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

No. 1513

Sir: I have the honor to refer to my despatch No. 1475 of May 31, 1940,42 as well as to telegraphic despatches on the status of exchange transfers in payment of commercial imports of American origin.

On June 15, 1940 the Turkish Exchange Control Office temporarily ceased the issuance of permits for dollar exchange transfers. This suspension continued until around July 10 when the issuance of permits was resumed but on a limited scale. The Exchange Director gave varying reasons for the temporary suspension but it is believed probable that dollar exchange transfers were stopped by an order of the Ministry of Finance pending some clarification of the rather [Page 979] tense political situation in the Balkans which existed at that time. As a matter of fact, Namik Kemal Bey, the Director of the Istanbul Exchange Office, in a conversation with the Assistant Commercial Attaché on July 5th, made a definite statement to that effect.

On July 10 the issuance of permits was again resumed but the amounts granted have not been large. From July 10 to August 1, inclusive, only $141,296 of permits have been issued. Since the Embassy’s last telegraphic despatch on the exchange situation (June 29 [30], 1940)43 until August 2nd new applications have been filed with the exchange authorities in the amount of $196,293.

On August 2nd the total unpaid applications on file covering commercial imports from the United States amounted to $3,283,017 of which $332,945 represented imports effected during 1939. It should be noted that the figure for the 1939 arrears is not, strictly speaking, an accurate one as the Embassy is obliged to make calculations based on data furnished by the Exchange Office and the Turkish authorities consider as 1939 arrears only those imports which were effected prior to December 4, 1939, the date on which the exchange premiums came into effect. The Department will recall that last December the Turkish Government finally agreed to continue to liquidate the old arrears without the collection of an exchange premium but that an exchange premium would be levied on new imports and the date fixed for the application of the exchange premiums was December 4. It is probable, therefore, that the figure given above as representing 1939 arrears is in error by a possible $200,000 almost all of which is believed to be due to the Socony Vacuum Oil Company.

With the entrance of Italy into the war the problem of effecting actual dollar transfers covered by permits issued became increasingly difficult. Although the Central Bank continued to issue dollar checks against exchange permits, local firms were extremely reluctant to make use of the ordinary post as the Turkish postal authorities, while accepting mail for the United States, were still undecided as to the means by which the mail would be forwarded (the Trans-Siberian route by way of Vladivostok and Japan was finally decided upon and is still being utilized). The Central Bank refused to sell dollars for cable transfer and the other banks were obliged to follow the lead of the Central Bank.

On June 13 the Embassy approached the Foreign Office with a request that the Central Bank be approached with a view to authorizing the sale of dollars for cable transfer. The Embassy pointed out that permits being issued by the exchange authorities covering commercial imports from the United States were of relatively little value if the local importer found it impossible to transfer to the United [Page 980] States the dollars granted him. As a result of the Embassy’s efforts the Central Bank did effect cable transfers but by way of London, presumably through the sale in New York of Sterling from the Bank’s London balances.

With the suspension in the issuance of permits the question of the actual transfer of the dollars lost its immediate importance but has again arisen with the resumption of the granting of permits. At the present time the only means of transfer of dollars is again by ordinary post. The Central Bank states that they are unable to make cable transfers as recent British regulations prevent transfer through London. Furthermore, the Central Bank will not permit the use of airmail for dollar remittances stating that the use of airmail for this purpose is against their regulations.

The Embassy believes that the attitude of the Central Bank is anything but a liberal one as it is the Embassy’s understanding that practically all the dollar purchases of the Central Bank are by cable on New York. The tobacco companies have, since the early part of the year, been making their dollar sales for tobacco purchases and manipulation by cable in New York and it is consequently difficult to understand the refusal of the Central Bank to utilize their dollar balances in New York to sell dollars here for cable transfer. A specific example exists in the case of a permit for $74,000 granted the Socony Vacuum Oil Company more than three weeks ago. The American company has not to date been able to effect the transfer of this sum. It is believed that there are probably other instances although as most of the permits granted during the past few weeks have been for relatively small amounts it is possible that local holders have obtained the checks and mailed them by ordinary post.

The Embassy intends approaching the Central Bank directly with the request that they give serious consideration to the possibility of authorizing the sale of dollars for cable transfer at the same time calling attention to the Embassy’s understanding that the dollar purchases of the bank are usually effected by cable on New York and citing as an example the case of the dollar sales of the tobacco companies. As an alternative measure, the use of airmail communications will be suggested.

Respectfully yours,

J. V. A. MacMurray
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