121. Telegram From the Embassy in Yugoslavia to the Department of State0
1283. From several indications we gain impression Yugoslav leaders are just now in throes of some sort of crisis of decision with possible far-reaching implications for both domestic and foreign policy.
We are reliably informed that last week’s session of expanded plenum party executive committee under Tito’s chairmanship was devoted entirely to considering Yugoslavia’s economic plight and its many bitter implications. No decisions have yet been announced, and it is possible no final ones have yet been taken.
[Page 259]Am confident that policy of economic liberalization which prevailed throughout 60 and most of 61 is now under heavy critical pressure; and that [garble] persons, in many instances Slovenes and followers of Kardelj, who sponsored or favored its introduction, are in difficult position. Even Todorovic may be affected.
It is plain that barring some new major source of external assistance severe restrictive measures will have to be taken to bring economy better under control and improve finance external payments. These measures will presumably affect adversely both living standards and rate of growth. But even this will probably be insufficient to meet external payments problem which, as recently reported, is now assuming serious forms, particularly in inability of government to meet promptly current external obligations and to assure adequate imports raw materials and component parts for Yugoslav export industries.
Leading Yugoslavs have recently shown themselves preoccupied and more reticent than usual about major problems Yugoslav policy. Efforts to get answers from them on pending questions economic collaboration have encountered unusual difficulties and delays. Technical assistance program for 62 has been pending for nearly two months with no reply. Attempts to elicit even informal comment unsuccessful. Although some textile factories are understood reduced to 30 percent capacity operation for lack raw material, we have now been waiting nearly three weeks for reply our offer to make available 50,000 bales under Title IV, PL 480. External debt statement, which has repeatedly been promised us since December 1960 and which they know would be helpful to us in meeting applications developmental loans, still not forthcoming. We have no evidence Yugoslavs have yet made their wishes fully clear to AID or Export-Import Bank. They have as yet given us nothing specific here. Yesterday they finally rejected long-standing Canadian offer to help with construction oil refinery at Pancevo, although they are just in throes of sending high-powered commercial delegation to Canada to stimulate trade. All in all their behavior is hesitant and partly contradictory, and contrasts sharply with eagerness for Western aid they might normally be expected to show in present difficult situation.
Have noted no particular signs of irritation against our government, this mission, or myself personally. They seldom take initiative in communicating with us; but this is standard practice. Have not even had any direct complaints re curtailment of AID programs, though there have been various warning hints that in circumstances they would have to look elsewhere, including eastwards, for help. Have impression they realize our present plans represent limit of what is possible in light public and Congressional opinion in US.
[Page 260]Possible hypotheses recent Yugoslav behavior are these: (1) that Tito, having been preoccupied with Africa and relations with unaligned nations throughout 61 and until end February 62, has only recently become aware full seriousness balance of payments situation, and has put some sort moratorium on current decisions, particularly those involving new obligations, until future policy course fully determined. (2) That Yugoslavs are preparing some major appeal to Western countries and international organizations to increase their maneuverability in dealing with their present payments situation, and detailed decisions being held up pending completion this approach. (3) That discussions or soundings are being taken with Russians, in deference to which other decisions, particularly ones concerning us, are being held in abeyance. I think we must be prepared for possibility that in light narrowing dimensions our assistance, and increasing severity financial terms, Yugoslavs may be approaching point where they would appreciably facilitate achievement of alternative solutions. I personally do not see much probability of this last at present time. Yugoslavs are clearly disturbed and miffed over continued failure Gromyko to return Popovic visit. Their pride is such that I cannot conceive their going to Moscow as supplicants for economic aid so long as this courtesy is being withheld. But their distress is so acute that no one can entirely vouch for their conduct. And it may of course be that a date for Gromyko visit has been fixed confidentially but not yet announced.
- Source: Department of State, Central Files, 768.00/3–2362. Confidential. Repeated to Bonn and Moscow.↩