No. 165
The Acting Secretary of State to the Ambassador in Austria (Thompson)1
top secret

My Dear Mr. Ambassador: As United States representative at the United States–United Kingdom–Yugoslav discussions on Trieste in London, your mission is to work out if possible a permanent [Page 369] settlement of the Trieste problem that will be acceptable to both Yugoslavia and Italy, and that will contain the minimum seeds of future controversy.

You should be guided by the following principles in conducting the negotiations:


We want to put the Trieste problem in the larger context of an over-all Italo-Yugoslav rapprochement which, ideally, would lead ultimately to Italian membership of, or association with the Turkish-Greek-Yugoslav defense pact.

While it is not the purpose of this paper to suggest negotiating tactics, we believe that the United States–United Kingdom should make clear at the outset that they are not thinking in terms of a local settlement, or even of Italo-Yugoslav relations alone, but rather of the political, military, and economic health of a key area which will have great significance for all of the free world and for the world-wide effort to throw back Soviet expansion. The implications of a failure to find a mutual accommodation between powers which are or should be destined by geography and strategy to be close partners if Soviet expansionism is to be successfully resisted in their parts of the world, are of a very serious character. On the other hand, the benefits of a successful settlement would be very great. There is no form of pressure against the Soviet system so powerful or so effective as the demonstration of unity among countries of the free world, and there is no part of the free world, except for the relations between France and Germany, where that demonstration would have more profound significance in the eyes of the Kremlin than in the area of Yugoslavia and Italy. And there is nothing so infectious as the force of example. We are therefore seeking a “package deal” which would put Italo-Yugoslav relations on a permanently sound basis. We believe also that a package deal will enable both parties to accept sacrifices in a Trieste settlement that neither could accept if the deal were narrowly confined to the Trieste problem.

The United States–United Kingdom should also make clear at the outset that when they made their October 8, 1953 declaration they had reason to assume that it would be acceptable to the Yugoslavs. If it seems desirable, they may wish to point out that Tito in his September 22, 1952 interview with Eden actually said that he could accept a division along the lines of the present zonal boundaries. Admittedly the United States–United Kingdom did make an error of judgment, but the fact remains that the present situation is in large measure the responsibility of all three of the occupying powers, as it is certainly in the interest of all three of them that a permanently acceptable solution be reached. However, the United States–United Kingdom have refrained from putting the October 8 [Page 370] declaration into effect, on the principle that the best solutions are agreed ones. At some point during the discussion it may become necessary, perhaps through different channels, to make known to the Yugoslavs that they can hardly expect to reject an agreed solution without putting the United States–United Kingdom in a position where they would have no recourse but to go back to the October 8 declaration. The United States–United Kingdom cannot be expected to withdraw the October 8 declaration, except on the basis of a generally acceptable alternative.

A package settlement might include:

Reciprocal guarantees of minority rights.
A broad trade agreement which would substantially increase Italo-Yugoslav trade, with suitable clearing arrangements. There should also be economic arrangements which would encourage Yugoslav purchases of the products of Trieste industry and the maximum Yugoslav use of Trieste facilities, in addition to any area of the port where they may have special rights. A fishing agreement might be included.
Military cooperation, including if possible early staff talks.

By a “package deal” we do not of course mean a single document or one agreement, but rather a series of agreements.

We want so far as possible to draw an ethnic line which will give the Italians a continuous coastal strip including Capodistria, Isola, and Pirano, but which would so far as possible avoid giving detached enclaves to either in the territory of the other (suitable guarantees of minority rights must take care of such groups).
The Yugoslavs should have a suitable area in the port for their exclusive use with secure access to it by a rail link over which they would have an assured right-of-way and right-of-maintenance. We would not exclude the cession of a port area and a “corridor” to the Yugoslavs if it seems essential to the success of the negotiations, but would hope that the exclusive use of a suitable area, together with a rail link, could be arranged on a lease basis (say, for 99 years). The port area should be sufficiently advantageous to encourage Yugoslav use of it, with facilities for economic turn-around of ships, and suitable warehouse, processing, and switching space. The possibility of United States assistance out of Trieste counterpart funds, if necessary to create a suitable area with adequate rail access, should be considered.
If a basic tripartite understanding for the settlement of the Trieste problem were reached, the so-called Pella proposal would then be brought into operation, by asking for an Italian representative to come to London, or elsewhere, if circumstances should make a change of venue desirable. He would not, of course, be presented with a fait accompli, but it is believed that the Italians have given [Page 371] sufficient indication that they could accept a settlement along the lines described in this paper to justify the three occupying powers in agreeing ad referendum on the essentials of a settlement before the Italians are brought in. The final agreement might be applied by the three powers, as occupying powers, redefining the Zone boundaries, the Yugoslavs might then annex the newly defined Zone B, and Zone A might concurrently be turned over to the Italians on the assumption that after holding it for a token period they might annex it.
The United States–United Kingdom should hold to the position that the Yugoslavs cannot claim the right to do as they want in Zone B without conceding the United States–United Kingdom right to dispose of Zone A as they deem appropriate. With that understanding, we should indicate that we are prepared to discuss with them any proposals they may wish to make.
The United States–United Kingdom should discourage any Yugoslav proposal for “autonomy” for Zones A or B or any parts of them, as creating a situation without sufficient assurance of stability to be in the interest of either Yugoslavia or Italy. You should endeavor to persuade the Yugoslavs that their preoccupations concerning the Slovene minority in Italian territory can best be satisfied by a firm and explicit agreement on minorities.


W.B. Smith
  1. Although this letter was addressed to Thompson at the Embassy in Vienna, it was presumably handed to him on Jan. 28 while in Washington for consultation just prior to departing for London for the negotiations on Trieste. In an interview in November 1971, Thompson characterized these instructions as “hopeless” since they were basically favorable to Italy and did not give room to negotiate with the Yugoslavs. (Campbell, Successful Negotiation, p. 26)