Foreign Relations of the United States, 1977–1980, Volume XX, Eastern Europe

296. Memorandum of Conversation¹

Belgrade, June 25, 1980, 7:15–8:30 a.m.

SUBJECT

• Breakfast Meeting

PARTICIPANTS

• U.S.

  • The President
  • Dr. Zbigniew Brzezinski
  • Under Secretary David Newsom
  • Under Secretary Richard Cooper
  • Ambassador Lawrence Eagleburger
  • Steve Larrabee, NSC Staff Member
  • Victor Jackovich (Interpreter)

• Yugoslavia

  • President Cvijetin Mijatovic
  • Lazar Kolisevski
  • Dragoslav Markovic
  • Veselin Djuranovic
  • Josip Vrhovec
  • Ambassador Budimir Loncar
  • Steven Doronski
  • Milos Minic

Mr. Djuranovic opened the meeting by asking the President if he had had a good rest. (U)

The President replied yes. He said he hated to see his visit come to an end. It would be nice to stay another week, but he had to get back to work in Washington. (U)

The President then invited President Mijatovic to make a few remarks. (U)

President Mijatovic, in turn, suggested that Mr. Djuranovic discuss the economic situation. (U)

Mr. Djuranovic began by noting that Yugoslavia had had a very dynamic economic development, with an average growth of over six percent. This had been followed by serious economic problems, however. The domestic economy had become overheated and Yugoslavia’s trade deficit had increased, as had its foreign debt. The increase in oil prices had reinforced these difficulties. Yugoslavia would have to pay $2.0 billion more this year than last year. All this had caused real economic problems. The Yugoslavs had introduced a program of economic stabilization. This was intended to bring down the growth rate, which would be two percent lower this year. (C)

They had also introduced measures to reduce economic investment and consumption. The Yugoslavs intended to undertake further measures toward stabilization such as the devaluation of the dinar. The main task was to reduce the deficit to $2 billion; however, it was necessary to have help from abroad to carry out this stabilization program. That is why the Yugoslav government had been talking to Secretary Miller and Mr. Rockefeller. The Yugoslavs had long experience with Rockefeller, going back some 35 years and they wanted to continue this favorable cooperation. (C)

Turning to the question of Mr. Rockefeller’s recent visit, Mr. Djuranovic said that there had been two problems. Mr. Rockefeller had wanted a consortium of world banks. However, this would make a Yugoslav program of stabilization more difficult. The Yugoslavs wanted credits exclusively from US banks. They recognized the relationship of the United States government to the private banks, but felt that the government could still exert a certain favorable influence on the banks. They had also discussed a second credit of $500 million next year. This would help to continue the program of stabilization. In July they looked forward to a meeting with Secretary Miller in Washington. (C)

The President then invited Under Secretary Cooper to make comments on the economic situation. (U)

Mr. Cooper said that he appreciated the problems associated with the Yugoslavian economy. However, he pointed out that the Yugoslavs had made considerable economic progress as well. He had discussed with Minister Kostic his upcoming visit to Washington. Thus much of this had already been discussed. (C)

The President said that when he returned to Washington he would meet with Secretary Miller and ask him to pursue the question of credits with Rockefeller and other bankers. He understood that one of the problems had been a lack of dealing with the Central Bank, and that Mr. Rockefeller would be sending one of his bankers to Belgrade very soon. The President offered to do anything he could within the bounds of US laws and customs to give the Yugoslavs assistance in this matter. He asked if it would be helpful if he talked to Chancellor Schmidt privately, and other European banks, or whether the Yugoslavs would prefer to handle this themselves. (C)

Mr. Djuranovic replied that Yugoslavs had already talked to the Federal Republic, particularly to its finance minister. He himself would be visiting the FRG soon and would appreciate US help in this matter. (C)

The President then asked whether the Yugoslavs had any contact with British and French banks. He offered to suggest to them that they participate in any consortium if the Yugoslavs felt this would be appropriate. He stressed this would be done on a confidential basis. In this connection he stated that the United States regarded Yugoslavia as a sound investment for the banks. Despite current difficulties the US believed that Yugoslavia’s economic system was basically sound, and that the banks would respond favorably. (C)

Mr. Djuranovic said that he would like to say some things frankly and openly. He had the feeling that the banks needed more time in order to gain confidence in Yugoslavia. The President’s visit had been helpful in this regard. The Yugoslavs intended to continue with their stabilization program, but the banks still had some reservations. He noted, in this regard, that the Yugoslavs had already had contacts with the French and British bankers and the response had been favorable. (C)

The President said it would be helpful to have Rockefeller’s financial expert come to Belgrade and see the strength of the Yugoslav economy. This would help to influence a positive response. (C)

Mr. Cooper added that all countries had problems with the increase of the price of oil. He stressed that these countries had to break the link between economic growth and dependence on oil. This was particularly true for small and medium countries. (C)

The President noted that at Venice the countries represented had discussed the reduction of the import of oil through conservation measures. The U.S., for instance, had reduced the import of oil in the first six months by thirteen and a half percent and it would increase its effort to save energy in every possible way. He offered to share any U.S. experience and scientific developments to conserve energy. Some countries, he noted, import as much oil as their exports. These countries were in much worse condition than the U.S. or Yugoslavia. The problem was a world-wide problem, except for the OPEC countries, and it was getting worse. Summing up, he noted that the exchange had been helpful in enabling the United States to understand Yugoslavia’s economic problems and he promised to do everything he could to help out. (C)

President Mijatovic said he would like to use the opportunity on behalf of the presidency and for himself to express his appreciation for President Carter’s understanding of Yugoslav policies, both bilateral and international, and to thank him for his assistance on the Krsko nuclear plant. (C)

The President said he understood the plant would be in business by next year. [(U)?]

Ambassador Eagleburger replied that if it wasn’t, he would be ridden out of town on a rail. (U)

The President jokingly said that he would hold Ambassador Eagleburger personally responsible. (U)

President Mijatovic said he would also like to thank the President for his help in taking action against the terrorists, whose activities had been detrimental to the welfare of both the United States and Yugoslavia. He also wanted to thank him for the earthquake assistance, which was very important and which had been greatly appreciated. (C)

The President replied that he felt a sense of brotherhood with the Yugoslavs and that we had much in common. The United States wanted to see an economically, politically and militarily strong Yugoslavia and it was in its own interest to help out. Making reference to Mt. St. Helens,² he said that he understood the tragedy of human event. (C)

Continuing, he said that it would be a great pleasure for him to report that he was the first president to visit Yugoslavia after Tito’s death. He would report what a strong government existed here and the continuity that he had found; although, he pointed out, people have little doubt about this. He had mentioned this in his toast, which had been highly publicized around the world, but he promised to confirm it with other leaders. (C)

President Mijatovic thanked him for these remarks. (U)

The President said that he was grateful that it was a fact. He added that the United States had greatly benefited from Yugoslav help in Iran and within the non-aligned movement. In these trying times Yugoslavia’s allegiance to non-alignment had been a great benefit to the United States and to countries all over the world. (C)

President Mijatovic replied that the Yugoslav side would inform the countries of the non-aligned movement about their talks with President Carter. He assured him that they would report frankly and that the picture of the talks would be realistic. He also assured him that the Yugoslavs would do everything to interpret the results as favorable to their friends in the non-aligned movement, and that this would have a positive impact on the views of the non-aligned countries. (C)

Turning to relations with the Soviet Union, President Mijatovic noted some interesting new developments had taken place. There had been a greater Soviet interest in contacts with Yugoslavia than in the past. Their views and criticisms had not changed, especially regarding Afghanistan and Kampuchea. In Belgrade, in talks with Doronski and Kolisevski, the Soviets had emphasized how they respected the non-aligned principles and non-interference. Yugoslavia had been very satisfied with this. In this connection, President Mijatovic noted that he had given an interview about the Belgrade communique which the Soviets had published. This was interesting and new. In the past the Soviets had not shown much interest in this. All these were positive signs. In the future he thought the Soviets would take a deep interest in Yugoslav affairs. (S)

The President replied that this was good but he warned the Yugoslavs to be cautious. (C)

Mr. Doronski remarked that the Yugoslavs had had a lot of bitter experience with the Soviets, and they had had a lot of good experience. This had tended to make them careful. On the whole, however, he pointed out, cooperation was developing well. (S)

The President stressed that the best deterrent was a strong and a united people. (C)

Mr. Brzezinski added, “and the balance of power”. (C)

President Mijatovic then said he would like to say something about their experience with the Soviets. He wanted to be frank and did not want to be misunderstood. The Yugoslavs were aware that the Soviets had not given up their goal of bringing Yugoslavia into the bloc and taking away their independence. Some such tendencies existed in the West, too, he noted, but not in the case of the United States. Yugoslavia’s policies, domestic and foreign, would remain the same, and Yugoslavia would continue its non-aligned policy. (S)

Mr. Doronski added that Yugoslavia was simply carrying out Tito’s policy. (C)

1. Source: Carter Library, National Security Affairs, Brzezinski Material, Subject File, Box 38, Memcons: President: 6/80. Secret. The meeting took place in Dedinje Palace.
2. On May 18, 1980, a 5.1 Richter scale earthquake collapsed the north face of Mount St. Helens, an active volcano in Washington State. The subsequent eruption killed 57 people and caused widespread destruction over 230 square miles.