No. 832


Memorandum of Conversation, by Michael R. Gannett of the Office of Eastern European Affairs


Subject: Factors regarding provision of additional grant assistance to Yugoslavia

Participants: S/P—Mr. Joyce
EE—Mr. Truesdell
EE—Mr. Walker
EE—Mr. Rawson
EE—Mr. Gannett
IBRD—Mr. Rosen

After Mr. Rosen had outlined the position of the International Bank on the question of what further U.S. economic aid to Yugoslavia will be necessary (see Memorandum of Conversation, January 17, subject “Position of International Bank concerning Loans to Yugoslavia”1), Mr. Joyce stressed the importance felt by the White House, the Departments of State and Defense, and elsewhere in the Executive Branch of the Government that Tito receive the necessary assistance to meet present and future pressures placed on Yugoslavia by the Soviets and its satellites. He mentioned that increased [Page 1690] thought is currently being given to the strength provided in the strategic area of southeastern Europe and Asia Minor by the total of 70 divisions possessed by Yugoslavia, Greece and Turkey (which, he said, are certain to fight for the defense of their countries if called upon to do so) and to how the strength of this area can be augmented. He also mentioned that Tito thinks it possible he will be attacked this spring and is now taking steps to increase the number of his troops from the present figure of 450,000 to 600,000. He stated the view that the Tito regime, composed as it is of men who in the first instance are nationalists, recognizes the necessity of making adjustments in its domestic, political and economic objectives, in order to meet the greater task of defending the country and itself, and added the view that the regime will probably be prepared to take the steps necessary to this end.

Mr. Joyce then asked whether, in view of these circumstances and in the light of United States legislation and of the domestic political scene in this country, it would be possible for the U.S. Government to furnish Yugoslavia with the large-scale economic assistance it now requires.

Mr. Truesdell replied that, judging largely from the experience gained during the enactment of the Yugoslav Emergency Relief Assistance Act of 1950, Congress most certainly would not regard favorably further appropriations for Yugoslavia unless the Tito regime were to take steps to place the Yugoslav economy on a sound basis. These steps are required under Public Law 897 (Yugoslav aid bill) and Mr. Truesdell stated that, strictly speaking, he questioned whether we should be providing assistance to Yugoslavia under the present Act, since it might be that the Yugoslav Government was not complying with the provisions of the Act. Mr. Truesdell further stated that it would be impossible to justify additional grant assistance without specific Congressional authority, …

In any case it appeared that Yugoslavia would require, as Mr. Rosen had observed, additional grant assistance before its economy could undertake the burden of serving additional loans. Congress had been willing in view of the defense considerations involved to provide grant relief to overcome the effects of the drought, an adverse factor beyond the control of the regime; but it appeared most probable that Congress would not view favorably additional assistance to surmount the chronic ailments of the Yugoslav economy or to augment Yugoslav defense capabilities unless Tito demonstrated his readiness to become a full and active partner in the Western defense effort. The other persons present were in general agreement with this view.

[Page 1691]

Mr. Truesdell added he believed that were Tito to take these steps, it would be possible, if certain obstacles were surmounted, for Yugoslavia to become a member of OEEC and receive ECA funds with which to sustain its economy. Mr. Joyce stated that it was quite clear from current information coming to the Department that the countries of western Europe regarded the preservation of the Tito regime as of the utmost importance to them.

Mr. Joyce then said that, as it appears it will be necessary for Tito to make certain political decisions regarding his relations with the West, which until now he has avoided for fear of provoking the USSR to aggressive action, the problem is how to ensure that Tito knows the United States cannot provide the economic assistance which he must have in order to meet present and future pressures from the Soviets unless he does make these decisions. Mr. Gannett said he would explore this problem.2

  1. Supra. The discussion summarized in this memorandum is a continuation of the conversation under reference.
  2. At the Secretary of State’s daily meeting with top Department officers on January 18, there apparently was considerable discussion of the issues raised by Rosen in his conference of the preceding day with Department officers. According to the summary record of the Secretary’s meeting, “the Secretary asked Mr. Matthews to stir this matter up to see what could be done about it.” (Secretary’s Daily Meetings, lot 58D609)