No. 641
Report of the Second Tripartite Conference on Assistance to Yugoslavia1



1. This Report has been prepared on the assumption that it is of great political and military importance to the United States, the United Kingdom, France and the Western world generally to maintain the advantages which the existence of an independent Yugoslavia outside the Soviet orbit confers upon the West, to avoid the [Page 1285]consequences which a collapse of Yugoslav resistance to the USSR would entail, and to move Yugoslavia further in the direction of the West.

2. An estimate of Yugoslavia’s balance of payments in the year July 1, 1952 to June 30, 1953, has been prepared and is given in Appendix C.2 This estimate shows that, after allowance has been made for all financial facilities at present in prospect, the maintenance of a volume of imports only slightly above that of 1949 will necessitate further assistance of about $99 million and the taking of steps to deal with problems relating to Yugoslavia’s investment and external debts.

3. The attainment of the objectives set out in paragraph 1 is therefore still threatened by the economic situation of Yugoslavia, and the Governments of the United States, United Kingdom and France (in this Report called “the participating Governments”) should agree that they will continue to give economic assistance to Yugoslavia in the period ending June 30, 1953, and will continue to cooperate and consult together in the provision of such assistance.

Responsibility of the Yugoslav Government

4. The Yugoslav Government should make every effort to achieve the economic viability of Yugoslavia, and consequently its independence of foreign economic assistance, at the earliest possible date. As, however, part of Yugoslavia’s resources are devoted to its defense plans, the economic cost and duration of which are not fully known, the participating Governments are not in a position to determine at the present time a target date for the achievement of viability. Progress towards viability will nevertheless depend principally upon the policies and actions of the Yugoslav Government, which should be informed on this subject in the terms set out in the draft aide-mémoire attached as Appendix A.3

Proposals Concerning the Provision of Grants

5. The participating Governments should accept responsibility towards one another for providing the Yugoslav Government with the following grants in the year July 1, 1952 to June 30, 1953:

  • The United States Government $78 million;4
  • The United Kingdom Government £4½ million sterling;
  • The French Government 2,940 million francs.

6. Each of the participating Governments should apply its grant to financing Yugoslav imports and technical assistance, for the purpose of contributing to the attainment of the common objectives set out in paragraph 1.

7. Each of the participating Governments should, however, after consultation with the other two Governments, be free to determine to which purposes its own grant is to be applied, and the times at which, and the manner in which, it will be applied. Each Government should also be free to determine, in agreement with the Yugoslav Government, the projects to which the counterpart funds resulting from its own grant may be applied, but should consult with the other two Governments concerning the general purposes for which such funds are to be applied.

Proposals Concerning Yugoslav Investment

8. An examination of investment in Yugoslavia has shown that the annual rate of investment expenditure constitutes too heavy a drain on the resources available, and should be reduced. It has also shown the need for the Yugoslav Government to arrange its investment projects in order of priority, and to direct its efforts towards the completion of those of first priority. The data provided by the Yugoslav Government do not include sufficiently firm figures (quite apart from the technical examination which will be necessary) to enable decisions to be reached now by the participating Governments about which groups of industries or which projects are most likely to yield the maximum benefit to the Yugoslav economy. An examination of the Yugoslav “key project” program and supporting data has, however, shown that in deciding which groups of industries or projects are to be financed the following factors should be borne in mind:

the direct improvement in the balance of payments;
the direct or indirect effect on Yugoslavia’s resources as a whole;
the necessity of substantially reducing the burden which the Yugoslav “key project” program would place on Yugoslavia’s resources, both of materials and of technical skill;
the extent to which for any group of industries or any project there is the essential related investment, e.g., iron ore, coke and power for the iron and steel industry;
the extent to which a project has already been financed;
the ability of the industry or project to compete effectively in world trade;
the length of time required for completion.

[Page 1287]

9. Assistance should be given to Yugoslavia to carry out investment selected in accordance with the criteria set out in paragraph 8. Such investment would increase its productivity and help to reduce its balance of payment deficit. The International Bank for Reconstruction and Development (IBRD) should be considered the source of loans for investment for Yugoslavia. In view of these considerations the participating Governments should support the granting, as soon as possible, of a second IBRD loan to Yugoslavia of an amount approximately equal to the amount of the loan of $28,000,000 approved by the IBRD on October 11, 1951. In view of the special circumstances of grant aid to Yugoslavia by the participating Governments and the close interdependence of investment and such aid in achieving the general objectives of the participating Governments and the IBRD in Yugoslavia, there should be close consultation, particularly in Belgrade, between the IBRD and the participating Governments on the projects to be financed and the conditions of such a loan.

10. Each of the participating Governments should, subject to such consultation, accept responsibility5 towards the other two Governments for assuring the availability to the IBRD of an appropriate amount,6 on request by the IBRD, of that country’s currency for a second IBRD loan to Yugoslavia.7

11. Such amounts of the currency of each of the three countries as are used by the IBRD for a second IBRD loan shall be considered as reducing pro tanto the amount of that country’s obligation arising from paragraph 13 of the London Report8 to increase its assistance to Yugoslavia instead of postponing debt payments due from Yugoslavia in the period January 1, 1951 to June 30, 1952.

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Proposals Concerning Yugoslav External Debts

12. The present position of each of Yugoslavia’s external debts is shown in detail in Appendices D and E.9 These indicate that on January 1, 1952 Yugoslavia’s total outstanding debt (as there defined) amounted to $219 million, and an additional $102 million10 was still undisbursed. At the same date Yugoslavia’s swing ceilings on trade agreements amounted to $55 million, of which $38 million had been utilized. The estimated service falling due in the next few years (exclusive of repayments of “swings”) is as follows:

$ Million
Principal Interest Total
1952 49 6 55
1953 47 5 52
1954 47 8 55
1955 39 10 49
1956 21 6 27
1957 17 5 22
1958 26 6 32

In the years 1959 to 1971 the annual amounts are substantially less, ranging from $12.39 million to $2.38 million. From a comparison of these figures with the estimate in Appendix C of Yugoslav foreign exchange earnings from exports and services in 1951 1952 and 1952 1953, which are of the order of $260 million, it is apparent that unless moratoria on debt payments are obtained, a considerable part of the aid proposed in paragraph 5 will be covering payments of debt, and that the debt burden as at present constituted exceeds the capacity of the Yugoslav economy.

13. The participating Governments should agree that such of Yugoslavia’s debt payments owed to their respective countries as fall due in the period July 1, 1952 to December 31, 1953, and as are set forth in Appendix B, will be postponed or dealt with so as to eliminate effective payment thereof by Yugoslavia. Debt payments to the United States, United Kingdom and France not included in Appendix B should be considered by the participating Governments as dealt with through their respective grants to Yugoslavia.

14. The participating Governments should confirm their continuing intention to work actively for a revision of Yugoslavia’s debt repayment schedules. For this purpose, they should agree to consider [Page 1289]the sponsoring of a conference of Yugoslavia’s creditors to study possible action for amelioration of Yugoslavia’s debt burden, either through funding on a long-term basis or through other measures, and to take such action as may then appear appropriate.

15. In the meantime the participating Governments should, by more actively supporting Yugoslav efforts, or by assuming the initiative where desirable (a) work for moratoria on debt payments falling due to countries other than the United States, the United Kingdom and France in 1952 and 1953 and (b) urge such countries to consider amelioration of Yugoslavia’s debt burden after 1953. In this latter connection the participating Governments should, after consultation with the Yugoslav Government, inform the other creditor countries that the participating Governments are considering sponsoring a conference of Yugoslavia’s creditors for the purpose stated in paragraph 14.

16. The participating Governments should by means of paragraph 3(c) of the draft aide-mémoire contained in Appendix A request an assurance from the Yugoslav Government that it will seek the advice of the participating Governments in good time before contracting any new credits (to be understood as including loans, lines of credit, bank acceptance facilities and overdrafts) with exception of credits extended by the IBRD and credits for the sole purpose of refinancing existing credits.

17. The participating Governments should consult together on the problems arising from any credit, as defined in paragraph 16, which the Yugoslav Government proposes to seek abroad. The participating Governments should endeavor to reach agreement on the advice to be given to the Yugoslav Government and in the event of such agreement should give their advice jointly. Failing such agreement each Government should separately inform the Yugoslav Government of its views. If the Yugoslav Government fails to seek the advice of the participating Governments in accordance with paragraph 16, each of the participating Governments shall be entitled, after consultation with the other two Governments, to cease the issue of its grant assistance referred to in paragraph 5 to the extent it considers necessary to protect its financial interests. If the Yugoslav Government proceeds, contrary to the advice of any one Government, to contract the credit, that Government shall similarly be entitled, after consultation with the other two Governments, to cease the issue of its grant assistance to the extent it considers necessary to protect its financial interests.

Procedure in Belgrade

18. The participating Governments should instruct their Economic Missions in Belgrade that, in carrying out the recommendations [Page 1290]of this Report if approved, they should exchange information and should consult together to the end that the assistance given in the form of grants or otherwise by the participating Government will be such as most effectively to promote their objectives as stated in this Report. In particular, the Missions should continue to review developments in the Yugoslav economy, with special reference to their impact on the need for foreign assistance.

Communication to the Yugoslav Government

19. If the participating Governments accept the recommendations of this Report, they should instruct their diplomatic representatives in Belgrade to present to the Yugoslav Government an aide-mémoire in the terms set out in Appendix A, which should be construed as an integral part of the recommendations of this Report.

London Report

20. The agreement between the participating Governments which resulted from the adoption by them of recommendations contained in the London Report should terminate on June 30, 1952, except as provided in paragraph 13 of the present Report.

  1. The Second Tripartite Conference on economic aid to Yugoslavia, involving representatives of the United States, the United Kingdom, and France, opened in Washington on Feb. 19. Subsequent meetings were held Feb. 21, Feb. 27, Mar. 17, and Apr. 21. The meetings were presided over by Willard Thorp, head of the U.S. Delegation. Heading the British Delegation was Sir R. Francis Mudie; the French Delegation was headed by Christian Auboyneau, Counselor of the French Embassy in Washington. Minutes of the conference meetings, agenda for the meetings, policy papers, various committee reports, and numerous charts and tables used in connection with the conference are in a looseleaf volume entitled, “Second Conference on Assistance to Yugoslavia—U.S. Delegation.” (768.5/4–2152)
  2. Not printed.
  3. Not printed. The aide-mémoire was presented to the Yugoslav Government on July 10. See Document 648.
  4. The United States Delegation reserves to its Government the right to provide part of the stated amount by way of loans instead of grants, should that Government so decide in the light of United States law. If this right is to be exercised, the United States Government should so inform the other two Governments in good time, and should indicate the proportion of the said amount which is to be provided by way of loans, whereupon the other two Governments should be entitled to provide loans instead of grants in the same proportion. [Footnote in the source text.]
  5. The United Kingdom and French Delegations reserve to their Governments the right to inform the IBRD of the conditions on which they will allow their respective currencies to be used for financing specific projects. [Footnote in the source text.]
  6. According to information made available by members of the staff of the IBRD during the course of the Conference, the present view of the IBRD staff on the appropriate amount is as follows:

    • U.S. dollars—$5 to $6 million
    • Sterling—equivalent to $5 to $6 million
    • French francs—equivalent to $10 to $12 million [Footnote in the source text.]

  7. The United Kingdom and French Delegations indicate that the maximum amounts which their Governments would be prepared to permit to be used by the IBRD for a second loan to Yugoslavia are £2.06 million and francs 4,200,000,000, respectively. [Footnote in the source text.]
  8. The Report signed in London on June 13, 1951, by the heads of delegations representing the United States, United Kingdom and French Governments at a conference on the Yugoslav economic situation. [Footnote in the source text.]
  9. Neither printed.
  10. Being the total of the columns headed “Amount Drawn” in Appendix D for the periods subsequent to January 1, 1952. [Footnote in the source text.]