329. Memorandum of a Conversation, Department of State, Washington, June 8, 19551

SUBJECT

  • Turkish Loan Request

PARTICIPANTS

  • Mr. Zorlu, Deputy Prime Minister of Turkey
  • Mr. Esenbel, Turkish Foreign Office
  • Mr. Robert Murphy, Deputy Under Secretary
  • Mr. George V. Allen, Assistant Secretary, NEA
  • Mr. Thorsten V. Kalijarvi, Deputy Assistant Secretary for Economic Affairs
  • Mr. William O. Baxter, Director, GTI

After introductory amenities Mr. Allen referred to the useful discussions held with Mr. Zorlu during the past few weeks and assured him that the Turkish economic situation and the views of the Turkish Government had been given most serious and sympathetic consideration in all branches of this Government. The question had been taken up yesterday by the highest level officers of State, Defense, Treasury and FOA, and the decision made by them had only this morning been cleared with the President. The final position of the United States Government was set forth in a letter which Mr. Allen read aloud and then handed to Mr. Zorlu (copy attached).2

Mr. Zorlu asked if he was correct in understanding that the Turkish request for a loan was rejected. Mr. Allen confirmed this fact. After most careful examination of the Turkish situation, he said, the United States could not recommend to the Congress a course of action that would involve Turkey in further international financial commitments that in our opinion would not be remedial in nature nor prevent the present situation from recurring in the near future. He wished to stress to Mr. Zorlu that we were most sympathetic with regard to the present difficulties and with the Turkish wish to develop industrial potentials and improve the standard [Page 648]of living of the Turkish people. However, there was an honest difference of opinion between our two Governments as to how such an aim could be achieved. It was the view of the Turkish Government that a large cash loan was required, whereas the United States Government felt that this would only postpone the remedial measures which the Turkish Government must take to get its economy on a sound footing.

Mr. Zorlu said he wished to express the thanks of the Turkish Government for this offer of additional grant aid. It was a substantial amount which would be of assistance in the coming months. He was touched by this proof of United States friendship for his country. However, while he and his Government were thankful, they could not be “happy,” as this was not the reply he had hoped to get. He believed that the magnitude of the problem and the great potentialities for strength in Turkey called for a large loan at this time. He summarized many of the arguments he had advanced in previous discussions, pointing out that Turkey had requested a loan rather than additional aid in the belief that it would be easier for the United States and that it would be an indication of Turkey’s intention of standing on its own feet. He also made clear that Turkey had never tried to bargain or to threaten that it would cut back its defense effort if the loan were not forthcoming. “Turkey will keep its twenty-five divisions,” he stated flatly, and expressed the opinion that they were worth something to the United States. He felt he must point out, however, that this decision will come as a great shock to his Government.

Both Mr. Zorlu and Mr. Esenbel then urged that the FOA loan guarantee provision be exercised at once in connection with Turkey’s current obligations to the American oil companies. Such a suggested solution had been discussed with the oil companies in Ankara and had been forwarded by the FOA Mission to Washington, where it was turned down. It was pointed out to Mr. Esenbel that the loan guarantee provision had been written into FOA legislation by the Congress with the aim of encouraging new investment abroad and not with the idea of “bailing out” debts to existing American enterprises. Furthermore, it was not FOA policy to finance oil purchases or to guarantee loans for oil. Mr. Zorlu said that one exception he knew had been made in the case of Greece. Mr. Allen promised that this question would be taken under consideration.

After leaving Mr. Murphy’s office there was an opportunity for a brief exchange with Mr. Hoover who reaffirmed our sympathetic interest and our willingness at all times to discuss frankly with the Turkish Government our views on action, most of which he believed would have to be measures taken by the Turkish Government, to work out of the present difficulties into a firm economic position.

  1. Source: Department of State, Central Files, 882.00/6–855. Confidential. Drafted by Baxter on June 13.
  2. Dated June 8, from Allen to Zorlu, not printed. The letter indicated that the United States was prepared to increase its economic aid to Turkey from $70 million to $100 million. It also noted that this assistance would be extended “in the confident expectation that the Turkish Government will take every remedial step in its power, along lines which have been brought out during our discussions.” Regarding the loan requested by the Turkish Government, the letter noted that the United States believed that “the incurring of additional financial obligations by the Turkish Government at this time would not be a remedial measure likely to prevent a recurrence of economic and financial difficulties.”