867.5151/161: Telegram

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

60. Your 156, 157, 159, and 160. The American Government expects that Turkey will adhere to the principle that dollar exchange in Turkey be made available in the chronological order in which requests for exchange are made in accordance with the note attached to the Trade Agreement. The release of dollar exchange for new imports involving a departure from this chronological order would be contrary to this provision.

Our apprehension in this regard is strengthened by a report from a reliable American manufacturer that Turkish importers are now offering to open letters of credit in New York for new American shipments.

As regards the claims that the Turkish authorities do not have at their disposal sufficient exchange to liquidate arrears, you should insist that the exchange being transferred to Turkey during the present season in payment for various Turkish products, principally tobacco, be applied to such liquidation. The Department is naturally keeping in touch with the tobacco companies with regard to the amount of such exchange being transferred to Turkey, and requests you to follow the matter closely.

As regards the Turkish Government’s endeavor to regain the confidence of the American exporter, the Department considers that this may best be done by liquidating the arrears at their full dollar value in chronological order, or some solution which would be entirely acceptable to the existing American creditors. Indications have already been received that failure to liquidate in chronological order, far from regaining confidence, would probably shatter the confidence of the American exporter in the Turkish Government’s promises, for the Trade Agreement would be violated during the first year of operation.

Incidentally the Weirton Steel Company claims that it has some $4,000 remaining blocked from 1938 transactions. The company’s agent in Istanbul is Edward La Fontaine Sons.

For your confidential information, the matter of the loan is being referred to the Export-Import Bank. You should however avoid any discussion of this matter at the present time as any optimism regarding such a loan would be unwarranted.