Yugoslavia's expulsion from the Cominform in 1948, Albania was effectively a Yugoslav satellite. In repudiating the 1943 Albanian internal Mukaj agreement under pressure from the Yugoslavs, Albania's communists had given up on their demands for a Yugoslav cession of Kosovo to Albania after the war. In January 1945, the two governments signed a treaty establishing Kosovo as a Yugoslav autonomous province. Shortly thereafter, Yugoslavia became the first country to recognize Albania's provisional government.
In July 1946, Yugoslavia and Albania signed a treaty of friendship and cooperation that was quickly followed by a series of technical and economic agreements laying the groundwork for integrating the Albanian and Yugoslav economies. The pacts provided for coordinating the economic plans of both states, standardizing their monetary systems, and creating a common pricing system and a customs union. So close was the Yugoslav-Albanian relationship that Serbo-Croatian became a required subject in Albanian high schools.
Yugoslavia signed a similar friendship treaty with Bulgaria, and Marshal Josip Broz Tito and Bulgaria's Georgi Dimitrov talked of plans to establish a Balkan federation to include Albania, Yugoslavia, and Bulgaria. Yugoslav advisers poured into Albania's government offices and its army headquarters. Tirana was desperate for outside aid, and about 20,000 tons of Yugoslav grain helped stave off famine. Albania also received US$26.3 million from the United Nations Relief and Rehabilitation Administration immediately after the war but had to rely on Yugoslavia for investment and development aid.
Joint Albanian–Yugoslav companies were created for mining, railroad construction, the production of petroleum and electricity, and international trade. Yugoslav investments led to the construction of a sugar refinery in Korçë, a food-processing plant in Elbasan, a hemp factory at Rrogozhinë, a fish cannery in Vlorë, and a printing press, telephone exchange, and textile mill in Tirana. The Yugoslavs also bolstered the Albanian economy by paying three times the international price for Albanian copper and other materials.
Relations between Albania and Yugoslavia declined, however, when the Albanians began complaining that the Yugoslavs were paying too little for Albanian raw materials and exploiting Albania through the joint stock companies. In addition, the Albanians sought investment funds to develop light industries and an oil refinery, while the Yugoslavs wanted the Albanians to concentrate on agriculture and raw-material extraction. The head of Albania's Economic Planning Commission, and Hoxha's right-hand man, Nako Spiru, became the leading critic of Yugoslavia's efforts to exert economic control over Albania. Tito distrusted the intellectuals (Hoxha and his allies) of the Albanian party and, through Xoxe and his loyalists, attempted to unseat them.
In 1947, Yugoslavia acted against anti-Yugoslav Albanian communists, including Hoxha and Spiru. In May, Tirana announced the arrest, trial, and conviction of nine People's Assembly members, all known for opposing Yugoslavia, on charges of antistate activities. A month later, the Communist Party of Yugoslavia's Central Committee accused Hoxha of following "independent" policies and turning the Albanian people against Yugoslavia. This was the closest Hoxha came from being removed from power. Apparently attempting to buy support inside the Albanian Communist Party, Belgrade extended Tirana US$40 million worth of credits, an amount equal to 58% of Albania's 1947 state budget. A year later, Yugoslavia's credits accounted for nearly half of the state budget. Relations worsened in the fall, however, when Spiru's commission developed an economic plan that stressed self-sufficiency, light industry, and agriculture. The Yugoslavs complained bitterly. Subsequently, at a November 1947 meeting of the Albanian Economic Central Committee, Spiru came under intense criticism, spearheaded by Xoxe. Failing to win support from anyone within the party (he was effectively a fall guy for Hoxha) he committed suicide the very next day.
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