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

226. Telegram From the Secretary of State Shultz to the Department of State¹

Secto 11053.

New York, October 3, 1984, 0204Z

SUBJECT

• Secretary’s UNGA Bilateral With Yugoslav Foreign Secretary Dizdarevic.

1. Secret—Entire text.

2. Begin summary. Dizdarevic assessed bilateral relations as generally positive and expressed appreciation for the close cooperation and support that the U.S. accords Yugoslavia. While Yugoslavia has made good economic progress, a high debt servicing burden impedes economic growth and is becoming a political as well as an economic matter. Describing the U.S. role as pivotal, Dizdarevic asked for U.S. support for longer-term rescheduling of Yugoslavia’s Western debt. In response, the Secretary stressed our continued desire to be of appropriate help and to follow Yugoslav matters closely. In response to Dizdarevic’s request, the Secretary also provided some impressions of the recent round of Gromyko meetings in New York and Washington.² End summary.

3. The Secretary opened by recalling vividly his one visit to Yugoslavia when, as Secretary of the Treasury, he was invited for a long and fascinating discussion with then-President Tito. This was one of the Secretary’s most memorable meetings. Tito had spoken eloquently about nonalignment, a concept which he had in large part originated and which we support. We will continue to give Yugoslavia our very warm support.

4. Responding with appreciation for the Secretary’s statement of support, Dizdarevic hoped the Secretary would be able to visit Yugoslavia. He would be most welcome, and he would be able to see for himself the progress we have made. Dizdarevic assessed the overall state of U.S.-Yugoslav relations as very positive. He recalled recent high-level visits, including that of the Vice President to Yugoslavia and of former President Spiljak to the U.S. We enjoy a wide range of contacts, he said, and a full and healthy dialogue. It is time to consider specific things we ought to be doing over the next year, starting with a visit by the Secretary. The Secretary responded by expressing his desire to make a visit, but stressing that it was a matter that would have to be addressed at a later time.

5. Turning to Yugoslavia’s economic situation, Dizdarevic outlined some favorable results of the country’s stabilization program while conceding that some serious problems remain. He pointed to a 5 percent increase over the first eight months of the year in industrial production, a balance of payments surplus over the same period, and increased foreign exchange earnings. By year’s end, he expected a 2 percent increase in agricultural production and a 2 and a half percent rise in the domestic product. Foreign debt obligations were being liquidated without need for recourse to new credits.

6. In sum, Dizdarevic said Yugoslavia will be entering 1985 with greater optimism. At the same time, the leadership is resolved to reduce debt servicing ratio (currently 40 percent) through a longer term stabilization program. It is now preparing such a program which will have to be put before Parliament. Its basic feature is multi-year rescheduling of existing foreign debt obligations “as some other countries have done” in order to avoid stagnation and permit some needed economic growth. Dizdarevic noted that there had been a 35 percent drop in living standards over the last three years. This had become both an economic and a political question. The Secretary agreed that living standards had to go up.

7. In any multi-year rescheduling, Dizdarevic said the U.S. role will be pivotal. We will need the support of our partners. We appreciate U.S. support in the past; it has meant a lot for us. Dizdarevic recalled specifically expressions of support for Yugoslavia’s stabilization program during the Spiljak visit.

8. In response, the Secretary assured Dizdarevic of our continued support and understanding for Yugoslavia. We will be working on ways in which we can be helpful, both directly (through CCC and EXIM) and in the reschedulings. He commented that now that Ambassador Eagleburger is no longer in government, he would have DAS Mark Palmer keep Yugoslavia in close focus.

9. Dizdarevic then referred briefly to “some difficulties” on certain issues with some Western countries. These involved Yugoslav perceptions of anti-Yugoslav activities in the West. The East, he said, had offered its solidarity, but this was something that Yugoslavia did not need, particularly if it meant any shift in its policy of strict nonalignment. Dizdarevic said that he had gone over these concerns with Ambassador Anderson in Belgrade. He did not need to dwell on them at this time. He was convinced the U.S. understands their concerns. Our relations, he said, are really very good. The Secretary responded that he had read Ambassador Anderson’s report.³ We need to be true to our own principles and ideals. At the same time, we have great friendship for Yugoslavia and desire close cooperation.

10. Asked for his impressions of the results of the Gromyko meetings, the Secretary said that the spirit and tone of the discussions—their businesslike aspect—all showed improvement. As to content, there was no change in any significant position. This was not unexpected, however. Both sides had approached the talks without such expectations. The Secretary said that there was practically no issue that was not addressed. The talks had been intense in the sense that both sides engaged themselves seriously in in-depth exchanges. Both sides agreed that nuclear weapons are a most serious problem that must be addressed. The proper forum for such talks remains to be resolved. While the statement at the conclusion of the meetings that both sides would keep in touch may sound casual, the Secretary said that we expect to work carefully and diplomatically in coming weeks to construct a substantive dialogue with the Soviets.

11. Dizdarevic noted that in his meetings with Gromyko, the Soviet had himself expressed interest in a more active NNA role at CDE. He thanked the Secretary for his letter on CDE which Ambassador Goodby had recently delivered in Belgrade.⁴

12. In conclusion, the Secretary said he wanted to underline his hope that Gromyko had gone back to Moscow knowing that the President was prepared for serious discussions but at he is also a man of strength who will not enter into agreements that are not in our interest or that of our friends. That said, we recognize that agreements have to be mutually beneficial. It was important that Gromyko understand that he is dealing with a President who is strong, determined and reasonable.

13. In addition to the Secretary, the meeting was attended on the U.S. side by Assistant Secretary Burt, Assistant Secretary Hughes, DAS Palmer and EUR/EEY Deputy Director Kuchel (notetaker). Dizdarevic was accompanied by Ambassador to the U.S. Rakic, Ambassador to the U.N. Golob, and a notetaker and interpreter. The 35-minute meeting took place in the Secretary’s suite at the UN Plaza Hotel on October 2, 1984.

Shultz

1. Source: Department of State, Ambassador Robie Mark Palmer’s Files, 1972–1985, Lot 87 D 177, Yugoslavia 1984. Secret; Immediate; Nodis. Sent Immediate for information to Belgrade and Moscow. Shultz was in New York for the UN General Assembly session.
2. See Foreign Relations, 1981–1988, vol. IV, Soviet Union, January 1983–March 1985, Documents 284–288.
3. Not further identified.
4. Not found.