CENTRAL INTELLIGENCE AGENCY
THE CURRENT SITUATION IN THE FREE TERRITORY OF TRIESTE
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THE CURRENT SITUATION IN THE FREE TERRITORY OF TRIESTE
SUMMARY
The emergence of Triesteajor International trouble spot derives from thc postwar conflict between East and West. Since the Italian Peace Treaty compromise which created the Free Territory of Trieste under United Nations control, the big powers have had direct responsibility foreaceful settlement in Trieste which would satisfy Italian national pride and Yugoslav/Communist expansionist aims.
The US, by associating itself with the tripartite proposal for the return of the Territory to Italy and by its anti-Communist stand in Europe. Is committed tothe Territory from coming under Yugoslav control. Final Soviet reaction to thc tripartite proposal will await the outcome of the Italian elections In April. In the eventommunist victory, Soviet policy will be concerned primarily with effecting the withdrawal of US-UK occupation troops. In pursuance of this objective, the USSR may attempt to force the US, UK, and France to abide by their pre-electoralhe Communists are defeated, however, the USSR may follow one of two courses. The Kremlin may maintain thc status quo ln order to avoid giving the appearance of failure to stand by one of its Satellites; or It may agreeodification of the Westernin the hope that, after the withdrawal of US-UK troops, Italy may lack the strength to prevent subsequent Yugoslav/Communist penetration of the area.
Meanwhile, regardless of the ultimate disposition of the area, the US and UK now bear the major responsibility for obstructing Yugoslav designs on thc Territory. Unless the current trend toward rapid economic deterioration in Trieste is reversed, either the UN or Italy will become heir to an area so economically depressed that it will be an easy prey for subsequent Communist infiltration. AMG estimates that such acan be prevented only by thc allocation of US funds either directly or through Italy's European Recovery Program allotment, with which to rehabilitate Trieste's shipping and manufacturing interests. Evenourse is not certain to bebecause of the unlikelihood that the Territory can, ln the foreseeable future, become economically self-sufficient under UN control or regain its prewar activity if incorporated with the Italian economy.
NOTE: The Information ln this report Is as ofpril
The Intelligence organisations of the Departments of State, Navy, and the Ah-
t:"ttettoe ofno official statement had bee" received from the Department of the Army.
the current situation in the free territory of trieste
Impobtahce ov Trieste.
The emergence ol Triesteajor International trouble spot derives from thc postwar conflict between East and West, aggravated in Trieste by purely chauvinistic considerations, rather than from Trieste's intrinsic value or strategic importance to any of the disputants. Although of major significance before the War as tne principal Mediterranean outlet for the commerce of Central Europe, Trieste today is of vitalneither to Yugoslavia nor to Italy. Italy's trade has shifted westward and can be adequately handled by other ports, while Yugoslavia's needs can eventually be served by Fiume. Trieste's industry Is of minor significance.
Because the Italian Peace Treaty has placed the area under United Nations control, the peaceful solution of the Trieste problem is and will continue toig-power responsibility. In order for the UN toeaceful Trieste, lt would have toolution which, in addition to resolving thc area's ethnological complexities, would satisfy simultaneously Italian nationalism, which could never brook permanent loss of Trieste, and Yugoslav Communist expansionism which desires Trieste as an outpost of Communism.
Meanwhile, Uie US is directly committed to preserve peace in the areaermanent solution is found and mustarty to any such solution. Although Trieste in itself is of litUe strategic importance to theommunist or Yugoslav victory there would be interpreted as an indication of US inability lo support its anti-Communist stand, and wouldiscouraging effect on non-Communists in Western Europe.
of tub Free Terbitqry or Trusts.
The compromise represented in thc Free Territory of Trieste (FTT) under the control of the United Nations was written into the Italian Peace Treaty because It was the only solution for Trieste acceptable to the four major signatories (US, UK, France and theull implementation of this part of the Peace Treaty, however. Is unlikely as long as the US and the USSR fail toettlement in Europe.
Consideration of the Trieste problem in the Italian Peace Treaty grew out of thc need to rectify tho ethnically unjust prewar Italo-Yugoslav border and out of Yugoslavia's attempt, In the last stages of World War II, to seize the entire Italian province of Vcnczla Oiulia. When Allied troops of the British Eighth Army5 finally obliged the Yugoslav Army to withdrawine east of the city of Trieste, it was agreed that the US-UK would occupy that part of the disputed territory west'of what was at that time designated the Morgan Linehile Yugoslav troops would occupyomprising former Italian territory between the new line and thc prewar Italo-Yugoslav border. (See map.)
The Italo-Yugoslav boundary north of the city of Trieste finally established by the Peace Treaty was west of the Morgan Line, ceding to Yugoslavia former Italian territory populated predominantly by ethnic Slavs. The impasse resulting from Soviet insistence
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that the Italian city o( Trieste also be ceded to Yugoslavia was finally resolved bytoree territory under United Nations control to be administeredovernor appointed by the Security Council. Pending appointment of the Governor that part of the Free Territory (including the city of Trieste) formerly inould continue to be administered and occupied by Anglo-American forces, while Yugoslav troops would occupy that part of the Territory formerly in Zone B. This arrangement, designed purely to provide for interim trusteeship over the area, has been prolonged by Uie inability of the Security Council to reach agreementovernor. Meanwhile, conditions in tho Free Territory have deteriorated to such an extent that, evenovernor were appointed by the UN, successful government of Uie area by Uie United Nations wouldirtual impossibility.
The impasse over the selecUonovernor has been the result ofan be chosen who could be counted on to resist Yugoslav/Communist encroachments, and Soviet refusal to consider tne appointmentan without leftist leanings. The recent US-UK-French recommendation that Uie Territory be returned to Italy was prompted by Uie realisation that agreementovernor was unlikely and was made in the hope of hastening some settlement which would prevent Uie area from falling to Yugoslavia.
3. The Political Situation. a. VS-UK Zone.
The political climate in the city of Trieste, which contains moref the Free Territoiy's entire population, has always been dominated by racism andrather than by poliUcal ideologies. While still part of thc Austro-Hungarlan empire, Italians and Slavs struggled to maintain their respective cultures; this ethnic dispute continued after Uie areaart of Italy following World War I. Today, the historical struggle between Italians and Slavs has been both intensified andby the ideological conflict between Communists and non-Communists. Thus the major powers hareew state in which for cither nationalist or ideological reasons, or both, the entire population is divided between those who hope for return of the area to Italy and those who wish for eventual cession of the area to Yugoslavia.
Normally it would be expected that any election in Uie city ot Trieste would reflect the overwhelming Italian% of thender present circumstances, however, there are many Italians who follow thc Communist line, even in the knowledge that the Party is the chief promoter of cession of theto Yugoslavia.ity election, enough of them would vote Communist to give that partyf Uie vote;lebiscite confined to Uie issue of cession,Communist strength would be considerably reduced hy Uie defecUon of Italians who would feel compelled to support the claims of their homeland.
Communist party membership in Trieste is numerically small. Thc Party's importance, however, Is out of all proportion to itsnd is Uie result of tacUcs employed by Communist parties throughout Uie world.
The Party is under the direct control of Uie Yugoslav Communist Party. Is well disciplined, and is well supplied with money. It has establishedcultural clubs"
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and controls seven political organizations and seven newspapers. The most important organization through which the Communist Party exerts political influence is the Italo-Slovene AnU-Fascist Union with an estimated membershipt is thiswhich is most active in trying to undermine the authority of the Allied Military Government, to destroy Trieste's faltering economy, and to penetrate the localbodies appointed by AUG.
The continued high level of unemployment and the general economicin Trieste have enabled the Communists to gain tho support of many workers who have been attracted by promises of high wages and better living conditions. The Com-munist-dominated Smdicari Unictembership0 drawn mainly irom manual laborers in the shipyards and the city's manufacturing estabushmcnts. Thc Communists have thus far used their control of this union mainly to stage strikes for purely political reasons.
AMG has thus far been able to prevent the Communists from causing any major disturbances, and Communist strength is insufficient to seize control of the area as long as US-UK troops remain, If the area's economy continues to deteriorate, however, the influence of the Communists will Increase to such an extent that they mighterious threat to internal peace and order. Meanwhile, the Communists will continue their efforts to undermine the authority of AMG, to penetrate civil and businessin Trieste, and to work actively toward furthering eventual Yugoslav hegemony over the entire Free Territory of Trieste,
Non-Communists in Trieste have suffered in comparison with the Communists by their lack of unified, aggressive leadership, by their failure to formulate any clearly defined goals other than the return of Trieste to Italy, and by their need for funds with which to combat the active Communist program. With the exception of the small anti-Tito Slovene Democratic Union, most non-Communists in Trieste axe Italians who belong to parties which are more or less extensions of the parent bodies in Italy. Although they are united in theoretical opposition to Communism, antagonism between the extreme rightist and the moderate elements among them has weakened the Italian cause. Tho Italians* strongest political instrument Is the nationalist association, Lega Nationale, with0 members. Moreover, the non-Cornmunlsts have thus far successfully prevented the Communists from penetrating the Italian-sponsored trade union. Camera del Laooro, whichembership0 composedof white-collar employees.
The recent tripartite recommendation for the return of Trieste to Italy has considerably strengthened the morale of the non-Communist. pro-Italian population. Moreover, it has intensified the Issue of nationalism (Italian vs. Yugoslav) whileirunlrruzing the importance of the purely Ideological phase of the struggle. The immediate effect of this development has been to weaken the Slav-Communist political position.
b. Yugoslav Zone.
Political conditions ln the Yugoslav-occupied Zone have become Jjidistingulsh-able from those in Yugoslavia proper. Civil liberties have been abolished. All political
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parties unwilling to follow the Communist line have been eliminated. Many Italians in thc area have been repatriated to Italy, expelled, or imprisoned. Politically,thc union of thc Yugoslav Zone with tho US-UK Zone either under Italy or the United Nations would entail great difficulties. Moreover,nion woulda serious threat to the security of the Territory by greatly increasing the relative strength of the Slav/Communist element.
4. Economic Situation. a. US-UK Zone.
Economic as well as political considerationsart in the four-power compromise establishing Trieste as an international port under United Nations control. It was felt at the time that Trieste could regain its prewar status as the Mediterranean outlet for Central Europe and thereby maintain itselfelf-sufficient economic unit, Tne conflicting political aspirations of Italy and Yugoslavia, however, make It unlikely that Trieste In the foreseeable future could attain economic prosperity or independence, under UN control.
Economically, the Free Territory of Trieste is primarily dependent upon Its port activities. The city of Trieste has excellent harbor faculties and Is connected with the Danube basin by two rail lines.owever, maritime activity in Trieste wasf8 traffic Much of this tonnage was accounted for by US relief supplies for Italy, Austria, and Trieste, although there hasradual increase in commercial traffic. Moreover, there hasecline in locally owned shipping. Before theons of shipping were registered in Trieste. War lossesthis, most of which has since been transferred to Italian registry, resulting in the loss not only of shipping revenues but of marine insurance and related business.
In addition to its port activity, the city of Trieste was formerly supported In partizeable shipbuilding industry and several manufacturing enterprises,food-canning, woodworking, jute and hempteel mill and an oil refinery. These are currently operating atf their prewar level.
onsequence of this general economic stagnation,f Trieste's labor forces unemployed; the cost of living is rising steadily,aily per capita food rationalories Is maintained only by US relief supplies equivalentalories per day per person. Because the revival of Trieste'sis dependent on the economic restoration of Europe generally, unemployment and the cost of living in Trieste can be ameliorated temporarily onlyrogram of public works and relief.
Continued economic stagnation in Trieste may have serious political andimplications, depending upon the ultimate disposition of the area. As long as the US and UK aaniiruster the area, economic deterioration increases the difficulties of preventing internal disorders and makes AMG more vulnerable to attacks by theContinuation of the present downward trend would also make it far more' difficult for either the United Nations or Italy to control the inevitable social unrest and
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economic disorder which would follow. Thus, Communist penetration would beand eventual control of the city by Yugoslavia would become more likely.
AMG Is currently handicapped in its efforts to restore the economy of thc area because it Is powerless to cope with the basic causes of the city's economic plight. The generally low level of economic activity in Europe must be raised if Trieste's maritime activity is to approach prewar levels. Restoration of Europe's economy, however, will not in itself revive Trieste's port activity because the Communist governments which now rule the majority of thc European countries upon which Trieste formerly depended can be expected to favor the Yugoslav port of Fiumc, wliich Yugoslavia Is attempting to develop as the principal' Mediterranean outlet for the Satellites.
Neither can AMG take any effective steps to nullify the detrimental effects on Trieste's economy which result from AMG's limited powersrustee for the UN and from its dependence on Italy. AMG is not empowered to underwrite the purchase of vessels by Trieste firms and has not the funds to make loans for the rehabilitation of Trieste's manufacturing enterprises. Nor can AMG prevent the flight of Italian capital to Italy, which is caused by the fear that Yugoslavia may eventually gain control of Uie city. Even more important, AMG is financially dependent upon Italy. Italy has finally agreed to meet thc normal administrative deficit of the US-UK Zone and to supply the Zone's foreign exchange needs. Italy, however, will meet AMG's special needs (such as public works, loans to industry,nly after consultation with AMG as to the exact amount required. Thus AMG must obtain Italian concurrence before lt can take any effective steps beyond those necessary to prevent the outbreak of disease and unrest. In view of tho recent tripartite proposal,on-CommunistIn Italy is unlikely to approve of excessive expenditures in an area which may fall to Yugoslavia or may soon be returned to Italy. (The consequences if AMG became dependentommunist Italy need noonsequently, any long-range plans by AMG to restore the economy of Triesteevel approximating that of prewar are unlikely to be supported in full by Italy unless thc US makes the funds available through Uie European Recovery Program
The recently approved US Foreign Aid Program for0 throughs designed only to prevent economic retrogression rather than to make the area sclf-sulTiclcnl under international control. Soviet agreementovernorto the West and the full implementation of thc Peace Treaty provisions would not eliminate the racial and ideological conflict within thc area. Consequently, Italian capital would still avoid the city, and Yugoslavia would continue its efforts tothc UN administration in the hope of gaining eventual control.
Triestearton-Communist Italy would also face economic difficulties. Although the expense ofeparate administration would be eliminated. Italy must adopt strong measures if Trieste's economy is to be successfully integrated with that of Italy. The present flight of Italian capital from the area can be reversed only if Italy demonstrates its ability to control and check Yugoslav Communistand infiltration. Moreover, In view of Uie decline of Eastern European traffic through Trieste, Italy must concentrate on the development of the city's manufacturing
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industries and on their integration into the Italian economy, rather than on any "utile attempt to restore port activity to prewar levels, 6. Yugoslav Zone.
Thc economy ol thc Yugoslav Zone of the Free Territory has been incorporated into that of Yugoslavia. In this primarily agricultural district, the Yugoslav authorities have disregarded the provisions of the Peace Treaty by promulgating agrarian reforms aimed at the complete communization of thc Territory, Peasants are required to turnf their produce to the local Communist cooperative, the remainder to be kept for personal use and for resowing. No sales may be made in the open market in the northern zone where prices are considerably higher than the official Yugoslav rate. Similarly, fishermen are required to sen their catch to the cooperative at the equivalent of seven US cents per pound; the cooperative in turn sells it for thirty cents on the Trieste market. Basic commodities are strictly rationed. As thc Yugoslav zone has its own currency, which has no legal backing and is therefore unacceptable to residents of tho northern zone, Inhabitants of the southern zone are unable to purchase surplus foodstuffs from the other part of the Free Territory.
Thus, economically as well as politically, Yugoslav actions have created nearly insuperable obstacles to the eventual union of the two zones.
5. Probable Futuse Developments.
The tripartite recommendation for the return of the Free Territory of Trieste to Italy will not result in any change in tho status quo, at least until after the ItalianSince implementation of the proposal will require Security Council approval, it Is improbable that the USSR will either reject or accept the proposalewassumes office ln Italy. Rather, the USSR will continue its attempts to counteract thc effects of the tripartite announcement in Italy by accusing the US of deliberately offering something to Italy which it alone cannot give, Moreover, the USSR willthe Issue by questioning thc motives of the US in making the proposal and by hinting at the advisability of additional amendments to the Italian Peace Treaty in an attempt to embarrass the US. Such activity might include re-emphasizing Sovietfor the return of former Italian colonies to Italy, offering to return some of thc Italian warships allotted to the USSR, or rolmquishlng its reparations claims on Italy. Any such suggestions, however, would probably imply that their Implementationupon the electionommunist government and would in no way cornrnit the USSR to definite action ln the eventommunist defeat.
Final Soviet reaction to the tripartite proposal will be determined by theof thepril elections in Italy. In the eventommunist victory in Italy, the disposition of Trieste as regards Italy or Yugoslavia would be completely academic from thc USSR's point of view. Under these circumstances, Soviet policy would be directed primarily at effecting the withdrawal of US-UK troops from the area. Thus the USSR would probably press the US, UK, and France to live up to their pre-election proposal. After the United Nations had relinquishedontrol over tbe Free Territory,
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Th* FrcssdeM Secretary of State
ChJrt of Staff to Commander la Chief
Secretary of Defense
Secretary of the Army
Secretary of ihc Navy
Secretary of tbe Air Force
Executive Secretary, National Security Council
Chairman, National Security Resource* Board
Chief of Staff, US Army
Chief of Naval Operation*
Chief of Staff, Ufl Air Force
Director of Man* and Operations, General Staff, US Army
Deputy Chief of Naval Operations (OperaUoaak
Dtrcetor of Plans and Operations, US Air Force
Special Assistant to tho Secretary of State, Kcscarch and Intelhflrnce
Director of Intelligence, OeneialS Army
Chief ot Naval InvUlgenre
Director of Intelligence. US Air Force
Secretary, Joint Chiefs of Staff
Secretary, Joint intelligence Oroup
Secretary.Force Coordinating Committee
Executive Secretary, military Liaison Comrnlttoo to the Atomic Energy Coramlsasnc
Director of Security and Jntellicence, Atomic Energy Comir.bgkm
Chief, Acquisition and Distribution, OICD, Department of State
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Original document.
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