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

No. 1480

Sir: I have the honor to refer to the Department’s despatch No. 468 of May 1535 in which this Embassy is requested to furnish the Department any information it may be able to obtain regarding the suggestions made by the Goodyear Tire & Rubber Company to the effect that the Turkish authorities have been delaying the issuance of exchange permits in the expectation of a loan to be made to Turkey by the Export Import Bank.

It will be recalled that from January 5 to March 4, 1940, no new exchange transfer permits were issued by the exchange authorities, and no reasonable explanation of this delay was ever offered. The principal explanation given was that the Exchange Control Office was finding it more difficult than had been anticipated to recall and replace those permits issued between December 15, 1939, and January 5, 1940, which had not been utilized by holders by reason of the fact that they required the payment of an exchange premium. The Embassy did not at the time consider that the alleged difficulties were such as to occasion any such prolonged delay. On March 4, however, the issuance of new permits was resumed; and since that date, the Exchange Control Office has given out permits totalling approximately $2,400,000.

The Embassy did not attribute this prolonged delay primarily to the Turkish Government’s hope of obtaining a loan from the Export Import Bank, although there was evidence that this hope was present in the minds of the Turkish authorities. On at least two occasions the Minister of Commerce, in discussing the exchange situation with the Assistant Commercial Attaché, stated that the arrears could all be cleared up promptly if the Turkish Government were granted a loan from the Export Import Bank. On both occasions the Minister was advised that the Turkish Government’s request for a loan had been transmitted to the Department in December (my telegram No. 156 of December 12, 1939, 4 p.m.36), and that as no instructions had since been received there was nothing further that [Page 974] the Embassy could say at that time. The Minister was told unofficially in December, at the time the loan was requested, and on subsequent occasions when he referred to the subject, that it would be unwise to count upon the loan being granted. However, it would appear from information which has recently become available that in spite of the fact that the Turkish authorities were discouraged from adopting too optimistic an attitude with regard to the loan, it was in the expectation of obtaining such a loan that the exchange transfers were held up during the period January 5 to March 4. The fact that the Turkish officials obviously could not admit to the Embassy that transfers were being held up for this reason would account for the very unsatisfactory excuses for the delay which were given at the time.

It was apparently the Turkish Government’s intention to utilize any loan obtained from the Export Import Bank for the purpose of liquidating the outstanding arrears which, at the time the loan was first requested, totalled some $6,500,000, and to devote dollar exchange derived from the purchase of Turkish tobacco by American companies and other Turkish exports to the United States to making prompt dollar payment for new imports of American origin upon their arrival in Turkey and opening letter of credit in the United States to cover such new imports. This is borne out by several statements made by the Minister of Commerce in December and January to the effect that dollar exchange would be available to pay for new imports from the United States upon arrival here and that it would be possible to open letters of credit covering new purchases of American merchandise. When the Embassy pointed out to the competent Turkish authorities that such action would be in violation of the provisions of the Turkish-American Trade Agreement, the idea of effecting immediate dollar payment for new arrivals of merchandise of American origin was abandoned, and letters of credit for only some $400,000 were opened at that time.

It is probable that the resumption on March 4 of exchange transfers was due primarily to the Embassy’s action in pressing for a more rapid liquidation of the arrears, rather than to the apparent failure to obtain the loan from the Export Import Bank, as during the latter part of April the Minister of Commerce while in Istanbul again referred hopefully to the loan in a conversation with a member of the Embassy staff.

Respectfully yours,

J. V. A. MacMurray