Foreign Relations of the United States, 1949, Eastern Europe; The Soviet Union, Volume V

660H.119/7–2849

The Secretary of State to the Secretary of Defense (Johnson)¹

top secret

[Washington,] August 4, 1949.

My Dear Mr. Secretary: I have given most careful consideration to your letter of July 28, 1949,² stating that the National Military Establishment considers that the export of a blooming mill to Yugoslavia at the present time would be inconsistent with US national interests, and suggesting several revisions in the US export control policies. I appreciate fully the reasons underlying your objections to the export of this blooming mill. After a thorough reexamination of the political, military, and economic factors involved, however, it is my opinion not only that the issuance of a license for the export of this mill is in the national interest, but that failure to take this action would prejudice the achievement of important political objectives of this Government and might thereby have a serious effect upon the security of the US. I should like to set forth briefly some of the factors which lead to this conclusion.

The considerations upon which the decisions contained in NSC 18/2³ were based are, I believe, adequately set forth in that paper. The developments that have occurred since that time have only served to add greater point and validity to them. The economic boycott of Yugoslavia by the Soviet Union and its satellites has recently been drastically tightened. A series of public statements and actions on both sides has further widened the rift between the Tito regime and the Kremlin. Tito has publicly announced the closing of the Greek frontier and has taken some steps toward a rapproachment with the legitimate Government of Greece. If this policy of the Yugoslav Government is continued, it should enhance considerably our efforts to bring about a cessation of guerilla activity in Greece. I know that you are fully aware of the important contribution which such a development would make to our security. Moreover, as a result of Yugoslav defiance of the Kremlin, the Soviet Union withdrew its support of Yugoslav claims on Austria thus enabling considerable progress to be made toward the achievement of an Austrian peace treaty.

The continued existence of Titoism has exerted an erosive and disintegrating force within the Soviet sphere. Tito’s example appears to have played an important part in weakening the morale and unity of the Communist leadership in the satellite states as illustrated by the purge of Rajk in Hungary and Kostov in Bulgaria,⁴ as well as leaders and numerous members of the Communist rank and file in other countries. As you know, we are continuing to refuse licenses for the export of equipment similar to this blooming mill to Poland and Czechoslovakia. We can be sure that the leaders of the satellite Governments are closely watching developments with respect to Yugoslavia, and it is to our interest to encourage the nationalist elements in those countries, whether Communist or not, which oppose complete subservience to Moscow.

I have no illusions as to the nature of the present regime in Yugoslavia which is both totalitarian and Communist. Our policy toward Yugoslavia cannot be based on any feeling of friendship toward such a regime. It is my considered opinion, however, that the maintenance of the Tito-Kremlin split should continue to be an important objective of our current foreign policy. I do not believe there can be any dispute on this point. Although we could not be sure what Tito’s attitude would be in the event of a general war, Eric Johnston reported after his interview with Tito early in October, 1948, that:

“Tito stated there would not be war since Russians would not start one. When asked what Yugoslav position would be in event war between Soviets and West did break out he replied that he could not say since Yugoslav position would depend on who started war and ‘circumstances at that time’. Johnston pressed matter and has definite impression that Tito would maintain neutrality if it were possible for him to do so.”⁵

The bitterness with which the fight has developed since that time convinces us that Tito could never allow Soviet troops in his country without reducing his life expectancy to an extremely short period. It is clearly impossible to predict with accuracy what a dictator will do, but nearly every week brings a new development further separating Tito and his former masters in the Kremlin. Soviet uncertainty as to Tito’s intentions is itself a powerful deterrent to Soviet aggressive action against the Western democracies. The reestablishment of Soviet control over Yugoslavia would be a victory for the Kremlin of major proportions with repercussions throughout the world.

The question is how can this split best be maintained or, to put it another way, what are the dangers that Yugoslavia may again fall under Soviet domination and what must we do to avoid increasing them. There is, of course, the possibility that Tito may be liquidated. This is a risk that is very real, but our reports indicate that even in this event there is a good possibility that Tito’s followers could maintain their independence of Moscow. Tito’s immediate lieutenants are as compromised as he in the eyes of the Kremlin and are doubtless well aware of the fate that would await them should they again fall under the power of Moscow.

The Tito regime might be overthrown by force of arms, but as the studies of the US Army General Staff … indicate, this could probably only be accomplished by the Soviet Government at great risk since the Soviet satellites are believed to be incapable of defeating the Yugoslav army without direct Soviet assistance including the use of Soviet troops.

There is also the possibility that Tito and his lieutenants might be overthrown from within. While this does not now appear likely, if those upon whom Tito and his lieutenants depend for support became convinced that he could not maintain his independence of Moscow or could do so only at the expense of sacrificing all plans for the improvement and development of that country, they might well connive with Moscow for his overthrow. You will recall that after the Tito-Cominform break one of the Yugoslav accusations against the Cominform was that Moscow wanted to maintain Yugoslavia as a pastoral state and frustrate its plans for industrialization and development. The development of the country and the raising of the standard of living has been the major theme with which the regime has attempted to obtain popular support.

The ability of Yugoslavia to carry out a program of industrialization is, of course, limited, and we will not wish to contribute to such an achievement any more than necessary to gain our ends. We will, therefore, continue to control closely the acquisition by Yugoslavia of major items of capital equipment. It is important to note, however, that Yugoslav officials both here and in Belgrade have made clear that they would consider our decision on the blooming mill license as a test of our intentions. In a recent cablegram our Ambassador in Belgrade reported as follows:

[Here follows the final paragraph of telegram 728, July 29, from Belgrade, page 914.]

The reestablishment of Kremlin control over Yugoslavia is the risk to be considered in a denial of this export license to Yugoslavia.

I do not believe there can be any question but that if the Tito regime were to be overthrown in the near future, Yugoslavia would again come under Soviet domination. If the Yugoslavs believe that we will only allow them to have such consumers goods as they can buy with their exports and that the regime can do nothing to improve their economic situation, there would appear to be real danger that Tito will be unable to maintain himself and that Yugoslavia will again be included in the Soviet power bloc.

As you know, the Yugoslav Government and the OEEC countries have already been informed that the license for the export for this blooming mill would be issued. It is my understanding that even if the license is granted, the mill, which has still to be manufactured, could not reach Yugoslavia in less than a year. We have informed the Yugoslav Government, and they have accepted the condition, that actual export of the mill could still be stopped should unforeseen developments occur at any time prior to its actual shipment.

There appears to be some disagreement between our advisers as to what the facts are with respect to the capacity of this mill. I am sending you and the Secretary of Commerce a separate memorandum⁶ containing the information furnished me on this subject. I may say, however, that the Company responsible for constructing the mill has several times stated its capacity for production of finished steel as 400,000 tons. This capacity can only be reached when substantial additions, requiring the construction and importation of important new facilities not now under contract, have been made to the Yugoslav capacity to produce steel ingots and perhaps to finish the semi-fabricated products of the blooming mill. Moreover, the 400,000 ton capacity of the mill, even if reached, will not represent a net addition to Yugoslav capacity for producing finished steel since we are advised that the existing blooming mill will be used as an additional stand on the finishing mill, making five stands instead of four. The maximum net addition on this assumption is 150,000 tons of finished steel capacity, or less than 1% of Soviet orbit plus Yugoslav capacity.

In reply to your proposal for a reexamination of NSC 18/2, I shall be very glad, of course, to agree to a reexamination of this paper at any time. In view, however, of the facts set forth above you will realize that I would not be prepared to agree to a complete embargo of all durable capital 1–A items. I would readily agree, however, that every application for a license to export a 1–A item as well as items of capital equipment on the 1–B list, be examined carefully, and that if there is disagreement between the representatives of State, Defense, or Commerce at the working level, the issues should be referred at the request of any one of them for discussion at a high level before approval of an export license is granted. I believe this would not require a formal reconsideration of NSC 18/2 but could be arranged between us and the Secretary of Commerce.

As for consideration being given to possible additions to the Positive List, this matter is of such a highly technical nature and with so many varied factors involved, both military and non-military, that I feel it should first be thoroughly examined by the Advisory Committee on Requirements.

I agree fully on the importance of securing cooperation from Marshall Plan countries in exercising export controls. We have consistently urged upon those countries the desirability and the necessity of taking such action. While we have had some success in this regard with the principal ECA countries, we would welcome any suggestions which the NME may have that would contribute to the accomplishment of that objective.

In conclusion, I should like to express the hope that after consideration of this letter and the separate memorandum which I am sending to you, you will withdraw your objection to the issuance of the blooming mill license. Irrespective of the circumstances in which it occurred, we are now faced with the fact that the Yugoslav Government was notified on June 28 that the license would be issued, and similar notifications were made to representatives of the OEEC countries. It seems clear, therefore, that the adverse effects of refusing to issue the license now would be greater than would have been the case when the application was made. If you are not prepared to agree, I urge that we take steps to resolve the matter promptly, since I am concerned at the political effects which may result from further delay.

Sincerely yours,

Dean Acheson

P.S. It strikes me that the Tito speech reported in The New York Times of August 3,⁷ suggesting that Yugoslav help might be available to elements in Bulgaria and Albania who desire to break with the Kremlin, is a highly significant confirmation of the value of Tito to U.S. security.

1. Under cover of a letter dated August 5, the Secretary of State transmitted a copy of this letter to the Secretary of Commerce. In his letter, not printed, Secretary Acheson expressed the belief that it would be advisable for the three Secretaries to meet as soon as possible to obtain an early decision on the blooming mill question. He also expressed the hope that Ambassador Harriman, then in Washington, might be allowed to attend such a meeting (660H.119/7–2849).
2. Ante, p. 911.
3. Not printed; see editorial note, p. 868.
4. For information on the arrest and trial of Laszlo Rajk and Traicho Kostov, see p. 471 and footnote 1 thereto, and p. 333, footnote 2.
5. The quotation is from the report contained in telegram 1332, October 5, 1948, from Belgrade ( Foreign Relations, 1948, vol. iv, p. 1113) of the conversation of October 5, 1948, between Marshal Tito and Eric Johnston, President of the Motion Picture Association of America.
6. The memorandum under reference here, entitled “State Department Staff Memorandum on Proposed Export License for Steel Blooming Mill for Yugoslavia”, dated August 4, 1949, is not printed. Most of the salient points of the staff memorandum, which covers 12 typewritten pages in the source text, are included in the letter printed here (660H.119/7–2849). A copy of the staff memorandum was also sent to the Secretary of Commerce.
7. The reference here is to a speech delivered by Marshal Tito on August 2 at the celebration of the fifth anniversary of the Peoples’ Republic of Macedonia.