867.51/7–2549

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

confidential

No. 239

Subject: Secretary Snyder’s Ankara Visit, July 18–20; Turkey’s need for Financial Assistance; Transmitting Memorandum of Conversation with President Inönü and Other Papers.

Sir: Key-note of the official discussions held during this warmly welcomed visit of the Secretary of the Treasury, I have the honor to report, was struck by President Inönü, He said inter alia:

Our two countries’ common problem is defense against Soviet Russia.…1

In a struggle such as this, for common cause, it is not sufficient that Turkey be armed with military weapons only. Financial weapons are’ also needed.…

For the next two to three years we shall be in great financial difficulties. It is doubtful that we shall find a remedy within our own means....

Every day our deficit is growing. Once financial equilibrium is upset, the national economy, without which the armed forces cannot subsist, must go from bad to worse.

These quotations are excerpts from the Secretary’s conversation with the Turkish President, A full memorandum thereof, prepared from notes taken by me at the time, is enclosed.2 It has Mr. Snyder’s approval. Its full text will, we feel sure, be read with interest in the Department.

Currently Turkish-proposed remedies for the situation there described are: 1) continuance of the Truman-Doctrine-inspired Turkish Aid Program, and 2) a stepping-up of ERP assistance to the end that Turkey’s military establishment be assured an adequate sustaining economy.

Last year (FY 48–49) Turkey received ECA allocations totaling $44.6 millions: 50 percent for agricultural equipment; 44 percent for coal, power and road development; nothing for “consumables”. For FY 49–50 it programmed, for submission to OEEC, $85.8 millions (54 percent thereof for continuance of these projects) and $25.5 for “consumables” (70 percent for oil products).

Since submission of this 1949–50 program, reports of serious crop failure have been confirmed. Consequently, a supplementary submission [Page 1677]has been filed. It requests $20 millions for necessary wheat imports from hard-currency countries (i.e. 200,000 tons plus freight).

It is the granting of the total of these two figures for “consumables”, i.e. $45.5 millions, which the Turkish authorities now stress as being essential to sound sustaining of the country’s economy.

This latter was the burden of the Prime Minister’s remarks during the brief half-hour’s courtesy call which Mr. Snyder paid him on arrival in Ankara July 18. To specific queries the Prime Minister replied:

Latest estimates put Turkey’s crop-year need for wheat imports at 400,000 tons, i.e. twice the figure cited above. It was believed that 100,000 tons could be obtained from Syria.

Preliminary budget estimates for 1950 had established that estimated 1949 expenditures must be cut by some Ltqs. 200 millions (15 percent) if balanced budget is to be achieved.

Unless help were forthcoming, he failed to see how the current rate of military expenditure could be maintained. Ministry of National Defense appropriations alone now represented 33 percent of the total budget. It was only there that substantial saving could be made; and that would necessitate substantial reduction in the size of the armed forces.

Mr. Snyder and I sensed that these remarks, interspersed among the compliments of a formal courtesy call, were but an opening gambit for fuller presentation of the Turkish case.

Such presentation, from the angle of the Government’s financial position, was given the following morning in an hour-and-a-half conversation with the Minister of Finance. It was concluded at noon by President Inönü in the conversation highlighted above.

Relative to the conversation with the Minister of Finance, I enclose copies of two papers prepared by Mr. Judd Polk, Treasury Representative for the Near East: 1) a Memorandum of the conversation itself; and 2) a “Brief Statement of Turkey’s Financial Problem” prepared by Mr. Polk for Mr. Snyder’s confidential information.3

Highlights of the latter, in addition to an interesting exposition of budget, taxation and debt figures, were the following:

Of TL 9 billions of Government expenditures in the last ten years, half have been directly or indirectly for military purposes. The budget is still a war budget....

Possibilities of sales of bonds to the public are very limited....

In the circumstances, it looks as though the TL 200 million deficit can be eliminated only if the military budget is cut.

Similarly, Mr. Polk’s “Statement” stresses that “The planned modernized military establishment probably cannot be achieved unless [Page 1678]the Government’s internal revenues can be increased.” Other pertinent highlights were:

The credit position of the Government has been seriously impaired. (Note: Four chief contributing factors are cited.)

It is very doubtful that the budget deficit 1949 can be covered by non-inflationary finance.

Considerable internal financial relief may be forthcoming in the next year if ECA assistance includes grants or loans to cover increased consumption-goods imports.

Following these three official conversations and certain informal briefing by members of the Embassy and Aid Mission, Mr. Snyder held a short press conference of which an approved transcript is enclosed.4 It was of a general nature, Mr. Snyder declining to reveal any details of his Ankara conversations and avoiding direct reply to such questions as: “Do you believe there are any plans for the readjustment of currencies in Europe?”

He left Ankara for Cairo early the following morning, July 20, in his official airplane. The Minister of Finance was among those present at the airport to bid him farewell.

Official Turkish reaction to the visit was excellent. Mr. Snyder, while emphasizing that he could make no commitments, had shown keen interest in and sympathetic understanding of Turkey’s problem of interrelated finance, economy and national defense. To President Inönü he had given an undertaking that he would “be happy to present it personally to President Truman”.

Press reaction, to paraphrase a careful memorandum on the subject prepared by the Embassy’s Public Affairs Officer, was one of close and constant interest, reflected in daily front-page headlines and a spate of editorial comment necessarily chiefly of speculative character. While his few public remarks were accurately quoted, there was considerable interlineation suggesting that Mr. Snyder’s discussions had dealt with matters of highest moment to the country’s future welfare—from loans and capital investment to currency depreciation and direct financial support.

Personally, I enjoyed and profited much from the visit. In particular, I was able to discuss at some length with Mr. Snyder and Assistant Secretary Martin the subject matter of my telegrams no. 194 of April 305 and no. 256 of June 7, last, and the Department’s reply, no. 250 of July 1. This despatch may be considered as a supplementary presentation of the recommendation considered therein that Turkey’s need for financial assistance continue to receive the Department’s careful consideration.

[Page 1679]

I am glad to report in this latter connection that Secretary Snyder before leaving Ankara directed Mr. Polk to complete his current study of Turkey’s finances and authorized him to visit the country at least twice a year to keep abreast of current developments.

Respectfully yours,

George Wadsworth
  1. Omissions in this document are indicated in the source text.
  2. The memorandum is not printed. During this conversation, Secretary Snyder was accompanied by Assistant Secretary of the Treasury William McChesney Martin, Jr., and Ambassador Wadsworth. President Inönü had with him Finance Minister Ismail Rustu Aksal and Foreign Ministry Secretary General Faik Zihni Akdur’.
  3. Neither of the documents under reference here is printed.
  4. Not printed.
  5. Not printed, but see footnote 1 to telegram 256, June 7, from Ankara, p. 1673.