142. Telegram From the Embassy in Yugoslavia to the Department of State 0

883. Re Deptel 624.1 In our talk on March 192 Tito in single sentence repeated Yugoslav desire economic aid be placed longer term basis. Since he advanced no suggestions how this might be done I regarded it simply as an aside and omitted reference in memo conversation.

Yugoslav desire for economic aid on longer-term basis is old and oft-repeated one. It reflects some apprehension and irritation about re-appraisals we have had from time to time of our aid program in relation Yugoslav foreign policy. Such re-appraisals imply US aid given in return for good Yugoslav political behavior and thus derogate from Yugoslav position of neutralism and of taking positions on international issues on basis merits specifically related to those issues. Yugoslav desire for longer term aid also reflects natural desire of all countries seeking assistance to get as much as they can on as certain basis as possible.

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In fact, there are some significant long-term arrangements in our present aid program, and this point might well be made to Nikezic.3 For example, we have recently made DLF loan to Yugoslavia for Pancevo fertilizer plant. Loan provides for disbursement over period three years and for repayment in 20 years. DLF has also authorized loan for diesel locomotives with 12-year repayment period. (Do not know what disbursement period is to be on diesel loan but this point can be checked with DLF in Washington.) Practically all projects under our Technical Cooperation program are now projected through FY 1962. (Exceptions are for projects expected to be completed before then.) These projections are included in project agreements signed between USOM/Y and Yugoslav Technical Assistance administration and are thus known Yugoslav Government. Might also be noted to Nikezic that even without specific commitments US aid to Yugoslavia has in fact been substantial and continuing for many years. With one exception we doubt much more can (under existing legislative authority) or should be done by us to put our aid on longer-term basis.

Exception relates PL 480. We understand legal authority now exists conclude PL 480 agreements for longer than one-year period.4 In connection with request for long-term assistance Yugoslavs have frequently pointed to problems created for them by uncertainty as to commodities, if any, and amounts they would get from one year to next under PL 480. Given our substantial surpluses and likelihood we shall have PL 480 programs in Yugoslavia for at least next several years, we might well consider concluding, say, two-year PL 480 agreement. Such agreement would cost us little, if anything, and would go considerable way to meeting Yugoslav complaints on short-term nature PL 480 and more generally Yugoslav desire for longer term assistance. Though not decisive consideration, longer term PL 480 agreement would reduce burden and irritations involved in annual negotiations. I assume that if longer term agreement were concluded, it would have to be subject to modification in light later, more up-to date information on Yugoslav requirements and US availabilities but rest of agreement (for example, provisions on exchange rate and use local currency generated) could remain unchanged.

Aside from question term US aid, Yugoslavs should realize that amounts assistance they have been requesting from US Government [Page 376] (for example $200 million from DLF or Export-Import) are beyond capacity US given other needs to be met. There is some possibility private credits provided Yugoslavia would modify its institutional arrangements, particularly as regards management and control, with regard such capital. While Yugoslavs much interested in private capital, they give no indication readiness make necessary internal adjustments and provide conditions under which such capital would enter. While we can appreciate and respect Yugoslav desire maintain its own economic and social system, Yugoslav should at the same time appreciate that responsibility lies with them, not US, so far as facilitating inflow private capital is concerned.

  1. Source: Department of State, Central Files, 768.5–MSP/3–3159. Confidential.
  2. Telegram 624, March 27, requested a summary of remarks made by Tito on economic aid during his March 19 conversation with Rankin together with Embassy comments.(Ibid., 768.5–MSP/3–2759)
  3. see Document 141.
  4. Ambassador Leo Mates left the United States in June and subsequently was appointed Secretary General of the Yugoslav Foreign Office. Marko Nikezic was nominated to succeed him and presented his credentials to President Eisenhower on October 27.
  5. For text of the Extension and Amendment of the Agricultural Trade Development and Assistance Act of 1954, P.L. 85–931, approved September 6, 1958, see 72 Stat. 790. Only the barter provisions of the act were extended beyond one year.