338. Letter From the President’s Special Consultant (Randall) to the Secretary of the Treasury (Humphrey) and the Under Secretary of State (Hoover)1
Gentlemen: Together with my associates, I have endeavored today to review the Turkish problem.
The purpose of this letter is to submit some specific recommendations.
In the morning we had an exploratory conference with the new Ambassador,2 Mr. Warren, with Patterson and Scott from Ankara, and with Baxter of State.
This afternoon we met with Prochnow, Overby, FitzGerald, and Gray, and various staff members.
The situation is mixed in Turkey and not too satisfactory.
On the financial stability program, the line established by the Prime Minister in January has been reasonably well held, but no new steps have been taken. Doubt is cast upon its vitality by the resignations of Ulas and Kurdash, who had been known proponents.
The immediate and most urgent crisis has to do with the importation of petroleum products, commonly called POL. The Turks have exhausted every known means of financing those imports [Page 676]beyond the end of May, and without them their economy will certainly come to a full halt.
It is the position of the Turkish Government that the amount of aid granted pursuant to our mission to Turkey is inadequate to meet the public relations problem. People in Turkey still expect a $300 million loan, and the Prime Minister fears that his Cabinet will fall due to his failure to secure that sum of money. For this reason he has not yet announced the total of FY 1956 aid.
The International Monetary Fund is now sending a working party to Ankara in advance of its normal June date. Sturc, who leads that party, will arrive in Ankara on April 23, to be followed by Merle Cochran on May 10. It is hoped that out of that mission may come discussions of the exchange problem, but in the opinion of our country team the Turks will not voluntarily open that subject.
Out of our discussions today, there seemed to me to be consensus to support the following specific recommendations, which I now submit:
- The American people and the Turkish people must be told promptly the full amount of American aid for FY 1956. The Turkish Government should be given a further opportunity to make that announcement itself, but if they fail to do so, we should release the facts to the press in both countries. This will serve as a partial check on the obvious belief held by many Turks that our dollar aid allotment is not yet final, and will negative [negate] the impression which some members of the government have promoted that what we have done is niggardly and unworthy of the relationship with a staunch ally.
- $13 million out of the recent allotments should be made available to our country team for financing about three months of POL. We all recognize the difficulty that this creates for ICA, but we see no escape from the dilemma. We cannot let all Turkish industry be shut down for lack of fuel and lubricants, and there is no other source from which the money can come.
- This allocation should be used, however, by the country team for the express purpose of persuading the Turks that they themselves must open with IMF the subject of the improvement of the exchange situation. We believe this can be done without making it as bald as a categorical demand for devaluation. We see no way, however, other than by the use of these funds, to insure that IMF will have the subject before it, and if this present working party should leave Turkey without discussing that subject, it might set the whole matter back for a long period of time.
- When these steps are taken, we should stand absolutely firm, and grant no other aid whatever to Turkey until discussions for FY 1957 open. The fact that we are standing firm, and that these decisions are in fact final, should be made clear to the Turks by every means at our command.
Upon my return from the other mission, it had been tentatively agreed that I would go back to Ankara with my associates the first [Page 677]week in May. This was for the purpose of checking the progress of the stabilization program.
After discussing it at length with all concerned, I have come to the conclusion that it would be inappropriate and perhaps dangerous for us to go that soon. For us to arrive there while the IMF study is on might take the whole pressure off. It would once more suggest to the Turks that some miracle might still happen.
I do think, however, that we should go back later.
I am not available in the month of June, but I shall be prepared to go at any time after the first week in July, and my associates will be prepared to go with me.
Meanwhile I will continue to follow the subject.