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

Conference files, lot 60 D 627, CP 399

No. 717
The Director of the Foreign Operations Administration (Stassen) to the Embassy in Yugoslavia ¹

confidential

Washington , November 23, 1954—8:12 p.m.

Usfoto 115. Subject: Yugoslav Economic Talks. Joint State/FOA message.

I. At final meeting with Yugo delegation² following U.S. proposal presented:

A. Wheat and Cotton Assistance (PL480)

1. U.S. will grant 450,000 tons wheat Yugoslavia (in addition to 400,000 tons already committed) under terms similar to those applicable to previous grant aid, namely 90% for Yugoslav uses and 10% for U.S. uses. 90% counterpart will be used for purposes consistent with economic cooperation, bilateral agreement and applicable provisions PL480 which are similar to bilateral agreement. 10% portion will be utilized by U.S. in same manner as such counterpart has heretofore been utilized.

2. U.S. will, during the month of February 1955, review Yugoslav wheat availabilities prior new harvest in 1955. If these amounts inadequate meet essential minimum needs Yugoslavia, U.S. will then give friendly and careful consideration to additional wheat grant.

3. 125,000 tons under Title I in original 400,000 ton commitment will be handled on the basis outlined in para 1 above.

4. Loan provision not applicable to local currency generated by sale agricultural surpluses under Section 402 of PL665. Dinar proceeds these sales will be utilized under current counterpart procedures in accordance 90%–10% distribution pattern.

5. If Yugoslav Government wishes, it may purchase cotton for dinars up to amount of $10 million. This transaction at option Yugoslav Government and would be separate transaction from grant wheat offered above. Proceeds of such cotton sales would accrue in dinars to U.S. account for such uses as U.S. may determine. U.S. will, in considering possible expenditures of these funds, take into account current balance of payments situation of Yugoslavia.

B. Other Comments

1. Offshore Procurement. U.S. impression that Yugoslav performance under existing contracts excellent. With respect future contracts, U.S. must take into account reduced limits set by Congressional authorization, distribution product facilities throughout Europe, and ability potential producers meet standards of price, quality and delivery schedules. Yugoslav capacity produce off-shore procurement materials will be kept under constant review and it is expected Yugoslavia will continue participate in this program.

2. Short-term Debt. Yugo delegation has explained in general terms its proposal for Export-Import Bank loan to enable Yugoslavia liquidate short-term debt. U.S. understands this is difficult problem for Yugoslavia. As a matter of procedure, details this proposal should be presented initially to Exim Bank for consideration. Under study made by Exim Bank, not possible indicate what decision will be. FOA/W will provide assistance, if desired, as regards procedures and methods. It was emphasized that procedure will require considerable time.

3. Creditors’ Conference. Re proposal creditors’ conference, U.S. understands large part Yugo medium-term foreign debt held by private commercial enterprises, which are probably unable or unwilling fund these obligations on long-term basis. Inasmuch no such obligations held in U.S. we feel this technical problem should be handled between YuGov and those governments whose enterprises hold these obligations.

U.S. representatives have participated in talks in Belgrade, exploring problems and procedures concerning such conference. We are prepared to continue to explore these matters with YuGov in endeavor to be helpful.

4. Other Issues. Re other issues raised U.S. feels these will be basis further friendly talks in usual channels. These matters will be dealt with in cooperative and friendly manner.

II. Tempo stated several times U.S. assistance offered will be great help Yugoslavia and not inconsistent Yugo.

A. Concerning (1) wheat, he stated belief amount wheat offered insufficient because doubted possibility increase internal supplies. Will however explore all possibilities to meet shortfall. (2) cotton, Tempo reiterated B/P problems involved in offer. YuGov will reply after consideration. (3) medium-term debts. Tempo will be exploring refunding with UK, France (on return trip Belgrade) and Germany and hopes solution can be found. (4) short-term debts, he hopes U.S. will provide more than procedural assistance in obtaining Exim loan.

B. Tempo reported IBRD seemed sympathetic to Yugo request for loan assistance for agricultural development and Mission will be sent Belgrade to explore possibilities.

Stassen

1. Drafted by Kleine (FOA) and Colbert and cleared with Scoll, Killen, Ohly, Kaplan, and Stassen. Also sent to Paris by pouch.
2. This meeting took place on Nov. 22. For text of the joint communiqué issued at the conclusion of the talks on Nov. 22, see Department of State Bulletin, Dec. 6, 1954, p. 869.