444. Memorandum From the Presidentʼs Assistant for National Security Affairs (Kissinger) to President Nixon1
SUBJECT
- Turkey Aid Loan for FY 71
Secretary Rogers (Tab A)2 requests your approval of a $40 million development loan for Turkey to include a program loan of $25 million for commodity imports and a project loan of $15 million to expand the Eregli steel mill.
At the Turkish Aid Consortiumʼs April 27 pledging session, the US will be called upon to announce its pledged amount of aid for Turkey in FY 71. Failure to do so at that time would be interpreted by Turkeyʼs new government as an indication of our lack of confidence in it. We have no reason to show any such lack of confidence and want to get off to a good start with Prime Minister Erim, who has reaffirmed Turkeyʼs strong ties to NATO.
There is, however, a persuasive economic case for the loan. Last August Turkey, after considerable urging by the IMF, World Bank and ourselves, undertook a major economic reform program including a 40 percent exchange devaluation, institution of an incentive system for encouraging exports, removal of some restrictions on imports, and measures to hold down inflation. At this point it is too early to tell whether the reform will yield the significant results Turkish planners hope for, but preliminary indications point to some important successes. The proposed $25 million AID program loan, coupled with similar loans from other donors and the multilateral institutions, should provide Turkey with adequate foreign exchange to continue its liberalization of imports, and increase the stability of the Turkish lira.
The Eregli steel mill, a private sector company with substantial Turkish government participation, was begun in 1962 and subsequently expanded with the participation of AID, the World Bank, and US private industry. Further expansion, designed to double its capacity, will be financed in part (roughly $120 million) by Ex-Im and the World Bank; AID under the proposed project loan, would pick up $15 million of the cost.
[Page 1091]The only issue that has arisen in connection with this loan was the question of whether the US pledge should be conditioned on a Turkish promise to announce this June an end to the planting of opium poppies in 1972. Secretaries Connally and Rogers have agreed that we should go ahead and make our pledge at the aid consortium meeting Tuesday—that it would not be wise to raise this issue in this international forum. They further agreed that Secretary Rogers would raise the question with the Turks when he is in Ankara at the end of the week. Although we have no commitments, the initial attitude of the new Turkish government on the opium question has been encouraging.
Recommendation: That you approve pledging $40 million in aid for Turkey at the consortium meeting April 27 as recommended by Secretary Rogers. [The concurrence of the Office of Management and Budget is at Tab B.]3
- Source: National Archives, Nixon Presidential Materials, NSC Files, Box 633, Country Files—Middle East, Turkey, Vol. II 1 Jan 1970–31 Dec 1971. Confidential. Sent for action. A notation on the memorandum indicates Nixon saw it.↩
- Attached but not printed.↩
- Brackets in the original. The President initialed the approval option on April 26. Tab B is attached but not printed.↩