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

No. 1408

Sir: Supplementing my despatch No. 1381 of February 29, 1940, relative to the situation in respect to the liquidation of the exchange arrears, I have the honor to report that the Exchange Control Office in Istanbul resumed the issue of new exchange permits on March 4, presumably as the result of instructions received from Ankara in consequence of the Embassy’s representations. The issue of exchange permits, however, proceeded at a very slow rate, less than $300,000 in permits being issued during the first ten days. In view of the interest manifested by the Minister of Commerce in improving the trade relations between the United States and Turkey, the Embassy considered that it would be helpful to bring to the Minister’s personal attention the situation in respect to the issue of exchange permits for the transfer of payments for commercial importations from the United States. Arrangements were made for the Assistant Commercial Attaché to [Page 971] call upon the Minister with a view to pointing out to him the deplorable effect which the continued delay in the liquidation of the exchange arrears was having on American-Turkish trade. The Minister expressed surprise on learning that so little exchange had been transferred since the resumption of the issue of exchange permits, and said that he had supposed that at least a million dollars would have been transferred. He undertook to discuss the matter with the Minister of Finance; and on the following day, March 22, he stated that the Minister of Finance had promised to give at once the necessary instructions for the acceleration of the exchange transfers.

The Minister of Commerce was unable to obtain any definite information from the Minister of Finance as to the amount of dollar exchange which was available. (The latter did not know the details of the dollar exchange position and the officer in charge of the matter was ill.) The Minister of Commerce had made inquiries, however, at the Central Bank, and was informed that, since the beginning of December, the Bank had purchased approximately $5,900,000,* representing presumably the dollars sold by American companies to cover their tobacco purchases and the proceeds of other Turkish exports to the United States made during that period. He said that he felt that this figure was rather low and that he was inclined to believe that there had been some “flight” of dollars which should have been forthcoming from exports to the United States. The Minister declared that he would endeavor to obtain exact information with regard to the amount of dollar exchange now available and that he would insist upon full restitution if he discovered that dollar exchange which should have been utilized for the payment of commercial imports from the United States had been diverted to noncommercial purposes. He referred to shipments of gold made to New York last year, and intimated the possibility that a certain amount of the exchange received during recent months might have been used to repay the advances for which the gold shipments presumably were security. He indicated his readiness, in the event that there had been a diversion, to make available for the payment of the dollar arrears the exchange which he anticipated receiving in payment for wheat shipments to Mediterranean countries, which are payable in dollars. Apparently this exchange is the only dollar exchange over which the Minister of Commerce has direct control.

As reported in the Embassy’s telegram No. 34 of March 30, 2 p.m.,34 the Istanbul Exchange Office stated on that date that the amount of [Page 972] exchange permits issued up to that time since March 4 totalled $927,400. This figure indicates that the issue of exchange permits during the last fifteen days of this period was considerably accelerated.

With respect to the question of the application of the rate established for the purchase of dollars sold in connection with the export of Turkish commodities to the United States, namely, the official rate plus an exchange premium of twenty-five per cent., it may be stated that, as reported in my telegram No. 29 of March 23, 12 noon, this rate has not been made applicable to dollars sold for non-commercial purposes, although the Minister of Commerce had stated that this rate would be applied to all transactions, involving the sale of dollars for Turkish currency, and although the Embassy had been given to understand by the Central Bank that regulations relating to this matter were being worked out. After a reasonable time had elapsed and no action had been taken to apply the exchange premium to the purchase of non-commercial dollars, the Embassy took the matter up with the Foreign Office which in turn consulted the Central Bank. The competent official in the Central Bank informed the Foreign Office that it had been decided to make available the Uniturc rate to dollars sold for non-commercial purposes. In the event that such dollars were offered for sale by persons not connected with a foreign mission, the transaction would have to have in each case the approval of the Ministry of Finance. It was stated that the approval of the Minister of Finance would be given promptly provided that the dollars in question had been brought into Turkey from abroad. The Foreign Office official indicated that in practice the official rate would be applied only to dollars presented by persons who were unable or did not desire to explain their origin, the assumption being that such dollars had been acquired illegally. After receiving this information, the Embassy sought to ascertain whether the Uniturc rate was actually being accorded to persons, not connected with a foreign mission, who offered dollars for sale. In view of the infrequency at the present time of the sale of dollars for non-commercial purposes by persons not connected with a foreign mission, some time elapsed before a sufficient number of cases had come to the Embassy’s attention to justify the conclusion that the Uniturc rate was actually being made available generally to dollars sold for non-commercial purposes. The Embassy has now established that in half a dozen cases American newspaper men in Ankara have experienced no difficulty in obtaining the permission of the Ministry of Finance to dispose of their dollars at the Uniturc rate; and there has not come to the Embassy’s attention any case in which this rate has been refused. The Embassy will follow developments in this matter, however, with a view to seeing whether [Page 973] the Uniturc rate continues to be made available to persons selling dollars for non-commercial purposes.

Respectfully yours,

J. V. A. MacMurray
  1. This figure checks approximately with the information obtained by the Embassy from the American tobacco companies to the effect that the sales of dollars effected by the three principal American purchasers since the opening of the tobacco market in early December total more than $5,300,000. [Footnote in the original.]
  2. Not printed.