ESTIMATE OF THE YUGOSLAV REGIME'S ABILITY TO RESIST SOVIET PRESSURE DURING 1949

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• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP78-01617A003500140001-7
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• Document Creation Date: December 27, 2016
• Document Release Date: February 28, 2013
• Sequence Number: 1
• Publication Date: June 20, 1949
• Content Type: REPORT

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COPY NO a 7
Gke=fiteltIbT FOR THE ASS ISTANT DIRECTOR
FOR REPORTS AND ESTIMATES
-Ta
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ESTIMATE OF THE YUGOSLAV
REGIME'S ABILITY TO RESIST
SOVIET PRESSURE DURING 1949
This document has been
approved for release through
the RISTOR/CAL monsw PROGRAM of
the Central Zntelligence Agency.
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ORE 44-49
Published 20 June 1949
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CENTRAL
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Date:
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INTELLIGENCE AGENCY
ARIIIIIVAL RECORD
MARE RETURN TO
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: CIA-RDP78-01617A003500140001-7
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ESTIMATE OF THE YUGOSLAV REGIME'S ABILITY TO RESIST SOVIET
PRESSURE DURING 1949 *
SUMMARY
1. Kremlin plans do not include direct
Soviet and/or Satellite military aggression
against Yugoslavia for the duration of 1949.
2. In addition to a more hostile but prob-
ably ineffective propaganda campaign, border
incidents against Yugoslavia will probably in-
crease. These activities, however, will not de-
velop into large-scale guerrilla warfare in
1949.
3. Tito's regime will meet no insurmount-
able obstacles to its continuance in power dur-
ing 1949.
4. It is estimated that the proclamation of
an "independent" Macedonia would have lit-
tle success in gaining the support of any
significant number of Yugoslav Macedonians.
Such a proclamation, however, is considered
unlikely for the immediate future.
5. Under prevailing internal and external
conditions, the Soviet bloc will not be able in
* This estimate presents a survey of some of the
methods available to the Kremlin to dispose of the
Tito regime and of the means available to Tito to
resist such methods as the Kremlin may employ in
1949. The methods and means under consideration
fall logically into four main categories: Military,
political, economic, and subversive.
1949 to exert sufficient economic pressure to
force the collapse of the Yugoslav economy.
Even without imports from the US, the Yugo-
slav economy would not be seriously dis-
rupted during this period.
6. During 1949, Tito will seek to acquire in-
dustrial imports from the West. He is ap-
parently confident of Western determination
to maintain him as a continuous irritant to
the Kremlin, and of his ability to obtain eco-
nomic assistance from the West with a mini-
mum of political concessions and strategic ex-
ports. Following a policy of self-protection
and of economic self-interest, he will continue
to trade with the East in certain strategic
items.
7. Military pressure from the East may
eventually necessitate, for the purposes of US
policy, military and economic assistance
which would provide Yugoslavia with some
means of self-protection. Much depends upon
the extent of such pressure. The West, how-
ever, could provide necessary military equip-
ment for immediate emergency use more
easily and with greater assurance of effective
utilization than it could the means for pro-
duction of such equipment.
Note: The intelligence organizations of the Departments of the Army and the Air Force have
concurred in this report. The Intelligence Organization of the Department of State
"concurs in the main body of the subject report. The appendix, however, contains
figures which are not confirmed?some at variance with our estimates. Concurrence,
therefore, does not extend to the accuracy of the details in the appendix." The Director
of Naval Intelligence "concurs with subject paper except for paragraph 7, page 1, and
fourth paragraph, 2nd column, page 4, which discuss future U.S. policy. The Office
of Naval Intelligence has no cognizance over the formulation of U.S. policy." The
report is based on information available to CIA as of 8 June 1949.
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ET
ESTIMATE OF THE YUGOSLAV REGIME'S ABILITY TO RESIST SOVIET
PRESSURE DURING 1949
1. Military.
The Soviet leaders have the following pos-
sible courses of action open to them in at-
tempting to bring about the overthrow of the
Tito regime by force of arms:
(1) Development of border incidents into
organized guerrilla warfare (see Subversive
Section, page 4) ;
(2) Direct military aggression by a combi-
nation of satellite armies from countries con-
tiguous to Yugoslavia;
(3) Direct military aggression against Yu-
goslavia by Soviet troops.
Large-scale guerrilla warfare, which would
actually be a war of attrition, presents the
only serious military threat to Tito's control
for the remainder of 1949. It is estimated
that the Kremlin will not resort to large-scale
guerrilla warfare unless it is prepared to risk
open war with Yugoslavia. Tito would take
vigorous counter-measures to prevent the de-
velopment of a war of attrition with its po-
tentially fatal consequences to his regime.
In such an eventuality, those measures would
probably involve Yugoslav-sponsored guer-
rilla action in Albania and Bulgaria, which
would create serious difficulties for the regimes
of those two countries, especially the insecure
Hoxha Government in Albania.
The Yugoslav Army, which is the second
largest and second most competent in East-
ern Europe, can defeat any combination of
bordering satellite armies. The latter, apart
from their doubtful loyalty to the Soviet
Union, cannot in 1949 attain the capabilities
to cope with the Yugoslav Armed Forces, even
with extensive Soviet logistical aid.
Direct Soviet military intervention in 1949
is considered improbable. Prior to any direct
attack upon it, the Yugoslav Army would
probably have from thirty to sixty days to re-
group in the mountainous region south of the
Sava and Danube rivers, thus preventing its
annihilation by the USSR forces. The de-
termination and ability of Tito's forces to re-
sist, even in guerrilla warfare, would act as an
additional deterrent to direct Soviet military
intervention.
2. Political.
The Soviet Union can expand its dialectical
campaign against Tito and step up the war of
nerves against Yugoslavia by increasing the
number and virulence of protests against
alleged Yugoslav-inspired border incidents.
Through propaganda media it can appeal
more and more openly to various Yugoslav
minority groups to overthrow the Tito regime
in return for promised preferential treatment.
Though considered less likely, it could with-
draw USSR support of Yugoslav claims in
Trieste, Italy, and Austria, and could organize
and recognize an "independent" Macedonian
state aimed at undermining Tito's position in
southern Yugoslavia. Even more unlikely,
as a final positive political step, it could sever
formal Soviet and satellite diplomatic rela-
tions with Yugoslavia.
Since the beginning of the year, Yugoslav-
Soviet relations have increased in hostility.
The intensified Soviet propaganda campaign,
however, will probably meet with little success
because the Cominform charges are becoming
increasingly hollow and ineffective. On the
other hand, Cominform propaganda tactics
have had the effect of rallying the extensive
non-Communist Yugoslav population to Tito's
camp. A majority of the Yugoslays, in spite
of their dislike for Tito, would support him
rather than contribute to the return of Yugo-
slavia to Soviet control.
There are certain minority groups in Monte-
negro, Macedonia, and possibly the other
Yugoslav republics, who might attack Tito's
regime in exchange for promises of preferen-
tial treatment by the USSR. Tito can thwart
the potential threat of such groups through
his security police. The proclamation of an
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"independent" Macedonia would have little
success in gaining the support of any signifi-
cant number of Yugoslav Macedonians during
1949. Such a proclamation, in any event, is
considered unlikely for the immediate future.
If seriously threatened at any time in 1949 by
the formation of a Macedonian state, Tito
could engineer mass deportations of unre-
liable Macedonians to other areas in Yugo-
slavia. He could also cut off existing Yugo-
slav aid to the Greek guerrillas and might
even come to some understanding with the
Greek National Government.
It is believed that Tito's early conviction
that the Kremlin planners did not want a
war with the West gave him the courage,
initially, to defy, the USSR. As he probably
still holds to his original estimate concerning
Soviet intentions, Tito will react vigorously
to any menacing Soviet-Satellite overtures
which directly threaten his security. The So-
viet leaders, never certain of Tito's reactions
or his ability to involve them in an undesired
war with the West, will proceed with caution.
Tito always has available as a final political
counter-measure the threat to charge the So-
viet Union with aggression before the United
Nations.
3. Economic.
The Soviet-bloc nations can impose many
economic sanctions against Yugoslavia. For
instance, they can stop their deliveries of in-
dustrial equipment and essential raw mate-
rials.' It is estimated, however, that the
Kremlin will not apply total economic sanc-
tions against Yugoslavia in 1949. While such
sanctions would not be sufficiently effective to
impair seriously the over-all Yugoslav econ-
omy, the loss of Yugoslavia's strategic metals
would be detrimental to Soviet-bloc economy.
Since 1946 there have been few signs of eco-
nomic deterioration in Yugoslavia. In 1948
the per capita grain production approximated
the prewar levels and food shortages created
by forced exports are expected to be alleviated
in 1949. Tito has been able to import petro-
leum to maintain the restricted use status
1 There is no conclusive evidence that war mate-
rial is, or is not, being sent from Soviet-bloc nations
to Yugoslavia.
complicated by the Satellite embargoes; pro-
duction of steel, non-ferrous metals, electric
power, textiles, and timber has reached pre-
war levels, and in each case is continuing to
expand; and the transportation system is
capable of meeting all foreseeable traffic re-
quirements within 1949.
If the present reduction in Eastern Euro-
pean trade with Yugoslavia is extended to
bring a complete cessation of trade, Tito's
economy will not be seriously damaged, al-
though the loss of Czech and Hungarian ma-
chinery and equipment and of Polish and
Czech coke will force a somewhat greater de-
pendence on the non-orbit countries for these
items.
Yugoslavia, in anticipation of unfavorable
relations with the Soviet bloc and uncertainty
in its trade dealings with the US, has already
concluded several important trade agreements
providing for expanded trade with the West.
The Yugoslav economy, while not deteriorat-
ing, is not making the industrial expansion
envisaged in its unrealistic Five-Year Plan.
Even if Yugoslavia were able to procure suffi-
cient foreign exchange to purchase industrial
equipment, rapid industrial progress would
not be feasible in the near future without
a large increase in the skilled labor supply
and substantial technical assistance from the
West.
Military pressure from the East may even-
tually necessitate, for the purposes of Western
policy, military and economic assistance
which would provide Yugoslavia with some
means of self-protection. Much depends upon
the extent of such military pressure from the
East, but the military necessities can be pro-
vided by the West for immediate emergency
use far more easily than can the means for
the production of such military equipment,
with greater assurance for effective utilization.
4. Subversive.
Under Soviet direction, the Soviet-bloc na-
tions can increase the scope of subversive ac-
tivities in Yugoslavia. They can infiltrate
numerous small anti-Tito bands from contig-
uous satellite areas in order to disseminate
anti-Tito propaganda, enlist recruits, incite
local insurrections, perform acts of sabotage,
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a
disrupt communications, and prepare the way
for assassination of Tito and his aides. The
Soviet-bloc nations can employ aircraft to
drop anti-Tito propaganda leaflets and to
parachute arms, supplies, and guerrilla war-
fare specialists to anti-Tito groups.
Although Tito can expect intensification of
Soviet-inspired covert guerrilla activity, it is
estimated that for at least the remainder of
1949, the effectiveness of such maneuvers or
other subversive tactics can be minimized
The vast majority of the Yugoslav Commu-
nists probably support Tito's regime. The ex-
ceptions constitute about two percent (ap-
proximately 8,000) of the total party member-
ship. These anti-Tito elements are divided
roughly into three main categories: (1) old
line Communists who spent many years of
their lives in the Soviet Union and whose
sympathies are with the Kremlin; (2) oppor-
tunistic elements who are dissatisfied because
they failed to gain high positions in the gov-
ernment commensurate with their war-time
records; and (3) Communists who left Yugo-
slavia as refugees before the war and have
subsequently been repatriated. This latter
group had no contact with the Partisan move-
ment and hence feel no particular loyalty for
Tito. These pro-Cominform groups are al-
legedly attempting to organize active opposi-
tion to the Tito regime by concentrating on
wresting control away from the army. Tito,
apparently aware of the presence of such a
potentially dangerous opposition, is retiring
these elements as a group to the background
in Party affairs and replacing the known un-
reliables with young stalwarts. Tito's secret
police (UDB) are considered loyal and will
provide stern counteraction to any campaign
to infiltrate Cominform agents extensively,
perpetrate widespread acts of sabotage, fo-
ment disturbances or insurrections, or or-
ganize assassination plots.
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APPENDIX
ESTIMATE OF YUGOSLAVIA'S ECONOMIC POSITION
1. Agriculture.
Yugoslavia has an agricultural economy,
without appreciable benefits of mechaniza-
tion. During 1948 the per capita production
of grain approximated the prewar level which
permitted annual exports of some 650,000
metric tons. This production is maintained
by backward methods and is not dependent
upon mechanization. About half of Yugo-
slavia's present usable tractors were imported
during the postwar period. Any substantial
additions of tractors and motor-driven agri-
cultural machinery in the near future would
be of little benefit except on existing collec-
tive and state farms because of the poor con-
dition of the roads in the rural areas, the hilly
terrain, and the limited number of trained
operators. At the present time there are re-
portedly fewer than 6,000 tractors in Yugo-
slavia which can service the approximately
1,375,000 acres comprising the collective and
state farms. Since the acreage of these farms
represents less than three percent of the total
acreage, a cut in production because of im-
mobilized tractors would hardly cripple the
economy of the country. However, any great
increase in tractors and motor-driven machin-
ery might handicap the entire economy be-
cause of the related supply problems, such as
the greater need for petroleum and spare
parts.
Unlike some of the Satellites, Yugoslavia
has no serious shortage of draft animals. The
number of horses as of 1 January 1949 is esti-
mated at 990,000 or 82 percent of prewar, and
105 percent of 1 January 1948. Cattle totals
are nearly at the prewar level.
Food shortages in 1948, especially in fats
and oils, were not due to lack of basic supplies,
but to government policy, such as the hog
confiscation in September and large exports
of grains and meat. The food situation
TO0P,ilet
should improve in 1949. Such improvement
is not dependent upon farm machinery im-
ports from the West, nor will it be seriously
affected by an embargo from the Soviet bloc.
2. Petroleum
Before World War II, Yugoslavia produced
approximately 1,000 metric tons of crude pe-
troleum a year, while the present estimated
annual output is 40,000 tons. Prewar annual
domestic requirements are estimated to be
around 145,000 tons of petroleum products.
At present, if military requirements are added
to estimated civilian needs, Yugoslav require-
ments are approximately 400,000 tons. Under
the Five-Year Plan, 500,000 tons of annual
crude petroleum output is to be achieved by
the end of 1951. Such an increase in pro-
duction depends entirely upon the importa-
tion of oil drilling machinery, for exploration
and exploitation. It is extremely unlikely,
however, that Yugoslavia will be able to ob-
tain sufficient equipment, either at home or
abroad, to realize its goal.
In addition, the government planned to
place in operation a 300,000-ton cracking
plant by the beginning of 1950. Yugoslavia
is entirely dependent on imports to equip this
plant. In view of the limited number of
sources of equipment and the possible diffi-
culty in acquiring it, it is inconceivable that
this refinery can be placed in operation by
1950, or soon thereafter. Yugoslavia, itself, is
probably capable of maintaining the existing
oil machinery inventory but is not capable of
manufacturing additions.
The problem of insufficient supplies of pe-
troleum products which existed in Yugoslavia
before the rift was aggravated by the embargo
applied during the summer of 1948 by the
other Eastern European countries. However,
primarily as the result of a trade agreement
with the UK, it appears likely that Yugo-
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slavia will be able to obtain sufficient foreign
crude oil to meet its 1949 requirements.
There is considerable evidence, moreover, that
through June 1948, postwar imports of avia-
tion and motor gasoline were sufficient to
maintain the restricted level of consumption
in effect since the close of World War II, until
imports from the West were received.
Unless Western Europe imposed a total em-
bargo, the denial of petroleum products and
crude petroleum by the Soviet bloc would not
have serious effects upon the Yugoslav econ-
omy, particularly since Yugoslavia has been
receiving these products under extensive
agreements with the UK, Trieste, Tangiers,
Italy, and the Anglo-Iranian Oil Company.
3. Steel.
At present, in spite of war damage and im-
proper maintenance, annual Yugoslav raw
steel production exceeds 1939 levels by 21,000
metric tons, a 10 percent increase. The Yugo-
slav Five-Year Plan calls for a production of
760,000 metric tons in 1951; but plan fulfill-
ment is dependent upon steel industry mod-
ernization and expansion, as recently pro-
posed by a British engineering concern. This
will require Western assistance. Proposals
by British technicians would provide total fa-
cilities (including coke plants, steel plants,
rolling mills and blast furnaces) for reaching
the Five-Year Plan goal.
However, Yugoslavia has facilities for main-
taining the present inventory of steel proc-
essing equipment, unless such facilities are
diverted to other uses, such as military. Even
without implementation of the British tech-
nical plans, the Yugoslav steel industry should
be able to increase production slowly. Total
embargo by the USSR and its Satellites is
not likely to put a strain on Yugoslav steel
production facilities; however, inability to ac-
quire equipment and technical assistance
from the West would slow development of the
industry.
4. Coke.
At the present time Yugoslavia has no cok-
ing industry, nor does it have any known de-
posits of metallurgical coking coal. It is en-
tirely dependent upon outside sources of sup-
ply for metallurgical coke for the iron and
steel industry. An estimated 550,000 metric
tons will have to be imported in 1949. Of
this amount, 50,000 tons will be received from
Poland and a quantity valued at 10 million
crowns will be received from Czechoslovakia.
During the latter part of 1948, Yugoslavia
joined the ECE Coal Commission and asked
that 50,000 tons of Bizonia coke be allocated
during the first quarter of 1949. In addition,
during the first quarter of 1949, 54,000 tons
were promised by Czechoslovakia and 15,000
by the Netherlands. For the second quarter,
Czechoslovakia agreed to ship 66,000. In the
event deliveries from Eastern Europe (Poland
and Czechoslovakia) are cut off, Yugoslavia
can probably obtain sufficient coke to meet re-
quirements through the Coal Commission
from Western Europe.
5. Non-Ferrous Metals.
It is estimated that toward the end of 1948,
production of non-ferrous metals, primarily
copper, lead and zinc, approximated the pre-
war level as shown in the following table:
Smelter
Production
1939
1940
1948
Copper
41,993
42,951
41,000
Lead
10,652
32,949
28,000
Zinc
4,182
4,989
5,000
The Five-Year Plan provides for a goal of
36,000 tons of refined copper by 1951. How-
ever, Yugoslavia's one refinery has only 19,000
tons annual maximum capacity. To provide
for the planned increase in total production of
refined copper, Yugoslavia would be obliged to
import expensive refining equipment. In the
production of smelted copper Yugoslavia has
not reached the maximum capacity of the
existing plant equipment near the Bor Mines.
It is estimated that the output of the Bor
Mines, of smelted copper, could be increased
to 60,000 tons annually, providing repairs and
parts replacements could be procured.
Although the Five-Year Plan predicted a
rise in the production of lead (smelter) from
10,600 tons in 1939 to 65,000 in 1951 and zinc
(smelter) from 4,100 to 20,000 tons, produc-
tion of these two metals is reported to be
28,000 and 5,000 tons respectively for 1948, the
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second year of the Plan. During 1948, in-
ternal consumption of lead and copper con-
centrates was higher than prewar, leaving ex-
port capacity for lead concentrates at an an-
nual rate of 40-60,000 tons?approximately
one-half of prewar?and for blister copper at
30-40,000 tons. It is reported that during
1949 from 65-70 percent of these metals had
gone to Eastern European countries, and in
1949 the proportion will probably still be high.
Zinc production is expected to follow the
lead output, proportionately.
In 1942 Yugoslavia was the ninth largest
copper producer in the world, with an output
of 49,895 tons or 1.8 percent of the world's
total production. The importance to Europe
of Yugoslavia's lead and zinc supply is indi-
cated by the fact that during the war this
country supplied one-third of the lead and
about 6 percent of the zinc to Axis-Occupied
Europe. While the total output of Yugo-
slavia's non-ferrous metals is a comparatively
small percent of world production, it is of
great importance to the Soviets and the Satel-
lite countries, and the demand for it by the
Soviet bloc will act as a deterrent to complete
severance of trade relations. Present trade
treaties with Soviet orbit countries and nego-
tiations for new trade agreements indicate
that Yugoslavia will continue, as in the past,
to ship sizable quantities of these metals to
the East.
It seems unlikely that production of these
metals will be expanded to any marked de-
gree without added necessary equipment for
both expansion and needed repair and re-
placement of present machinery.
6. Power.
In spite of what would seem to be a rela-
tively weak position in regard to the Yugo-
slav power industry, there is considerable evi-
dence to prove that electric power output is
appreciably greater than in prewar times.
Production of electricity in Yugoslavia is
about evenly divided between thermal and
hydro resources. In the absence of recent
statistics, it is estimated that the division is
about 55 percent thermal and 45 percent
hydro, although it may now be approaching
a 50-50 basis, as strong emphasis is being
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9
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placed on the development of excellent water
power resources. The machinery and equip-
ment for this development, as well as for re-
placements and expansion in the thermo
plants, must come from abroad, since Yugo-
slav manufacturing facilities, in spite of great
efforts to provide them, are entirely inade-
quate to supply the nation's needs in meeting
the Five-Year Plan objectives. The Five-Year
Plan and goals for the electric industry con-
template a fourfold increase in electric power
output as compared to prewar, a goal that
would tax the resources of any country, even
under ideal conditions of supply and techni-
cal-industrial ability.
It is known that there have been important
additions to the national electric power gene-
rating capacity since the war's end, and orders
for large generating units have been placed in
Switzerland and Italy within the past year.
While inability to obtain electrical machinery
and equipment from the West would surely
result in failure to accomplish the planned in-
dustrialization, it would not significantly im-
pair electric power output. Eastern Euro-,
pean exports, with the exception of those from
Czechoslovakia, have been of no real . conse-
quence in the development of Yugoslav elec-
tric power, and the Soviet bloc could, there-
fore, exert little economic pressure to disrupt
the industry.
7. Timber.
Timber products have always represented
one of Yugoslavia's most important export
items. Prewar exports averaged approxi-
mately 1,000,000 metric tons, or 1,500,000
cubic meters and went largely to Germany
and Western Europe in exchange for manu-
factured goods. Since the war, until the break
with the Cominform, most of Yugoslavia's
timber exports have gone to Eastern Europe
and the USSR. Total timber production for
1948 is estimated at 23,000,000 cubic meters.
This is about 2 percent greater than the 1937
production. Present indications are that the
1949 cut will slightly exceed 1948. Machin-
ery and equipment for further development
of the timber industry is being sought from
the West.
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Exports for 1949 may reach 1,700,000 cubic
meters. The 1949 trade agreements and
trade negotiations indicate that 80 to 90 per-
cent of the Yugoslav timber entering interna-
tional trade channels will go to non-orbit
countries. For example, the trade agreement
with the United Kingdom calls for deliveries
of 845,000 cubic meters, which accounts for
almost 50 percent of the total estimated 1949
exports. It is probable that there would have
been an eventual increase of Yugoslav timber
exports to Western Europe had there been no
break with the Cominform. There is no
doubt, however, that the Cominform break
has accelerated this shift in trade.
8. Textiles.
Before World War II, cotton goods consti-
tuted one-half the output of the textile indus-
try in Yugoslavia, woolen goods one-quarter,
with silk, linen, and other fiber goods making
up the remaining one-quarter.
Although 1948 production of textiles was re-
ported officially at a level somewhat above pre-
war, not all of the production reached the con-
sumers because of difficulties in the marketing
system.
Textile production is estimated as follows:
1939 1947 1948
(in meters)
Textiles (cotton 150,080,000 117,230,000 167,183,000
and wool)
Yugoslavia has trade agreements with Italy,
Poland, India, and Czechoslovakia for import-
ing necessary raw materials, semi-processed
and finished textile products. Production in
this industry is not significantly dependent
on imports from the Soviet orbit.
9. Manufacturing.
The prewar Yugoslav economy supported
only four major manufacturing establish-
ments, exclusive of its arsenals. However,
during the German occupation, sizable addi-
tions to capital equipment were made. In ad-
dition, relatively large quantities of equip-
ment were obtained through Lend-Lease,
UNRRA, reparations, and postwar trade.
In 1940 there were 756,000 employees en-
gaged in construction, mining, and manufac-
turing in Yugoslavia, out of a total popula-
T 0 P
0;050001
tion of approximately 15.8 million. The pro-
portion of skilled workers was low compared
with Western standards, and even compared
with some other Eastern European countries.
Many of these industrial workers, particularly
from the skilled group, were lost as a result of
deportations during World War II. It is esti-
mated that toward the end of 1948 the total
number of industrial employees had increased
to approximately 950,000, but the number of
skilled workers was still small. In order to
meet the labor requirements for rapid indus-
trialization under the Five-Year Plan, there
must be large increases in the size of the
skilled labor force. Yugoslavia cannot pro-
vide teaching cadres for such a rapid
expansion.
Uncoordinated implementation of certain
parts of the Five-Year Plan by the Yugoslav
theoreticians and planners has served only to
worsen the inherent difficulties of the Plan
itself. As a result, the limited resources with
which Yugoslavia has to pay for industrial im-
ports have been and are being ineffectively
dispersed by investment in capital goods, and
the purchase of excessive quantities of indus-
trial materials, such as ball bearings and ab-
rasives, which they are not prepared to use
immediately. Although Yugoslav leadership
has called attention to the fact that many
new factories stand empty of machinery and
that other factories stand with unused ma-
chinery, the Yugoslav purchasing policy con-
tinues to be one of buying, not for immediate
need and conversion to useful products, but
of purchasing quantities and items which will
fit into the Five-Year Plan.
Available evidence would indicate that
Yugoslav manufacturing facilities have at
least doubled in the postwar period over pre-
war times. German additions, reparations,
contributions under Lend-Lease and UNRRA,
and purchases from abroad, as well as small
amounts of manufactured equipment within
Yugoslavia, have added quantitatively to
Yugoslav manufacturing equipment inven-
tory. Proper results are not forthcoming
from such equipment because of: (1) poor
management which fails to dovetail supply,
production and distribution; (2) poor pur-
chasing policy; (3) lack of skilled labor and
ET
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T 0 P E T 11
knowledge in operating such equipment as
exists; (4) inability to direct efficiently factory
production; and (5) normal difficulties in the
transition to a planned economy. In spite of
these difficulties, an inordinately large part
of the fabricating facilities have been utilized
for the production of war material, which
Yugoslavia can ill afford if it is to advance
its industrial economy. Therefore, in spite of
the reportedly poor condition in the field of
industrial equipment, it would seem that
Yugoslavia has manufacturing facilities on
which it can draw for improving its existing
inventory of equipment, if it is believed that
the external security position can afford a re-
duction in military expenditures.
10. Transport.
Although Yugoslav economy is widely de-
centralized, making the country more depend-
ent on transportation than would otherwise
be the case in a nation with so young an in-
dustrial economy, the country is in no danger
of a transport collapse. The transportation
system, although ailing, is capable of coping
with foreseeable traffic requirements for a
year and possibly longer, regardless of an
Eastern economic blockade. The system,
however, will not sustain planned industrial
expansion unless, as in the past, transport
equipment and components are obtained from
the West or from the Satellites.
The railroads are the most significant factor
in the Yugoslav transport system. Currently
they are carrying freight traffic at approxi-
mately 180 percent of the 1938 rate. Inland
waterways move only a small percentage of
the total traffic?six percent in 1948, seven
percent in 1938. Much of it was in transit
traffic on the Danube. Highway transport
traffic has not yet developed enough to have
been tabulated, but an increase in the number
of vehicles and road improvement have made
it possible for highway transport to contribute
toward making the over-all transport system
stronger and more elastic than before the war.
Present tonnage of ocean shipping amounts to
only 43 percent of prewar. The slow rate of
recovery of the merchant marine may be due,
in part at least, to the fact that the postwar
trade which has been predominantly withtthe
East, has moved largely by rail. Civil avia-
tion has developed to a considerable extent
since the war, but the shortage of aviation
gasoline is requiring curtailment of traffic.
In spite of the substantial volume of traffic
now being carried by the railroads as com-
pared with prewar times, reports are repeat-
edly being received regarding inefficiency of
the system. This situation is caused largely
by the shortage of trained railroad operating
and maintenance personnel, by the lack of
qualified railroad administrators, and by fre-
quent lack of cooperation from industry in
planning and receiving shipments. Unless
improvement in the utilization of railroad fa-
cilities is attained, traffic delays and periodic
congestion of local traffic will continue, even
though currently the railroads appear to be
achieving the planned goals with respect to
rolling stock and mileage.
11. Foreign Trade.
In 1948, the value of Yugoslavia's foreign
trade is estimated to have exceeded the pre-
war level. Exports in this year, totaling ap-
proximately $210,000,000 are believed to have
approached the maximum foreseeable export
potential, and expansion of exports in 1949,
if any, will probably be small.
While prewar exports were shipped almost
entirely to the West, primarily to Germany,
the majority of postwar exports have gone to
the Soviet bloc. On the basis of 1947 trade
and incomplete data for 1948, between 50 per-
cent and 60 percent of the exports went to
Eastern Europe, with Czechoslovakia, USSR,
Poland, and Hungary as recipients of the larg-
est amounts. In 1948, it is estimated that 65
percent to 70 percent of Yugoslavia's non-fer-
rous metals exports moved into this area.
Other leading exports were ferrous metals,
agricultural products, timber, and tobacco.
Yugoslavia's most critical imports from the
Soviet orbit have been petroleum, coal, coke,
semi-finished steel, and industrial machinery
and equipment.
Since the rift, the only complete Soviet-
Satellite embargo against Yugoslavia has
been on shipments of petroleum. However,
deliveries of other items have been reduced in
amount. It is believed that, in view of the
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12 TO RET
aforementioned strategic items received from
Yugoslavia, the USSR and the Satellites
would be reluctant to sever completely their
trade relations. Thus far in 1949, indications
are that, despite announced reductions, So-
viet bloc-Yugoslav trade will continue, in
items of primary importance to their respec-
tive economies, on a strict basis of economic
self-interest. This trade reduction with the
East will enable Yugoslavia to direct a greater
portion of its exports to the West in exchange
for industrial equipment and machinery, al-
though the expansion in this trade will de-
pend largely on the type of commodities avail-
able for export to the West, and the volume
of Western financial assistance.
The following factors will limit Yugoslavia's
ability to expand her trade with the West in
1949:
(1) Serious shortage of foreign exchange
and gold reserves;
(2) Continued exports, to the East, of for-
eign exchange producing commodities;
(3) Commitments to the West on payment
of nationalization claims;
(4) Anticipated reduction of major food ex-
ports designed to alleviate domestic short-
ages.
Yugoslavia, fully appreciating this defi-
ciency, is currently attempting to procure
substantial Western loans, without which
trade expansion will be far from sufficient
to meet requirements of the Yugoslav Five-
Year Plan.
TO;lioeT
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0 514 16 itIS
k 022541
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