Memorandum of Conversation, by Bernard C. Connelly of the Division of Southern European Affairs

Participants: Mr. Sava Kosanovich, Yugoslav Ambassador
Mr. Milenko Filipovic, Yugoslav Minister-Economic Counselor
E—Mr. Thorp
OFD—Mr. Knapp1
CP—Mr. Armstrong2
SE—Mr. Connelly

Ambassador Kosanovich called on April 12 at his request to introduce Mr. Filipovic, the newly arrived Minister-Economic Counselor at the Yugoslav Embassy, and to discuss various matters concerning US-Yugoslav economic relations.

[Page 882]

The Ambassador said that the Yugoslavs had recently submitted to the International Monetary Fund full documentation regarding the Yugoslav economy to support their application that the Fund recognize the par value of the dinar as 50 dinars to one dollar, and asked that the United States Representative on the Fund favor the Yugoslav request. Mr. Thorp observed that we would give very careful consideration and study to this matter. He explained by way of background that whereas several years ago the Fund, due to unsettled world conditions and the lack of available statistics, was in general inclined to certify as the par value the rate suggested by the requesting country, since then various steps toward world recovery had been made, and statistical information was more readily available. Accordingly, in the interest of obtaining realistic exchange rates throughout the world, close study was now being given by the Fund to all such applications in order to determine the rate which would accurately reflect the requesting country’s economic situation.3

The Ambassador then spoke of the pending Yugoslav application before the World Bank for a general loan of $500 million. He said that the Yugoslav authorities had given most careful study to their requirements, and had come to the conclusion that a $200 million loan to cover specific projects in the fields of agriculture, mining, and industry, would cover their needs. Mr. Filipovic had brought with him the detailed figures on these projects, had already submitted the papers relating to the agricultural proposals to the World Bank, and would shortly submit similar data on the mining and industrial programs. The Ambassador accordingly asked for a benevolent attitude by the US toward the Yugoslav request for the $200 million loan. Mr. Thorp replied that we would be glad to examine very carefully all the information and data available relating to the Yugoslav application in order to determine our position in the matter.4

In answer to Mr. Thorp’s inquiry regarding the present status of the ECE-World Bank timber loan, Mr. Filipovic remarked that agreement would shortly be reached. The only difficulty to be resolved was finding a formula which would permit the Bank to have its officials inspect the projects financed by the loan and at the same time recognize Yugoslavia’s sovereign status and right to have a voice in controlling the activities of the Bank’s inspectors. Both the Ambassador [Page 883] and Mr. Filipovic insisted that the inspectors would be permitted to go wherever they wished, and expected that the necessary compromise between the positions of the Bank and the Yugoslav Government would soon be reached. Mr. Thorp explained that when the US Government lends money to US corporations it frequently requires that Government officials be permitted even to sit on the board of directors of the corporation in order to follow carefully the uses to which government funds are being put. The Ambassador observed that of course the corporations did not permit such controls, and was most surprised to learn that they actually did agree to such measures.

Referring to the matter of US export licenses, the Ambassador asked whether it would be possible for the Yugoslavs to be given an indication of the types of articles which the Yugoslavs could purchase, in order to enable them to formulate their plans in the light of available items rather than expend considerable time and money on projects which were impossible of achievement because of their inability to obtain the necessary industrial equipment. Mr. Thorp pointed out that there was no concrete list of articles which could or could not be exported; that the availability for export of any particular item depended on numerous factors, supply for example, which were not constant, and that as a result there was considerable flexibility in regard to items which might or might not be licensed for export at any particular time. Supplementing Mr. Thorp’s comment that we had recently approved a considerable number of Yugoslav export license applications, Mr. Armstrong stated that in the approximate three months period from January 1 through March 25 of this year over $11 million worth of goods had been approved for export to Yugoslavia as compared to just over $12 million worth of goods approved for export to Yugoslavia during the ten months from March through December of last year. Mr. Armstrong observed that in view of the flexibility of exportable items, it would be helpful if the Yugoslavs could provide us with a list of specific items in which they were interested. This list we would examine carefully and expeditiously, and would then indicate which items it appeared would, or would not, probably be available for export to Yugoslavia at the time they were ready for shipment. The Ambassador and Mr. Filipovic expressed their pleasure at this suggestion, and indicated that they would take advantage of this proposal.

As he was rising to depart Mr. Filipovic asked about the present status of the blooming mill, and was informed by Mr. Armstrong that we were trying our utmost to obtain an early decision on this item.

B[ernard] C. Connelly
  1. Joseph B. Knapp, Director, Office of Financial and Development Policy (OFD).
  2. Willis C. Armstrong, Adviser on State Trading, European Branch, Division of Commercial Policy (CP).
  3. In his telegram 354, April 2, from Belgrade, not printed, Ambassador Cannon reported having discussed the question of the dinar-dollar exchange rate with Yugoslav Deputy Foreign Minister Aleš’ Bebler. Cannon suggested to the Department that the exchange rate matter be postponed for several months (860H.5151/4–249).
  4. At the end of March 1949, the Department of State was informed that Yugoslav representatives were seeking private credits from the Bank of America and the Chase National Bank to finance purchases in the United States.