound. Therefore, there is no doubt there exists treaty obligation AMG, as well as Italy, to effectuate supply Italian liras their zone in such way that economic independence FTT not be destroyed.

In spite this, AMC has concluded a number of treaties with Italy in complete contradiction this obligation, and which have as final effect economic incorporation Trieste into Italy.

These treaties are the following:

1. An agreement dated March 9, 1948 between Italy and AMC concerning regulation certain financial questions arising from execution Treaty.³ First article this agreement reads as follows:

“The Italian Government and the Command of the Zone undertake to place no restrictions on the free movement of “bank notes and notes of the Italian State between their respective territories in order that the requirements for economic activities may continue to be provided through the normal financial channels.”

Thus, monetary frontier wiped out; and other articles of same agreement further put FTT with regard monetary problems, under sovereignty of Italy. According Article 2 of this agreement, each time the Italian Treasury has been allocated effective supply currency, AMC will similarly be granted amount equivalent to 0.65% of these means, which operation will be transacted by Trieste branch Bank of Italy, which, according Article 4 of agreement, will administer Treasury Zone. Should Italian Treasury return any part these means to Bank of Italy, AMC is therewith obliged return proportionate amount.

First sentence Article 5 of agreement reads:

“The Command of the Zone will apply in the Territory under its jurisdiction all regulations of the Italian Republic concerning monetary circulation and will avoid taking any contrary measures.”

Thus, FTT is subjected to measures Italian Government, by which it increases or decreases circulation of notes, in accordance own estimates and exclusive interest of Italy, without any possibility FTT protect its rights in any way whatsoever and without any obligation issue advance information regarding such measures to AMC.

Moreover AMC obliged on basis this agreement directly apply Italian regulations regarding the circulation of money in Allied Zone. It is obvious this more than monetary union: This represents in monetary regard submission and incorporation of part of FTT into Italy—and destruction the economic independence of Allied Zone.

2. Agreement on finance, also dated March 9, 1948,⁴ provides Italy will finance administration of Zone, and that the Italian Government thereby will be granted complete control its finances. It is clear aim agreement not merely subject temporarily Allied Zone to Italy, but by implicating FTT in debtor relationship with Italy, to prevent in advance its economic, and, consequently, its political independence.

Hence, in addition to serious violations of above mentioned clauses of Treaty and of decisions of Council of Foreign Ministers, the AMC has gone far beyond mandate by imposing on future government FTT a contractual obligation, final amount of which not determined at present time and which will eventually depend only on agreement between Anglo-American part FTT and the Italian Government.

3. Agreement on provision of foreign exchange for Zone, also dared March 9 completes this work.⁴ Article 2, para 1 agreement reads:

“The Italian Government and the Command of the Zone recognize that the operation of the provisions of Article II, Annex VII of the Treaty of Peace must involve the application to the Zone as heretofore of the Italian exchange control regulations. The Italian Government shall receive current foreign exchange earnings accruing to the Command of the Zone under the exchange regulations in force.”

Hence, the UK–US Zone completely subordinate to Italy in regard foreign trade as well.

Informazioni per il commercio estero—Bollettino settimanale dell’ Istituto Nazionale per il commercio commercio estero, dated May 6, 1948 issued agreement between Ital Govt and AMC, with respect fulfillment agreements made on March 9, 1948, which, in second para asserts, according to the agreement of March 9, 1948, all existing trade and payment agreements between Italy and other nations considered extended to the Zone as well.

In fact, AMC has thus handed over to Ital Govt control most important foreign relations of UK–US Zone. This constitutes most flagrant violation basic task of the mandate, as entrusted AMC in Article 1, Annex VII of Treaty—to protect independence and integrity FTT. Destruction independence and inclusion of UK–US Zone into Italy, in provisions cited article of agreement May 6 have also been formally accomplished, as Ital Min Foreign Trade, through Min Foreign Affairs, to inform all states with which Italy has trade and payment treaties of its agreement of March 9, which renders all existing agreements between Italy and other nations effective this Zone as well. The violation an open one.

Article 3 agreement May 6, provides Min Foreign Trade and AMC will reconvene immediately after respective govts have had opportune revise obligations within framework “The Economic Cooperation Act” for purpose establishing exact position for Zone in relation Italy’s trade and financial treaties. In meantime, AMC has no intention initiating negotiations of financial character with any other state in Europe and to date FTT has concluded no commercial treaty with any state.

In this way, text itself stresses exclusive character relation Italy. Article 24, para 4, Annex VI Treaty expressly prohibits associations exclusive character; but, agreement May 6 goes even further, because it established not only association but also a subjugation. Other provisions nothing more than logical consequence this alienation independence of Zone. According Article 1 agreement, circular letters, bulletins and in general all written instructions Foreign Trade will be applied Zone: and, as indicated Article 4, the Trieste Custom House will be included in customs system of Italy. Thus, entire Zone encompassed in customs system of Italy.

On April 24, 1948, Ital Dep Currencies issued announcement as follows:

“Between FTT and Italy there is no customs barrier and therefore no obstacle exists exchange goods between Trieste and Italy, with exception those essential to this territory and which AMC will not allow for import into the Republic.

“The Custom House in Trieste is to all practical purposes considered equal for both export and import to any Italian custom house, with the reservation that AMC issues permits exclusively, for the Custom House in Trieste, to business firms members Trieste Chamber Commerce. But the permits, if competent Italian authorities agree, may be valid any other Italian custom house.”

Paragraphs 5 and 6 agreement of May 6 disclose Ital UK–US Zone as far as import goods concerned, completely dependent Min Foreign Trade as this ministry must approve all special purchases abroad. Para 7 points out obligation AMC to issue import and export permits, only with prior approval Italian representative in Trieste. In paragraphs 8 and 9, Ital regulations, in regard “exports without the obligation to cede the currency” and in regard to “imports franco currency” extended UK–US Zone FTT. In para 11, the UK–US Zone assumes obligation liquidate all special accounts at Bank of Italy in Trieste, which presumably in contradiction trade treaty between Yugoslavia and Italy.

4. In addition above agreement, AMC concluded postal agreement with Italy by which UK–US Zone, in establishing uniform postal rates with Italy, placed under Ital sovereignty. According this agreement, Zone does not represent for Italy a territory of transit and is represented in its relations with foreign countries by Italy, who regulates accounts for FTT.

5. The incorporation of Trieste into Italy is being realized not only by agreements as those cited above, but also by day-to-day administrative decisions of the Allied Military Command of the Free Territory of Trieste.

Thus AMC recently proclaimed June 2nd, i.e. the day celebrating the founding of the Italian Republic, as an official holiday of FTT. Reduction taxes in interest business people in Trieste was initiated by the Commission of the Italian Ministry of Finance. AMC places in responsible positions its administration representatives of that minority of population of UK–US Zone which openly favours liquidation FTT the incorporation of Trieste within Italy.

The Govt Yugoslavia cannot help but associate these violations independence FTT with the widely-known proposal of the three powers to incorporate FTT into Italy and it perceives in these violations plan Govt US and UK to impose on SC, as well as on states which signed Treaty with Italy, “fait accompli” of incorporation Zone FTT into Italy.

The Govt of Yugoslavia, as a co-signer Treaty with Italy, as an administrator that part of the Free Territory of Trieste entrusted to it, as directly interested party, brings these facts before SC and has honour to request SC, as appointed guardian of integrity and independence FTT:

To declare the above mentioned agreements violations of those provisions of the Treaty of Peace with Italy which pertain to the Free Territory of Trieste;

To undertake the measures it considers necessary and sufficient for nullifying the respective agreements concluded between the Anglo-American Zone and the Republic of Italy, because by these agreements a situation is created likely to endanger the maintenance of international peace and security; and,

To assure the respect by the Governments of the United States of America and the United Kingdom of their international obligations, thus guaranteeing the independence of the Free Territory of Trieste.⁵

Sent Trieste, rpt London 3009, Rome 2012.

Marshall

1. The text is printed in full as document S/927, United Nations, Security Council: Official Records, Supplement for August 1948, pp. 78–84.
2. Printed in full as document S/944. United Nations, Security Council: Official Records Supplement for August 1948. pp. 85–99. See footnote 2, p. 523.
3. See editorial note, p. 559.
4. See editorial note, p. 559.
4. See editorial note, p. 559.
5. In the Department’s telegram 385 to Trieste of July 30, repeated to Rome as 2023, not printed, the Secretary requested the views of the United States Political Adviser (860S.00/7–3048).