811.20 Defense (M) Turkey/671: Telegram
The Ambassador in the United Kingdom (Winant) to the Secretary of State
[Received July 9—1:55 p.m.]
4480. For Department, BEW, and USCC. Department’s 3411, May 29, and 4123, July 7,34 Embassy’s 3595, May 25.
1. The British completed on July 6 their reexamination of preclusive buying policy in Turkey which began when it appeared to them that effective preemption could not be attained without unofficial purchases but that such purchases might involve hazards out of all proportion to preemptive gains.
2. The British have modified their views on preemption following fuller explanations from the two Ambassadors in Ankara, and from Washington, of the situation in Turkey, and are sending to Washington and Ankara a telegram giving in detail the background of the Preemption Committee’s deliberations on policy. It will direct: (a) That no démarche to the Turkish Government for increased [Page 1138] allocations will be made in view of the Ambassadors’ negative recommendations on this point. (b) Preemption in Turkey will be continued and both official and unofficial purchases will be made. If British Ambassador in Ankara agrees, such unofficial purchases can be undertaken by the UKCC as well as by the USCC. The British Ambassador will be given full discretion in the matter in consultation with his US colleague. (See section 6 below) (c) In conformity with the general line of increasing the area of local discretion in Ankara, the Ambassadors will be authorized to request the appropriate corporation to purchase any of the commodities included in a list to be agreed by Washington and London. (London’s proposed list is set forth in separate telegram.) Although the list divides the commodities into three categories according to their importance to the enemy, the British Ambassador would be authorized to purchase any commodity from any category without prior reference to London. This is an important modification of British policy on preemption as it has existed to date.
3. The British consider that their latest definition of policy is in fact a reversion to the line set forth in their telegram No. 1393 of April 17, 1943, to Washington and Ankara, with the important exception just noted above. The British wish to retain and emphasize a limitation on the authority of their Ambassador which was given in that telegram. This is a caveat to the effect that the Ambassadors should be expressly limited to purchases in which they are satisfied that there is a reasonable chance of purchasing such a proportion of the Turkish exportable surplus of any commodity as will substantially reduce the quantities of that commodity which the Ambassadors anticipate the enemy is trying to acquire. The Embassy understands that the British interpret this directive to mean that Ankara could purchase even a small quantity of an important commodity if the amount acquired would appreciably damage the enemy; e. g., in the case of copper it has been agreed that any amount acquired would have preemptive effect.
4. The British feel that a further important argument in favor of a flexible policy of local discretion and unofficial purchases is the distinct possibility that before the end of the year Axis purchasing power and ability to transport goods might be seriously curtailed by military developments. Therefore every effort should be made to concentrate on the short-term problem of preventing enemy from getting any advantage out of Turkey in near future.
5. The British direct that frequent and regular reports should be made by Ankara to the two Governments of all purchases and commitments so that the financial position can be kept constantly under review. In this connection they have been advised of the intention [Page 1139] of the Department, as expressed in its telegram No. 3411 in reference, to request the US Ambassador to furnish estimates of the amount of commodities which can be purchased and their cost so that these estimates can be compared with probable resources in Turkish pounds. The British have not undertaken to request their Ambassador for similar estimates. It is believed that such a comparison between resources and needs will be, in effect, made currently on the spot with overall supervision from London and Washington, and that an attempt to set up a program with target figures would in effect be a reversion to the early form of the joint program which proved to be impracticable.
6. During the discussions of policy which are summarized in this telegram, the British have considered the joint program to be in effect. However, a difficulty has arisen out of the fact that the Turks have been making allocations of commodities to the two corporations in amounts which do not coincide with the allocations under the joint program. Many allocations by the Turks are being split 50–50 between the two corporations. If dollar payment on amounts Turks officially allocate US is required, the British fear that this may result in the Turks acquiring excessive dollar resources and that UKCC may not then be able to utilize the considerable resources in Turkish pounds which will accrue to it if the Turks, as they have promised, pay their indebtedness to the corporation.
The British have always had strong objection to leaving an open-end liability on purchases since this gives the Turks a right to demand payment in the currency which suits them at a later date when this may not suit the United Nations. Further, it would inordinately complicate bookkeeping between the corporations. The British feel that they should be entitled to purchase through the special account those commodities which will be consumed in the sterling area, which offers the advantage of a 40 percent exchange premium. If the Turks pay their debt to the UKCC, the British will have adequate pound resources for the present at least.
The British consider that in no circumstances should the UKCC pay the Turks in dollars. If the Turks insist on USCC buying one-half of a commodity assigned in joint program to the British and which is destined for sterling area consumption, the British prefer to let the USCC buy the commodity for dollars and then resell to the UKCC for dollars outside Turkey.
The British have recently received a telegram from Ankara which is being repeated to you separately, which indicates that while the Turkish Ministry of Commerce has no objection to interchangeability of US and UK allocations, it requests that payments be made in [Page 1140] dollars or sterling respectively on the basis of the original commodity allocation even in cases where one country took up the entire quantity.
The Treasury and Foreign Office are considering the whole payments question and the Embassy will report further as soon as possible. In the meanwhile, as in the case of silk cocoons, the British will prefer, if allocation cannot be transferred for payment in sterling, that USCC should take up the US share of joint allocations where it appears that the Turks may demand dollar payment or that there may be an open-end dollar liability.
In the case of valonia referred to in the last paragraph of the Department’s telegram No. 4123 just received, the British had not made a direct proposal that the USCC purchase the valonia but, as stated in Embassy’s airgram of June 11,35 they indicated that they had no objection to the corporation’s doing so, pending advice from Ankara on which decision could be reached here. Since, however, question of dollar payment to the Turks has arisen, the British think that Washington should authorize USCC to purchase half the total quota should this be necessary.
7. In its consideration of further modification of preemption policy in Turkey, the Committee took account of the following possibilities: (a) The facilities which it is reported Turkey may be making to the enemy in allowing him to use gold for payments in Turkey and to utilize funds realized through sale of securities of occupied countries constitute an opportunity for the enemy to escape from the disabilities imposed on him by his lack of other forms of purchasing power and his difficulties in producing and transporting goods. The British are considering the advisability of some kind of démarche to the Turks which may include a warning that title to looted gold may not be clear after the war and a protest against such action in favor of the enemy of Turkey’s ally, (b) If, as a recent British telegram from Ankara has stated, allocations to Germany under new Clodius agreement are fixed in terms of value while quantities are subject to modification as price alters, there may be a real opportunity for United Nations to disrupt enemy’s takings by engaging in purchasing operations designed to raise prices. After close study of the text of the agreement, the Embassy, British Treasury and MEW are not at all sure the Ankara interpretation is correct and the British are requesting confirmation from Turkey. Our Government’s views on dangers of disruptive purchases cited in Department’s 3008, May 11, have been brought to the attention of British. However, problem may deserve reconsideration if Ankara’s interpretation of agreement is correct.