Foreign Relations of the United States, 1981–1988, Volume X, Eastern Europe

211. Telegram From the Embassy in Yugoslavia to the Embassy in Romania¹

7641.

Belgrade, September 18, 1983, 0834Z

SUBJECT

• Vice Presidential Visit to Yugoslavia: Talks With Vice President Zarkovic.

1. (C—Entire text.)

2. Summary. In three hours of discussion September 16, Vice President Bush and his host, Vidoje Zarkovic, Vice President of the SFRY Presidency, focussed on the negative impact of the Korean airliner shootdown on East-West relations, China, bilateral relations, and North-South issues. End summary.

3. East-West relations. The Vice President said frankly that U.S. relations with the Soviet Union “are not good.” He emphasized that it was extremely important the the Yugoslavs understand how deeply outraged all the people of the United States—whether on the left or the right of the political spectrum—are about the Soviet destruction of the Korean airliner. The Soviets have behaved badly: first by denying that it happened, second, by claiming the airliner was on an intelligence operation, which the Vice President as former CIA Director could attest is an “absurd” charge, and thirdly, by heartlessly saying they would do it again. As to the Soviet claim that the U.S. and Japan should have steered the airliner back on course, the Vice President pointed out that Soviet uncooperativeness produced a gap in the civil radar coverage between Alaska and Japan.

4. The “hot rhetoric” on the part of the President and other American political leaders reflected honest anger in the United States. However, the Yugslavs should have noted that our reactions have been reasoned. We would continue disarmament negotiations including INF, START, MBFR, and chemical weapons. In response Zarkovic expressed familiar Yugoslav concern over “the deterioration of the international situation” and for the first time in recent memory said this deterioration could lead to a “war” that would be a catastrophe for mankind. Zarkovic’s comment on the KAL downing did not go beyond the tepid Yugoslav official statement of September 15 (Belgrade 7632).²

5. In conclusion, the Vice President said the KAL disaster has beclouded the entire U.S.-Soviet relationship and has confirmed the President’s belief that the Soviets are not to be trusted. Coming on top of other East-West difficulties—Poland, Afghanistan, and severe restrictions on emigration from the East—the disaster cannot be seen as just a passing incident. Nevertheless President Reagan wishes to continue U.S.-Soviet dialogue, even at the highest level.

6. Yugoslav-Soviet relations. Zarkovic restated the principal outcome of Soviet Premier Tikhonov’s visit in April, namely that the differences between Yugoslavia and the Soviet Union on international issues, such as Kampuchea and Afghanistan, had been accepted by the Soviets as a permanent aspect of the bilateral relationship. On trade, Zarkovic said Yugoslavia exchanges food and finished goods for Soviet raw materials but wishes to avoid dependence.

7. China. Zarkovic, who returned from China earlier in the week, said that he had been told Taiwan and technology transfer were the present difficulties in U.S.-Chinese relations. The Vice President responded that relations with China remained as strong as they were when the Shanghai Communique was signed,³ that the Taiwan issue was manageable, and that the two sides were well on the way to resolving the technology transfer problem. Finally, the Vice President expressed his view that Andropov’s accession did not mean there would be a Sino-Soviet rapprochement as the problems between those two countries are abiding and pre-date Andropov.

8. Bilateral relations—overview. The Vice President began by characterizing bilateral relations as “excellent,” stating clearly that he was reflecting the views of the President. He reiterated strong U.S. support for Yugoslavia’s sovereignty, independence, and unity, and U.S. respect for Yugoslavia’s non-alignment, drawing attention to his September 14 Algiers speech.⁴ Zarkovic responded that he had read the speech; he did not comment otherwise. Continuing, he said the Yugoslav side “assesses bilateral relations positively,” and that U.S.-Yugoslav cooperation has been on an ascending line for the past ten years without “the oscillations” of the previous period.

9. Bilateral relations—economic. The Vice President took note of intensified U.S. support for the Yugoslav economy over the past year. He announced that USDA had approved a Yugoslav request for a reallocation of dollars six million in CCC credits from the purchase of wheat to soybeans.

10. The Vice President explained that the inter-relationship between the U.S. economy and the economies of the developing world is heavily influenced by:

— High U.S. unemployment, and resulting domestic political pressures for protectionism;

— The high federal budget deficit, which the President believes has a major impact on interest rates in the U.S. capital market to which many developing countries must turn.

11. North-South. Speaking as a representative of a developing country, Zarkovic expressed appreciation for the Vice President’s description of U.S. economic problems. Nevertheless Zarkovic said the U.S. also bore the burden of developing countries. The Vice President, in response, emphasized President Reagan’s strong view that the United States must have a disproportionate responsibility for the welfare of the people of the world, regardless of their political systems. For example, there was considerable pressure in Congress to reduce the federal deficit. [garble] President Reagan was now seeking a larger U.S. contribution to the IMF. The Vice President also stressed that U.S. foreign aid levels were at their highest under this administration. Keying on Zarkovic’s statement of continuing Yugoslav interest in access to U.S. capital markets the Vice President observed that this access could be facilitated by making U.S. private investment in Yugoslavia easier through amendment of Yugoslav joint venture legislation.

12. Further Yugoslav needs. Zarkovic barely touched on specifics in discussing economic cooperation, mentioning in passing Yugoslav interest in retaining benefits under GSP and in co-production. He said external factors, namely the world recession and the second oil price shock, had contributed to Yugoslavia’s poor economic performance in recent years. However Zarkovic admitted that the principal problems were Yugoslavia’s own: productivity and exports had not kept pace with the country’s economic development that was fueled by heavy new borrowing in the 1970’s. To correct this Yugoslavia intended to rely more on market forces, increased labor productivity, targeted production for export, and movement toward a rational relationship between wages and prices. This long-term program would enable Yugoslavia to honor its foreign obligations. In the interim Yugoslavia was benefitting from short-term financial assistance provided by the “friends package”, which Zarkovic said would have to be replicated over the next few years, albeit at a lower amount with each passing year.

13. Bilateral relations—terrorism. After expressing appreciation for “the significant contribution made to bilateral relations by actions taken by U.S. law enforcement authorities in suppressing hostile Yugoslav terrorist emigre activities,” Zarkovic reiterated prevailing Yugoslav worry over non-violent political activities of anti-Yugoslav organizations abroad, which have their “largest financial centers” in the United States.

14. Military cooperation. Zarkovic raised this subject and returned to it several times during the discussion. Despite Yugoslavia’s large degree of self-sufficiency, it must turn to outside sources for the most sophisticated military equipment. Seeking to diversify its sources, the Yugoslavs were anxious for more purchases from the U.S. The Vice President expressed appreciation for Yugoslav cooperation, mentioning the general officer visitor program, Sixth Fleet port visits, and the recent agreement to facilitate U.S. military tourism in Yugoslavia. Zarkovic, who was most animated during this part of the discussion, stressed Yugoslav interest in “counter-trade” whose present level the Yugoslavs found disappointing. Military tourism and purchases of Yugoslav meat for U.S. commissaries in Europe amounted to only 5–6 percent of Yugoslav military purchases from the U.S., Zarkovic said.

15. Comment. The talks went much longer than originally planned. Zarkovic was his usual straightforward self, uncomplicated, a proud Montenegrin of military background. He spoke extensively from notes and generally listened with interest and close attention to the Vice President’s remarks. Zarkovic seemed discomfitted only at the several instances when the Vice President lashed out at the Soviets over the KAL tragedy. All in all, a very good and useful exchange of views although (as some of the Yugoslavs admitted to us privately) Zarkovic may have gone on a bit too long with some of his discourses. Such is the nature of diplomatic conversation in the Balkans.

Anderson

1. Source: Reagan Library, Paula J. Dobriansky Files, VP Bush Trip to N. Africa/E Europe 9/83 (3). Confidential; Niact Immediate. Repeated on October 4 from Belgrade to the White House. Bush was in Belgrade September 16–18, one of several stops on his trip through North Africa and Eastern Europe.
2. Telegram 7632 from Belgrade, September 16, conveyed the Yugoslav Federal Secretariat for Foreign Affairs statement on the Korean airliner incident. (Department of State, Central Foreign Policy File, D830537–0492)
3. Issued on February 28, 1972. Printed in Foreign Relations, 1969–1976, vol. XVII, China, 1969–1972, Document 203.
4. See Document 21.