YUGOSLAVIA AND ITS FUTURE ORIENTATION

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79R01012A005600040009-9
• Release Decision: RIFPUB
• Original Classification: S
• Document Page Count: 16
• Document Creation Date: December 23, 2016
• Document Release Date: May 15, 2013
• Sequence Number: 9
• Publication Date: February 23, 1955
• Content Type: NIE

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IN I C 01-55
23 February 1955
NATIONAL INTELLIGENCE ESTIMATE
NUMBER 31-55
(Supersedes NIE 93)
YUGOSLAVIA AND ITS FUTURE
ORIENTATION
Submitted by the
DIRECTOR OF CENTRAL INTELLIGENCE
The following intelligence organizations participated in the
preparation of this estimate: The Central Intelligence Agency
and the intelligence organizations of the Departments of
State, the Army, the Navy, the Air Force, and The Joint Staff.
Concurred in by the
INTELLIGENCE ADVISORY COMMITTEE
on 23 February 1955. Concurring were the Special Assistant,
Intelligence, Department of State; the Assistant Chief of Staff,
G-2, Department of the Army; the Director of Naval Intelli-
gence; the Director of Intelligence, USAF; and the Deputy
Director for Intelligence, The Joint Staff. The Atomic Energy
Commission Representative to the IAC, and the Assistant to
the Director, Federal Bureau of Investigation, abstained, the
subject being outside of their jurisdiction.
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CENTRAL INTELLIGENCE AGENCY
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June 1953.
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YUGOSLAVIA AND ITS FUTURE ORIENTATION
THE PROBLEM
To estimate probable developments in Yugoslavia over the next few years, with
special emphasis on its future orientation.
CONCLUSIONS
1. We believe that the dominant concern
of the Tito regime will remain that of in-
suring its own survival and avoiding for-
eign domination. The principal aim of
Yugoslav policy is the achievement of
beneficial relationships with both power
camps with a minimum of Yugoslav com-
mitments to either. Since Tito recognizes
that war between the two major power
blocs would place his regime in jeopardy,
he will also seek to promote policies aimed
at reducing the risk of general war.
(Paras. 19, 20)
2. Although Yugoslavia has largely com-
pleted a "normalization" of relations with
the Soviet Bloc and will probably con-
tinue to maintain these relations, we esti-
mate that it will not return to the Bloc
at least so long as Tito remains in power.
(Paras. 21, 22)
3. Despite its desire to be independent of
both blocs, the Tito regime recognizes its
need for further Western aid and would
probably seek to maintain some security
ties with the West even if such aid were
substantially curtailed. It will probably
agree to further joint planning with its
Balkan allies and ultimately to some ex-
tent with Italy and NATO, though its
acceptance of more formal ties with the
West is highly unlikely. (Paras. 24, 25)
4. Yugoslav leaders will continue to de-
sire an Albanian regime under their in-
fluence if not under their direct control,
and will oppose any Western proposals re-
garding Albania's future which might
prejudice these ambitions. However, Yu-
goslavia is unlikely to undertake unilater-
ally any major intervention in Albania,
except in the event of a serious govern-
mental crisis in that country, for fear of
arousing strong Greek, Italian, UK, and
US opposition. (Para. 27)
5. The Djilas-Dedijer affair reflects major
differences in view within the party, and
some degree of political ferment will al-
most certainly continue. However, Tito
is still clearly the undisputed boss, and
we foresee? no major threat to internal
stability so long as he is alive. (Paras.
33, 36, 37)
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6. Tito's death would be a serious blow
to the regime. Even if the transfer of
power were to take place without difficul-
ty, it is uncertain whether any successor
could develop a comparable degree of con-
trol over the party machinery and govern-
ment. At least at the outset, a successor
regime would probably seek to carry out
Tito's policies. However, Yugoslavia's
orientation would be uncertain if there
were a disruptive struggle over the suc-
cession or a subsequent deterioration of
the regime's strength and unity. (Paras.
38, 39)
7. Assuming a continuation of some ex-
ternal aid and credits and reasonably
good harvests, Yugoslavia's longer-term
economic prospects appear favorable. In
the short run, however, Yugoslavia will
continue to face the basic problem of how
to balance its foreign accounts while pur-
suing an ambitious development program
and making heavy defense outlays.
(Paras. 49, 51)
8. The Tito regime will probably continue
to rely on foreign aid, as well as on in-
creased production for export and further
rescheduling of foreign debt payments, to
meet this problem. It probably estimates
that Yugoslavia's strategic importance
will compel the US to continue aid. Cur-
tailment of this aid would thus make seri-
ous readjustments necessary, and even
though it would probably not critically
endanger the Yugoslav economy except
in the event of further droughts, the po-
litical repercussions might affect Yugo-
slavia's internal and foreign policies.
(Paras. 51, 52)
9. Despite heavy economic strain, the Ti-
to regime will almost certainly continue
its intensive efforts to build up its armed
forces. Provided that substantial West-
ern arms aid continues, Yugoslav defense
capabilities will continue to improve. Yu-
goslavia's military position will also be
benefited by the Balkan Alliance, under
which joint military planning has already
developed satisfactorily. (Paras. 55, 58-
61)
10. The possibility cannot be excluded
that secret arrangements may have been
made or may be made, between top Yu-
goslav Communists and the USSR, de-
signed to align Yugoslavia with the USSR
in case of general war. There are per-
sistent and unsubstantiated allegations
that a secret Moscow-Belgrade deal has
already taken place. We believe that
such allegations cannot be wholly dis-
counted but that it is highly improbable
that they are true. (Para. 17)
11. We believe that the present Yugoslav
regime would prefer to remain neutral
in the event of general war, but probably
has little confidence that it could success-
fully do so. We estimate that Yugoslavia
would feel compelled to fight on the side
of the West if its Balkan allies were
attacked, but if the Balkan area were not
invaded it would probably elect to remain
neutral as long as the international sit-
uation would permit. (Para. 62)
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DISCUSSION
I. YUGOSLAVIA'S PRESENT INTERNATIONAL
POSITION
12. Since June 1948, when Yugoslavia was
expelled from the Cominform for its resist-
ance to Soviet domination, its international
position has been anomalous. At first re-
luctant to believe that its ostracism from the
Communist world was more than tempo-
rary, Yugoslavia was finally forced by Soviet
hostility and by its own economic difficulties
into closer relations with the West. In 1950
it accepted Western assistance rather than
face economic collapse. Since then it has
slowly but steadily built up its economic, mili-
tary, and diplomatic ties with the Western
Powers, capitalizing skillfully on Western in-
terest in keeping it free of Soviet domination.
To date it has received from the West more
than $700 million in economic grants and
credits and close to $1 billion in military aid.
It has reoriented its foreign trade, in 1948
more than 50 percent with the Bloc, into an
overwhelmingly Western pattern. It has re-
solved a number of outstanding differences
with the Western Powers, including the
Trieste dispute with Italy. It has even gone
so far as to enter into mutual defense com-
mitments with Greece and Turkey.
13. At the same time Yugoslav cooperation
with the West has been subject to significant
limitations. Yugoslav leaders have consist-
ently emphasized their continuing dedication
to Communism and have not hesitated on
occasion to range themselves alongside the
other Communist powers in criticism of vari-
ous Western institutions and practices. They
have been grudging and suspicious in their
dealings with the West and have further un-
derlined their unwillingness to identify them-
selves completely with the capitalist world by
efforts to cultivate socialist parties and such
neutral countries as India, Burma, and
Sweden.
14. These apparent inconsistencies in Yugo-
slay foreign policy have been intensified in
the period since Stalin's death. Although
this period was marked by the final abandon-
ment of Yugoslav intransigence over Trieste
and by the development of Yugoslavia's
friendship pact with Greece and Turkey into
a formal defensive alliance signed in August
1954, the most spectacular development of
the period has been the restoration of osten-
sibly friendly relations between Yugoslavia
and the Soviet Bloc. In line with this
"normalization," the USSR has not only
dropped its virulent propaganda campaign
against Tito but has gone out of its way to
acknowledge the contribution of Tito's parti-
sans to Yugoslavia's wartime liberation, to
hail the Trieste settlement, and to admit pri-
vately that Yugoslavia had been wrongly
treated in 1948. It also appears to have cur-
tailed its support of Cominformist Yugoslav
emigres and other anti-Tito subversive activi-
ties. "Normalization" of Yugoslav-Bloc rela-
tions, which is now largely complete, has
included the resumption of full diplomatic
relations with the USSR and the Satellites,
the establishment of such relations between
Yugoslavia and Communist China, the re-
opening of communications across the Yugo-
slav borders, the restoration of Yugoslav-Bloc
trade in nonstrategic materials, improvement
of Yugoslavia's position in the Soviet-domi-
nated Danube Commission, and exchanges of
cultural and sports delegations.
15. Yugoslavia was initially cautious about
these steps toward "normalization," which
were taken almost entirely at Soviet initiative.
Of late, however, the Yugoslays have been in-
creasingly outspoken in welcoming renewed
contacts with the Soviet world. Although
Tito and his key associates have voiced con-
tinuing skepticism about ultimate Soviet ob-
jectives and have taken pains to reassure the
West that they "will never go back," they have
hailed the new Soviet tactic as a demonstra-
tion that the Kremlin's new leadership has
realized the bankruptcy of the old Stalinist
policy. They have clearly been impressed by
the reversal of Bloc attitudes toward Yugo-
slavia and by the parallel indications that a
less dominating Moscow attitude toward the
Satellites was possibly in the making. They
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have considered that Bloc moves toward rap-
prochement with Yugoslavia were part of a
general slackening of Soviet militancy and
that an easing of world tensions was now
possible.
16. As Communists who fought to overturn
capitalism in Yugoslavia and who look for-
ward to its eventual disappearance elsewhere,
the Yugoslav leaders have been uncomfortable
at being debarred from friendly contact with
other Communist nations and at being forced
to consort largely with capitalist nations
whose institutions and policies they distrust
and whose ultimate preferences would be for
a non-Communist Yugoslavia. "Normaliza-
tion" of relations with the Soviet Bloc has
restored the channels through which contacts
with the Communist world can be resumed.
These developments in the "normalization"
trend have placed new emphasis on the possi-
bility of Yugoslavia's realigning itself with
the Soviet Bloc.
17. Thus far, however, there is little indica-
tion that Yugoslavia is succumbing to Soviet
lures. There are persistent and unsubstan-
tiated allegations that a secret Moscow-Bel-
grade deal has already taken place. We be-
lieve that such allegations cannot be wholly
discounted but that it is highly improbable
that they are true. Yugoslav leaders have
remained openly critical of many aspects of
the Soviet system and of the aggressive ele-
ments of its foreign policy. Moreover, there
appears to be no slackening in the spirit of
stubborn independence and pride which led
Tito and his associates to follow their own
concept of Communism despite the Comin-
form's displeasure, nor in the emphasis on
the regime's self-interest which has marked
its diplomacy since June 1948.
18. The consequences of the sudden rupture
of Yugoslavia's relations with the Soviet Bloc,
on which it was almost entirely dependent
for trade, economic support, military guid-
ance and supplies, and scientific and cultural
contacts, provided Tito with an impressive
lesson in the dangers of exclusive cooperation
with a single power grouping. Yugoslavia's
subsequent relationship with the West has
been far less restrictive, but it has still placed
4
Yugoslavia in a position of economic depend-
ence on the West and has confronted the
Yugoslays with the uncomfortable necessity
of considering the impact of their actions on
Western official and public opinion. The re-
sumption of "normal" relations with the So-
viet countries not only alleviates Yugoslavia's
one-sided dependence on the West but also
increases its bargaining power.
II. YUGOSLAVIA'S PROBABLE ORIENTATION
AND FOREIGN POLICIES
19. We believe that the dominant concern of
the Tito regime will remain that of insuring
its own survival and of avoiding foreign dom-
ination. For this reason, the practical re-
quirements of maintaining power will con-
tinue to override purely nationalistic or
ideological considerations. The Yugoslav
leadership has shown no indication that it
will abandon its coldly realistic view of world
power politics or that it will alter its views of
where the chief threat to its own survival lies.
So long as it considers that this threat is from
the Bloc, it is highly unlikely to jeopardize
its support by the Western Powers.
20. At the same time, the Yugoslav regime
almost certainly believes that its own best
interests lie in avoiding too close an associa-
tion with either great power bloc. In the
belief that the threat of Soviet aggression has
become less immediate since Stalin's death,
Yugoslavia is attempting to achieve beneficial
relations with both camps with a minimum
of commitments to either one. Yugoslavia's
preoccupation with its own independence and
security will also lead it to promote riblicies
aimed at reducing the risk of general war.
The Tito regime clearly recognizes that in
such a conflict between the two great power
blocs its own position would seriously be jeop-
ardized.
21. Policy Toward the Bloc. In pursuit of
the above objectives, we believe that Tito will
continue to maintain these "normalized" rela-
tions with the Bloc. His regime will remain
interested in renewing its contacts with
fellow Communists and in influencing the
Bloc toward policies favorable to Yugoslavia.
However, further relations between Tito and
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the USSR cannot but be affected by a contin-
uing deep distrust and suspicion on both sides.
Tito almost certainly would not accept signifi-
cant Soviet influence over Yugoslavia, even if
he were assured of becoming a favored Satel-
lite. Moreover, in his relations with the
Bloc he will probably avoid going so far as
to risk loss of Western support, though it is
possible that he may miscalculate the Western
reactions to his moves.
22. We estimate that\ Yugoslavia will not re-
turn to the Soviet Bloc at least as long as Tito
remains in power. We believe that the Tito
regime would be suspicious of any Soviet at-
tempts to offer him a Bloc status materially
different from that of the other Satellites and
would consider such an offer a subterfuge. In
determining his response to such an offer
Tito would have to consider Soviet willingness
to make political, economic, and military con-
cessions, the disadvantages of losing Western
support, and the internal situation within
Yugoslavia. In our view the Tito regime
would be likely to realign itself with the Bloc
only in the event that the USSR had already
basically revised its policy toward the Satel-
lites to such an extent as to convince Tito
that Moscow was really willing to permit rela-
tions on a basis of equality. We believe that
such a basic- alteration in Soviet policy to be
highly unlikely during the period of this esti-
mate.
23. While we believe that the likely immedi-
ate successors to Tito would at the outset be
disposed to follow the same policy, we cannot
predict the course of Yugoslav policy in the
event of his death, especially if there is a
struggle for power over the succession.
24. Relations with the West. So long as the
Yugoslays regard the chief threat to their
independence as coming from the Bloc, we
believe that they will continue their policy of
seeking countervailing Western support.
They regard this relationship as strictly a
marriage of convenience. They believe that
the West needs them and will support them
in its own interest and, for their part, they
recognize their need for further Western mili-
tary and economic aid in building up their
own strength. Even if such assistance were
substantially curtailed, Tito would probably
still seek to maintain some security ties with
the West.
25. Since the Yugoslays regard military
strength as vital to their security, we believe
that they will continue their policy of limited
military collaboration with the West. They
recognize that some degree of joint planning
and coordination is essential to maximum
defensive potential. They also probably esti-
mate that the West will insist on some degree
of cooperation as the price for continued aid.
Therefore, they will probably agree to further
joint planning with their Balkan allies, and
ultimately to some extent with Italy and
NATO. However, we believe that Yugoslavia
will prefer to keep such arrangements in-
formal. It is highly unlikely that the Yugo-
slays would accept more formal ties with the
West, such as membership in NATO or the
Western European Union, although they may
participate in other European organizations
such as the Organization for European Eco-
nomic Cooperation. The Tito regime will
probably continue to regard formal military
ties as involving undesirably close relations
with one power bloc and as endangering the
"normalization" of relations with the Soviet
orbit.
26. The Search for a "Middle Position." We
believe that so long as the Tito regime con-
siders that there is a period of reduced inter-
national tensions, Yugoslavia will seek in-
creasingly to achieve an independent position
in world affairs. This effort will not be al-
lowed to jeopardize Yugoslavia's military
arrangements with the West. Yugoslavia
will continue to gravitate toward such powers
as India and Burma with which it feels a cer-
tain identity of interests and outlook. Tito
apparently hopes that cooperation with such
powers will help to reduce tensions, promote
peace, overcome Yugoslavia's isolation, and
increase Yugoslav prestige. In the event
that international tensions should increase,
however, Tito probably would be compelled to
place greater emphasis on his ties with the
West.
27. Regional Interests and Ambitions. Yugo-
slavia will retain certain special interests and
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ambitions in the Balkan area, but the Tito
regime's pursuit of these ambitions will prob-
ably be restrained by the requirements of its
over-all policies. Yugoslav leaders almost cer-
tainly desire to have an Albanian regime re-
sponsive to their influence if not under their
direct control, despite their public proclama-
tion of interest in having Albania free and
independent. To this end, they will continue
to support certain Albanian emigre and
resistance elements, will endeavor to neu-
tralize the efforts of such powers as Italy,
Greece, the UK, and the US to build up similar
influence, and will oppose any Western pro-
posals which might prejudice Yugoslav ambi-
tions, particularly those involving partition of
Albania or the establishment of a non-Com-
munist regime there. However, Yugoslavia
will probably soft-pedal its propaganda efforts
to undermine the present Albanian regime so
long as the "normalization" policy appears to
be producing favorable results. Moreover, it
is unlikely to undertake unilaterally any ma-
jor intervention in Albania, except in the event
of a serious governmental crisis in that coun-
try, for fear of arousing strong Greek, Italian,
US, and UK opposition. For similar reasons,
Yugoslavia is unlikely to revive its propaganda
claims to Greek and Bulgarian Macedonia so
long as the exigencies of the international
situation require the avoidance of friction
with these two powers.
III. CHARACTER AND STABILITY OF THE
REGIME
Present Situation
28. Internally, Yugoslavia remains a Commu-
nist dictatorship dominated by the command-
ing personality of Tito. Power is concen-
trated in the hands of Tito and a small group
of men personally loyal to him who hold inter-
locking positions in the government, the party,
the armed forces, the secret police, and the
mass organizations. There is no evidence of
significant rivalry among these groups. The
rank-and-file of the party are chiefly import-
ant as providing the driving force for carrying
out the regime's programs.
29. The Tito regime, by its own admission, is
still confronted with underlying hostility on
the part of most of the people toward Com-
munism, although Tito himself appears to
have won widespread respect for his vigorous
leadership and defense of Yugoslav national
interests. The peasantry, comprising two-
thirds of Yugoslavia's 17,000,000 population,
continues to regard Communism with suspi-
cion and dislike, despite the current relaxa-
tion of forced socialization in the countryside.
The regime's efforts to control and discipline
the Roman Catholic and Orthodox clergy and
Moslem religious leaders have made the
church a continuing symbol of popular opposi-
tion to the regime, even outside the ranks of
the devout; although the Yugoslays are not
particularly religious, church attendance has
remained consistently high. While animosi-
ties and grievances among the various minor-
ity groups in Yugoslavia appear to be quies-
cent at present, regional jealousies and riv-
alries probably contribute in some measure
to dissatisfaction with the policies of the
present government. The low standard of
living remains a countrywide source of grum-
bling. Under Tito's dictatorship, however,
popular opinion has little effect on the re-
gime's stability and is important only insofar
as it affects economic productivity.
30. Prior to its 1948 break with Moscow, Yu-
goslavia consciously imitated the government-
al patterns of the USSR. Since 1950, how-
ever, Tito and his associates have made a
series of efforts to develop a more flexible,
efficient, and popularly acceptable system of
economic and political controls than that of
the USSR, which Yugoslav theoreticians have
criticized as stifling initiative, encouraging
bureaucratic excesses, and alienating popular
opinion. In recognition of the strength of
peasant opposition, the drive for collectiviza-
tion of agriculture has in effect been reversed,
with the result that only slightly over two
percent of the farm land is now under collec-
tive or cooperative control, as against nearly
20 percent in 1951. At the same time the
onerous system of crop deliveries has been
abandoned and greater production incentives
have been provided in the form of credits and
higher prices. Decentralization of planning
and supervision has taken place under the
economic development program.
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31. These changes in the economic sphere
have been paralleled by a series of "democrat-
ic reforms," including the introduction of
workers' councils, decentralization of govern-
mental administration, moves to combat bu-
reaucratic lethargy and to stimulate greater
rank-and-file enthusiasm and initiative in
Communist Party affairs, and the inaugura-
tion of a somewhat less arbitrary exercise of
police authority. These concessions, however,
have to a large extent been illusory. Although
Tito appears to have seriously intended to
liberalize the regime to some extent, he was
evidently unprepared to face the dissipation
of administrative authority and control, and
the confusion and dissatisfaction among many
old-line party functionaries, which these re-
forms entailed. The bold program for demo-
cratization and reinvigoration of the Commu-
nist Party adopted at the Sixth Party Con-
gress in November 1952 was sharply curtailed
at a Central Committee plenum at Brioni the
following June. The heaviest criticism was
levelled at those guilty of relaxing party dis-
cipline, spreading of "petty-bourgeois-anarch-
ist ideas of freedom and democracy," and
failure to suppress "foreign and antisocialist
manifestations."
32. The Djilas-Dedijer Affair. Strong senti-
ment for revival of the liberalization program
has nevertheless persisted among some mem-
bers of the ruling circle. In the fall of 1953
Milovan Djilas, one of the principal advocates
of the 1952 program and at the time the No.
3 man in the regime, launched a series of
articles charging the party bureaucracy with
despotism, sterility of dogma, and self-aggran-
dizement and advocating that the Leninist
doctrine of party dictatorship be dropped and
the party apparatus allowed to "wither away"
in the interest of "true democracy." In Jan-
uary 1954, after a particularly provocative
final article accusing the wives of high party
officials of petty bourgeois snobbishness and
cliquishness, Djilas was stripped of his party
functions and forced into retirement by Tito.
However, the whole problem came up again
in December 1954, when Vladimir Dedijer, Ti-
to's official biographer, flaunted party efforts
to discipline him for backing Djilas and in-
stead took his case to a Western newspaper-
man. Djilas in turn gave an interview to
another Western journalist which indicated
that he remained even more convinced of the
need for greater democracy in Yugoslavia.
Both were tried and given light suspended
sentences.
33. Although the Djilas-Dedijer affair has
apparently had little effect on the stability of
the regime, and its outcome indicated that
Tito is still undisputed boss, the affair reflects
major differences in view between the more
liberal and the more authoritarian elements
in the party. While Djilas has no organized
support, he remains the only Yugoslav Com-
munist other than Tito with any significant
degree of popular appeal and his stand has
almost certainly evoked favorable reactions
among some party members and portions of
the general public. This sympathy for Djilas
probably extended into the upper echelons of
the party, although few if any would endorse
his sharp rejection of Marxist-Leninist prin-
ciples regarding the central role of the party
in the state. Dedijer even claims that Vice-
President Kardelj and Rankovic, head of the
secret police, were among those who privately
agreed with Djilas' articles but were afraid to
quarrel with the "old man." Tito himself
has appeared to lean toward the Djilas view-
point in the past.
34. However, Tito and Kardelj obviously con-
cluded that Djilas had gone too far and that
steps would have to be taken to reaffirm the
authority and prestige of the party and gov-
ernmental bureaucracy and to restore party
discipline. In this, they were almost certain-
ly supported by most of the party. bureaucracy.
Some of these party functionaries were prob-
ably motivated primarily by personal resent-
ment of Djilas' onslaught on the party leader-
ship and by concern for the preservation of
their rank and authority. However, there are
almost certainly others who regard Djilas not
merely as a difficult and irresponsible trouble-
maker but as a dangerous dissenter from
Communist orthodoxy. This doctrinaire ele-
ment is presumably dissatisfied at least to
some degree with the dilution of Communism
under Tito and even more uncomfortable in
the company of the West than other Yugoslav
Communists.
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35. As such, they might be particularly sus-
ceptible to the lure of realignment with the
"first land of socialism" now that Stalin's
vindictive policies toward Yugoslavia appear
to have been reversed. There are presumably
also some Soviet agents and secret sympa-
thizers within Yugoslavia. However, there
appears to be no organized Cominform resist-
ance to the Tito regime at present and no
evidence of organized pressure for a return
of Yugoslavia to the Soviet Bloc.
Probable Developments
36. Although the immediate result of the
Djilas-Dedijer episode will probably be a
tightening up of party discipline and a sup-
pression of open controversy, some degree of
political ferment in Yugoslavia will almost
certainly continue. Basic issues are still un-
resolved with respect to the form which
Yugoslav Communism will utimately take,
Yugoslavia's position in world affairs, and the
management of economic affairs. Orthodox
elements in the hierarchy will probably press
for the strengthening of dictatorial controls
over the party, the government, and the econ-
omy, and possibly also for the establishment
of closer relations with the Soviet Bloc and
more distant ones with the West. On the
other hand, there will also be continuing sent-
iment, probably shared to some extent by Tito
himself, for the development of a political sys-
tem which will harness the country's energies
on behalf of the regime more effectively and
will also serve as an example to other Commu-
nist countries.
37. Despite such political ferment, Tito will
continue to dominate the Yugoslav situation
and we foresee no major threat to Yugoslav in-
ternal stability so long as he is alive. He is
admired, respected, and feared even by such
extreme dissenters as Djilas. It is unlikely
that any members of the hierarchy would
openly oppose him and extremely unlikely
that they could do so successfully. Although
Tito's actions will continue to be circum-
scribed to some degree by requirements of
political expediency, the major decisions in
the last analysis will continue to be his own.
38. Tito's death would be a serious blow to the
regime. Though there is at present little evi-
dence of serious rivalry among Tito's associ-
ates, a disruptive struggle over the succession
may take place, particularly since Tito's death
would almost certainly revive the basic differ-
ences revealed in the Djilas affair. Even if
the transfer of power were to take place with-
out difficulty, none of Tito's potential succes-
sors possesses his personal magnetism and
prestige, and it is uncertain whether any suc-
cessor could develop a comparable degree of
control over the party machinery and govern-
ment.'
39. At least at the outset, a successor regime
would probably seek to carry out Tito's pres-
ent domestic and foreign policies, including
its probable unwillingness to return to the
Soviet Bloc. However, if there were a dis-
ruptive struggle over the succession or a sub-
sequent deterioration of the regime's strength
and unity Yugoslavia's orientation and poli-
cies would be uncertain.
IV. ECONOMIC SITUATION AND PROSPECTS
40. Following World War II the Tito regime
made vigorous efforts to reorganize the Yugo-
slav economy and force the pace of economic
development along Soviet lines. It national-
ized nearly all sectors of industry and em-
barked on an overambitious industrialization
program designed to capitalize on Yugoslavia's
fairly sizeable but undeveloped supplies of
many of the basic resources needed for in-
dustrial expansion ? coal (mainly brown coal
and lignite) , iron ore, water power, bauxite,
and nonferrous ores._
41. Despite these efforts, Yugoslavia remains
a poor and predominantly agricultural coun-
try, although considerable industrial progress
has been made. Its economic development
The most prominent candidate for the succes-
sion is Vice-President Kardelj, a distinguished
Marxist theorist who is the real architect of
Yugoslavia's so-called new socialist democracy,
has taken an active role in Yugoslav foreign
policy, and has been a sort of alter ego to Tito.
Other potential candidates are Rankovic, head
of the secret police; Gosnjak, who heads the
defense establishment; and Vukmanovic-Tempo,
the economic czar of the country.
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program has run into serious difficulties.
These arise from a combination of factors,
among them: (a) a shortage of capital, capital
equipment, and industrial and scientific
know-how; (b) the regime's own inexperience
and doctrinaire rigidity resulting in ineffi-
ciency and mismanagement; (c) the regime's
need completely to reorient its trade relations
following the 1948 break with Moscow and
the subsequent Bloc economic blockade; (d)
the concurrent economic drain of extremely
high defense outlays; and (e) a lag in agricul-
tural production occasioned largely by obso-
lete methods, by peasant distrust of the re-
gime, and by a series of disastrous droughts.2
42. In 1950 these factors confronted Yugo-
slavia with economic collapse, from which it
was saved only by inauguration of large-scale
Western aid. This dependence has continued,
and up to June 1954 the US, UK, and France
have extended some $464 million in grant
economic aid, including about $360 million
from the US. (Plans for FY 1955 call for an
additional $149 million, including $140 million
from the US.) Yugoslavia also received ex-
tensive loans and credits which, combined
with comparatively small prewar debts,
amount to over $400 million. Servicing of
these loans and credits has contributed to
serious balance of payments difficulties.
43. The Yugoslav leaders were also forced to
abandon their overambitious Five Year Plan
(1947-1951). They began gradually decen-
tralizing the rigid economic planning and
control system and substituted for the Five
Year Plan a looser series of annual "Social
Plans." These set forth the general frame-
work in which the economy is to operate and
specify annual production targets. Outlays
for heavy industrial development were re-
duced slightly below the levels originally
planned and were concentrated in some 150
"Key Projects," (ore processing plants, power
plants, development of mines, oil refineries,
etc.) which were chosen as being the most
likely to make an early improvement in the
In the seven years since the Cominforrn break,
there have been three droughts. The prewar
level was approximately one drought year in
three.
9
balance of payments position. The regime
also shelved its agricultural collectivization
program and has permitted the peasants to
withdraw from the collective farms.
44. Despite its more realistic economic pro-
gram, Yugoslavia has continued to face seri-
ous problems. In part these arise from the
continuation of a large part of the ambitious
industrialization program and heavy defense
expenditures, which claim the high proportion
of 25 percent and 16 percent of GNP respec-
tively. Although the over-all index of indus-
trial production has risen from 167 in 1949
(1939=100) to 209 in September 1954, many
of the "Key Projects" are considerably behind
schedule. Moreover, agricultural output has
continued to lag seriously, owing largely to
peasant resistance to the regime and to the
serious droughts in 1950, 1952, and 1954.
45. As a result of these factors Yugoslav eco-
nomic growth has been severely retarded.
GNP fell sharply in FY 1953 and despite a
subsequent recovery it is estimated that GNP
for the present fiscal year will be only two
percent over the FY 1952 figure. The best
available estimate of total GNP is $3.7 billion
in 1953-1954 as compared to $1.8 billion for
Greece and $5.4 billion for Turkey. Per capita
GNP is roughly comparable in all three coun-
tries. However, the percentage of Yugoslav
GNP devoted to consumption is lower than
that of any Western European country, and
the Yugoslav standard of living is little if any
higher than before the war.
46. Yugoslavia's need to import foodstuffs
during the drought years, its imports for de-
fense and capital investment programs, and
the difficulty of reorienting its trade from the
Bloc to the West have led to severe balance of
payments difficulties. It has been able to
balance its foreign accounts only through
Western grants and loans. Largely because
of these loans Yugoslavia is burdened with a
foreign debt as of 31 August 1954 of almost
$400 million, which it is finding difficult to?
service. However, its over-all balance of pay-
ments deficit has declined from $213 million
in 1952-1953 to $145 million in 1953-1954.
47. During 1954 a revival of Yugoslav trade
with the Soviet Bloc took place largely on
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Bloc initiative, and trade agreements, mostly
for short periods, were concluded with all Bloc
countries except Albania and Communist
China. So far in 1955 annual agreements
have been concluded with four of these coun-
tries. If these agreements are fulfilled, the
trade would approximate 13 percent of
total Yugoslav foreign trade. Negotiations
are in progress with other Bloc countries and
this figure will probably increase. The com-
parable prewar figure was 15-20 percent and
for 1948 was 50 percent. Yugoslavia has a
clear economic basis for welcoming such trade,
since the Bloc can supply fuels, raw materials,
and even capital goods which must otherwise
come from hard currency areas. The Yugo-
slav Government has assured the US that it
will not ship strategic materials to the Bloc.
Such small shipments as have occurred are
probably attributable to weaknesses in control
of transshipments.
48. Yugoslavia's exports to Western Europe
have declined from a high of 77 percent of
total exports in 1952 to 69 percent for the first
half of 1954. Exports to North America have
also declined. This trend is due primarily to
the difficulty the Yugoslays have in market-
ing their exports (particularly new manufac-
tures) in these areas. The difference has
been mainly made up in increased trade with
the Middle East and Latin America. Thus,
while Yugoslavia continues to be dependent
on dollar imports, its dollar earnings and
earnings of convertible Western European
currencies are declining.
Economic Prospects
49. Assuming a continuation of some external
aid and credits and reasonably good harvests,
Yugoslavia's rate of economic growth should
gradually increase and its longer-term pros-
pects appear favorable. Industrial produc-
tion will probably continue to increase as more
of the _"Key Projects" come into operation,
and should lead to greater exports. Sufficient
agricultural improvement to permit mainte-
nance of a substantial export program is al-
most certainly a long-term matter and any
further crop failures would involve the need
for emergency food imports. The govern-
ment will probably modestly increase invest-
ments in agriculture but it is unlikely that
these investments will be sufficient to lead to
any substantial short-term increases in pro-
duction.
50. Barring droughts, Yugoslavia will proba-
bly be able to effect further gradual reduc-
tions in its foreign trade deficit, but there is
little prospect that it can achieve a balance
in its payments over the next two or three
years. Moreover, it is now in the period when
its foreign debt requires the largest annual
servicing, ranging from $37 million to $48
million in 1955-1957. Some additional re-
scheduling of this debt may be possible but
even a complete moratorium could not by
itself eliminate Yugoslavia's payments deficit,
which will continue to stem in the first in-
stance from an adverse trade balance.
51. In the short-run therefore, Yugoslavia is
still faced with the same basic problem it has
had ever since its break with the Comin-
form ? how to balance its foreign accounts
while pursuing an ambitious development
program and making heavy defense outlays.
We believe that the Tito regime will remain
unwilling to cut defense expenditures and
reluctant to cut capital investment signifi-
cantly, but will continue to pursue a policy
of relying on foreign aid, increased industrial
and raw material exports, and further re-
scheduling of Yugoslavia's foreign debts to
reduce its payments imbalance. Tito prob-
ably estimates that the strategic importance
of Yugoslavia to the West is such that the US
will feel compelled to continue some military
and economic aid.
52. Curtailment or elimination of foreign
economic aid would force Yugoslavia to make
significant adjustments in investment, de-
fense, or consumption. In the absence of
further serious droughts, such adjustments
would not critically endanger the Yugoslav
economy, but the political repercussions might
affect Yugoslavia's internal and foreign poli-
cies. We are unable to estimate which
adjustments the government would make,
since a cut in any sector would entail serious
disadvantages.
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53. In view of the desperate need to increase
agricultural production and of the peasant
distrust of the regime, we do not believe that
the gov,ernment will revert to the Soviet-type
farm collectivization program which it aban-
doned in 1952-1953. While the government,
because of its need to control agriculture,
probably retains the ultimate aim of socializ-
ing the countryside, it will probably approach
this through cooperatives in which the peas-
ants will continue to own their land, but will
cooperate on purchasing, marketing, credits,
etc.
54. Trade between Yugoslavia and the Soviet
Bloc will probably increase so long as political
considerations on both sides favor it. The
extent to which this trade will approach or
exceed prewar levels will depend both on the
Bloc's economic and political incentive to ex-
pand this trade and Yugoslavia's fear of
becoming seriously dependent on the Bloc. It
is unlikely that this trade would again ap-
proach the level of 1948 or that trade consid-
erations alone could impel Yugoslavia to re-
turn to the Bloc.
V. MILITARY TRENDS
55. Despite heavy economic strain, the Tito
regime is continuing its intensive efforts to
build up Yugoslavia's armed forces. Defense
outlays in the past three years have been some
16 percent of GNP. Substantial imports of
military supplies (over and above US military
aid) also have contributed greatly to Yugo-
slavia's foreign trade deficit. However, we be-
lieve that the regime is highly unlikely to
make any significant reduction in the Yugo-
slav military establishment, since it is still
anxious to strengthen itself against the threat
of Bloc aggression.
56. The Yugoslav military forces and the
security police constitute the major elements
in the regime's control of the country.
Recognizing the importance of the support
of the military, the regime has favored the
armed forces; most of the officer corps has
received some tangible evidence of the
regime's interest in its welfare. Although
there has been some evidence of Comin-
11
formism in the officer corps in the past, there
is no reason to believe that the officer corps
is disloyal to the regime.
57. By far the most important factor in the
improvement of the Yugoslav armed forces
over the past few years has been US military
aid, which since 1951 has amounted to nearly
$1 billion (the figure for FY 1955 is roughly
$150 million). Yugoslavia's armaments in-
dustry is now producing some small arms and
light artillery as well as ammunition for these
weapons. Yugoslavia also has a modest ship-
building industry. However, it remains de-
pendent on outside sources for all other types
of equipment and ammunition. Therefore, a
cutting-off of US arms aid (unless replaced
from other sources) would in time markedly
reduce the combat capabilities of the Yugo-
slav forces, particularly the air force.
58. The Yugoslav Army of 300,000 men is
organized into 29 rifle and three armored divi-
sions. It is considered well trained up
through regimental level, and two-thirds of
the divisions are considered combat ready.
The army is currently deployed to meet
threats from the Satellites. There are also
35,000 Border Guards. By M+90 the army
could be expanded to 1,200,000 men and 44
divisions, but the reserve units would lack
heavy weapons and supplies. Yugoslav sol-
diers are well-trained, tough, and intensely
patriotic. The army's chief weaknesses are:
shortage of both heavy and communications
equipment; heterogeneity and obsolescence of
much of the equipment on hand; the inex-
perience of senior officers in handling large
forces in combined operations, including air
support of ground forces. Assuming con-
tinued US aid, the capabilities of the army
will continue to improve.
59. The Yugoslav Air Force, whose primary
mission is ground support, is now in the
process of conversion to jet aircraft. Princi-
pal operational aircraft include approximately
115 F-84G's, 140 F-47D's, and 100 S-49's 3 all
utilizable in a fighter or fighter/bomber role.
Also there are about 125 Mosquitos and 200
An obsolete piston single engine fighter of Yugo-
slav manufacture.
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obsolete IL-2's, and PE-2's available for recon-
naissance, light bombing, and attack pur-
poses. Personnel strength totals nearly 28,-
000 including about 1,000 qualified pilots.
Largely as a result of US aid and training
this air force has improved rapidly during the
?
past three years and, as long as such aid and
training are continued, air force combat capa-
bilities will further improve over the next few
years. By mid-1956 it is planned to have nine
fighter-bomber squadrons (F-84G's) and
three interceptor day fighter squadrons (F-
86's) . As these aircraft, radar, and com-
munications equipment are received, the air
force should also develop a limited air defense
capability. During this same period eight
airfields will be available for the handling of
these jet aircraft, including five airfields con-
sidered to be fairly secure from initial ground
force attack.
60. Yugoslavia's Navy is a 27,000-man coastal
force of four coastal destroyers, one subma-
rine, 95 patrol craft including 79 motor tor-
pedo boats, 30 mine vessels, 48 landing craft,
and some 200 other types including 35 sta-
- tioned on the Danube. Although it has a
weak logistical system, the Navy's combat
readiness appears to be high. However, its
capabilities are limited to coastal defense,
blockading Albania, and supporting small am-
phibious attacks against that country. With
continued Western aid, the effectiveness of the
navy should improve, but it will almost cer-
tainly remain a minor force with limited capa-
bilities.
12
61. Yugoslav Capabilities and Intentions in
Event of War. The Balkan Alliance has bol-
stered Yugoslavia's military position, and mili-
tary planning under the Alliance has de-
veloped satisfactorily. However, if confronted
by a concerted Satellite attack logistically
supported by the USSR, we believe that Yugo-
slavia would be forced to give up the plain
of northeast Yugoslavia. It would be able to
withdraw sizeable organized ground units into
the mountains. After such a withdrawal
some organized resistance could probably be
maintained with prompt and substantial mili-
tary support from the West. Guerrilla activi-
ty would probably continue as long as the
Yugoslav people retained a hope of liberation
by the West. However, under the impact of
defeat and the dispersion of the army, the
opportunities for popular and unit defection
would increase. In those circumstances, pro-
Western anti-Tito guerrilla forces might be
formed.
62. We believe that the present Yugoslav re-
gime would prefer to remain neutral in event
of a general war despite its Balkan Pact com-
mitments. However, it probably has little
confidence that it could successfully do so,
since Yugoslavia lies athwart the main inva-
sion routes of Southern Europe. Therefore,
we estimate that Yugoslavia would probably
feel compelled to fight on the side of the West
if its Balkan allies, Greece and Turkey, were
attacked. If, however, the Balkan area were
not invaded, Tito would probably elect to re-
main neutral as long as the international sit-
uation would permit.
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