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

240. Telegram From the Department of State to the Embassy in Yugoslavia¹

136197.

Washington, May 6, 1987, 0559Z

SUBJECT

• Secretary’s Meeting With Yugoslav Deputy Foreign Secretary.

1. (C)—Entire text

2. Summary. The Secretary met for thirty minutes April 29 with Yugoslav Deputy Foreign Minister Budimir Loncar. (The last ten minutes of the meeting were a tete-a-tete between the Secretary and Loncar.) The Yugoslav visitor assessed Yugoslav-US relations as good, stable and friendly, although he noted that there are some existing problems and some urgent priorities. Loncar described current developments in the USSR as confirmation of earlier Yugoslav efforts to chart their own course and to challenge Soviet reality. He said that these developments represent a positive process which, however, is not without obstacles, both objective and subjective. Loncar noted that the US can have an important impact on the Soviet scene, and, without sacrificing national interests, he urged that the US respond quickly to Soviet proposals. End summary.

3. After expressing appreciation for the opportunity to meet with the Secretary, Loncar conveyed to him greetings from Yugoslav Prime Minister Mikulic and Foreign Affairs Secretary Dizdarevic. Loncar assessed bilateral relations as good, stable, and friendly. He noted the existence of some problems and some “urgent priorities,” the most important of which is the question of the rescheduling of Yugoslavia’s debt. Loncar said that the Prime Minister and other members of the Yugoslav leadership are very concerned about the delay in renewing rescheduling agreements because of the impact this has on attempts to move toward a more market oriented economy in Yugoslavia. Loncar added that the problem is even more urgent when seen in the broader context of what is happening in the USSR, which presents certain challenges for Yugoslavia.

4. In response to the Secretary’s request for an assessment of what is going on in the Soviet Union, Loncar said that developments there represent both a confirmation of Yugoslav efforts and a challenge. Until now, Yugoslavia had challenged Soviet reality and established an alternative to it. The Yugoslavs had developed a democracy based on self-management which was open to the outside world, encouraged human contacts, and sought to move toward a market economy.

5. Loncar stated that what is happening in the USSR is a response to an economic and social crisis. The Soviet leadership realized that the economic gap between the Soviet Union and the developed Western countries was growing. A new generation, aware of the challenge from scientific and technological innovation, has decided that fundamental change is needed. Since effecting this change will be most difficult in the economic sector, the Gorbachev leadership is starting there. As elements in the leadership’s efforts to address this complex problem, Loncar pointed to: A). A desire to reduce defense spending, as demonstrated in the efforts to promote arms control agreements; B). An effort to reduce subsidies to COMECON members; and C). Attempts to spend less on countries outside the Warsaw Pact such as Afghanistan, Ethiopia, Cuba and Nicaragua.

6. Loncar assessed the present process in the Soviet Union in positive terms, although he noted that it is not without obstacles, both objective and subjective. He noted that the last CPSU Plenum had been delayed several times, which resulted in deeper and broader criticism and analysis of the personnel issues being addressed. In Loncar’s view, this result could, in effect, speed up the pace of change. Loncar noted that the party conference scheduled for 1988 could be more important than the last CPSU Congress.

7. In concluding, Loncar told the Secretary that the US could be a big actor on the Soviet scene. He said he mentioned this not to suggest that the US just make concessions to the Soviets, but to note that in relation to the positive process now underway in the USSR, it is important that the US respond quickly to Soviet proposals, obviously along lines that conform to its national interests. The Secretary responded that Loncar had provided an interesting picture of what is occurring in the USSR. He said that during his recent trip to Moscow, he had been quite struck by the new atmosphere which exists there.² Change is, no doubt, taking place; however, we will have to wait to see how profound it is.

8. In ten-minute subsequent private meeting, Loncar told Secretary that Soviets are cultivating Yugoslavia more vigorously but also more subtly than in the past, and this also presents challenges as well as opportunities for Yugoslav leadership. He urged Western friends of balanced Yugoslav East-West orientation to be alert to this factor and keep policy lines to Yugoslavia open and in good working order.

9. Accompanying Loncar to the meeting with the Secretary were Ambassador Mico Rakic, Foreign Affairs Director for North America Predrag Pjanic, Embassy Minister Vladimir Matic, and Second Secretary Branis Av Bajovic. American participants were Deputy Secretary John Whitehead, Assistant Secretary Rozanne Ridgway, EB DAS Dennis Lamb, Deputy Assistant Secretary Thomas Simons, EUR/EEY Director Martin Wenick, and S Staff Assistant Deborah Graze.

Shultz

1. Source: Reagan Library, Nelson Ledsky Files, Subject File, Yugoslavia—1987–1988 (1), Memos/Letters—Cables—Reports/Research. Confidential; Priority.
2. April 13–15.