Foreign Relations of the United States, 1955–1957, Central and Southeastern Europe, Volume XXVI

284. Memorandum From the Deputy Assistant Secretary of State for European Affairs (Beam) to the Secretary of State¹

Washington, September 4, 1956.

SUBJECT

• Your meeting with the Yugoslav Ambassador, Tuesday, September 4 at 4:15 p.m.

It is anticipated that Mr. Mates’ interview has been sought in order that he might convey to you a letter addressed by President Tito to the President of the United States.² Since this letter was dispatched by special courier almost one week ago (August 29), and is being delivered after several days delay, it is probable that it will deal with the general subject of US-Yugoslav relations and will deal with US aid only incidentally.

Following are the main specific problems in current US-Yugoslav relationships.

1. Wheat. The Yugoslav Government was informed August 22³ that the United States could not reach a decision regarding current Yugoslav requests for 300,000 tons of wheat under PL 480, Title I, until completion of the Presidential determination required by the Mutual Security Act of 1956. The Yugoslavs have since informed us that they are taking steps to secure these needs from the USSR (and possibly from Syria). Yugoslav total wheat import needs for FY 1957 are estimated to amount to 1,300,000 tons. Therefore, when it becomes possible to reach a decision on further PL 480 support for Yugoslavia, there will be ample need on the Yugoslav part for a continued wheat-supply program. The Yugoslavs greeted this announcement with concern but have since evidenced a desire not to allow this problem to cause a worsening of relations.

United States inability to meet current Yugoslav wheat requests was the subject of a UP story which was published in the Washington Post on Sunday, September 2.

2. Military Aid. Delivery of major military supplies such as airplanes and other “end items” has been suspended pending the Presidential finding. The Yugoslavs have taken this development calmly and have not retaliated except to restrict additional assignments to the US Military Assistance staff in Belgrade.

3. Yugoslav-USSR Aluminum Deal. The Yugoslavs have announced a long-term agreement with the USSR and the German Democratic Republic (GDR) for the development of 50,000 tons of aluminum capacity over a five-year period starting 1957, with the promise of a subsequent agreement for an additional 50,000 tons. The USSR is to furnish 1,000,000 tons of wheat (and/or other commodities) for local financing while the GDR is to provide most of the foreign credits needed to obtain imported equipment.

The agreement has caused a negative reaction among Western Governments because (1) it moves Yugoslavia close to full recognition of the GDR regime and, (2) it tends to tie an important segment of Yugoslavia’s economy (including a fixed schedule of aluminum exports) to that of the Soviet bloc over a long term. The agreement tends to make similar arrangements between Yugoslavia and Western suppliers of capital less attractive than formerly.

4. Majdanpek Copper Project. The request for a US loan of about $10 million to assist the development of a copper mining facility and related plants in Yugoslavia in conjunction with a French financial group is still outstanding. The Export-Import Bank is not favorably inclined to this project, but it will not act, in any event, until the President has made a decision regarding future aid.

1. Source: Department of State, Central Files, 611.68/9–456. Confidential.
2. Dated August 26 [8 pages of source text], not declassified. (Eisenhower Library, Whitman File)
3. In telegram 148 to Belgrade, August 18, the Department of State requested the Embassy to inform the Yugoslav Government that the United States could provide no further assistance, including wheat, until after the Presidential determination required by Section 143 of the Mutual Security Act. (Department of State, Central Files, 768.5–MSP/8–1356) In telegram 260 from Belgrade, August 22, Hooker reported that he had informed Hasan Brkic, President of the Committee for Foreign Trade, that wheat and other aid from the United States would be delayed. Brkić replied that Yugoslavia was exploring the possibility of obtaining wheat from both the USSR and Syria. (Ibid., 768.5–MSP/8–2256)