Foreign Relations of the United States, 1949, Eastern Europe; The Soviet Union, Volume V

641.60H31/5–1249: Telegram

The Acting Secretary of State to the Embassy in Yugoslavia

secret

Washington , May 26, 1949—2 p. m.

266. Dept perceives no objections to possible UK credit to Yugo as part UK–Yugo trade and payments agreement. Urtel 499 May 12.¹ You may inform Brit accordingly if again approached.

Dept agrees UK, Fr, Ital credits to Yugo probably justified by (1) tangible benefits increased Yugo trade with West, (2) their effects on general orientation Yugo toward West, and (3) bolstering Tito regime against Cominform pressures.

Dept also concerned about difficulties appraising size and urgency Yugo fon exchange requirements and ability bear burden credits. FYI status Yugo credit requests in US fol:

(a) Private credits: March 29 Bank of America reps informed Dept Yugo interested $20 million credit for purchase mining, timber, agricultural equipment US, repayable from dol proceeds exports non-ferrous metals; Bank wanted security in gold or dol assets. (Deptel 182 Apr 15²), Mar 31 Chase Bank rep informed Dept similar Yugo loan request recd via Philipp Bros and Yugometal, Chase wishing full gold collateral; May 2 Chase informed Dept two short-term credits Yugo under consideration, one for two-year credit of $5 million, secured by Yugo metal sales, another for three-year credit of larger (unspecified) amount, secured by gold. Both banks promised keep Dept informed but so far Dept has heard nothing further.

(b) Internatl Bank: Dept understands little progress made so far re Yugo application, filed about Apr 6, for two agricultural projects totalling $53.1 million. (Deptels 176 Apr 13, 182 Apr 15, 220 and 221 May 4, urtel 487 May 10.³) Filipovic told Thorp May 16⁴ Yugo wld be prepared receive IBRD technical mission June, and other projects (mining equipment etc.) wld be available for presentation IBRD in 10–15 days. However Dept understands IBRD not yet decided send mission Yugo. Unlikely any IBRD credit, except $2 million timber credit, cld be expected before six months.

(c) Eximbank: Filipovic informed Thorp May 16 Yugo authorized Wash attorney negotiate Eximbank credit.⁵ Attorney informed Dept size credit wanted $25 million. Thorp inquired relation this request to IBRD application. Filipovic explained IBRD application for long-range projects whereas Yugo urgently needs funds for miscellaneous machinery, raw materials. (Actually IBRD projects contemplate two-year repayment period. Deptel 182, urtel 487.⁶) Thorp remarked that not sure Eximbank procedure any faster than IBRD’s, and that simultaneous financing thru both banks raises certain problems for US Govt.

Re Yugo ability bear burden overall Western credits and size foreign exchange requirements, tentative results preliminary OIR study (pouched May 18) anticipate 1949 balance of payment deficit ranging from $27.1 to $73.5 million, depending assumptions used. (Deptels 220 May 4, 251 May 19.⁶) Assumptions underlying higher figures believed more realistic. Ur comments re results above study requested soonest.

Depts position re Yugo IBRD application is to support extension credits for projects deemed constructive provided this warranted from sensible business point of view. Re Yugo Eximbank approach, Thorp told Bank’s Board Directors May 18 Dept wld have to consider matter further before taking position and meanwhile door shd not be closed. If Yugo need dol funds urgent because inability secure private credits US, Eximbank procedure might be prompter than IBRD’s if Yugo able submit specific project for short-term financing with reasonable assurance of repayment. Dept wld appreciate Embs views and suggestions re Depts position soonest, esp re economic and/or political urgency and desirability prompt Eximbank credit.⁷

Webb

1. Ante, p. 889.
2. Not printed.
3. None printed.
4. Willis C. Armstrong’s memorandum of the conversation referred to here is included in file 660H.119/5–1649.

5. At the beginning of May, reports appeared in the press that Yugoslavia had applied for a loan from the United States Government. At his press conference on May 4, Secretary of State Acheson denied any knowledge of such a request, but he conceded that the United States was prepared to take a friendly attitude toward a Yugoslav application for a loan from the International Bank for Reconstruction and Development. It was subsequently learned by the Department that Ambassador Kosanovic had authorized an attorney to act on behalf of the Yugoslav Government with the Export-Import Bank on May 13.

   Subsequently, telegram 381, July 16, to Belgrade, not printed, informed that the Yugoslav Embassy approach to the Export-Import Bank for a cotton credit had been discouraged because Yugoslav textile exports to hard-currency areas were inadequate to make it a self-liquidating proposition. It was further reported that the Yugoslav Embassy was intending to ask the Export-Import Bank to consider financing equipment purchases needed to maintain and expand the output of existing non-ferrous mines in Yugoslavia (811.516 Export-Import Bank/7–1649).

6. Neither printed.
6. Neither printed.
7. In his telegram 546, May 28, from Belgrade, not printed, Ambassador Cannon replied and suggested that the Department of State propose further Export-Import Bank discussions with Yugoslav Representatives with a view to soliciting a more specific request. In such discussions the Export-Import Bank might indicate a receptivity in principle, particularly as regards cotton and might suggest the size and terms of such a credit and seek to obtain information on Yugoslavia’s dollar position (811.516 Export-Import Bank/5–2849). Telegram 277, June 2, to Belgrade, not printed, informed Ambassador Cannon that Assistant Secretary Thorp had proposed and the Export-Import Bank Directors had agreed to proceed in a manner closely following the Ambassador’s suggestion (811.516 Export-Import Bank/5–2849).