Office of the Historian

868.00/7–154: Despatch

No. 695
The Ambassador in Yugoslavia (Riddleberger) to the Department of State

top secret
No. 5
Belgrade, July 1, 1954.

Ref:

  • Desp. 8641

Subject:

  • Tempo Proposals

This is Joint FOA/Emb message.

1.
The most significant feature of the Tempo proposals is the implicit request that the United States develop its aid program in terms of Yugoslavia’s needs for the next several years, rather than the next year only, and design the instruments of aid to meet the special exigencies of the Yugoslav scene.
2.
In some ways, Tempo makes a much more realistic approach than has heretofore been the habit of the Yugoslavs. His proposals, although contemplating the $35 million in FY 55 for which Congressional approval is being sought, are unique in that they do not ask for more grant aid as such. His request for US support in a debt conference and with the IBRD on prewar debts does not involve the outlay of more appropriated funds as grant aid. His proposal for 3–4 year wheat grants is an amplification of what the YuGov has already been told of certain possibilities. Lastly, his solicitation of a long-term loan to write off short-term debt may, and undoubtedly does, stem from (a) our denial of the recent request for additional aid and (b) Mates’ following of the Congressional pressures for translating grants into long-term loans.
3.
Each of these requests, assuming (a) the passage of “surplus disposal” legislation which would permit approval of the wheat proposal, and (b) the availability of loanable funds in the Ex-Im Bank, probably lie within the present ability of the United States without special legislation or additional earmarking of funds for grant assistance. On these assumptions, the question would seem not so much whether funds are available as whether the United States feels the acceptance of Tempo’s concrete proposals and the implications of the talks he suggests would serve our interests. This is fundamentally a political question, and as all such questions, has strong overtones which concern military and economic matters as well.
4.
Here we are prompted to review our basic objectives in the military and economic fields. The military goal is simple and clear cut: to build-up and maintain a defensive strength in accord with proscribed levels and for agreed purposes.
5.

The economic objectives can be stated as:

(a)
to build up the economic basis of the Yugoslav economy in order to develop a capacity to support the desired military establishment, and
(b)
to effect the reorientation of the Yugoslav Government and the Yugoslav economy toward a greater measure of liberalization as an inducement to popular support for the defense effort.

Our economic assistance is justified, in the economic sphere, only to the extent these objectives are advanced.

6.
Yet the volume of economic assistance is of necessity only a relatively small part of the total resources available to the Yugoslav Government and may be largely negated by the inefficient utilization by the Yugoslavs of their other resources. A significant and meaningful purpose of assistance, therefore, is to encourage the Yugoslavs to so allocate their total resources as to maximize their constructive impact on Yugoslavia’s defense potential. In the face [Page 1392] of Yugoslavia’s “propensity” to invest in a Utopian autarchy, only distantly related to Yugoslavia’s defense potential, and the ideological stumbling blocks in its agricultural policy, the effective use of our grant aid requires that we exercise a moderating influence on many aspects of Yugoslav internal economic affairs. A chief tactical objective, therefore, is to obtain maximum influence with minimum outlay of assistance.
7.
This question of maximizing influence is also closely tied in to the Tempo proposal that the two Governments jointly consider Yugoslavia’s economic problems for the period of the next 3 to 4 years. . . .
8.
During the early years of our aid program in this country, there was considerable uncertainty on our part as to the reliability of the Tito regime as an anti-Cominform Government. This well-founded skepticism inevitably gave birth to the “short-tether” approach. Although it has served well during the last three years, Yugoslavia’s closer bonds with the West and the continued and increasingly confirmed divorcement from old Cominform ties appear to warrant a cautious extension of the time period over which we formulate our policy vis-à-vis Yugoslavia. If the Congress, by legislative enactment, authorized a three-year program of agricultural surpluses disposal the instrument for extended programming is ready at hand. Some reasonable assurances on this score would go far towards removing a chronic disequilibrium from the Yugoslav scene. In the same manner, US consideration of Yugoslavia’s debt problem as it will affect its economic development over the years immediately ahead, and the readiness to give a reasonable measure of assistance in ameliorating that burden would release resources for a more rapid development of Yugoslavia’s economic defense potential.
9.
These are not unrealistic proposals. They do not run afoul of the need for annual Congressional appropriation of funds for the mutual security program. They do not pose a request for commitments beyond the competence or authority of the Administration. They do call for a willingness to relax our close rein on our stated intentions towards Yugoslavia.
10.
We believe such a course would (a) further secure the resources of Yugoslavia for Western defenses; (b) induce additional steps by Yugoslavia towards closer political, military and economic ties with the West and particularly with the United States; (c) expedite the growth of the economic defense base in Yugoslavia; (d) enhance the influence of the United States in Yugoslavia’s external and internal affairs; and (e) facilitate a more effective utilization of Yugoslavia’s resources.
11.
The United States has invested approximately one billion dollars in military and economic aid to Yugoslavia since 1950. The gradual reorientation of the FPRY has been slow, difficult and at times frustrating. But substantial progress has been made towards our political, military and economic objectives. We believe that the Yugoslavs, given the necessary encouragement, are now ready to take another step towards greater collaboration with the free world, or, in other words, towards the achievement of our stated objectives. Success in ultimately drawing Yugoslavia away from her past Cominform associates and securely aligning its strength beside that of the free world would mark not only a success in military strategy, but perhaps more significantly, a victory for Western ideals.
12.
In determining the answer to the Tempo proposals the following considerations are worthy of attention:
(a)
The strategic location of Yugoslavia.
(b)
The determination of the Yugoslavs to maintain their national independence. (This determination is not confined to the members of the Yugoslav Communist Party.) The Cominform link was broken on this particular issue in 1948 and the likelihood of any return to a “satellite” status is most remote.
(c)
The Yugoslav armed forces, numbering approximately 400,000 in uniform, with 800,000 trained reserves; accustomed to hardships, the Yugoslav soldier is tough and a first-class fighter.
(d)
The growing development of the Turkish-Greek-Yugoslav Alliance holds promise for full integration of Yugoslav forces into an effective system of collective security in the Mediterranean-Southern European-Middle Eastern front, fully consistent with NATO objectives.
(e)
The growing industrial potential of Yugoslavia. While it is too early to make any firm judgment concerning the ultimate results of this Yugoslav effort, sufficient evidence is already at hand to indicate that we should not sell short future Yugoslav industrial capabilities and their worth to the Western military and economic build-up.
(f)
The growing tendency of the Yugoslav Government to orient itself towards the democratic countries of Western Europe in both internal and international relationships.
(g)
The expanding areas of economic activity in which the Yugoslav Government is seeking U.S. advice and assistance. The remnants of the earlier resentment against consultation on internal Yugoslav developments are rapidly disappearing.
(h)
The disquieting effect on the bordering satellite states of a healthy Yugoslavia, with a steadily rising standard of living. This would add fuel to the existing embers of discontent within the Soviet orbit.
(i)
From a longer-range point of view, the build-up of a healthy productive economy in Yugoslavia, maintaining the present trend away from totalitarian control and improving the abnormally low [Page 1394] living standard of the people in Yugoslavia, would go far towards the elimination of this historical Balkan “tinder-box”.
13.
Many arguments can be made concerning the sins of “omission and commission” of which the Tito regime is guilty. However, the U.S. program here has not been without effect in encouraging more realistic and liberalizing attitudes toward political and economic problems. There is reason to believe that these attitudes can be cultivated and expanded through the continued and judicious use of U.S. influence, advice and assistance.
14.
We therefore recommend that the Ambassador and Director/USOM be authorized to advise the appropriate officials of the Yugoslav Government that the U.S. would welcome the requested “talks” and will communicate further with the Yugoslav Government concerning the time, place and agenda of such discussions.
For the Ambassador:
James S. Killen
Counselor of Economic Affairs
  1. Despatch 864 summarized a conversation between Killen and General Tempo on June 18. (868.00/6–2454)↩