811.20 Defense (M) Turkey/37: Telegram
The Ambassador in the United Kingdom (Winant) to the Secretary of State
[Received August 6—5:52 p.m.]
4394. Department’s telegrams Nos. 3414, July 23,46 and 3561, July 30.47 Before receipt of the Department’s 3561 the representatives of the Embassy had a number of meetings with British authorities, including the Treasury, concerning preclusive purchasing in Turkey and had consulted the London Pre-emption Committee at a meeting held on July 31, 1942. At the meeting the Committee expressed satisfaction with the inauguration of American preclusive purchases in Turkey as well as the general terms of the Department’s telegram to Ankara setting forth particulars of the program.
The following remarks, based partly on this meeting, were drafted prior to the receipt of the Department’s 3561 but they are, nevertheless, transmitted in the belief that they represent accurately the British views of the position prior to consideration of the USCC proposals just received and that they may help to ensure smooth functioning of the program. The British reaction to the USCC proposals will be transmitted as soon as possible: With respect to paragraphs 10 and 11 of the Department’s instructions to Ankara48 this Embassy would like to stress the following points on utilization of British purchasing power in Turkey. There are two main Anglo-Turkish accounts (a) commodities account (exchange rate 5.20 Turkish [Page 720] to £1 sterling) used for paying for minerals and 20% of value of certain other commodities coming to the United Kingdom. Probably, however, British and Turks could agree exceptionally to use this account if UKCC were acting as principals in a purchase but not as in recent case of copper where United States Ankara Embassy negotiated the deal and only asked UKCC to act as bankers and shippers. (b) Special account (exchange rate 7.28 Turkish to £1 sterling so long as British continue to receive 40% premium). British already hold substantial balance of Turkish pounds on this account. These Turkish pounds can be used for UKCC purchases but Turks might refuse to accept them if a purchase had obviously been made by United States and was only being financed by UKCC. Remittance has been made for payment for copper through the special account but Turks would be within their rights in refusing this method of payment.
Therefore, in both the above cases if we want to use British purchasing power UKCC should appear as principals vis-à-vis Turks from the start of any deal. It is most improbable that the Turks would permit us to make a straight purchase of British-owned Turkish pounds and use them for our buying program.
To take advantage of the Anglo-Turkish accounts it seems advisable that the UKCC should be brought into the picture at the outset of any deal and the Department and our Embassy at Ankara may wish to have all of these purchases made by UKCC for USCC account with the sole exception of cases agreed upon by the two Embassies at Ankara which can reach appropriate understanding about the method and currency of payment in each case.
A case in point is mohair covered by paragraph 4 (c) of the Department’s telegram under reference which contemplates resale to the British.
British are perfectly prepared to pay for this with their Turkish pounds but they cannot make a straight transfer of these Turkish pounds to USCC (see above). They are, therefore, telegraphing to UKCC Turkey to contact Embassy and Turks and to try to arrange that UKCC do the actual buying from merchants although the mohair be exported under our export license. If Turks do not agree only sensible arrangement seems to be that purchase is made with our dollars, and since British are offering to pay for bulk of purchases in Turkey (see below) this would soon be offset. There would be no question of the British reimbursing us directly in dollars for any mohair purchased by us since the dollar resources are not available to them.
British are telegraphing their Embassy in Washington that while it is of course agreeable to them that we should help their dollar position by our purchasing from them for dollars commodities which they have pre-empted in Turkey with their Turkish balances they wish [Page 721] it made clear that if we are going to relieve them of dollar liabilities in Portugal and possibly in Spain they are willing to reciprocate by paying outright for goods bought in Turkey whether on an American, British or joint program. They would only expect us to put up the cash where purchases could not be paid for in sterling but would cost gold or dollars either because the Turks refused to sell except on such terms or because British purchasing power was exhausted.
British consider that it is to the advantage of United Nations to use their purchasing power in Turkey since this would avoid necessity of shipping extra goods from United States to Turkey to absorb Turkish dollar purchasing power resulting from preclusive purchases for dollars.
It is understood nothing in the procedure above described should be construed as modifying existing arrangements for purchase of chrome in Turkey. The London Pre-emption Committee concurs with the views of the Department in this respect as expressed in paragraph 11 of the Department’s telegram in reference.
British do not feel that we should in any way try to balance exactly their extra burden in Turkey against ours in Portugal since as they say there is no reason why the two things should balance and in order to make them balance goods might be shipped in the least efficient way. Their view is that each should do what he can, where he can, and that goods bought should go where they are needed and not necessarily to the country financing the purchase.
The views of the British regarding the utilization of their purchasing power in Turkey and the British stand that we ought not to try to balance exactly their position in Turkey with ours in Portugal and Spain, as well as the other British views outlined above, are submitted without comment as the Embassy does not feel that it has sufficient knowledge of how the Department views the question in its broader aspects to do so.
Please repeat to Ankara from the Department.