Foreign Relations of the United States, 1958–1960, Eastern Europe; Finland; Greece; Turkey, Volume X, Part 2

318. Telegram From the Embassy in Iran to the Department of State⁰

Tehran, September 29, 1958, 6 p.m.

678. From Dillon. Had useful discussions with Turkish officials in Ankara.¹ Turks were full of gratitude for US economic assistance, both direct [and] with other OEEC countries. Both Zorlu and Polatkan made long trip to airport to welcome and see us off. At request Zorlu and Menderes that some joint statement be issued upon conclusion of visit which would indicate long-term nature of Turkish development effort and US desire to assist Turks in this effort, joint communiqué issued on departure. Embassy Ankara requested cable text to Department.² Following were main points raised in discussions.

1. Stabilization plan. Turks repeatedly expressed determination live up to requirements of plan. They apparently fully satisfied with arrangements reached Washington since had never mentioned limitations of ICA waiver to [of] November 15 date. Presumably this date fully satisfactory to them. They showed concern, however, for delays in implementation EPU part of bargain. They were particularly concerned by six percent rate of interest presently being asked by EPU. They said Turkish public opinion would consider this usorious rate. They indicated they understood all countries except Britain prepared give 5-1/2 percent rate and they requested further US assistance in Paris to expedite negotiations. I told Turks that we would make further effort in Paris to expedite conclusion of arrangements so that funds would become available promptly. Comment: I believe Menderes is facing serious political problem if he is forced accept unduly high rate of interest. Therefore think it advisable for us to use best efforts with British reach agreement on 5-1/2 percent rate. Turks informed us that rate of French loan early this year was 4-1/2 percent. This makes acceptance of 6 percent rate particularly difficult. Turks have real need for prompt receipt of funds from EPU countries. This has been fundamental to success of plan all along. Recommend strong representations in Paris in view of fact US has fully released its share of funds. Turks should be kept informed of any action taken by US in this regard.

2. Purchase of new textile factory in USSR. This matter discussed at some length with high-level Turks who at first professed ignorance. Menderes sent special representative to airport to give me detailed information. According to this information new plans were part of overall clearing arrangements on current trade with Soviet Union. Equipment being purchased for three new factories has value of roughly $11 million. This not yet been cleared by Finance Minister or Coordination Committees but I expect it will receive approval their committees. I made strong point that all dealings with Soviets having to do with investment projects should be carefully considered by Coordination Committees so that they would not impose additional burden on stabilization program. Turks agreed that this would be the case and seemed impressed with my concern about this particular matter.

3. Development Loan Fund. Turks inquired re status DLF loans and we assured them that early action expected on some of projects. In view prompt action by EXIM Bank I hoped DLF would take action to approve some Turkish projects in immediate future. This also basic to success our overall plan. Please cable me at Delhi résumé of actions taken at October 3 DLF meeting.³

4. BP project. We were informed that Turkish and Iranian Governments had submitted project for Turk-Iranian railroad on September 26. We assured Turks that DLF prepared give this project prompt and serious attention. I told Turks in view of size of project it might be necessary to accomplish financing in stages.

Comment: In view of earlier US pressure in BP Economic Council to expedite submission of this project it is important that DLF commence studies promptly and treat this as priority matter.

5. I was highly impressed with attitude of MAAG toward MAP program. MAAG at all echelons are fully aware economic implications of MAP program and are working with some success to find ways to reduce unnecessary military expenditures. MAAG made clear that if we really desire to increase Turk military capacity at most rapid rate as result Secretary’s commitments in London⁴ this can best be done by substantial increase in training personnel and not by stepped up deliveries of military equipment which Turks are not prepared to utilize. (Thus MAAG has prepared delivery schedule for APC carefully coordinated with ability to utilize which should permit deferring funding of considerable portion to FY 60. Detailed recommendations on this subject made to EUCOM (information D/A in ARBP–C’s 23)⁵ for substantial increase in training personnel. MAAG recommended increase of about 300.) This is desired by Turks and will make very favorable impression of our determination to strengthen Turkish armed forces. Situation here has fundamental similarity in Iran in that there are not enough trained technical personnel available to Turkish armed forces. Therefore greater training effort should have priority.

Wailes

0. Source: Department of State, Central Files, 882.00–TA/9–2958. Secret. Repeated to Ankara and Paris.
1. Dillon visited Turkey September 27–29, during an 11-nation trip to study the work of the Mutual Security Program.
2. Not found.
3. No telegram has been found.
4. Apparent reference to commitments made at the London meeting of the Baghdad Pact July 28–29, 1958. For documentation, see volume XII.
5. Not Found.