868.151/37: Telegram

The Acting Secretary of State to the Ambassador in Great Britain (Houghton)

176. (1) On December 22, 1924, Ulen and Company, of New York, concluded with the Greek Government a contract for the construction of waterworks for the cities of Athens and Piraeus. Under this contract, which was ratified by the Greek Parliament on April 3, 1925, bonds to the amount of $10,000,000 are to be issued by the Greek Government secured in the manner described in Article 19 of the Contract substantially as follows:

  • “(a) Revenues of waterworks existing in Athens and Piraeus or to be constructed under the contract;
  • (b) A first lien upon existing waterworks construction at Athens and Piraeus and upon the works to be constructed pursuant to the contract;
  • (c) The excess of revenues, assigned to the service of the Public Debt, and subject to the control of the International Financial Commission but only to the amount necessary to pay the said service of interest and amortization. …4 The said revenues shall be subject only to the prior charge for the service of loans made previous to the date of this contract and for which the said revenues are pledged by law.”

Under a subsidiary contract for provisional waterworks construction signed later and not requiring Parliamentary ratification, bonds to the amount of $1,000,000 are to be issued, ranking after the service of the bonds for $10,000,000 as a charge upon the same security. On April 15 and May 7, 1925, the Greek Government, through its Minister at Washington, acting in pursuance of the Loan Agreement of 1918, requested the assent of the United States to the pledging of the security specified in the contracts with Ulen and Company. Requests of the British and French Governments are understood to have been made at the same time.

(2) In view of the urgent need of improved waterworks for Athens and Piraeus, particularly under the conditions resulting from the large accession of refugees, and in view of the fact that the payments of principal and interest of the contemplated loans will apparently be met out of the revenues to be derived from the operation of the waterworks, the Department under dates of May 5 and 23 communicated to the Greek Legation its assent to the pledging of the security specified in the contracts. The Department is informed that neither [Page 291] the British nor the French Government has replied to the Greek request for assent to the pledging of this security. It is reported that the British financial house of Hambro, which, in cooperation with Speyer and Company of New York, undertook the flotation of the recent Greek refugee loan, has, presumably for the protection of investors in that loan, made representations to the British Government against compliance by that Government with the Greek request. The Greek Government itself, acting, Ulen and Company believe, at the instigation of the French or British Government, is reported to have requested the International Financial Commission to declare that the bonds to be issued under those contracts must, despite the stipulation in Article 19 (c) of the principal contract, rank, as a charge upon the revenues of the Commission not pledged at the time of the conclusion of the Ulen contracts, after the portion of the Ottoman Public Debt to be allocated to Greece and presumably to be charged upon the revenues of the Commission under Article 48 of the Treaty of Lausanne.5

Ulen and Company inform the Department that they are ready, if necessary, to execute formal assurances with respect to withholding their half of the bonds from the market for two or even three years and that they would use their influence with the Bank of Athens to secure similar action on the part of the Bank. Ulen and Company are not disposed at this time to consider the question of allowing priority to the Greek share of the Ottoman Public Debt as a charge on the revenues of the International Financial Commission remaining unpledged on the date of their contract.

(3) The Department desires you to approach the Foreign Office informally and, without requesting any action or the expedition of any action by the British Government, to ascertain what is the present status of the consideration of the question of complying with the Greek request and what may be the factors responsible for the apparent hesitation of the British Government to comply with that request.

(4) Repeat foregoing to Paris, Rome and Athens and telegraph cost of repetition to be charged Ulen.

(5) Mr. James F. Case, a representative of Ulen and Company, is in London and will call at the Embassy and furnish any explanations which you may desire to have before approaching the Foreign Office.

Telegraph reply.

  1. Omission indicated in the original telegram.
  2. Treaty of July 24, 1923, between Turkey and the Allied Powers; League of Nations, Treaty Series, vol. xxviii, p. 11.