The Secretary of State to the Yugoslav Chargé (Makiedo)1

The Secretary of State presents his compliments to the Chargé d’Affaires ad interim of the Federal People’s Republic of Yugoslavia and refers to the letter dated July 2, 1949,2 and transmitted by the Yugoslav Government to the Secretary General of the United Nations on July 6, 1949, concerning the loan by the Yugoslav Government of five hundred million dinars to the military administration of the Yugoslav Army for the Yugoslav Zone of the Free Territory of Trieste for the purpose of replacing the medium of exchange of the Zone with Yugoslav dinars.

The United States Government must again reject the Yugoslav allegations that the Allied Military Government in the United States-United Kingdom Zone of the Free Territory of Trieste has violated the Italian Peace Treaty through the conclusion of certain agreements with the Italian Government. These and similar charges have been [Page 515] made by the Yugoslav Government on previous occasions and have been brought to the attention of the Security Council of the United Nations which failed to sustain them. The United States and the United Kingdom Governments have set forth in detail and explained at length the nature of the agreements between Allied Military Government of the United States-United Kingdom Zone and the Italian Government. These agreements have been demonstrated to be in conformity with the provisions of the Italian Peace Treaty and indispensable to assure the well-being of the inhabitants of the United States-United Kingdom Zone. The United States Government deplores the fact that the Yugoslav Government continues to put forward these charges which upon objective examination have been demonstrated to be groundless.

In the course of the earlier discussion of the Yugoslav charges concerning the administration of the United States-United Kingdom Zone it was pointed out on several occasions that it is, in fact, the Military Administration in the Yugoslav Zone of the Free Territory that has violated the Treaty and has followed a policy clearly calculated to tie the Yugoslav Zone ever more closely to Yugoslavia. The recently announced currency conversion represents an additional move in this direction which can have the result only of further integrating the Yugoslav Zone into the Yugoslav economy.3

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The United States Government has not failed to note the statement of the Yugoslav authorities that they have been unable to reach agreement with the Italian Government upon the supply of Italian lira to the Yugoslav Zone, Free Territory of Trieste, in accordance with Article 11 of Annex VII of the Peace Treaty. Inasmuch as the Yugoslav authorities have not followed the procedures provided in the Treaty of Peace for the settlement of such questions, this statement cannot be accepted as a valid explanation for their unilateral action in introducing the dinar into the Zone under their temporary military administration.

The United States Government has previously recommended a solution of the Trieste question in the interests of international stability and the well-being of the inhabitants of the area and deplores any action which adds to the difficulty of achieving such a solution.

  1. Handwritten instructions on the source copy “to be delivered by hand by L. E. Thompson—July 14, 1949”.
  2. See footnote 1, p. 511.
  3. In telegram 1448 to Rome, July 8 (repeated to Belgrade as 353, to Trieste as 292, to London as 2374, to Paris as 2476, and to USUN as 353), not printed, the Department of State transmitted a draft of the proposed note for comment. The above three paragraphs were the same as in the initial draft. The fourth paragraph pointed out that the Yugoslav action was “in complete disregard” of the machinery provided for settlement of disputes concerning the Treaty of Peace with Italy, and it stated that the United States could not admit the validity of the statement used by the Yugoslav authorities in justification of a unilateral action which presented the parties at interest with a situation at variance with the relevant provisions of the Treaty. (860S.00/7–849)

    In telegram 482 from Trieste, July 11, not printed, Baldwin urged changes in the third and fourth paragraphs, pointing out that the United States would be indicting the Yugoslavs for serious violations of the peace treaty but at the same time admitting inability to do anything except present a protest which would presumably be rejected. Baldwin continued: “As we are obviously unwilling take stronger action which would complicate relations with Yugoslavia, might it not be preferable play down seriousness violation by omitting paragraph 3 and replace paragraph 4 with phraseology which might serve similar purpose but also at least imply our unchanged position re March 20 declaration?” (860S.00/7–1149)

    The final portion of the note was redrafted before its presentation to the Yugoslav Charge on July 14.

    In telegram 505 to Moscow, July 11, the Department explained that it had informed Ambassador Dunn that the note was intended both to refute the Yugoslav charges and to demonstrate to the Italians continued United States solidarity with the Italian position: “We point out that while we agree with Ital position that we should not give tacit approval to recent Yugo action we do not believe it would be desirable for this matter to become subject debate in SC as we are not only dubious of validity Ital position re technical matter providing lira and foreign exchange to Yugo zone but we believe it might have unfortunate effect on achievement our objectives with respect to Yugo and might also open possibilities advantageous to USSR.” (860S.00/7–1149)