TRIESTE DEVELOPMENTS AFFORD USSR EXPLOITABLE ISSUE

Created: 7/20/1949

OCR scan of the original document, errors are possible

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ctfitral ihteo-icaicb agu!cy

intelligence meisohatot

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trieste developments afford ussr exploitable iasue

yugoslavia's recent move toward consolidating tho economy ofof trieste with that of jugoslavia proper, sss thoitalian reaction, hasizable obstacle in the pathrapprochement on trieste and has thusexploitation of the trieste issue by the kraal in in orderrelations with the fleet. specifically, thoconsists of the announcement early in july of thethe jugoslav, dinar in place of sn occupation currency as themonetary unit, which is to ba implemented0 million dollar) loan to the'"'vm'sij

tito's precipitous action aaa taken despite tho resultant 1 pportunities for kremlin exploitation. among his motives for this arpi

A fear prompted by the soviet abandonment of yugoslav claims against austria that the kremlin was similarly planning to renounce its support of an international trieste in favor of the standing western proposal of8 to return the whole free territory to italy, and

a consequent desire to atrengthen the jugoslav bargaining position by thus indicating an intention to retain control of zone b. yugoslav

note: this memorandum has not been coordinated with the intelligenceof the departments of state, army, navy, and the air force.

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Italian Peace Treaty by the do focto absorption ofy Yugoslavia and of the Allied Zone by Italy. ourse nould be consistentthe Soviet postwarornal adherence to engagements entered into by the Big Pour, despite the Kreolln's repeated violations of the spirit of many such agreements. The Kremlin, moreover, would thus avoid offoring Tito the opportunity to exploit further Jugoslav nationalism by pointing to another Soviet sell-out.

On tha other hand, the Soviet Onion can gain significant advantages by announcing its support of the standing "Western proposal to return the whole Territory to Italy. ove would complicate Yugoslav relations with Italy and the lostifficult transition period. It wouldcalculated to impress upon the Jugoslav people their isolation from both Eastest. Koreover, the Soviet Union could thus point to an ostensibly conciliatory gesture tosard the West. The importance of the above considerations in the Kremlin's accelerated campaign against the Yugoslav regime, therefore, sucgeets that tho OSSR may time an announcement supporting the Western proposal on Trieste tooat effective blow against Tito.

Original document.

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