782.5 MSP/4–351

Memorandum by the Director of the Office of Greek, Turkish, and Iranian Affairs (Rountree) to the Director of International Security Affairs (Cabot)1


Subject: ECA Assistance to Turkey for FY 1952

Attached hereto is a paper prepared in GTI which discusses the problems involved if ECA maintains its projection of $66 million of economic aid for Turkey during the next fiscal year.

As indicated in the conclusion, GTI hopes that ECA will meet the position formulated by its representative in Ankara. If ECA is agreeable, this formula would involve additional ECA aid of $42 million or a total for FY 1952 of $108 million.


ECA Assistance to Turkey for FY 1952

1. ECA assistance to Turkey, as presently projected for FY 1952, amounts to $66 million. Assuming incremental Turkish military efforts to the extent of $40 million are met in full from this $66 million, only [Page 1139] $26 million of economic, as distinct from military, aid would result. Only two-thirds of this amount, or approximately $18 million, would be applicable to the non-military internal budget gap of approximately $120 million for the Turkish fiscal year 1951 (March 1, 1951 to February 28, 1952).

2. In the absence of additional ECA aid Turkey will not be able to cover in full the gap of $120 million, without inflationary financing or damaging cut-backs in expenditures. The U.S. would strongly oppose any cutback in military expenditures; therefore the cutback would have to be primarily in investment expenditures which, according to the ECA Mission in Turkey, are already at virtually a minimum level consistent with the maintenance of a sound economy. Even at present and contemplated levels, gross investment in Turkey as a percentage GNP (Gross National Product) is below that of virtually all participating countries.

3. Up to the present ECA aid to Turkey has been granted to finance a capital development program (which otherwise would not have been undertaken) rather than to finance a balance of payments deficit. In the present projection, ECA indicates that the import forecast has not been specifically developed to allow for the possible requirements of a relatively poor economy whose historic imports have often been shaped by foreign exchange limitations rather than need. Increased imports designed to increase internal resources in order to help cover the budgetary gap would have relatively little effect on per capita consumption which would still remain at a bare subsistence level. Additional ECA aid would not result in an increase in Turkey’s monetary reserves and it would not be difficult to obtain the Turkish Government’s concurrence to measures that would prevent such a development.

4. In order to retain Turkey’s confidence in the sincerity of our interest in helping it become strong militarily, economically, and politically, it is essential for us to give support in the economic as well as military field. This is particularly important inasmuch as Turkey, for many years, has been willing to bear a heavy defense burden which has limited the funds available for financing its investment program—a program which aims at raising the very low standard of living of the Turkish people and which will enable them better to support their military establishment.

A drastic cutback in the investment program would affect the internal position of the new Government of the Democrat Party in Turkey, which was elected in the first free and fair elections held in that country.3 Local reaction would undoubtedly extend to the U.S. and make it more difficult for the Government to cooperate as fully with the U.S. as in the past. The Turks are very conscious of their military contribution to the free world forces and consider that they [Page 1140] have received relatively limited amounts of economic assistance from the U.S. in relation to other countries whose standard of living is higher and whose devotion to the common cause has been less effectively demonstrated. While this can be countered with the explanation of what ECA was established to accomplish, the explanation is not one that is understood by the large mass of relatively uninformed Turks whose views must be taken into consideration in the new democratic Turkey.

5. We feel that ECA should endeavor to meet the position formulated by Russell Dorr who requested that ECA finance $60 million, or approximately one-half, of the $120 million gap (exclusive of the military support program). This formula would involve additional ECA aid of $42 million ($60 million minus $18 million already projected) or a total for FY 1952 of $108 million. As a minimum, we should seek an additional $20 million, or approximately half of that balance.

  1. Drafted by Edmund J. Dorsz, GTI.
  2. Drafted by Moore, GTI, on April 2.
  3. See Foreign Relations, 1950, vol. v, pp. 1224 ff.