750G.00/7–1254: Telegram

No. 223
The Ambassador in the United Kingdom (Aldrich) to the Department of State1
top secret

225. Limit distribution. Pass Defense for Hensel and Lemnitzer. From Thompson.

In presenting Italian counterproposals Velebit,2 we emphasized important fact we had held Italians within general framework of the proposals put forward and had also held them to reasonable counterproposals. Also pointed out that while Italians had insisted upon being treated as equals and on maintaining principle of reciprocity, this was in many cases question of form rather than real substance.
Velebit made no comment on the two minor amendments to the preamble.
On the proposals on traffic and movement of persons he objected strongly to paragraph 1 and paragraph 4. His objection, however, was based briefly on having it applied specifically to the area of the FTT. He would like for example facilitation of border crossing between Yugoslavia proper and Zone A. I doubt if Italians will make serious objection to this. We have already broached with the Italians the possibilities of dropping Article 1 of the Annex if Yugoslavs will take reasonable action beforehand, which seems a possibility. He was categoric in stating his government could never accept reciprocity on autonomy but after long discussion he indicated [Page 476] he would recommend dropping this provision altogether which would be satisfactory to Italians.
On reparations we stated Italians accepted principle of lump sum payment and willing set minimum figure of $10 million. We indicated this could be very substantially increased if agreement as whole satisfactory. He was not impressed by offer to reduce period since the lead time on many items they would want would extend beyond the 2 years.
He also was firm in stating they could not possibly agree to fisheries agreement on ground it would be politically unacceptable since Yugoslavia had developed its own fishing industry and the Italians would inevitably destroy the grounds by over-fishing. We argued that even a short term fisheries agreement would help us get larger reparations and that avoidance of incidents in period following agreement would be very important.
On the credit institute he was opposed to any exchange of letters and said in any event Yugoslavs could not agree to Italian credit institute operating in Yugoslavia. He admitted present Yugoslav laws would not permit operation of a comparable private institute. Most promising of various alternatives we explored was that Italians might assure US and UK that in pursuance of Article 6 of the Minorities Statute they would license the Slovene Credit Institute before the end of this year.
He seemed pleased with the provision about cultural house although he pointed out that Italian cultural institutes already operating Zone B. Although Italians had expressed no interest in the names of the cultural institutes to which the houses in Zone A would be given, Velebit was quite agreeable to my suggestion that provision might merely be made for them to go to “representatives Slovene organizations” and said he would make some suggestions on this. He mentioned specifically Agneletto.
Velebit was adamant on the question of an Italian Consulate in Capodistria. He argued that consulates dealt with citizens and there would be few Italian citizens in Zone B. The Yugoslav Consulate in Trieste was concerned with commercial and shipping matters which justified their request. We made clear that this was firm sticking point of Italians and he finally indicated that he would personally suggest but was by no means sure his government would agree to establish a basis of reciprocity by allowing the Italians to open a consulate somewhere outside the FTT, such as Llublana, which would have jurisdiction over Zone B.
We presented the original Italian request for modification of the boundary proposal but told him we had let the Italians know we would not support a line which gave them Ospo.
In presenting the proposals I said we believed the Italians were prepared to approach the problem in a new spirit and genuinely endeavoring to establish basis for cooperation. In this connection, I said we would count on the Yugoslavs not to take any precipitate action in Zone B in the immediate period after agreement which would make matters difficult. Velebit remarked that the only thing he could think of which might fall in this category would be conscription. Moreover in discussing movement of persons he said they would not want large numbers of Italian troublemakers to return to Zone B. Also in discussing consulates he referred to provisions for option that were included in Italian Peace Treaty for Territory ceded to Yugoslavs. Yugoslavs are clearly thinking in terms of virtual annexation.
Velebit’s reaction as a whole was that changes proposed meant that agreement was probably impossible. When we asked him to list points that troubled him most, he mentioned territory, autonomy, consulates and provisions about opening the frontier, but since this list did not justify his gloom he had recourse in stating that although the changes were small they added up to changing the character of the agreement. His courier carrying the text to Belgrade is expected arrive there Thursday morning.
  1. Repeated for information to Belgrade, Rome, and Trieste.
  2. In telegram 156 from London, July 9, Thompson reported that Brosio had given his approval to the rewording of the Italian Government’s counterproposals and that Thompson now wished to present them to Velebit as soon as the Department of State approved such an approach. (750G.00/7–954) In telegram 183 to London, July 10, the Department of State approved Thompson’s meeting with Velebit on July 13 or sooner, but stated that Thompson should bear in mind that it would probably not have had an opportunity to comment on the text of these proposals prior to the meeting with Velebit. (750G.00/7–954) The text of the redrafted memorandum of understanding and related documents were attached to a letter of July 9 from Thompson to Hooker. (750G.00/7–954)