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 | FOREIGN RELATIONS OF THE UNITED STATES 1964-1968 Volume XVII Eastern Europe Department of State |
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| Yugoslavia 175. Telegram From the Embassy in Yugoslavia to the Department of State/1/ Belgrade, June 24, 1964, 5 p.m. /1/Source: Johnson Library, National Security File, Country File, Yugoslavia, Cables. Confidential. Repeated to Bucharest, Hong Kong, Moscow, and Zagreb. 2055. Re Embtel 2015./2/ Comment and observations on certain matters discussed with Tito June 18 follow. /2/Telegram 2015, June 19, summarized Elbrick's June 18 meeting with Tito. (Department of State, Central Files, ORG 7 BELGRADE) 1. Bilateral Relations: Tito left little doubt in my mind that he continues to regard good relations with US as significant element Yugoslav policy and hopes concrete ways can be found to give expression to mutual desire for continued improvement. 2. International Communist Meeting: Seems clear that Tito still feels would be better not to hold meeting under present circumstances, and that he told Khrushchev so. He has apparently helped to induce Khrushchev to delay, at least for time being, taking irreversible step of convening meeting but I was left with impression Tito may be unable judge for how much longer Khrushchev will be willing to wait. At this point I am inclined to believe that while Yugoslavs sincere in opposing meeting, if meeting convened they will attend on grounds that they could not exert useful influence otherwise. 3. Rumania: His remarks to me on this subject, and his subsequent frontier meeting with Gheorghiu Dej,/3/ appear to strengthen view that Tito is seeking to restrain Rumanian anti-Soviet and anti-Khrushchev polemics. As Embassy has previously tried to point out, we do not believe Tito has discreditable motive, nor do we believe Tito has in slightest degree abandoned his independence or become Khrushchev's errand boy. I gathered from our conversation that he believes that Dej is taking undue risks by baiting the Soviet Union publicly; that Rumania should proceed to expand her international ties quietly and without unnecessarily exciting Soviet apprehension and animosity; and that if Rumanians continue to develop public anti-Soviet campaign dangerous consequences might ensue. These might include: Direct Soviet pressure on Rumania with setback this would represent to favorable trends in Eastern Europe; a hardened East-West confrontation, replacing trend toward accommodation on both sides which Tito believes exists and which he favors, upsetting relatively stable European situation; and discrediting, in eyes of Moscow and "the socialist world," relatively peaceful policy of Khrushchev which Yugoslavs feel is infinitely better for themselves (as well as for West) than any foreseeable alternative policy that Moscow might adopt. All evidence here seems to indicate Khrushchev did ask Tito to intercede with Dej. If so, we believe Tito did so for motives entirely compatible with Yugoslav independence. To summarize, Tito does not object to Rumanian efforts to develop international ties beyond circle of socialist countries, but he obviously feels it is dangerous for Rumanians to do this in demonstrative anti-Soviet style. /3/June 22. Tito clearly thinks it would be mistake if we were to encourage Rumanians to continue baiting Khrushchev, or if we seek to exploit publicly Rumanian situation as Western triumph against Soviet Union. This, he feels would tend to incite Soviets to take counter measures that could have seriously unfavorable consequences. 4. Tito's Condition: Tito impressed me with what seemed to be his excellent physical condition and intellectual alertness. He seems to be on top of major internal and international problems in which Yugoslavia involved, and is obviously actively and effectively engaged in effort to prevent developments in Eastern Europe from taking a turn that would in his opinion have unsettling and unpredictable consequence. Elbrick
176. Memorandum of Conversation/1/ Washington, July 16, 1964. /1/Source: Department of State, Secretary's Memoranda of Conversation: Lot 65 D 330. Confidential. Drafted by Andrews and approved in S on August 24. The source text is labeled "Part I of III;" separate memoranda of conversation dealing with East-West relations and visitors to Yugoslavia are ibid. SUBJECT PARTICIPANTS U.S. Yugoslav Upon his return from consultation in Belgrade (see memcon of May 22),/2/ the Yugoslav Ambassador on his initiative called on the Secretary. He pointed out he had spent more than a month in Yugoslavia and had seen President Tito and many Government officials. /2/At this meeting, Rusk and Micunovic discussed the state of U.S.-Yugoslav relations and Yugoslav foreign policy objectives in other areas. Memoranda of this conversation are ibid. The Yugoslav Government considered that relations with the US were normal, correct and good but that they could be even better. No serious political obstacles, as in 1962 or 1963, stood in the way of better relations. Yugoslav officials, however, saw a need for more active relations with the US, for more signs of understanding, for more results and for more contacts between the two Governments. Yugoslavia was interested in placing its relations on the same plane with both East and West. The Ambassador then raised specific questions in our relations. With reference to prewar Yugoslav debts (bonds), he said that a Yugoslav delegation was now in Washington; negotiations were proceeding satisfactorily and this question would soon be settled definitely. With reference to US claims against Yugoslavia for the nationalized property of US citizens, the Ambassador noted that Yugoslavia had increased its offer from $2 million to $3 million. At informal conversations in Washington recently, the figure of $3.5 million was mentioned. The Ambassador protested that if all the property in question were sold it could not fetch that sum of money. But he said that if the US would accept $3.5 million, our representative could go to Belgrade to negotiate a final settlement at this figure. The Secretary said he was not up-to-date on the details, and the Ambassador replied he was merely informing the Secretary. With reference to a Fulbright agreement, the Ambassador said that at last both sides were close to an agreement. It might be ready for signature in September. The Yugoslav Government wished to invite Senator Fulbright to visit Yugoslavia for the occasion, and the Yugoslav Embassy was in touch with his office. The Ambassador observed lightly that in this way a new agreement would be ready for signature every month until the end of the year. He hoped that not only the existing atmosphere but also the prospect for future relations would thereby be improved. For example, Yugoslav enterprises wanted to establish more contacts with US private capital. With reference to limitations on Yugoslav cotton textile imports into the US, the Ambassador said negotiations were not going too well. People in Yugoslavia believed that Yugoslavia was being treated worse than other states. The US was offering a quota which was less than the volume of Yugoslav exports to the US in 1962 and 1963. US agreements with other states, such as the UAR, set quotas which were higher than their exports during those years. The Ambassador, in answer to a question, confirmed that Yugoslav exports had risen in the 1961-1963 period. The Secretary then said that the US had had a gentleman's agreement with Japan on limiting Japanese cotton textile exports to the US during the same period Yugoslav exports were rising. He also reminded the Ambassador that the question of MFN for Yugoslavia had posed a special problem. The US had treated Yugoslavia as a special case, not wanting to limit cotton textile imports from Yugoslavia on account of the MFN problem. It was his understanding that Yugoslavia was being treated as well as other countries. The Ambassador demurred. The Secretary pointed out that if Yugoslavia had had a great increase in exports in 1962, then this would account for a quota lower than the volume of exports in 1962. The Ambassador remarked that the increase in Yugoslav exports was only in the value of a few million dollars and that it was part of the general trend to increase trade between our two countries. It was difficult to explain to Yugoslav enterprises why the US quota had to be lower than the volume of Yugoslav exports in 1962 and 1963, especially since Yugoslavia was not being treated as well as other states. He was hopeful, however, that a satisfactory agreement could be reached. The Secretary asked what the prospects were for agriculture this year. The Ambassador said that until June 15 or 20, wheat looked good but a period of exceptional heat for ten days and nights had seriously affected the crop. He believed his Government would be interested in negotiating for the purchase of more wheat. The Secretary referred to the Rockefeller Foundation's long relationship with Yugoslavia, mostly in the public health field since the war. The Foundation was also interested in the best ways of cultivating basic crops, such as wheat, corn and rice. Some remarkable results had been achieved in Mexico and Colombia, for example. The Foundation offered cooperation in developing research, training programs and extension services. The Secretary said he did not want to suggest that Yugoslavia was not up-to-date but he thought that, within the framework of scientific and technical contacts, Yugoslavia might be interested in inviting a Rockefeller Foundation member specializing in agriculture to visit Yugoslavia. Such ideas as he might develop might be useful for the Government to look into. The Ambassador thanked the Secretary for this suggestion.
177. Telegram From the Embassy in Yugoslavia to the Department of State/1/ Belgrade, October 26, 1964, 7 p.m. /1/Source: Johnson Library, National Security File, Country File, Yugoslavia, Cables. Confidential; Priority. Repeated to Moscow and Zagreb. 834. During call on Federal Assembly President Kardelj October 26, we discussed bilateral relations and Soviet leadership change./2/ Kardelj, who gave impression of being unusually interested in course of US-GOY relations, was friendly and responsive throughout. /2/Nikita S. Khrushchev was removed from his post of Chairman of the Council of Ministers of the Soviet Union on October 15. Aleksei N. Kosygin replaced him; Leonid I. Brezhnev replaced Khrushchev as First Secretary of the Central Committee of the Communist Party. Bilateral relations: Opening with this subject, I remarked upon interest expressed in recent months by GOY officials at all levels in expanding relations with US--an attitude which USG fully reciprocated. Activities in various areas such as negotiations for compensation for nationalized property, Fulbright Agreement, and PL 480 Agreement/3/ showed movement in right direction which I hoped would continue. /3/For text of the claims agreement, signed at Belgrade on November 5, 1964, see 16 UST 11. For text of the educational exchange agreement, signed at Belgrade on November 9, 1964, see 15 UST 2081. For text of the agricultural commodities agreement, signed at Belgrade on October 28, 1964, see 15 UST 2058. Kardelj replied at length. He said that while differences might occur between us arising from differences in political systems he believed we should make every effort to develop those areas where cooperation possible. He referred to aid given by US to Yugoslavia in past, which he termed very useful and important to GOY, but felt such aid, while necessary, tended to create difficult relationship. It is wise, therefore, to put such relations on more normal basis. Kardelj said some difficulties or "crises" in our relations had their source in tendency on part of USG to measure frequently "how many millimeters" GOY policy had departed from that of Moscow. This, he made clear, always manages to raise hackles of GOY. He felt GOY can play important role in East-West relations which points up importance of his country's relations with US without actually saying so--but following specific reference to situation created by change in Moscow--he intimated that friendly relations with US are of even greater importance now. While agreeing that GOY can play important role in helping solve East-West problems, I pointed out that this would be so as long as GOY follows "truly nonaligned policy." I said USG glad to note matters have progressed in Yugoslavia to point where we can now put our economic relations on more normal basis, fact which should be beneficial to both countries. Soviet leadership: Noting that recent changes in Soviet leadership are of great interest to all countries, I spoke along lines of Department circular telegram 722./4/ I said we were glad to have assurances from new Soviet leaders that previous policies would not be changed, but like most countries, USG is awaiting initial actions of new Soviet regime in order to judge true significance of shift. /4/Circular telegram 722, dated October 23, provided guidance for discussions on Khrushchev's ouster with other diplomatic representatives. (Department of State, Central Files, POL 15 USSR) Kardelj said world press had indulged in much speculation over change in Moscow but he, too, felt that any attempt at serious analysis is somewhat premature. He proceeded, nevertheless, to give me his opinion of certain aspects of Soviet developments. He said he felt Khrushchev's failings were generally those of style; that Khrushchev was inclined to be heavy-handed and brusque; that his removal was nevertheless a surprise. Kardelj felt that Khrushchev's important policies re coexistence and relaxation of tensions far outweighed any shortcomings that might be attributed to him. He felt immediate future would be a delicate period in history and was very pleased to note calm and statesmanlike way in which President Johnson had reacted to Khrushchev's dismissal./5/ /5/For text of the President's October 18 statement, see Public Papers of the Presidents of the United States: Lyndon B. Johnson, 1963-64, Book II, pp. 1377-1380. On subject of Sino-Soviet relations, Kardelj said he saw no real solution to this problem. He said Sino-Soviet differences had no ideological basis but were, rather, national or political. He felt Soviet Government would make effort to calm matters, but he did not think USSR could possibly make concessions demanded by China. ChiComs would like, of course, to "use" great power of Soviet Union in advancing their own interests, but Soviet Government could never agree to this. He said conceivably ChiComs might use Khrushchev's dismissal as pretext for trying to improve relations with USSR but would do so only to achieve their own objectives and any détente created thereby would be temporary. With respect to Yugoslav-Soviet relations, Kardelj said he did not expect significant change although I had impression that he feared any effective efforts to heal Sino-Soviet rift might work to Yugoslavian disadvantage. Significant feature of conversation was Kardelj's apparent emphasis on Yugoslavia's need of good relations with US. Uncertainty regarding future course of Soviet Government (Yugoslavians have been made particularly uneasy by Soviet reference to principles enunciated by 21st Party Congress)/6/ might well account for this although it would be premature and probably unrealistic to expect any overt moves in this direction. /6/Apparent reference to Khrushchev's address to the January 27, 1959, opening session of the Congress, which included a denunciation of the Yugoslav Communist Party's conduct in the context of an outline of rules for interparty conduct. For text, see Current Digest of the Soviet Press, February 18, 1959, pp. 12-19; February 25, 1959, pp. 3-10; March 4, 1959, pp. 17-25; and March 11, 1959, pp. 13-20. Elbrick
178. Memorandum From the Under Secretary of State for Economic Affairs (Mann) to the President's Special Assistant for National Security Affairs (Bundy)/1/ Washington, July 22, 1965. /1/Source: Johnson Library, National Security File, Country File, Yugoslavia, Memos, Vol. 1. Confidential. An attached table, entitled "Yugoslav Requirements and Proposed Financing," is not printed. SUBJECT The Yugoslavs are seeking financial assistance to support a far-reaching program of economic reform which has been worked out in close cooperation with the IMF. Internally the program involves further decentralization of economic decision making to business firms and banks operating in the context of a market economy. Externally it involves devaluation of the currency (dinar) and use of a customs tariff to reduce reliance on quantitative and other administrative measures. The Yugoslavs are concerned that they will not have adequate foreign exchange reserves to carry the program through at the pace and to the degree they desire. Currently their reserves amount to $70 million, or less than one month's imports. The Yugoslavs see as their difficult period the next three and a half years. To support their new program they want to build up their reserves this year to $200 million and by 1968 to $300 million. The attached table shows the details of their requirements and their present plans to finance at least part of them. Briefly, what they have in mind is a package of $150-$160 million basically in new medium and longer-term credits. They are looking to us, Italy, France and the U.K. to provide these new credits. In addition, they are about to get a $50 million net credit from the IMF. From the United States, they ask the following: (1) Assurance that Export-Import Bank will issue guarantees on privately financed medium term credits for purchase of U.S. raw materials and semi-finished goods in an amount of $20-$25 million through CY 1968. (2) Putting a two-year grace period in the March 1965 PL 480 Title IV/2/ agreement as well as in two 1964 PL 480 Title IV agreements, and extending the repayment period on the 1964 agreements from 3 to 12 years (which may represent a deferral over the short run of about $26 million). /2/For text of P.L. 480, the Agricultural Trade Development and Assistance Act of 1954, see 68 Stat. 454. (3) Easier terms (two-year grace period and repayment over 12-17 years) on a 1966 PL 480 Title IV program of about the same size as the current one. There appear to be no legal obstacles to working out a package meeting these requests, and the President has made the required determination for EX-IM Bank guarantees to Yugoslavia. The 1964 and 1965 PL 480 terms can be made more favorable in the context of a new PL 480 negotiation covering 1966, and the requested 1966 PL 480 terms, while more favorable than recent agreements with Yugoslavia, are within statutory limits. The requested EX-IM Bank guarantees, however, would be in addition to those which the Bank is already prepared to extend during the period, and the five to seven-year credit period requested for sales of raw materials and semi-finished goods is beyond EX-IM Bank terms for such sales. EX-IM policy now is to issue guarantees only for 18 month credits on such sales. Political Issues The advantages to the U.S. of supporting the program are that it will move the Yugoslav economic system even further towards a typical free-world system and away from the typical Communist system. It will mean closer integration with Free World economic institutions (Yugoslavia hopes the program will enable it to move from provisional GATT membership to full membership) and continue the pressures for liberalization in other aspects of Yugoslav life against more doctrinaire Communists. Success in carrying out the program will have a definite showcase effect in Eastern Europe, where dissatisfaction with the current economic systems and tentative experimentation with reform is widespread. It must be noted, however, that high Yugoslav officials, notably Tito, and the Yugoslav press have sharply criticized in one-sided terms U.S. policies in Viet-Nam, the Dominican Republic and the Congo. The U.S. has vigorously protested this criticism, and the Yugoslavs have been given to understand that it influences what we can do in the economic area. Since these representations were made, public statements by Yugoslav Government officials have been more restrained, and the joint communiqué issued on the occasion of Tito's recent visit to Moscow/3/ called for cessation of bombing of North Viet-Nam, not for withdrawal of U.S. troops. At the same time Yugoslavia has no diplomatic relations with North Viet-Nam, and it has not given that country any kind of material assistance. There have been no demonstrations against the U.S. in Yugoslavia and bilateral relations in the cultural and other fields have increased. In the context of criticism of U.S. foreign policy, Yugoslavia as a dissident Communist country presents a different problem than Pakistan, presumably an ally. Furthermore, Yugoslavia has been absolutely opposed to Chinese policies, especially as they relate to wars of national liberation, and has battled Chinese influence in the Afro-Asian world. /3/Tito visited Moscow June 18-July 1. Criticism of the U.S. on these matters must be weighed against the advantages to the U.S. of supporting, in pursuit of its long-range objectives, the fundamental movement towards economic liberalization and closer affinity to Western practices inherent in the Yugoslav program and the significance of this movement in enabling Yugoslavia to continue its role as the envied revisionist and historical disruptor of Communist unity. The financial support which the U.S. is being asked to provide for the reform program is relatively small--namely, less than $17 million a year. More importantly, this support is not in the form of grant "aid" but only of extending better terms on credit facilities, all of which are repayable in dollars. In my judgment, this contribution would not give us sufficient leverage to compel the Yugoslavs to change further their public statements on our military policies in Viet-Nam, since I believe that under existing circumstances it is in the U.S. interest to continue our normal dollar repayable PL 480 program. Therefore I recommend that the U.S. support to the moderate extent indicated the Yugoslav program for greater economic integration with the Free World. TCM
179. Telegram From the Embassy in Yugoslavia to the Department of State/1/ Belgrade, October 25, 1966, 1445Z./2/ /1/Source: Department of State, Yugoslav Desk Files: Lot 79 D 230, Pol 1966 US. Confidential; Priority. /2/Beginning in spring of 1965, the dates and transmission times of all incoming Department of State telegrams were in six-figure date-time-groups. The "Z" refers to Greenwich mean time. 1294. Informal GOY reaction to Food for Peace Law as enacted by Congress is one of utter dismay./3/ Latest telegraphic report from Ambassador Micunovic to FonOff apparently indicates that immediately upon signature by President law would close door on further PL-480 Title IV commitment to Yugoslavia. Presburger, Deputy Director Western Hemisphere Division predicted yesterday it will be impossible for FonOff to counter impression in upper levels GOY that U.S. has taken discriminatory step specifically and solely directed against Yugoslavia. He said Yugoslavs could draw no other conclusion in view USG promotion of expanded trade possibilities with other Communist countries in Eastern Europe, and fact that upshot of Congressional action is to give freedom to administration to pursue its policy in every respect except with regard to issue of PL-480 vital for Yugoslavia. Similar reaction although not as pointed heard yesterday from other Embassy contacts in FonOff and other government departments. /3/P.L. 89-808, November 11, 1966, extended the Food for Peace program. It eliminated surplus disposal programs and replaced them with grain sales in dollars supported by long-term credits. It also banned food sales to nations selling or transporting goods to North Vietnam or Cuba. For text, see 80 Stat. 1526. Elbrick
180. Memorandum From the Under Secretary of State (Katzenbach) and the Under Secretary of Agriculture (Schnittker) to President Johnson/1/ Washington, November 30, 1966. /1/Source: Johnson Library, National Security File, Country File, Yugoslavia, Memos, Vol. 2. Confidential. SUBJECT Recommendation: That you approve the sale to Yugoslavia prior to the end of 1966 of 35,000 metric tons of vegetable oils and 450,000 tons of wheat/2/ under Public Law 480, subject to clearance with key Members of Congress./3/ /2/The Yugoslavs requested a sales program of 1,150,000 tons of wheat for this fiscal year. [Footnote in the source text.] /3/There is no indication of Presidential action on the source text. At a December 21 press conference, Secretary Rusk, in reply to a question, stated that no decision had been taken on P.L. 480 shipments to Yugoslavia. For text, see Department of State Bulletin, January 9, 1967, pp. 46-47. Discussion: We have invested 3-1/2 billion since 1950 in Tito's Yugoslavia. This investment made it possible for Tito to make good his break with Stalin. It paid off. Tito's defection started the dissolution of the Communist Bloc. It led to riots in Poland, revolution in Hungary, and a new sense of national independence throughout Eastern Europe. Your program of building bridges to the East takes advantage of the forces that Yugoslavia's independence set in motion. Yugoslavia is now taking far-reaching and equally risky steps in the economic field. It is moving toward a market economy tied to the free world. It has reduced its tariffs, abolished import quotas and is now a full member of the GATT. Economic liberalization in Yugoslavia is already setting the pattern for other countries in Eastern Europe. It is in our interest to make it succeed. For this reason, the agricultural sales program we recommend would be a good investment. The proposed sale of vegetable oils and wheat amounts to $40 million. These credit sales would give the Yugoslav Government badly needed room to maneuver and help it deal with the balance of payment pressures that result from import liberalization. These dollar repayable credits would greatly encourage the Yugoslavs to continue in the direction we want them to go. They give good prospects for benefits throughout Eastern Europe. You will recall that PL 480 was amended at the last Session in such a manner as to forbid assistance to governments trading with North Viet-Nam and, after January 1, 1967, governments trading with Cuba, except for agricultural products as to which a Presidential waiver would be possible. Yugoslavia does not trade with North Viet-Nam and is the only Communist nation which does not do so. It does, however, permit small shipments of medical supplies and blood, collected through voluntary contribution to its Red Cross (a non-governmental organization). It is the view of the Department of Justice that these shipments would not, as a matter of law, preclude PL 480 aid. Yugoslavia also does a small amount of business with Cuba in non-agriculture commodities and, therefore, PL 480 assistance after January 1 will be prohibited. The wheat sales here recommended were under discussion between the United States and the Government of Yugoslavia prior to the amendment of PL 480 although no formal commitments were entered into. We have a signed agreement to sell the vegetable oil. If we are to go ahead with these sales, however, it would be important as a matter of law that they be approved prior to January 1. In addition, we agree that the sale of wheat should not be approved by you formally without discussion with key members of the Agriculture Committee so that there could be no misunderstanding with respect to the applicability of the amendments to PL 480. We would ask for your approval, therefore, subject to our straightening out any possible misunderstandings in Congress. Attached is a memorandum to you from Ambassador C. Burke Elbrick setting forth his views on this matter./4/ /4/Not found with the source text. Nicholas deB. Katzenbach
181. Telegram From the Embassy in Yugoslavia to the Department of State/1/ Belgrade, December 7, 1966, 1800Z. /1/Source: Department of State, Central Files, POL 15-1 YUGO. Confidential. 1712. Ref: State 96794, Belgrade 1666./2/ /2/Telegram 96794, December 5, provided instructions for discussions with Krajger. (Ibid.) Telegram 1666, December 5, requested the most current information on the Findley Amendment. (Ibid.) Regarding this amendment, see footnote 7, Document 125. 1. In December 6 call on Boris Krajger, Vice President of Federal Executive Council, I reviewed with him current status of GOY requests for financial support of economic reform, with particular reference to effects of Findley Amendment. Purpose my call was mainly to respond, even though inconclusively, to Yugoslav views which he had communicated to me prior my return to Washington (Belgrade 1427)./3/ I sought give Krajger a balanced appraisal of possibilities for repeal of the amendment, noting President's public statement regretting its inclusion in Food for Peace Act./4/ Concerning possibilities of interpretations that would be helpful to economic reform, I had little to add to views conveyed to Nikezic (Belgrade 1589)/5/ with which Krajger already familiar, but sought reassure him on administration's continuing interest in economic reform and generally in good relations with Yugoslavia. In course of conversation I took occasion to suggest desirability GOY viewing present problem against background of very heavy US assistance extended over long period, with many projects just now coming to completion--e.g., recently dedicated hydroelectric projects and Sarajevo-Ploce Railway. Referring favorably to Tito's private statements that GOY does not intend to dramatize situation arising from Findley Amendment,/6/ I suggested, as my personal view, that it would be important avoid new issues or sources of irritation to Congressmen whose support needed for repeal of Findley Amendment. /3/Telegram 1427, November 4, reported on a meeting between Elbrick and Krajger concerning economic assistance. (Department of State, Central Files, POL 15-1-4 YUGO) /4/For text, see Public Papers of the Presidents of the United States: Lyndon B. Johnson, 1966, Book II, pp. 1373-1374. /5/This telegram, subsequently renumbered 1559, reported on Elbrick's conversation with Nikezic. (Department of State, Central Files, POL US-YUGO) /6/In telegram 1623 from Belgrade, November 29, Elbrick reported that Tito had stated he was hesitant to "dramatize publicly" the problems arising from passage of the Findley Amendment. (Ibid., POL 17-4 YUGO) 2. In course of discussion, Krajger made following points: (A) Acknowledged magnitude and usefulness of past US assistance to Yugoslavia. This helped overcome many problems and provided foundation for current economic reform. Past assistance, always without any political conditions, had promoted good relations. (B) Stressed importance of assistance in 1966 and 1967, which to be used to carry out reform, not for expanded development. All signs indicate 1967 most important year, with many fundamental problems to be met in first half year. These include new foreign exchange regime (import liberalization) subjecting many firms to pressures of foreign competition, and restrictive credit policy, to counter inflation and force firms to export. (C) Measures to be taken in 1967 should perhaps have been carried through earlier, but it was necessary to make political preparations. Recently there have been "minor disturbances" due to this delay (pre-sumably referring to recent strong upward pressure on prices, wages and investments) but he believes possible overcome these in January and February. (D) If U.S. Food for Peace credits not forthcoming, or some alternative form of US financing, GOY would need to compensate internally for loss of 100 million (old) dinars (i.e., in revenues from sale of agricultural imports) and for balance of payments loss of some $60 million, taking account of higher payments required if purchases made on CCC credit terms. Problem is one of financing, rather than physical availability of commodities. (E) GOY greatly interested in interim assistance from rescheduling or new credits during period in which Findley Amendment remains on books, i.e., at least through first half of 1967. (F) GOY will have to consider all possible measures for compensation for restrictions of Food for Peace credits, but such measures will inevitably aggravate problems encountered in carrying out of reform. (G) He confirmed that GOY does not wish dramatize issue of Findley Amendment as a deterioration in economic relations with US. Internally, however, will need to dramatize "intense" problems encountered by economic reform in order mobilize all forces to limit economic demands and exercise greater self-discipline. Period 1966-1967 therefore being characterized as the "battle" for the economic reform. The greater the help from the US, the less dramatic this internal "battle" will be. Elbrick
182. Telegram From the Department of State to the Embassy in Yugoslavia/1/ Washington, February 24, 1967, 9:40 p.m. /1/Source: Department of State, Central Files, POL US-YUGO. Confidential; Priority. Drafted by Miller, cleared by Yost, and approved by Lisle. Repeated to USUN. 144121. 1. Following summary FYI only and Noforn. It is uncleared and subject amendment upon review of memcon./2/ /2/Not found. 2. Ambassador Micunovic called at his request on Secretary Feb. 24. Recalled regular, helpful practice of consultation with Secretary before returning Belgrade and said we need discussions now more than ever before. Tito and Foreign Office awaiting with great interest details his conversation with Secretary. Stressed his feeling that, without intention either Government, in last five or six months there have been unfortunate developments in US-Yugoslav relations, i.e. legislation of US Congress on Food for Peace,/3/ question US assistance for economic reform, December demonstration in Zagreb/4/ and January 29 bombings./5/ Question arises therefore of policy and intentions both governments. Need clarification future prospects. /3/See footnote 3, Document 179. /4/The demonstration on December 20, 1966, protested U.S. involvement in the war in Vietnam. It was one of a series of demonstrations and attacks on U.S. Government facilities in Yugoslavia during December 1966. /5/A coordinated series of bomb attacks against Yugoslav diplomatic missions in Canada and the United States took place on January 29. The Yugoslav Government denounced the attacks as the work of anti-Tito emigres. 3. Secretary replied bombings outrageous and unfortunate. He had asked Under Secretary to keep in close touch with Department Justice regarding progress investigation. There have been no arrests yet but results not completely blank and these must be checked out carefully. He stressed FBI has committed full facilities to investigation. USG must make clear its attitude toward such incidents very severe, even aside from US-Yugoslav relations, since it affects 118 countries with which we have relations. We will try keep Yugoslavs informed further developments. 4. On Zagreb demonstrations Secretary said these also unfortunate and he did not wish contradict what US authorities had said earlier. Although we have feeling that demonstrations could have been prevented and their effect should not be underestimated, they have not produced permanent injury to our relations as far as President and Secretary concerned and have not affected USG thinking. 5. Secretary recalled Executive Branch had vigorously opposed legislation eliminating Yugoslav eligibility Food for Peace sales and law not aimed solely at Yugoslavia. Outcome result of psychology over Vietnam in Congress. Secretary said he not aware any negative changes in USG attitude toward Yugoslavia and emphasized our hope to further develop relations. As example, cited hope both countries would have success in Kennedy Round. 6. Secretary said debt roll-over not easy but we continue active consideration. One problem is fact US called upon play major, often almost single, role in assistance many countries, e.g. food for India. With huge budget before Congress this year, USG concerned about what other countries doing in assistance field. 7. Secretary emphasized USG would very much like to see Yugoslav economic reform succeed and wishes to help. Problem for us is not one of policy but rather limited possibilities for action by other agencies as to amount of burdens other countries they can assume. 8. Answering Secretary's question what Micunovic considers major bilateral problems, latter expressed satisfaction Department's actions on damages resulting from bombing. In eyes Yugoslav Government, public and press there can be no question USG good will but violence against Yugoslav missions must be eliminated and FBI investigation must be successful. Secretary replied FBI actively working on available information but there is difference in possibility of action toward those involved in such acts as bombing and those politically opposed to Yugoslav regime. Micunovic said he referred only to acts of violence. Yugoslav missions in US can no longer operate under "reign of terror." 9. Micunovic said GOY had received no formal answer to request for economic assistance posed last July. GOY appreciated USG help and favorable attitude. However, whereas Yugoslavs told in October they could pay for CCC purchases at end of three years, now told must pay one third each year. GOY does not even know exact status edible oil in view question of PA requirement for purchase "usual marketing requirement" 15,000 tons oil in 1967, although GOY completed such purchases last year under April 1966 agreement. Micunovic recited emigre actions against Yugoslav premises and personnel in US in recent years. USG must provide minimum conditions for operation Yugoslav missions. Rusk
183. National Intelligence Estimate/1/ NIE 15-67 Washington, April 13, 1967. /1/Source: Central Intelligence Agency, Job 79-R01012A, ODDI Registry. Secret; Controlled Dissemination. According to a note on the cover sheet, the CIA, the intelligence organizations of the Departments of State and Defense, and the NSA participated in the preparation of the estimate. The estimate was submitted by the Director of Central Intelligence, and concurred in by the U.S. Intelligence Board with the Directors of INR, DIA, and NSA concurring. The representatives of the AEC and the Assistant Director of the FBI abstained on the grounds the subject was outside their jurisdiction. THE YUGOSLAV EXPERIMENT Conclusions A. Yugoslavia is a Communist state in name and in theory, but in practice it is a fully independent state which has rejected most of the "socialist" experience of other Communist states, including the USSR. It has deliberately removed a large portion of its economy from direct centralized controls, and despite its retention of a one-party political system, it has largely freed its people from arbitrary authority. B. The Yugoslav experiment appears to be progressing satisfactorily. Since the break with Stalin nearly 20 years ago, the Yugoslavs have managed to build a viable and independent economy, to go a good distance down the road to decentralization and the democratization of public institutions, and to establish a position in world affairs considerably more significant than their power and resources would seem to warrant. Although the trend toward further decentralization is probably irreversible, progress will not be smooth, and change in Yugoslavia will continue to be accompanied by dissension over the structure and role of party and government, over the nationalities problem, and over the speed with which market forces will be introduced into the economy. C. The greatest problem the Yugoslav Communist Party is likely to face is arranging an orderly succession to the 74-year-old Tito. Should the succession problem arise during a period of severe internal stress and before current reforms have become institutionalized, a serious struggle might ensue. There is a remote chance that such a struggle could threaten the cohesiveness of the Federation, but we believe it far more likely that the state would survive intact. Otherwise, once Tito's changes in party and state structure have become widely accepted, we believe a relatively united leadership could avoid serious crisis and choose a replacement or, more likely, agree on some form of collective leadership. Discussion I. Introduction 1. Yugoslavia under Tito is an unusual laboratory of state craft. It is a Federation of six constituent Republics/2/ whose people, after centuries of foreign domination and repeated upheaval, are divided by differences in religion, nationality, language, political experience, and economic development. It is a Communist state in name and in theory, but in practice it is a fully independent country which has rejected most of the "socialist" experience of other states, including the USSR, and which is deliberately removing its economy from centralized controls and freeing its people from arbitrary authority. Moreover, despite pretensions to a grand design, it is a state whose political, economic, and foreign policies have for nearly 20 years reflected mainly improvisation and compromise. /2/Croatia, Slovenia, Serbia, Bosnia-Hercegovina, Montenegro, and Macedonia. [Footnote in the source text.] 2. So far, despite anomaly and weakness, the Yugoslav experiment has been relatively successful. There have been occasional disruptions, such as the dismissal last summer of Tito's heir apparent, Aleksandar Rankovic,/3/ but over the years internal divisive forces have been balanced against each other. The economy, with massive aid from the West, has shed some of the more cumbersome bits of Marxist theory, weathered recurrent crises, and expanded at an impressive rate. And the state, despite the threats and blandishments of opposing power blocs, has retained its sovereignty and achieved an influence in world affairs out of proportion to its power and prosperity. /3/Rankovic was expelled from the Executive Committee of the Yugoslav Communist Party on July 1 and from the Party on October 4. 3. The Yugoslav Federation was established as World War II drew to a close, and the new state was ruled absolutely by Tito as the head of a disciplined Communist Party. In 1948, however, Tito's defiance led to the expulsion of Yugoslavia from the Soviet Bloc. Bereft of the stability provided by Soviet backing and hostile to most forms of Stalinist-Soviet experience, Yugoslavia's Communists began to seek new ways to win popular acceptance and to stimulate economic growth. They announced that Yugoslavia would embark on a "separate road to socialism," one which would relax the harsher aspects of Communist rule and eventually assure the withering away of the state through the gradual diffusion of central power to local and regional governments and the construction of a vaguely-defined "socialist market economy." 4. This separate road to socialism has been a rocky one. Despite Tito's many and clever improvisations, serious internal discords persist, and Yugoslavia's position in the international arena remains equivocal. He gave rein to a broad range of political and economic forces, hoping thus to engage the support of the population and confident that the ultimate power of a pervasive Communist Party could unite disparate interests or, in time of need, reimpose totalitarian direction. But he did not reckon with the erosive effect of decentralization or the party itself. Now, nearly 20 years after the Yugoslav experiment began, the party is in disarray, its members display loyalties divided between federal and local interests, and its effectiveness as an instrument of central power and unity is in question. 5. Yugoslav internal dissensions can be grouped into several categories. There is conflict between those who favor greater political liberalism and those who believe that the decentralization of political institutions has already gone too far; there is dispute between exponents of a centrally-controlled economy and those who would foster local industrial initiative and the profit motive; there is controversy over the role the Yugoslav Communist Party (LCY) should play in political and economic decision-making; there is tension between older leaders, nearly all veterans of Yugoslavia's partisan campaign against the Axis, and younger men unburdened by the emotional ties of comradeship and conservative Marxist ideology; and underlying all, there is the clash of national and ethnic identifications and the division of opinion on whether Yugoslavia is better constituted as a centralized federation of interdependent republics or a looser confederation which gives preeminence to the demands of the Republics for autonomy. II. The Nationalities Problem 6. It is an immutable fact of Yugoslav political life that most Serbs and Croats and Slovenes and Macedonians think of themselves first as Serbs or Croats or Slovenes or Macedonians and second, if at all, as Yugoslavs. National and ethnic rivalries are endemic; they have long constituted a centrifugal force which no liaisons for the solution of economic or political tasks can long overcome. Fears of a return to "greater Serb" hegemony haunt all Yugoslavs except Serbs; some Croats and Slovenes speak earnestly of a complete secession which no central government could tolerate; and less drastic attacks on the federal concept come from all regions. 7. The Communist regime was relatively successful in submerging particularist agitation in the years following World War II. It not only held tight rein on all forms of activity, and could exercise its considerable police powers without restraint, but it could also count on fresh memories of war and the German occupation to help generate a feeling of national unity. After 1948 and the break with the USSR, the regime could rely on common concern over the Soviet threat to perpetuate this unity. In recent years, however, arbitrary police authority has been curbed, the memory of war and wartime atrocity has faded, and the spectre of Soviet intervention has all but disappeared. At the same time, the progressive devolution of economic and political responsibility from federal to local and Republic bodies has encouraged those who would replace the federal system with a loose confederation of more or less autonomous Republics. Even Yugoslavia's growing foreign trade and the great disparities of wealth between various regions have lent weight to the arguments of Croatian and Slovenian particularists; both Republics, for example, have asked authority from Belgrade to establish quasi-official missions in Western Europe, and both have long decried the notion that they must subsidize the economic uplift of the more backward Republics. 8. Tito has met the problems of reemerging particularization in typical fashion, by limited concession and compromise. Much recent sound and fury on the nationalities problem stemmed from non-Serb fears that Rankovic, given as he was to packing party organs and the police with his fellow Serbs, might someday bring about a return of Serb hegemony. His purge probably did much to allay such fears, and Tito, in his post-Rankovic reorganization of the party, was careful to afford the Republics a more balanced representation in top party organs. In January 1967, the Federal Assembly's Chamber of Nationalities met for the first time in many years--an indication, perhaps, of the growing seriousness of the nationalities problem--and heard proposals for a constitutional amendment which would grant it equal rights with the Federal Council, now the most powerful parliamentary body. Tito may consider that by upgrading the Chamber of Nationalities he can establish a safe and controllable forum for the expression of particularist sentiment. 9. Tito has also introduced large numbers of younger men into the party and governmental organs of the individual Republics; he may thus hope to contribute to a weakening of the particularist idea. Though the sentiments on which they feed are widespread and of longstanding, the extremist segments of the particularist movement remain relatively small and--by their very nature--disunited. Younger men of the establishment, bred in an independent Yugoslavia, are likely to believe that the economic and political values of a unified federation outweigh the emotional appeal of secession. So far, this stratagem appears to be working. Many of the newer men, even some of those who were once outspoken in their advocacy of greater regional autonomy, have developed vested interests in the status quo and have become defenders of the federal concept now that they bear heavier administrative responsibility in the upper councils of party and governmental organizations. Many will continue to exploit the emotional appeal of particularism in dealing with their public supporters, but most are likely to submerge the issue in their approach to the solution of national problems. 10. We do not believe that Tito anticipates any real solution to the problem posed by particularism. On the basis of his past performance, he can be expected to seek measures which will permit these pressures to vent in a controllable manner. He may well allow individual Republics increased autonomy in the conduct of their economic affairs, but he will probably employ his full strength in putting down acts which tend to heighten regional political, cultural, and linguistic disputes. The issue of ethnic animosity, however, will continue to plague Tito, and it could represent a significant hazard to a less certain, less prestigious successor. The emotional content of this question almost certainly means that it will remain a potentially explosive issue for some years to come, one susceptible to exploitation by ambitious politicians. Or the people themselves, if dissatisfied and frustrated, could come to see in the federal structure the cause of their own discontents. On balance, however, we foresee a slow attenuation of particularist strength and the gradual invigoration of the Yugoslav idea, particularly among those whose livelihoods and sensibilities would suffer from the collapse of the unified state. III. The Structure of State and Party 11. Local governments in Yugoslavia have been granted relatively heavy responsibility for supervising economic and cultural activities within their own territories, and popular participation in local decisions on the implementation of policy has been actively encouraged. Only the broadest policy direction normally comes from the central government, and Tito has clearly relied on widespread application of the principle of interlocking directorates to provide the central government, or at least the party, with pervasive control. 12. The devolution of power to local authorities has led to widespread and vociferous debate on such significant public issues as the proper structure of the Federal Government, Federal-Republic relations, and the role and structure of the party. Over the years, Tito has responded to this debate with revisions and reforms designed to satisfy at least some of the people some of the time. Since its adoption in 1946, for example the Yugoslav constitution has twice been revised./4/ The most recent version (1963)/5/ instituted changes designed to check executive power: it established a court to review the constitutionality of Federal and Republic legislation; it granted Republic and local governments enhanced powers and broadened responsibilities; and it established the primacy of Federal and Republic assemblies over their respective executives. Legislators have been slow to exercise their new powers, but in Slovenia, the Assembly's unwillingness to go along with a government-sponsored bill brought about the temporary resignation of the Cabinet in 1966, and the Federal Assembly demonstrated its independence the same year by sending the federal economic plan back to the executive for revision 11 times. /4/For text, see Amos Peaslee, Constitutions of Nations (The Hague, 1950), vol. 3, pp. 522-551. /5/For text, see ibid., pp. 1236-1307. 13. Another consequence of the diffusion of governmental power from Belgrade to the Republics and to local governmental units has been a parallel diffusion of power within the Communist Party, from central organs to regional ones. Local party leaders have not always followed central party directives; they have frequently found themselves torn between the demands of party discipline and the imperatives of local policy decisions. The result has more often than not been detrimental to the party: factionalism has grown and has often reflected particularist divisions; unions, workers' councils, local party groups, enterprise managers' associations, and the like have become new loci of power, and contention and debate have become chronic. All this has been particularly troublesome in a system which was designed to depend so heavily on a unified and disciplined party--with personnel and organizational lines into all other groups and institutions--to provide the centralized authority afforded by no other means. 14. Tito recognizes that the glue has been melting out of Yugoslav society, and it is clearly his hope that the party can be revitalized and remade into the pervasive tool of national policy it was intended to be. But Tito has long felt that the party should not function simply as a coercive instrument which blindly obeys orders from Belgrade and crudely enforces the central will. He wishes the party somehow to become a model social force, inspiring and guiding a national consensus, and the confusions and uncertainties attending the party's statements and actions can probably in large measure be attributed to Tito's dream. 15. The reform of the party in 1966 is a case in point. Long overdue, according to Tito himself, the new measures represent compromise, go only part way toward a real restructuring and restaffing of the party, and do not seem to have any certain and tangible objective. Nevertheless, they do represent a real effort to cope with major problems and reflect a determined response to the situation precipitated by the fall of Rankovic. As the most influential conservative spokesman, Rankovic had marshalled forces to obstruct Yugoslavia's movement toward decentralization and political liberalism, and in doing so had played upon Serbian nationalism and had accumulated state power (including control of the secret police) to a dangerous degree. 16. Tito's subsequent reaction was not so much against conservatism per se as against particularism, factionalism, and extremism of any variety. In order to restore political balance and restrain the conservatives without giving undue power to their liberal opponents, Tito instituted a series of measures designed to dilute conservative power with newer, younger men; to lessen the powers of individuals in leading party organs by expanding membership; to minimize factionalism by separating executive and policy functions in the party leadership; and to broaden the number of party members participating in the government by requiring that elected officials be limited to a single term. As yet, these changes have been only partially implemented; the completion of the party and government reforms awaits new elections in April 1967 and the convocation of a Party Congress sometime in 1968. 17. In the meantime, however, Tito has successfully altered a number of party organs to achieve his aims. He has reduced the influence of a number of the most powerful conservatives by assigning them to a 35-man Presidium which is limited to policy guidance. He has specified that the revived Central Committee must deliberate in public view, eliminating the secrecy which had aided Rankovic in his accumulation of power. He has reconstituted the formerly all-powerful Executive Committee with younger, less prominent men charged with implementing the Presidium's decisions. Finally, he has packed party leadership organs on both Federal and Republic levels with new faces: new men in the party leadership now outnumber the old by 2 to 1, and the average age has dropped by some six years. 18. While a number of these changes appear to be aimed primarily at curbing conservative power, Tito has been careful not to destroy it. Almost all the old partisans have been retained in important party positions. Very few of Rankovic's followers were purged, and Rankovic himself was not subjected to criminal prosecution, although the evidence against him--his misuse of the secret police to eavesdrop in the offices of prominent leaders, allegedly including Tito himself--was certainly sufficiently damning. At about the same time, liberal leader Milovan Djilas was released from prison,/6/ perhaps as a counter to Rankovic's escape from prosecution. /6/Djilas was released on December 31 as part of a general amnesty. 19. Tito's admittedly provisional overhaul of the party has encouraged continuing debate on the proper role of the party within Yugoslav government and society. Is the party to exercise command and control or merely ideological guidance? Tito's position is ambivalent. He exhorts the party to lead by persuasion rather than command, but makes it unmistakably clear that the party's role "is growing and will increase for a long time." He has reduced the power of the secret police by greatly restricting its activities and cutting back its manpower, and he has expanded the rosters of leadership organs so that it will be a "little more difficult for an individual to stand out much." At the same time, he has insisted that the "party will not wither away," that it is "still a revolutionary party" and that it has "the right to apply all means necessary to protect the society, to protect the correct line of . . . socialist development." 20. If Tito has achieved no settlement of the several controversies his party reform addresses, he nonetheless seems to be on the way to constructing an uneasy consensus on the side of continuing the movement toward "democratization" and decentralization. The regime will seek to nominate and elect only supporters of the present course and leadership during the forthcoming elections to Republic and Federal Assemblies, and from these it will try to select reliable and moderate men for Republic and Federal Cabinet positions. Executive decisions will probably more and more fall to men capable of focusing on issues rather than personalities. Over the next year or so, barring a major upheaval and given a modicum of policy success, these newer men will probably take hold, and neither an ultraliberal Djilas nor an archconservative Rankovic will then be likely to become a rallying point for dissident forces. IV. The Economic Experiment 21. Yugoslavia began its lonely journey down the path of economic revisionism some 15 years ago. Since then, government economic policy has been to allow some considerable play of market forces, though government controls have never been fully relinquished and have been tightened in time of stress. The net result has been a respectable growth rate of about seven percent annually in gross national product, excessive and frequently unwise investment in industrial expansion, some growth in consumption, and a chronic deficit in the nation's balance of payments./7/ Over the years, Western lenders have been forthcoming, and Yugoslav indebtedness to the West now amounts to about $1.2 billion. The recent devaluation of the dinar and moves to facilitate the influx of foreign capital are likely to impress potential foreign investors favorably. At the same time, Yugoslavia has managed to keep her economy free from reliance on the Bloc, and although the USSR is Yugoslavia's single largest trade partner, two-thirds of her foreign trade is with Western or nonaligned nations. /7/In 1964, for example, Yugoslavia's balance of payments deficit was $206 million. In 1965 and 1966, new controls cut the annual deficit to about $21 million. [Footnote in the source text.] 22. The most recent swing of Yugoslav economic policy began in 1965, and like its predecessors, it has not been implemented without opposition. Political conservatives are undoubtedly concerned at any further decentralization, any lessening of the party's role in the decision-making process. Managers of less efficient enterprises are unhappy at the prospect of forgoing state protectionism and facing the harsh winds of foreign competition. Trade unions and workers in such enterprises have similar fears, and cannot relish the prospect of unemployment should their inefficient organizations fail and go out of business, as a number already have. Consumers, who may some day benefit the most from movement toward a market economy, in the meantime suffer from shortages of goods and rising prices. In point of fact, the Yugoslav economy is unstable and probably will remain so unless the market forces now being brought into play come to constitute a regulatory mechanism reliable enough to replace the centralized direction which in the past characterized Yugoslav economic control. 23. In the face of such problems, Tito has made a typical series of policy compromises. He has strengthened the financial resources of a number of enterprises by cutting their taxes, by permitting them to retain a major portion of their profits for investment, and by largely localizing the control of credit. At the same time, he has threatened the lash of foreign competition by eliminating import controls on fully half the goods Yugoslavia imports and by bringing Yugoslavia into full membership in GATT. He has not obstructed freer movements of capital investment and labor to needy sectors of the economy, but he is maintaining Federal control of a major portion of the price structure and 30 to 40 percent of investment capital. He has permitted labor to organize outside the direct control of the party, to play a significant role in enterprise management, and to gain inflationary wage increases. (There were a surprising 230 strikes, mostly on wage issues, in 1965 alone.) He has tried to meet the challenge of growing unemployment by encouraging the exportation of Yugoslav labor, and he has maintained extensive although indirect control on consumer consumption. 24. Despite the ambiguities of Yugoslav economic policy, the trend is currently toward increased decentralization and industrial "self-management." The process is now probably irreversible. Major control of investment capital, until 1964-1965 in the hands of Federal Government, is now vested in local and regional banks; individual enterprise managers now have a degree of discretion in the disposal of profits (up to 70 percent); and local governments, down to the level of the Opstina (township), have demonstrated great skill in ignoring economic directives from on high in order to pursue local goals. 25. Nevertheless, continuing danger of inflation and fear of instability will probably persuade Tito to retain remaining central economic levers for some time after their purely economic justification disappears./8/ In addition, injudicious and inconsistent employment of these levers, the inertia and resistance of bureaucrats charged with implementing the reform, and continuing obstructionism on the local level will probably delay achievement of the "socialist market economy" which appears to be the long-range goal of the Yugoslav economic experiment. /8/In addition to price controls and control over a declining share of Yugoslavia's investment capital, the Federal Government can maneuver the economy through limitations on enterprise wage bills and command of foreign trade, as well as through more indirect fiscal and monetary policies. [Footnote in the source text.] V. Foreign Affairs 26. Simply stated, Tito's main foreign policy goals have been to retain Yugoslav independence at any cost, to stand as a model of nonaligned socialist enterprise in the eyes of the world, and to achieve access to economic opportunity in both East and West. His methods for achieving these goals, marked by clever improvisation and shrewd compromise, have been largely successful. He has rejected alliance with either East or West and gotten substantial aid from both. He has denied Soviet hegemony in the socialist movement and lived to see that denial become something of a touchstone of socialist policy. He has accepted financial aid from the West in wholesale quantities, but has politely bid the West goodnight on the doorstep. He has failed in his efforts to establish the "third world" grouping he once sought, but he has redirected Yugoslav diplomatic energies to Europe, and this has brought him new opportunities without destroying his close relationships with the UAR and India. 27. Tito made his peace with the Soviet Union soon after Stalin's death. Trade is large, the Soviets have extended a fair amount of aid (including sales of military equipment), and attitudes toward many international problems are similar, though usually not identical. Nevertheless, party relations are often strained and marked by ideological bickering. Tito has never ceased to see himself as a Communist, a protestant perhaps, but still defender of the faith. In his view, it was Soviet recusancy, not Yugoslav, which split the socialist movement, and Tito must feel some considerable sense of vindication in the fact that other Eastern European nations are now applying lessons learned from the Yugoslav economic experiment and are choosing national roads to socialism. So long as the Yugoslav experiment continues to stimulate emulation within the socialist camp, the Soviet Union will carp and nag; so long as Soviet attacks continue to arouse Yugoslav fears for their independence from foreign meddling, Soviet-Yugoslav relations will be much more a matter of mutual convenience than affection. 28. Yugoslav relations with the US, while generally friendly, have been marked with a measure of restraint and wariness on both sides. The pragmatism which led Tito to seek US aid after the break with the USSR in 1948 remains the touchstone of the Yugoslav attitude. The hostility which Yugoslav exiles in the US bear toward the Belgrade government is always a potential source of friction, especially when it is periodically reflected in US legislation. But the Yugoslavs recognize the usefulness of a continuing measure of US political and economic support, and they do not allow themselves to be easily provoked. Nevertheless, on most of those issues which clearly polarize the world, the Yugoslavs will not forget their Communist antecedents and will pay at least lip-service to Communist positions. 29. Yugoslavia has been more actively seeking improvements in relations with its immediate neighbors in both East and West Europe. Partly this is because of the opportunity presented by relaxed tensions in Europe; partly it is designed as a defensive hedge against any future Soviet attempts at domination. Relations with Hungary and Bulgaria (despite friction with the latter over Macedonia) have significantly improved as Budapest and Sofia have begun to display signs of independence within the Bloc. Even more improvement has occurred in relations with Rumania; Belgrade and Bucharest have found common ground in their resistance to Soviet pressures and are now in a de facto alliance intended to strengthen and preserve their independence. Not surprisingly, Albania--allied with China, partly out of fear of Belgrade--continues its hostility toward Tito, but is taking steps toward some economic cooperation. Yugoslav relations with Greece, though complicated by longstanding minorities problems, are not likely to be troublesome. 30. Yugoslavia enjoys good relations with all major Western Powers except West Germany, and even here, action by the Kiesinger government to restrain Yugoslav expatriates could bring about a rapid improvement. Belgrade has already expressed interest in resuming normal diplomatic relations. Yugoslavia acceded last year to full membership in GATT, a move which will permit Tito to commit an even greater share of Yugoslav foreign trade to the lucrative Western market. Yugoslavia will continue to depend heavily on Western machinery and equipment in her drive toward fuller industrialization, and as Western economies move toward greater interdependence, the Yugoslav economy will probably become enmeshed in the same process. 31. Over the long run, the nonaligned and less developed nations will probably afford the Yugoslavs a lucrative and growing market./9/ Though itself underdeveloped by Western European standards, Yugoslavia is an advanced nation in "third world" terms, and its competitive position has been enhanced by its success in navigating between blocs and in establishing a socialist semi-market economy. It is probable that Tito will expend the diplomatic energy and extend the financial credits necessary to solidify his relations as broadly as possible with the nonaligned. /9/During the first 10 months of 1966, 33 percent of Yugoslavia's foreign trade was with Communist countries, 38 percent was with Western Europe, 10 percent was with the US, and 19 percent was with nonaligned nations. [Footnote in the source text.] VI. The Succession Problem 32. As national patriarch, savior, and political entrepreneur, Tito is truly irreplaceable. For nearly a quarter of a century, he has stood as a symbol of national unity and as Yugoslavia's supreme arbiter. Arranging an orderly succession to his office is the greatest problem the Yugoslav Party--and Tito himself--face. Though Tito is not blind to the problem his departure will create, this is one area of potential dissension in which his genius for compromise and improvisation cannot be brought fully to bear. It is possible for a man to arrange for his own funeral, but it is difficult for him to play a very active role in it. 33. A number of factors favor an orderly succession: though still evolving, the Yugoslav system as a whole has withstood the attacks of party factions, the stresses of economic crisis, and the importunities of separatists. The army continues to provide support for national unity, and fear of Soviet piracy will work to inhibit the adventuresome who might be tempted to steer a new course following the dropping of the pilot. While Tito cannot lay out a fixed path for a successor regime to follow, he may have established a pattern and style, a reliance on the empiric and the experimental, which a successor would probably want to imitate and which, in any case, he would find difficult to abandon. Much will depend, however, on when the succession takes place. Should it occur before Tito has accomplished the pending reorganization of the state and party structures, at a time of severe economic regression, or at a time when dissension among the Republics is high, serious struggle might ensue. The outcome of such a struggle is difficult to foresee. It is remotely possible that a concatenation of such unfavorable events could endanger the cohesion of the Federation. But we believe it far more likely that the state would survive intact. On the other hand, should the succession issue arise after recent reforms have become institutionalized, a relatively united leadership could, without serious crisis, choose a replacement or, more likely, agree on some form of collective leadership. 34. We believe that, over the long term, the principal accomplishments of the Yugoslav system are fairly secure, that Yugoslavia, even without Tito, will survive essentially intact and will persist as a hybrid system. We also think, however, that change and disarray will continue to confront the leadership--especially the post-Tito leadership--with a variety of serious problems. The destination of the Yugoslav regime, said to be a new and superior kind of "socialism," is vague and uncertain, and the route toward it uncharted. None of the forces released by the Titoist reformation is likely to prevail without a struggle; changes of this nature generate formidable opposition. Separatist sentiments are likely to weaken the Federation; both pragmatic and ideological considerations will probably operate to diminish the power of the party; and economic forces, increasingly decentralized, will almost certainly encourage nonparty institutions to play a larger role in shaping national policy. [Continue with the next documents] Volume XVII Index | Foreign Relations Online | Historian's Office | |