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3. ORE 23-48 : ARCHIVES SERVICE** RECORDS `NATIONAL AND SECRET THE CURRENT SITUATION IN THE FREE TERRITORY OF TRIESTE SUMMARY The emergence of Trieste as a major international trouble spot derives from the 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 for achieving a peaceful 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 to prevent- ing the Territory from coming under Yugoslav control. Final Soviet reaction to the tripartite proposal will await the outcome of the Italian elections in April. In the event of a Communist 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-electoral proposal. If the Communists are defeated, however, the USSR may follow one of two courses. The Kremlin may maintain the status quo in order to avoid giving the appearance of failure to stand by one of its Satellites; or it may agree to a modification of the Western pro- posal in 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 the 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 a develop- ment can be prevented only by the allocation of US funds either directly or through Italy's European Recovery Program allotment, with which to rehabilitate Trieste's shipping and manufacturing interests. Even such a course is not certain to be suc- cessful, because of the unlikelihood that the Territory can, in the foreseeable future, become economically self-sufficient under UN control or regain its prewar activity if incorporated with the Italian economy. NOTE: The information in this report is as of 12 April 1948. The intelligence organizations of the Departments of State, Navy, and the Air Force have concurred in this report; at the time of publication no official statement had been received from the Department of the Army. 1

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    "ocrText": "3.\nORE 23-48\n: ARCHIVES SERVICE** RECORDS `NATIONAL AND\nSECRET\nTHE CURRENT SITUATION IN THE FREE TERRITORY OF TRIESTE\nSUMMARY\nThe emergence of Trieste as a major international trouble spot derives from the\npostwar conflict between East and West. Since the Italian Peace Treaty compromise\nwhich created the Free Territory of Trieste under United Nations control, the big\npowers have had direct responsibility for achieving a peaceful settlement in Trieste\nwhich would satisfy Italian national pride and Yugoslav/Communist expansionist aims.\nThe US, by associating itself with the tripartite proposal for the return of the\nTerritory to Italy and by its anti-Communist stand in Europe, is committed to prevent-\ning the Territory from coming under Yugoslav control. Final Soviet reaction to the\ntripartite proposal will await the outcome of the Italian elections in April. In the\nevent of a Communist victory, Soviet policy will be concerned primarily with effecting\nthe withdrawal of US-UK occupation troops. In pursuance of this objective, the USSR\nmay attempt to force the US, UK, and France to abide by their pre-electoral proposal. If\nthe Communists are defeated, however, the USSR may follow one of two courses. The\nKremlin may maintain the status quo in order to avoid giving the appearance of failure\nto stand by one of its Satellites; or it may agree to a modification of the Western pro-\nposal in the hope that, after the withdrawal of US-UK troops, Italy may lack the\nstrength to prevent subsequent Yugoslav/Communist penetration of the area.\nMeanwhile, regardless of the ultimate disposition of the area, the US and UK now\nbear the major responsibility for obstructing Yugoslav designs on the Territory. Unless\nthe current trend toward rapid economic deterioration in Trieste is reversed, either the\nUN or Italy will become heir to an area so economically depressed that it will be an\neasy prey for subsequent Communist infiltration. AMG estimates that such a develop-\nment can be prevented only by the allocation of US funds either directly or through\nItaly's European Recovery Program allotment, with which to rehabilitate Trieste's\nshipping and manufacturing interests. Even such a course is not certain to be suc-\ncessful, because of the unlikelihood that the Territory can, in the foreseeable future,\nbecome economically self-sufficient under UN control or regain its prewar activity if\nincorporated with the Italian economy.\nNOTE: The information in this report is as of 12 April 1948.\nThe intelligence organizations of the Departments of State, Navy, and the Air Force\nhave concurred in this report; at the time of publication no official statement had been\nreceived from the Department of the Army.\n1"
}