Between ideology, strategy, and diplomacy: The political economy of Yugoslavia’s investment treaties

Abstract Why do communist countries sign bilateral investment treaties (BITs)? This article explores this question through the case of Yugoslavia, the first communist state to do so. In 1974, Yugoslavia signed a BIT with France, paving the way for further investment treaties – both in Yugoslavia and, soon after, in other communist countries. These developments sparked intense debate within the Yugoslav Communist Party, with some factions viewing them as a betrayal of Marxist–Leninist principles. While Western powers welcomed the move, it was strongly criticized by Eastern Bloc countries, particularly the Soviet Union, as ideological heresy. This paper analyses the complex motivations behind Yugoslavia’s foreign investment policy in the 1960s and 1970s, arguing that it was driven by domestic political, geopolitical, and ideological factors – not just economic considerations. Domestically, BITs were linked to the Communist Party’s efforts to maintain political power and stability. Geopolitically, they served as tools to secure international allies. Ideologically, the policy sought to promote a distinct Yugoslav model of socialism – one that blended socialist principles, workers’ self-management, market economics, and coexistence with both capitalist and socialist states. This ideological dimension, overlooked in the literature, highlights how BITs were not merely economic instruments but also tools for advancing a hybrid economic and foreign policy that challenged both capitalist and Soviet orthodoxies.