611.6731/642: Telegram

The Ambassador in Turkey (MacMurray) to the Secretary of State

152. My No. 150, December 4, 8 p.m.

The Minister of Commerce stated to Kelley today that the action contemplated by the Turkish Government was in fact devaluation of the Turkish pound in relation to the dollar, although the Government was not able to resort to avowed devaluation, he had therefore been unable to present the proposed measures in that light to the Turkish public. He emphasized that the proposed measure was general in its application; 1.625 Turkish pounds would be paid for dollars brought into Turkey either for the purchase of Turkish products or for any other purpose, that figure consequently represented the actual buying rate for dollars in the future. The Minister said that the appearance [Page 884] of a compensation transaction would be maintained by having the books of the Central Bank show 1.30 Turkish pounds of this amount as paid by the bank and 325 by the compensation society.
With regard to the purchase of dollars for the payment of imports from the United States the Minister said that dollars for the payment of future imports would be sold at a rate a few points above the buying rate and that dollars for the payment of past imports would be sold at the old rate which impliedly remains the official rate. (The exchange authorities in Istanbul assured the Assistant Commercial Attaché43 this morning that the existing arrears would be liquidated at the official dollar rate, i. e. 1.30, as rapidly as dollar exchange becomes available.) If this plan is carried out it would seem to obviate the situation as to which instructions were requested in my telegram No. 149, November 25, 2 p.m.
It would appear from the remarks of the Minister in discussing the blocked arrears that he is groping to find some means of reserving for the payment of current imports, the dollars receiving from the tobacco purchases which are just beginning. He discoursed at length upon the necessity of regaining the confidence of the American exporter by making exchange available immediately upon application which would also have a very beneficial effect in Turkey because it would bring about a reduction in the high prices of American products. He mentioned the possibility of his approaching us later with a view to obtaining financial assistance from the Export-Import Bank to pay off the existing arrears and the possibility of holders of exchange arrears waiving their right to immediate payment. The Minister understands fully, however, that under the trade agreement, exchange must be made available in chronological order of application as imports become available.
The representatives of the American tobacco companies ceased purchasing tobacco yesterday upon the Embassy’s stating its inability to give them assurances that the proposed action of the Turkish Government would not entail the Treasury’s application of countervailing duties to dutiable goods. Following the conversation with the Minister this morning Kelley advised a spokesman of the tobacco companies, in view of your telegram No. 41 of August 26, of the information obtained from the Minister and expressed the opinion that if the new measure was applied along the lines set forth by the Minister there would appear to be no question of the application of penalizing duties in the United States.
  1. Earle C. Taylor.