Foreign Relations of the United States, 1952–1954, Eastern Europe; Soviet Union; Eastern Mediterranean, Volume VIII

033.6811/11–1854: Telegram

No. 715
The Secretary of State to the Embassy in Yugoslavia¹

secret
priority

Washington, November 18, 1954—7:23 p.m.

491. Embtel 405.² Opening meeting afternoon Nov 12 plus two meetings Nov 15 and one on morning Nov 16 were given over lengthy Tempo presentation Yugo econ situation including general review postwar developments, wheat supply situation, urgent problem short and medium-term debts, investment policies in immediate future and general balance payments prospects. There was little discussion these matters between two sides except for few questions on details and some exchange with Killen on future USOM procedures and programs Belgrade.

Our offer was presented meeting afternoon Nov 16. We proposed sale for dinars (title to go to US) of 450,000 tons wheat, ten million dollars worth cotton and one million dollars tobacco under Title One Agriculture Trade Development Act. We offered utilize dinar proceeds roughly as fol: 21% for purchase strategic materials Yugo; 10% for purchased Yugo goods for delivery third countries; 9% for miscellaneous US govt purposes; 19% for long-term dinar loan to Yugos for internal econ development; 38% for purchase milit equipment in Yugo as grant to Yugo army (this not to displace MDAP dollar grants); and 3% for promotion agricultural trade. In addition, we stipulated Yugos must be ready buy 125,000 tons wheat from private US traders, and Yugos must also agree not use our wheat to depress their market prices. On medium-term debts, we advised them continue bilateral negotiations but said we would participate creditors conference if called and help Yugos to extent possible at conference. We made no comments on problems short-term debts, new OSP contracts or new IBRD loans or other loans for investments.

Tempo reaction was sharp and bitter. He characterized offer as new loan to cover current Yugo food needs which govt determined avoid if possible. He deplored lack US help or even response on other items and mentioned preference for reinstitution compulsory collections and rationing to new debts via our offer. He said our opposition to having Yugo incur new debts for investment while dictating new debts for food was “not friendly”.

At meeting afternoon Nov 17 with Murphy in chair Tempo refused be persuaded our offer favorable to Yugo. He announced he and del flying from Washington Nov 18. On return Belgrade he promised present offer fairly to govt but vowed do all in his power prevent its acceptance. He stated he was returning with empty hands as Yugos had from Moscow in 1948 and implied our offer might jeopardize Yugo econ independence.

“Social meeting” arranged for evening Nov 17 with Gligorov, Kopcok and Embassy counselor Vodusek turned into intensive exploration situation. Yugos very upset because we allegedly failed appreciate gravity their econ situation, offered no help pressing debts problem, did not cover total amount wheat requested (680,000 tons), presented offer in entirely new framework of conditions and suggested terms aggravating their balance payment difficulties. We told Yugos that we willing discuss terms and urged they get Tempo call off quick departure and allow further exploration situation.

They apparently did so since plane reservations cancelled and Kopcok, Gligorov and Vodusek in working level meeting this afternoon. Too early tell revised Yugo reaction situation but Tempo level talk with Murphy and Stassen now scheduled afternoon Nov 19. In any event likely that discussions will wind up Nov 20.³

Dulles

1. Drafted by Mark and cleared with Leverich.
2. Telegram 405, Nov. 18, described a Tanjug despatch which had appeared in Borba claiming that the talks in Washington were not going well and that the Yugoslav negotiators would shorten their stay and probably return to Yugoslavia on Nov. 19. The Embassy requested guidance as to how it should answer press queries which might be raised regarding these points. (033.6811/11–1854)
3. At the Secretary’s staff meeting, Nov. 18, Murphy reported that the Yugoslav negotiators were especially annoyed by the U.S. proposal that $1 million be used to purchase U.S. tobacco. Murphy said that the Yugoslavs had implied throughout the talks that they would have to “look elsewhere” if they could not obtain satisfactory arrangements with the United States. Dulles said that if the tobacco point was of great importance to Yugoslavia, the Department of State should get the Department of Agriculture overruled on this point, going to the President if necessary. (Secretary’s Staff Meetings, lot 63 D 75, “November 1954”) No record has been found in Department of State files or the Eisenhower Library that this point was raised with the President.