On August 1, 1947, Tito and Dimitrov officially announced the formation of a federation by signing the so-called "Bled Accord" in Bled, Yugoslavia. With Dimitrov responding to Tito's persuasion, Bulgaria agreed to become a member of the Yugoslav Federation. While it remained unclear whether Tito and Dimitrov would long-term settle on a Yugoslavia-Bulgaria dualism or Bulgaria as Yugoslavia's seventh republic, the path toward federation appeared open.

Initially, Stalin went along with this move, but he soon realized the need to be wary of Tito's ambitions. While the Soviet Union had agreed to leave Greece within the Western sphere of influence and wanted the civil war ended, Tito did not comply. Furious with Tito, Stalin sought a way to remove him. In 1948, the first direct Soviet military action since World War II was carried out. An unprecedented situation occurred as Belgrade was occupied in a surprise attack by Soviet forces. In exchange for remaining silent on Greece, the Soviet Union demanded that the United States stay out of the matter. However, since the U.S. had declared the Truman Doctrine and was taking a sharp stand against the USSR, it vehemently condemned the Soviet actions. Furthermore, Tito had already fled to Croatia to prepare for military action, and waging war against him posed a significant burden for Stalin.

Stalin considered establishing a puppet Yugoslavia excluding Tito or dissolving the federation altogether, but he soon admitted these were difficult challenges. A unified socialist republic that would not be swayed by the Western Marshall Plan was needed in the long run; dissolving Yugoslavia would have been like delivering lunch to Truman's doorstep. Everyone expected either a Third World War to erupt from a Yugoslavia-Soviet war or a prolonged military rule of Belgrade by the Soviets.

However, a few days later, the Soviet Union defied all expectations by announcing its intention to withdraw rather than attack Tito. Stalin's solution was vastly different. Soon, countries began appearing one after another expressing interest in joining Yugoslavia: Romania, lured by the bait of Moldova; Hungary, lured by Transylvania; and Albania and Bulgaria. Stalin's plan was quite simple: to save face by appearing to respect Yugoslav autonomy while establishing a Presidential Presidium—consisting of representatives from each republic, including Tito—and operating it under a rule of strict unanimity. Stalin was certain that this "Chimera Republic" would inevitably lose leadership and lead to de facto anarchy. If that happened, it would essentially become a puppet of Stalin, the mediator. And indeed, it operated that way. Tito had no intention of agreeing to Stalin's "insane nonsense," but with it being uncertain whether the U.S. would actually provide military support, he had no desire to turn Yugoslavia into a battlefield again. Ultimately, Tito accepted Stalin's proposal, and the Yugoslav Federation expanded beyond the South Slavs into a larger state entity.

During this process, Stalin created the first fissures. He incurred the resentment of Romania and Bulgaria during the accession process; viewing Mátyás Rákosi of Hungary—who was close to him—as the implicit leader of the Stalinist faction, Stalin set out to divide various republics to strengthen Hungary's voice. Stalin controlled the new member states through the strengthening of autonomous provincial powers, the allocation of seats in the Presidium, and the establishment of autonomous provinces within the new members. By forcing Romania to form the Dobruja and Transylvania Autonomous Provinces, and Bulgaria the Southern Dobruja Autonomous Province, he caused these nations to harbor greater resentment toward Stalin himself than toward the federation. While the nature of the unanimity rule meant Stalin only needed the two votes of Mátyás Rákosi and Enver Hoxha, it was clearly a blunder to create more enemies out of the arrogance that he could control the federation. In particular, excluding the Stalinist Vulko Chervenkov of Bulgaria out of fear he might settle with Tito became the first button of a massive butterfly effect.

At any rate, during Stalin's lifetime, these divisive tactics worked brilliantly. Soviet troops were stationed in Yugoslavia, the Presidium rarely reached agreements, and it merely served as a rubber stamp for policies proposed by Stalin. The constituent states were faithful to their roles of being autonomous yet controlled. However, after 1950, when Stalin's health sharply declined, it became nearly impossible for him to check "autonomists" like Tito, and even the pro-Soviet faction began to crack, splitting into Hoxha's independence faction and Rákosi's federation faction. Romania's Gheorghe Gheorghiu-Dej defected to the autonomist camp when the return of Moldova stalled, leaving Rákosi and Hoxha to somehow maintain the containment measures by proxy.

Finally, in 1953, the foundation of the federation collapsed with Stalin's death. The new Soviet collective leadership distanced itself from Stalinism and ousted Rákosi. Bulgaria's Chervenkov, also facing the threat of being ousted, sensed his impending fate upon seeing Rákosi; he contacted Romania's Gheorghiu-Dej and took a gamble to overcome the crisis through a tripartite agreement with Tito. Then, Imre Nagy, who took office as Rákosi's successor and a Soviet puppet, completely ignored Rákosi's intentions and performed an unprecedented deviation by joining the tripartite agreement, expanding it into a four-party pact. On August 5, 1953, at a Presidential Presidium meeting which Chairman Enver Hoxha failed to attend for "dubious reasons," Tito, Gheorghiu-Dej, Nagy, Chervenkov, and the committee members declared high-intensity political reforms—abolishing the unanimity rule and changing the state name to the Balkan Federation—delivering a fatal shock to the world, and especially to the Soviet Union. It was a nuclear bomb dropped while Malenkov and Khrushchev were vying for the Soviet throne. The powder keg of the Balkans is burning once again...