811.20 Defense (M)/381: Telegram
The Chargé in Turkey (Kelley) to the Secretary of State
[Received September 26—2:13 p.m.]
158. Department’s 71, September 21, 3 p.m.
1. I discussed this morning the question of the acquisition of Turkish chrome by the United States with the Secretary General of [Page 953] the Ministry of Foreign Affairs10 (the most energetic official in the Foreign Office and the one who negotiated the chrome agreements with Great Britain). I explained the situation as set forth in the Department’s telegram pointing out that the British Government was willing to sell to us the chrome to which they had taken title in Turkey but that under the chrome agreement of January 8, 1940, they could not resell Turkish chrome to a third country without Turkey’s permission. I emphasized that the acquisition of this chrome was a matter of the greatest importance to my Government and urged most strongly that permission be granted for the sale of this chrome to us by Great Britain.
Numan inquired whether it was a question of the purchase of chrome in Turkey or chrome that had already been shipped to Great Britain. I replied that I understood that it was a question of chrome now above ground in Turkey. He said that in that case he would much prefer to work out an arrangement for the sale of this chrome directly to the United States by the Turkish Government.
Upon my inquiring whether this was possible under the Anglo-Turkish agreements he said that he was confident that it could be arranged and added that while the British Government was obliged to purchase chrome the Turkish Government was not obliged to sell it to Great Britain. (I gathered from his remarks that he contemplates working out an arrangement whereby the British Government will relinquish to us part of the ore now earmarked for Great Britain.) He said that one condition upon which he would insist was that the contemplated transaction would be recognized as a special one outside the scope of our trade agreement.11 I said that offhand I did not think that there would be any difficulty on this score. He assured me that the Turkish Government was most eager to sell chrome to us since it had tremendous need of dollars to make purchases in the United States. He concluded by saying that he would personally take charge of this question, that he would take the matter up at once with the Director General of the E. T. I. Bank and the Minister of Finance and, as soon as he had all the facts in hand, with the Prime Minister. He promised to give me an answer within a few days. (During our conversation the Secretary General was handed a telegram which he said had just come in from the Turkish Ambassador in Washington relative to this matter.)
2. I also discussed today the chrome situation with the British Commercial Attaché12 (who has negotiated the several chrome arrangements between Turkey and Great Britain) who gave me the [Page 954] following information which may be of interest to the Department. He said that under the confidential chrome agreement of January 8, 1940, the maximum annual output of Turkey was fixed at 250,000 tons and that Great Britain obligated itself to purchase this quantity (plus an amount of 50,000 tons then in stock) less the amount sold to the United States. It was also provided that Great Britain could not sell chrome purchased from Turkey to a third country.
Jordan stated that a supplementary agreement was concluded on July 1, 1940, which fixes at 130,000 tons the amount of chrome which Great Britain is obliged to purchase up to the end of 1940. The E. T. I. Bank reserves the right to deliver a supplementary quantity of 50,000 tons. Jordan explained that these two amounts represent the estimated total Turkish production in the period in question and that inasmuch as Great Britain has a lien on the 130,000 tons specified the 50,000 tons represents the total amount at the free disposal of Turkey. He said that the E. T. I. Bank has already shipped 19,000 tons to the United States and that consequently there now remains only 31,000 tons at the disposition of the Turkish Government.
Jordan states that according to information furished him by the E. T. I. Bank there were approximately 36,000 tons of chrome at ports on August 31, 1940. He does not know how much there is above ground at the mines but he is certain that the total mined is much less than 100,000 tons. He expressed the opinion that the chief difficulty in working out an arrangement for the resale of Turkish chrome by Great Britain to the United States would be the question of the disposal of the dollar proceeds.
Since the proceeds from the sale of the chrome to Great Britain are earmarked for the payment of interest on and principal of Turkish obligations held by Great Britain, the dollars received from the resale to the United States of Turkish chrome purchased by Great Britain would not be available to the Turkish authorities unless they made available for the payment of interest et cetera an equivalent amount of pounds (sterling) from other sources. He intimated that if the Turkish Government were willing to do this the British Government would probably not object to the dollar proceeds being placed at the disposition of the Turkish authorities. I gather that there is a good possibility of some satisfactory arrangement being worked out with regard to this point.
3. Jordan also informed me that during the past 6 weeks the representative of the British Chrome Association has been endeavoring to persuade the E. T. I. Bank to offer us the chrome at its disposal for $22.50 per ton f. o. b. which represents a dollar less than [apparent omission] price. Following the Department’s telegram No. 66, August 28, 6 p.m., I pointed out in several conversations with interested [Page 955] British authorities that the principal difficulty confronting us in connection with the purchase of Turkish chrome was the high freight and insurance costs and that these high costs would not be offset by a reduction in the f. o. b. price of only one dollar per ton. I suggested to them, in view of the fact that the sale of Turkish chrome to the United States would be to the advantage of the British Government in that it would take off their hands chrome which Great Britain could not utilize, that the British Government provide ships to convey the chrome to the United States at operating cost. I pointed out that the ships would have a full cargo in proceeding from Great Britain to Turkey and in returning from the United States to Turkey and that the profits on these trips would offset the absence of a profit in transporting the chrome. It is understood that the British Commercial Attaché here has recommended a solution along these lines.