867.24/327: Telegram

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

580. The Turkish Government having formally accepted the new procedure outlined in the Department’s 145, April 14, 9 p.m., I assume that the Department will shortly give consideration to the negotiation of a master lend-lease agreement with Turkey (see Department’s 115, April 1, 9 p.m.). I accordingly venture to make the following suggestions which the Department may desire to consider in connection with any such negotiations and am setting forth below the position as we see it in Ankara with respect to the points in question.

The Turkish authorities are anxious to have clearly set forth the terms under which they have been receiving lend-lease material through the British on an indirect retransfer basis. They state that all military articles of British origin which the British Government has furnished them have been charged against credits granted to them by the British and that as American lend-lease material has been delivered to them by and through the British they are not certain but that our material may also have been charged against the credits granted by the British. The Secretary General of the Foreign Office states that the Turkish Ambassador in Washington has been cabling that he does not know the terms under which American lend-lease material has been or is being received and that in consequence the Turkish Government has found itself under the necessity of insuring at least some lend-lease shipments so that the Turkish Government would be protected against loss. He accordingly requests that the terms under which all American lend-lease material has been received in the past or is presently en route be settled as soon as possible. In order to avoid confusion in the minds of Turkish officials and to reap the full benefits of American lend-lease assistance, I recommend that if possible the same terms govern past, present and future lend-lease shipments to Turkey whether by retransfer or direct transfer. Such an arrangement would in my opinion favorably impress the Turks who have never understood the reasons for the retransfer basis and have only recently again stated that they did not know to whom they were responsible for the articles received to date. If this course is followed I suggest that it be clearly specified in the agreement that the material previously received by Turkey was actually American lend-lease material delivered through the British as a matter of convenience.
In as much as through the extension of lend-lease aid to Turkey we are supplying products and materials which Turkey considers essential to its national defense and welfare, it would seem desirable for us to request Turkey in return for such defense aid to furnish the [Page 699] United States, within the limits of Turkey’s capacity, the articles which we need in the prosecution of our war effort. The most important of these articles is chrome30 and, as the Department is aware, Turkey’s chrome agreement with Great Britain whereby its total production is delivered to Great Britain, expires on January 8, 1943. In my opinion, the negotiation of a master lend-lease agreement with Turkey would afford us an excellent opportunity to assure our continuing to obtain Turkish chrome upon the expiration of the existing agreement. Other articles in which we are interested are copper, antimony and opium. In seeking to acquire these commodities the Embassy has been faced with competition from the Axis which has already obtained Turkey’s commitment to supply considerable quantities of these articles in return for the supply by Germany of war materials and other essential products. Inasmuch as Turkey has already concluded agreements with other countries, including Germany, based on the principle of the reciprocal supply of commodities of equivalent economic importance to the two countries, Turkey could have no objection in principle to undertaking to deliver to us in return for war materials needed by Turkey specified quantities of the products which we consider essential to us.
In the event that it should be considered inadvisable to require Turkey to furnish us in return for lend-lease aid specified quantities of various commodities that it might be in a position to supply, I suggest that the Turkish Government be required to pay cash in dollars for an amount of American deliveries which would correspond approximately to the value of the Turkish products which we desire to purchase. Otherwise the application of non-cash reimbursable, or ordinary, lend-lease to all or practically all purchases in the United States would largely remove need of Turkish Government for dollars and would thus operate to make Turkish Government indifferent to the sale of its commodities to the United States thereby making it difficult for us not only to carry on a preclusive purchasing program in Turkey but even to acquire products of which we have particular need. Furthermore sale of some of our products to Turkey on a cash dollar basis would afford us an opportunity to increase our prices when as in the case of opium and copper Turkish authorities demand excessive prices for their products. Question of price has become an even more serious problem in view of recent abolition of the exchange premium of 25% hitherto paid for dollars sold for purchase of Turkish product[s] for export to the United States. Immediate effect of this measure has been to increase still further Turkish prices which as Department is aware are determined not by world market prices but by European famine prices. Unless Turkish Government is willing to stabilize its [Page 700] export prices at a reasonable level it is essential that we have means of meeting price situation.
In view of fact that extension of lend-lease aid to Turkey has relieved Turkish Government of necessity of using dollars to make purchases of needed American products it would seem reasonable to require Turkey in return to make dollars available for transferring American funds now frozen in Turkey comprising capital, interest, amortization and profits amounting to but a few million dollars. The excuse offered by the Turkish Government in the past has been the inadequacy of its dollar balances in the United States to cover both the necessary purchases and the transfer of frozen funds. This excuse has not obtained since almost all lend-lease deliveries have been made on a non-cash payment basis but the Turkish authorities have thus far shown no disposition to make available for transfer of [frozen funds] the dollars no longer required for the payment of purchases in the United States or any part thereof, or furthermore the situation from the American point of view is aggravated by the fact that substantial dollar amounts are transferred annually to Turkey whereas no American funds in Turkey may be transferred to the United States. Thus I am informed that the parent organization of Robert College transfers approximately 200,000 a year for maintenance of college and that other American bankers and organizations transfer substantial additional amounts annually for maintenance of other institutions in Turkey. Expenses of the United States Government for maintenance of its Embassy in Ankara and Consulates in Istanbul and Izmir also require substantial transfers. I have referred to the transfers for maintenance of our diplomatic establishments inasmuch as I am reliably informed that Dutch Legation in Ankara pays its expenses out of frozen balances of Dutch bank in Istanbul.
  1. For further negotiations regarding chrome, see pp. 742 ff.