750G.00/4–154: Telegram

No. 180
The Ambassador in Yugoslavia (Riddleberger) to the Department of State1
top secret

1065. Limited distribution. Trieste for Butterworth.

Interview with Foreign Secretary yesterday2 followed immediately upon plenum meeting of Communist Party which brought all top Yugoslav leaders to Belgrade. Strong presumption that London negotiations were discussed and Popovic instructed to call in Ambassadors to make serious effort to find way out. Both Mallet and I now believe that Yugoslav Government does not desire to have us take disagreed proposals to Rome but does desire to continue London negotiations in hope of finding agreed proposals to put to Italians. It was obvious that Foreign Secretary had carefully prepared for meeting and was in one of his rare conciliatory moods in which appeals were more evident than demands. He no doubt hopes that Mallet and I will influence our governments to examine again the Bassovizza strip and see if a compromise cannot be found. The second point strongly emphasized by him was an appeal for more specific indications on aid.
While Foreign Secretary did not make any concessions on territory, he repeatedly emphasized how close our views had come and in face of the contrary opinion of Mallet and me continued to state that territorial differences between us had been reduced to a question of square meters. Given this atmosphere, perhaps we should explore further (a) whether any chance exists of trading Bassovizza strip for corner of Zone B and drop the Muggia Peninsula rectification, and (b) whether if (a) is impossible the corner of Zone B could be enlarged to compensate for Bassovizza as it looks from our basis if certain possibilities exist in this region. I fear Yugoslav Government will be reluctant to give up Muggia rectification as otherwise the boundary lines will be practically within the back yard of San [Page 401] Niccola. In any case, from the atmosphere last night I assume more territorial discussions are possible.
Popovic returned at least four times to the economic aid question and made it abundantly clear that this would be an essential part of a compromise. He is apparently planning to declare such assistance as compensation for Yugoslav Government to build new port and railway in return for concessions in Zone A. From our analysis of Yugoslav balance of payments we know that calendar 1954 and 1955 will be exceedingly difficult years on basis of present statistics and projections. Need for essential imports and probably export earnings will leave gap of 30 to 40 million dollars in fiscal year 1954 and possibly 100 million dollars in fiscal year 1955 over and above current and projected aid levels for these years. Heavy debt repayments are scheduled for both 1954 and 1955. While neither Mallet nor I do believe that Yugoslav Government would for purely monetary considerations concede points of primary political importance, it seems clear that its present financial stringency will make the financial element important re timing and secondary points. To meet the various obligations falling, I have no doubt that Yugoslavs are most desirous of knowing what can be expected. If we think, therefore, that there is a possibility of a success for the London talks, Thompson should be prepared to talk figures on extra aid as soon as possible.
Mallet and I agree that we made some progress on autonomy as Foreign Secretary indicated that there might have been some misunderstanding of Velebit’s position in London. We should, perhaps, explore in London how far Yugoslavs will go and in particular if some vague formula could be devised. It would be important to know whether later Yugoslav-Italian negotiations would take place before or after the transfer of Zone A.
I feel that Yugoslav Government will continue to demand at least some form of symbolic compensation for Slovenes in Zone A. We cannot comment on this in detail from Belgrade, but, perhaps, some real property could be returned by AMG.
  1. Also sent to London, and repeated for information to Rome, Paris, and Trieste.
  2. This interview was described in telegram 1061 from Belgrade, Mar. 31, supra.