750G.00/9–1554: Telegram

No. 273
The Ambassador in Yugoslavia (Riddleberger) to the Department of State1
top secret

212. Limit distribution. Defense pass to Hensel and Lemnitzer. From Murphy.

Together with Riddleberger and Killen I called on Vice President Tempo this morning. Tempo had with him Ambassador Kopcok and Gligorov, Deputy Chief of Planning Institute.
After most cordial reception I expressed interest in general Yugoslav economic affairs and particularly situation created by shortages in agricultural supplies.
Tempo, during one hour and half, outlined course of events in economic field since end of war. Cited Yugoslav Government’s desire to industrialize, progress in that direction, effect Cominform break, Yugoslav Government turn to west, measure and importance US assistance towards completion investment program, relative production indices before and after war and other data all of which has been fully reported in past.
Tempo then turned to agriculture, saying agricultural policies divided into two time-periods, that of administrative controls and later period following discontinuance all compulsory tactics and introduction of economic incentives. Tempo discussed in detail and very frankly characteristics both periods and related policies. No significantly new data voiced this part of discussion.
Tempo then came to specific issue of wheat. He cited average crop yields over postwar period of approximately 2.35 million tons. With this yield approximately 700,000 tons imports needed. Had earlier estimated calendar year 1954 crop at about two million tons but only this morning up-to-minute estimate based on reports from countryside, precontract deliveries and threshing tolls indicated crop, would not exceed 1.6 million tons. Tempo suggested Embassy, as in spring calendar year 1953 might explore situation in countryside. This appears worst crop but one since 1918. On this basis required imports for crop year, September 1–September 1, would reach minimum of 1.3 million tons. Of this amount 100,000 already contracted Canada (involving $7 million new debt); 100,000 in US pipeline; negotiations proceeding with French for 100,000 (French requiring payment in dollars); and in spite of continuing Turkish [Page 540] unwillingness, Yugoslavia pressing for Turkish sales under trade agreement. At best Tempo indicated 900,000 to one million tons still to be found. Referred to current trade negotiations with Russians and said that while he favored gradual removal this trade embargo, opposed, in principle, Russian achievement role as major trading partner. Russians also wanted lead, zinc, copper, et cetera, as payment which Yugoslav Government would refuse. Yet in spite this reluctance to engage extensively (value-wise) in Russian trade, Yugoslavia, he said, may be forced to do so unless it receives aid on wheat and debts. Tempo reported wheat now being allocated to districts and extraction rate sharply increased.
Tempo then moved on to debt problem. He outlined general nature of debt position which we knew. Cited Yugoslav Government desire to fund medium-term debt and voiced concern over growth of short-term debt for current import financing. Said this only way in which level of industrial production being maintained but this could not go on. Referred to payment requirement this fiscal year of $50 million which Yugoslav Government could not make. Did not raise question of debt conference.
Tempo then recapped great value of US aid, starting in 1950 and during intervening years. He voiced appreciation of this aid for its specific uses and over-all relief it afforded Yugoslavia to continue its investment and defense programs. He remarked on voluntary long-term funding of Export-Import loan without any request from his government. He said it now appeared that there was some change in US attitude towards Yugoslavia. He had discussed Yugoslav Government economic problem with Riddleberger and Killen and made request for US help. No answers had yet been given. He wondered if some political conditions were being planned in view of critical Yugoslav Government needs. He said he did not know about this and perhaps he was wrong. Yugoslavia would not want to make political concessions, as a price for aid. He concluded his remarks and indicated his interest in my comment.
In thanking Tempo for his clear and frank exposition of the Yugoslav Government problems and difficulties, I said there was no change in US attitude toward Yugoslavia. My government naturally engaged in review of ensemble of European problems in light of developments of which he aware. US concerned with requirements of collective security. (Tempo nodded vigorously.) With this objective in view, problems such as the Franco-German and Yugoslav-Italian relations of primary importance. President of US actively interested in these problems and at his request I hoped discuss these larger considerations with Marshal Tito on Friday emphasizing urgency of prompt Trieste settlement. While the wheat and debt problems are economic issues and we try to keep economic [Page 541] and political issues separated, this is not always possible. I expressed hope that before my departure I would be able to give General Tempo “good news” on the wheat problem. I pointedly asked his personal support in achieving Trieste settlement. With reference to Yugoslavia’s debt difficulties, these had been fully reported to Washington by Embassy and US will be as helpful as it can be.
Throughout the discussions Tempo was frank and affable, and I hope that his obvious anxiety over pressing wheat and economic problems will stimulate his support in favor Trieste agreement.
  1. Repeated for information to London, Rome, and Trieste.