Foreign Relations of the United States, 1952–1954, Eastern Europe; Soviet Union; Eastern Mediterranean, Volume VIII

868.00/5–1454

No. 692
The British Embassy to the Department of State¹

secret

Aide-Mémoire

In an Aide-Mémoire communicated to the British Embassy by the State Department on the 5th of April,² the United States Government explained the reasons why they were seeking the agreement of Her Majesty’s Government to participate in a further programme of economic assistance to Yugoslavia and suggested that the British contribution in the period July, 1954 to June, 1955, should be the sterling equivalent of six million dollars.

In the Aide-Mémoire on policy towards Yugoslavia which was communicated to the State Department on the 5th of April,³ it was stated that Her Majesty’s Government had decided that United Kingdom economic aid to Yugoslavia, of the kind given for the years 1951–1954, should cease on the expiry of the present tripartite aid programme on the 30th of June, 1954. Mr. Eden has carefully considered the arguments adduced by the State Department for the continuance of tripartite aid for a further period, but has come to the conclusion that no alteration can be made in the decision referred to above.

The primary object of the tripartite aid programme was to enable Yugoslavia to switch the direction of her economy from East to West and to keep her afloat during the transition period which necessarily accompanied this change. In the opinion of the Economic Mission attached to Her Majesty’s Embassy at Belgrade this task has been accomplished, and Yugoslavia should now be able, by improving the price and quality of her goods, to stand on her own feet in international trade.

The secondary object of the aid programme was to help Yugoslavia to develop her own resources and to make her economy viable, and with this end in view, the greater part of the United Kingdom portion of the 1953/4 grant has been directed, as the State Department are aware, towards the improvement of Yugoslav agriculture. Mr. Eden considers that Her Majesty’s Government have contributed as much as they can afford to the attainment of this object, and that the aid already given should enable Yugoslavia to increase her agricultural exports, and thus substantially improve her balance of payments position.

As the two above-mentioned objects have, in the opinion of Her Majesty’s Government, largely been achieved, and in view of the paramount need for curtailing public expenditures, Her Majesty’s Government do not believe that they would be justified in contributing to a further tripartite programme of grant aid on the lines pursued in the past three years. They realize, of course, that the Yugoslav economy still lacks strength. This weakness is in great part due to the burden of the external debt. In this connexion, the Yugoslav Government have recently proposed to the tripartite representatives in Belgrade that a conference of creditors should be held in order to arrive at an agreed schedule of debt repayment designed to satisfy Yugoslavia’s creditors as far as possible without overstraining her economy. Her Majesty’s Government believe that their co-operation in such a scheme would provide the most effective form of economic aid to which they could contribute in the present circumstances, and they hope to communicate their detailed views on this Yugoslav proposal very shortly to the United States and French Governments.

Her Majesty’s Government appreciate that the Department of State may attach value to keeping a united front in Anglo-American economic policy towards Yugoslavia. In this connexion it should be recalled that Her Majesty’s Government have decided, provided that a settlement of the Trieste question can be reached in the near future, to contribute two million pounds to the cost of building a new port and communications in the neighbourhood of Trieste. This estimate will almost certainly be presented to Parliament as a continuation, for one more year, of economic aid. Consequently, on the assumption that a Trieste settlement can soon be concluded, it should be easy to demonstrate that the solidarity of Anglo-United States policy towards Yugoslavia has not been impaired.

An indication of Her Majesty’s Government’s position as outlined in the first five paragraphs above is being conveyed to the French Government by Her Majesty’s Ambassador in Paris.

Washington, May 13, 1954.

1. The aide-mémoire was delivered by Salt to the Department of State on May 14. A memorandum of her conversation on that occasion with Leverich and Colbert is in file 868.00/5–1454.
2. Document 690.
3. Not printed. (768.5 MSP/4–554)