611.6731/689

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

No. 1553

Sir: In continuation of my despatch No. 1488 of June 21, 1940, with regard to the liquidation of exchange arrears for imports from the United States, I have the honor to report the following developments relative to this matter which have occurred during the past two months:

As has been reported to the Department, the issuance of permits for the transfer of dollar exchange for the payment of imports from the United States was suspended on June 13, 1940. After two weeks had elapsed without the resumption of the issuance of permits, the Embassy took up again with the Foreign Office the question of the allocation of exchange for the liquidation of the outstanding exchange arrears. Mr. Kelley called upon the Director General of the Department of Commercial and Economic Affairs of the Foreign Office on July 1, 1940, and informed him that the Exchange Control Director at Istanbul had suspended on June 13, 1940, the issuance of exchange permits for the payment of imports from the United States and that the Embassy understood that this action had been taken as a result of instructions received from Ankara. He pointed out that the exchange arrears for imports from the United States amounted to approximately $3,228,000 and that of this sum approximately $460,000 represented arrears for imports effected in 1939, although six months had elapsed since the close of that year. He requested the Foreign Office to urge the competent authorities to allocate sufficient exchange to expedite the complete liquidation of the arrears.

The issuance of exchange permits was resumed on July 10, 1940, but from that date up to September 6, 1940, the total amount of the permits issued was only $350,600. The Turkish authorities in response to the Embassy’s representations have maintained that the decrease in the amount of exchange permits issued was due, not to any intervention on the part of the Turkish authorities, but to the fact that the quantity of [Page 983] exchange becoming available to Turkey had diminished as a result of the termination of the export season and of the decrease in shipping facilities.

There is enclosed, for the Department’s records, the text, together with a translation, of a note received from the Foreign Office dated July 4, 1940, commenting on certain statements contained in the Embassy’s memorandum of May 13, 1940, a copy of which was enclosed with my despatch No. 1488 of June 21, 1940. The Foreign Office would have us believe that the accumulation of exchange arrears in 1938 was due to the circumstance that Turkey did not receive sufficient dollar exchange to pay for imports from the United States. Such a thesis is not supported by the facts. As the Embassy has reported to the Department (see my despatch No. 1153 of July 15, 193944), in the twelve month period following May 11, 1938, the Turkish Government made available for the payment of imports from the United States not much more than fifty per cent, of the dollar exchange received from the purchase of Turkish products by the United States. The Foreign Office also maintains that the recent decline in imports into Turkey from the United States was due, not to the reasons set forth in the Embassy’s memorandum, but to the fact that “American firms since the outbreak of the war, have not stopped demanding payment in cash contrary to the chronological order provided for in the Turkish-American Agreement”. As the Department is probably aware, the policy adopted early in 1939 by many American manufacturers of requiring payment by letter of credit for shipments to Turkey was dictated by the existence of large blocked arrears in Turkey and the delay experienced in the receipt of dollar remittances for previous shipments to Turkey. It will be observed that the Foreign Office declares that it has been the constant care of the Turkish Government to see that the engagements arising out of the American-Turkish Trade Agreement are carried out within the bounds of the material possibilities, and that “payments for American imports are proceeding at present in accordance with the foreign exchange availabilities”.

The Embassy will continue to endeavor to expedite the liquidation of the outstanding exchange arrears which amounted to $3,216,000 on September 6, 1940. It would appear that the Minister of Commerce is determined to liquidate completely these arrears and that he is prepared to use for this purpose free exchange obtained from the export of cotton to Yugoslavia and of wheat to Greece. (My telegram No. 97 September 4, 12 noon). The Embassy understands that Turkey is to receive approximately $1,300,000 for cotton already sold to Yugoslavia. Inasmuch as an agreement in principle has been reached between the Turkish Government and the Socony-Vacuum Oil Company [Page 984] whereby that Company is to receive dollar obligations payable in two years for its outstanding exchange arrears which amount to approximately $1,000,000, the above mentioned amount of dollars would appear to be sufficient to settle all the remaining arrears. However, while the Minister of Commerce speaks very definitely of the possibility of utilizing such exchange for the liquidation of the American arrears, it is not at all clear at present that the Ministry of Finance shares his viewpoint.

Respectfully yours,

J. V. A. MacMurray
[Enclosure—Translation]

The Turkish Ministry for Foreign Affairs to the American Embassy

77387

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The Ministry of Foreign Affairs duly transmitted to the competent Department Note No. 293 of March 19, 1940,45 as well as the contents of the Memorandum dated May 13, 1940, which the Embassy of the United States of America was kind enough to forward to the Ministry on the subject of American imports into Turkey.

The competent Department cannot agree with the point of view of the Embassy of the United States as regards the reasons which brought about the existence of arrears arising out of these imports. It is, indeed, true that arrears accumulated during the year 1938 in consequence of an abnormal increase in American imports into Turkey and the exchange obtained from Turkish exports to the United States proved insufficient to cover them. However, since the conclusion of the Agreement of May 15, 1939, the competent Department has taken care to apply all the measures required for its sound application. As a matter of fact, an amount of $5,987,135, not including payments made by the State, was allotted up to May 31, 1940, for American imports.

The total of the payments made in the course of the last months alone amounts to $1,227,806. Payments for American imports are proceeding at present in accordance with the foreign exchange availabilities.

If the imports into Turkey have lately experienced a decrease, as pointed out in the Memorandum of the Honorable Embassy, this has nothing to do with the reasons set forth in this document but is due to the fact that American firms, since the outbreak of the war, have not stopped demanding payment in cash contrary to the chronological order provided for in the Turkish-American Agreement.

The Ministry of Foreign Affairs considers in view of the above [Page 985] facts that there does not appear to exist any indications susceptible of hampering—even in the slightest degree—the normal development of Turkish-American commercial relations, particularly as the Government of the Republic has constantly taken care to see to it that the engagements arising out of the abovementioned Agreement were carried out within the bounds of the material possibilities.

  1. Foreign Relations, 1939, vol. iv, p. 869.
  2. See last paragraph of despatch No. 1488, June 21, p. 975.