611.6731/645: Telegram

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

156. Your telegram No. 58, December 8, 6 p.m., third and fourth paragraphs.

The Minister of Commerce invited the Assistant Commercial Attaché to call on him yesterday for the purpose of discussing Turkish-American trade difficulties. From this conversation it would appear that in spite of previous assurances to the contrary the Turkish Government over the week-end had decided to liquidate the exchange arrears at the new rate (167½). When the Minister made known this intention, it was pointed out to him that the imposition of this rate for the liquidation of arrears would place an almost intolerable burden on Turkish importers many of whom would be unable to cover their dollar commitments at the new rate and that this would result in losses to American exporters. The Minister replied that such losses were the inevitable result of devaluation. He was informed that we considered that exchange arrears should be exempted from the effects of devaluation but he declined to accept this point of view.
The Minister stated that he desired to do away with blocked arrears and have exchange available for the current payment of new imports and with that end in view made the request that I submit to you a proposal that the Export-Import Bank grant the Turkish Government a loan of $6,500,000 (repayable in equal annual installments over a 5-year period) to be applied to the liquidation of the outstanding arrears.
In the opinion of the Embassy the extension of such a loan would undoubtedly be of assistance to Turkish-American trade which is handicapped by the existence of blocked arrears which under present conditions will recur annually. Furthermore it would facilitate our obtaining provision for the liquidation of the arrears at the old rate, on the other hand it should be borne in mind that the present situation is due to a large extent to the utilization by the Turkish Government for non-commercial purposes of a considerable part of the exchange received from last year’s American purchases of tobacco and other goods. Some assurance against the recurrence of such a situation would seem essential. The Department will also desire to take into consideration [Page 887] the fact that notes of the Turkish Government held by the match company44 have been in default since July 1, last year.
I am seeking an appointment with the Minister for Foreign Affairs with a view to urging that provision be made for the exemption of the existing blocked arrears from devaluation.
  1. The International Match Realization Company.