Foreign Relations of the United States, 1947, Eastern Europe; The Soviet Union, Volume IV

840.51 FC 60H/11–1347

Memorandum of Conversation, by the Secretary of State¹

restricted

[Washington,] November 13, 1947.

Participants:	Dr. Stanoje Simich, Yugoslav Minister for Foreign Affairs;
	Mr. Sava Kosanovich, Yugoslav Ambassador to the United States;
	Dr. Aleš Bebler, Yugoslav Deputy Minister for Foreign Affairs
	The Secretary.

The Yugoslav Minister for Foreign Affairs, who is in this country as Yugoslav Delegate to the General Assembly of the United Nations, accompanied by the Yugoslav Ambassador and by the Yugoslav Deputy Minister for Foreign Affairs, called by appointment made at their request on November 13.² Mr. Simich immediately referred to Yugoslav blocked gold in this country and in this connection Ambassador Kosanovich read a memorandum dated November 4, 1947 which they left for the Department’s consideration.³ The Ambassador then expanded at length upon that memorandum, alleging specifically, among other things, that the retention of this Yugoslav gold to satisfy US claims which have arisen against Yugoslavia since the original blocking order of 1941 is contrary to the purposes for which such blocking was instituted and inconsistent with the Bretton Woods Agreements concerning the International Monetary Fund and Bank, which envisage the full utilization of members gold reserves for monetary coverage.⁴ The Ambassador continued that despite these considerations the Yugoslav Government is most anxious to settle US claims and to obtain the release of the Yugoslav gold in order that it may utilize the gold for purchases in connection with Yugoslav reconstruction. He mentioned that the US is engaged in extending important financial assistance to Europe in the form of loans but pointed out that the Yugoslav request merely related to the return of funds already belonging to Yugoslavia. The Ambassador went into some detail concerning the nature of US claims against Yugoslavia, expressing Yugoslavia’s willingness to settle claims for compensation for the loss of direct American investments but her unwillingness to entertain claims for dollar payments for investments made through third countries by individuals who have subsequently become American citizens. He stated, without specifying exactly what he had in mind, that there are additional US claims which the Yugoslav Government is not even disposed to discuss (presumably our claim for compensation for the two airplanes destroyed by the Yugoslav authorities in 1946). The Ambassador further referred to the fact that the Yugloslav Government contends, on the basis of figures it alleges to have taken from US sources, that the total value of US direct investments in Yugoslavia in 1941 amounted to something over 5 million dollars. Mr. Simich then said that the Yugoslav Government is now prepared to offer to set aside from the Yugoslav blocked gold sufficient funds to meet our claims for compensation for direct US investments in Yugoslavia, on the understanding that the remainder of the gold would be unblocked.

I stated that I would personally interest myself in the matter they had raised and would consider their proposal strictly on the merits of the case.⁵ At the same time, I pointed out that the US Government has consistently endeavored to reach a satisfactory understanding with the Yugoslav Government whereby those mutually beneficial relations which we so much wish to see could exist between the US and Yugoslavia. However, I made clear that despite our efforts the Yugoslav regime has opposed our endeavors to this end at every turn. Mr. Kosanovich responded that the unfriendly activities of the US Embassy in Belgrade during the incumbency of Ambassador Patterson, our employment in the Embassy of Yugoslav nationals opposed to the regime, US action in dropping explosive fountain pens and pieces of coal from US airplanes, etc had been provocative and embittered the Yugoslav people against the United States. I said that I could of course appreciate the position of the people of war-devastated Yugoslavia and the various psychological forces which had resulted from the trials of the ordeal through which Yugoslavia passed. I emphasized, however, the impossibility for myself and the people of the US of accepting the psychological disruption of Yugoslavia as an adequate explanation for the provocative policy toward the US which events of the last two years cannot fail to convince us the Yugoslav regime has premeditatedly adopted. I cited as an example of the misconceptions prevailing in Eastern Europe at present in regard to US policy a conversation I had recently had with the Polish Foreign Minister.⁶ I told them that the Polish Foreign Minister had suggested that the European aid program would have been materially assisted if the USSR had been consulted in advance as had the British and French. I had told the Polish Foreign Minister and, speaking frankly, reiterated to them, that this attitude was based upon a complete misconception. Neither the British nor the French nor any other foreign government and in fact very few individuals in this country had actually been consulted in advance of my public proposal on European aid. Furthermore, except for emphasizing that we would not be in a position to accept a recovery plan which merely listed Europe’s financial requirements, I had carefully abstained from giving any advice in the formulation of the plan.

Mr. Bebler asked whether it would be envisaged in the European recovery program that Yugoslavia would be given full opportunity to trade with Europe and the United States? I replied that European recovery would seem to require the freest possible interchange.

1. Immediately following this conversation, Ambassador Kosanović and Assistant Foreign Minister Bebler called on John D. Hickerson, Director of the Office of European Affairs. According to the memorandum of conversation prepared by Walworth Barbour, not printed, Kosanović and Bebler carried on a lengthy discourse reviewing the alleged unfriendly actions of the United States against Yugoslavia, including charges that the American Embassy in Belgrade was engaging in improper activity. For his part, Hickerson reminded the Yugoslav representatives that the United States had consistently endeavored to find a basis for mutually beneficial relations between the two countries but had invariably met with hostile Yugoslav responses. (840.51 FC 00H/11–1347)
2. In a memorandum to the Secretary of State dated November 12, not printed, Hickerson had provided background information relative to expected conversation with Foreign Minister Simić. Hickerson’s memorandum characterized Simić and Bebler as follows:

   “Simich was Yugoslav Ambassador to the United States from June 1945 to the early part of 1946. Despite his office he is not a member of the inner ruling circle of the Yugoslav regime and the extent of his influence in Yugoslavia is problematical. The relative insecurity of his position, however, appears to make him feel that he must emphasize his strict adherence to the party line. Mr. Bebler is believed to be more solidly established with the Yugoslav Communist rulers and to have more authority than Simich.” (860H.51 FC 60H/11–747)

3. The memorandum under reference is not printed.
4. For documentation regarding the United Nations Monetary and Financial Conference at Bretton Woods, New Hampshire, July 1–22, 1944, see Foreign Relations, 1944, vol ii, pp. 106 ff.
5. Following his meeting with the Yugoslav representatives, the Secretary of State asked George F. Kennan, Director of the Policy Planning Staff, to examine the question of whether the United States position with regard to the blocking of the Yugoslav gold was fully justified. In pursuance of this request, a Policy Planning Staff paper, PPS–16, dated November 17, was prepared and submitted by Kennan to Under Secretary Robert A. Lovett under cover of a memorandum dated November 18, neither printed (840.51 FC 60H/11–1847). The conclusions of PPS–16 were as follows:
   • “1. The United States is justified in maintaining the blocking of the Yugoslav gold pending some satisfactory general settlement of its claims against Yugoslavia.
   • “2. We can, if the Yugoslavs are prepared really to negotiate, accept a smaller sum than we are asking for at the moment as part of a generally satisfactory settlement. The appropriate time to make a new offer is a matter of tactics.
   • “3. We should attempt to persuade the Yugoslavs that we desire a settlement and should press forward with the negotiations along the general lines on which, they have been initiated.”
6. See p. 446.