Foreign Relations of the United States, 1950, The Near East, South Asia, and Africa, Volume V

882.00R/6–750

Memorandum of Conversation, by the Officer in Chargé of Turkish Affairs (Moore)

confidential

[Washington,] June 7, 1950.

Subject: Difficulties Arising Between the Turkish Government and ECA Regarding the Release of ECA Counterpart Funds.

Participants:	Feridun Erkin, Ambassador of Turkey
	Raymond A. Hare, Acting Assistant Secretary, NEA
	George Woodbridge, Officer-in-Charge, Economic Affairs, GTI
	Francis F. Lincoln, Economic Affairs, GTI
	C. Robert Moore, Officer-in-Charge, Turkish Affairs

Problem: Ambassador Erkin requests the Department’s assistance in clearing up a difficulty between the Turkish Government and ECA arising over statements allegedly made to him by an ECA official and subsequently repudiated by ECA regarding the release of counterpart funds to Turkey.¹

Action Required: To express to ECA the Department’s interest in an early settlement of this difficulty.

Action Assigned: Mr. Hare and GTI.

Discussion: Ambassador Erkin called at his request to ask the Department’s assistance in bringing about settlement of the difficulties which had arisen between the Turkish Government and ECA with respect to the release of counterpart funds. More specifically the problem has arisen as a result of statements allegedly made in late April 1950 by Mr. McDaniel,² then Assistant to Mr. Foster³ of ECA, to the Ambassador as well as to Messrs. Alpar⁴ and Zorlu⁵ to the effect that ECA had changed its viewpoint with respect to the release of counterpart funds and no longer would insist on the usual procedures being followed, and that Mr. Dorr, ECA Mission Chief of Ankara, was being informed accordingly. The Ambassador had further understood from Mr. McDaniel that it would be agreeable for the Turkish Government to submit all of the investment projects provided for in this year’s budget to Mr. Dorr, who would select projects totaling TL 155 million for ECA counterpart financing, which projects would then be forwarded to OSR, Paris and to the ECA Administrator for final approval. The Ambassador asserted that Mr. McDaniel’s assurances were such that he had no reason to doubt that ECA had decided upon a more flexible policy on counterpart releases for Turkey.

The Ambassador then referred to his meeting on May 22 with Messrs. Hoffman and Foster. He was obviously very disturbed that these gentlemen, with whom he had maintained very friendly relations, had been under the impression that he had misinformed his Government in saying that an agreement had been reached. The Ambassador emphasized that if a mistake had been made it was a mistake that had been made by ECA, and that he felt ECA’s approach to him should have been in that vein, with the request to him to help straighten out the matter with the Turkish Government and to work out together the solution of the counterpart problem. Since a responsible ECA official who was presumably speaking for Mr. Foster had told him of the “new” ECA position and he had so informed his Government, he felt obliged to hold to that position and had so written to Mr. Foster following the meeting of May 22. The Ambassador stated that the matter had now become more serious as the new Prime Minister in presenting to the National Assembly the program of the new Government⁶ criticized the previous Government for claiming that it had reached an agreement with the American authorities on the release of counterpart funds to cover the Turkish budget deficit, whereas in fact no such agreement had been reached. The Ambassador indicated that the previous Government had based its claim on his own report,⁷ following the McDaniel conversations, and that he was the one who was being made to shoulder the blame. It was very clear that he wanted the Department to take up the matter with ECA and to induce it to accept a solution proposed earlier by the Ambassador viz: the Turkish Government to present its investment projects to Dorr, who would select for counterpart financing projects totaling TL 155,000,000, these to be forwarded to OSR and ECA/W for final approval.

I pointed out that I was, of course, in no position to speak for ECA and did not know how they were going to reply to his letter. I did know, however, that certain procedures and criteria for the release of counterpart funds had been established by law and experience and were applicable to all ERP countries, not just Turkey. Consequently, ECA while wanting to redress any wrongs that may have been committed may well not be in a position to meet the Turkish Government’s wishes with respect to counterpart releases. I pointed out that I was sure ECA regretted that this difficulty had arisen and would want to straighten it out in the most satisfactory manner, compatible with its own limitations.

I told the Ambassador that we would inform ECA of his visit and urge that an early reply to his letter of May 24⁸ to Mr. Foster be given him, particularly as he is anxious to know where the matter stands before he sails for Turkey on June 16. The Ambassador stated that if a satisfactory reply was not received very shortly he would ask for an appointment with Secretary Acheson, an approach which I sought to discourage.

1. A memorandum of May 26 by Assistant Secretary of State George C. McGhee to Under Secretary of State James E. Webb on the question of release of counterpart funds to Turkey recommended that “No action by the Department appears required as the problem is one which ECA and the Turkish Ambassador should be able to work out” (882.00R/5–2650, not printed). Russell H. Dorr, Chief of the Economic Cooperation Administration Mission to Turkey, called on Turkish Prime Minister Adnan Menderes at Ankara on June 7 to present the ECA position on use of counterpart funds in Turkey. On the following day Mr. Dorr sent Prime Minister Menderes an aide-mémoire setting forth the history of inconclusive negotiations between ECA and the Turkish Government regarding the status of counterpart funds (enclosure to despatch 439, June 17, from Ankara, 882.00R/6–1750, not printed).
2. Joseph M. McDaniel, Jr., former Assistant to the Deputy Administrator, Economic Cooperation Administration.
3. William C. Foster, Deputy Administrator, Economic Cooperation Administration.
4. Nahit Alpar, Financial Counselor, Turkish Embassy in the United States.
5. Fatin Rüştü Zorlu, Secretary-General, Turkish Ministry of State, left Washington about May 11, after inconclusive Turkish loan negotiations with the International Bank for Reconstruction and Development (Department’s telegram 221, May 15, to Ankara, 882.10/5–1550, not printed).
6. Program presented by Prime Minister Menderes to the Turkish Ninth Grand National Assembly on May 29 (enclosure 1 to despatch 415, June 7, from Ankara, 782.2/6–750, not printed).
7. Ambassador Erkin’s report, date not available, is quoted in part in telegram Toeca 419, May 18, from ECA Mission in Ankara to ECA Administrator (attachment to memorandum, June 13, by Mr. Hare to Under Secretary Webb, 782.5/6–1350, not printed).
8. Not printed.