Foreign Relations of the United States, 1969–1976, Volume XXIX, Eastern Europe; Eastern Mediterranean, 1969–1972

434. Memorandum From the Presidentʼs Assistant for National Security Affairs (Kissinger) to President Nixon¹

Washington, undated.

SUBJECT

• Economic Assistance for Turkey

Issue

On Sunday,² Turkey is expected to devalue the lira. The IMF, with our strong support, has been urging this for years as the most critical step needed to bolster the Turkish economy. An IMF meeting on Sunday will ask a number of donors to make new aid contributions to support the devaluation; our share will probably be about $25 million.

Devaluation

Devaluation will make the Turkish economic system much more competitive, enable her to liberalize her import controls, and promote an increase in exports. It is therefore of critical importance to her economic development. It has been urged on her for years by all outside observers, but has not happened before because of the extreme political sensitivity of the exchange rate in Turkey.

However, substantial financial assistance will be required to counter the possibility of speculation against the lira after the devaluation, and permit a measure of import liberalization. As part of a special multilateral assistance package designed by the IMF, we would be asked to provide approximately $25 million to the Turks.

In June I approved, on your behalf, Secretary Rogersʼ recommendation for an aid loan to Turkey of $40 million with the understanding that an additional $25 million would be provided if Turkey devalued.³ I continue to feel strongly that we should respond positively, on both economic and foreign policy grounds.

I raise the issue only because of our narcotics problem with the Turks. Secretary Kennedy had originally raised an objection to providing the loan until Turkey had agreed to eliminate its opium poppy production, although Treasury subsequently withdrew its objection and agreed with State that withholding it might aggravate political relations and restrict Demirelʼs ability to be helpful on the opium problem.

Demirel, in the subsequent months, has sharply reduced the number of provinces in which opium could legally be grown. He could ideally have done more. However, the opium producing provinces are important strongholds of his Justice party, which has only recently emerged from a divisive political crisis in which forty of its members voted with the opposition, defeated the budget, and forced resignation of the Government. Had Demirel banned opium production in all provinces, it is probable that he would have been unable to survive politically.

Despite the severity of the narcotics problem, I continue to believe that support for Demirel and his efforts to gradually end opium poppy production will serve both our foreign policy interests and our domestic interests better than utilizing aid as a leverage factor over the Turks. The Turks will require the $25 million to support the devaluation which we have long encouraged, and which is crucial to our long-term interests in Turkey. Withholding these funds could severely damage the Turkish economy and our relationship with Turkey which, as a NATO ally, is important to us. A major aggravation of our relationship with the Turks would also make it more difficult for Demirel, or a successor, to cooperate with us on the opium problem.

Recommendation

That you approve the additional $25 million in economic assistance to Turkey. John Ehrlichman, Pat Moynihan, State, and Treasury agree. (Pat suggested that, in doing so, we make clear to the Turks that this by no means indicates that we are not serious about the opium problem. I have instructed the agencies and our representative at the IMF to do so.)⁴

1. Source: National Archives, Nixon Presidential Materials, NSC Files, Box 633, Country Files—Middle East, Turkey, Vol. II 1 Jan 1970–31 Dec 1971. Secret. Sent for action. An attached August 7 memorandum from Bergsten to Kissinger recommended that if Kissinger wanted to raise the issue with the President, he send this memorandum. Kissinger wrote on Bergstenʼs memorandum: “File, donʼt forward. HAK.”
2. August 8.
3. See Document 430.
4. Kissinger initialed the approval line: for Nixon.