Foreign Relations of the United States, 1950, The Near East, South Asia, and Africa, Volume V

Ankara Embassy Files: Lot 58F33: 500 ECA Counterpart Funds¹

Memorandum of Conversation, Presumably by the Acting Army Attaché at Large²

secret

[Paris, February 1, 1950.]

At a meeting at the Turkish Embassy in Paris on 1 February, the following opinions were expressed by Turkish Foreign Minister Necmeddin Sadak and Turkish Ambassador to France, Numan Menemencioğlu. The Acting Army Attaché at Large was present and acted as interpreter for ECA Administrator Paul Hoffman and Ambassador Averell Harriman.³

Mr. Sadak said lie was happy to have the opportunity to meet with Mr. Hoffman and Mr. Harriman in Paris. Their presence here had indeed been influential in his decision to come to Paris. Inasmuch as Turkey now has a Ministry for Marshall Plan affairs, he is no longer the competent minister to discuss the merely technical aspects of the European Recovery Program; nevertheless, inasmuch as the matter had political implications, he was delighted with the opportunity to speak to Mr. Hoffman, not only in his capacity as ECA Administrator, but also as a prominent American with considerable influence with President Truman, Secretary Acheson and other influential personalities in the American Government.

He began by stating that Turkey because of her proximity to the Soviet danger had to bear an extremely heavy burden of military expenditures. Belgium, for instance, was spending 8% of her budget on national defense. France in the forthcoming year would spend between 18 and 20%. In the case of Turkey, this expenditure amounted to over half of the national budget. Because this situation had been going on for eleven years, Turkey had been unable to finance investment projects. He said that this situation was difficult for the Turks when they looked at Western Europe and saw that the countries thereof had already passed their prewar production indices and were continuing their economic development. Turkey had not yet been able to really start her economic development and during the past year when he had been in the United States, he had discussed Turkey’s problems with the State Department and asked two questions in the course of his conversations there.

First, he realized that because of U.S. legislation and necessity for obtaining Congressional approval, it was not possible for the U.S. to help Turkey directly with her military budget outside of the military assistance being rendered under the existing military aid programs, but he wondered whether it would not be possible for the U.S. to furnish Turkey with some consumer goods of military use (concurrently with the Military Aid Program) which might help Turkey’s needs in this field and lighten the burden of the defense budget or, if this were not possible, if the U.S. could furnish Turkey with a certain quantity of consumer goods which the Turkish Government might sell in Turkey and with the result thereof proceed with their investment program and with the financing of projects to be developed with Marshall Plan credits. He also asked that the State Department support him in his efforts to secure a loan from private banking circles in the U.S. In reply to his first question he was told that it would not be possible for the U.S. to supply these consumer goods as requested but it was suggested that in the Turkish presentation of her program to the OEEC she might request that the counterpart in Turkish pounds for a wheat grant of $20 million and drawing rights might be used for the purposes Mr. Sadak had in mind. He was told the U.S. would view this initiative sympathetically and support it. With regard to the second question, he said the State Department had arranged for appointments with American bankers for him and also given him an official of the State Department to accompany him on his visits to these bankers. He had a number of interviews and the general tenor of the replies which he received was to the effect that while great friendship and interest was felt in Turkey, Turkey was nevertheless too close to the Soviet Union for loans to be granted unless guaranteed by the Turkish gold reserves. This, Mr. Sadak stated, his government was not able to see its way to do.

The Turkish government had gone ahead and included in its programs this request for the use of the counterpart funds of the wheat grant and the drawing rights and this had been agreed to by the OEEC. He realized that the Marshall Plan credits would decrease from year to year but asked Mr. Hoffman for his assistance in obtaining for Turkey the same facilities in the forthcoming year and in pointing out the special case constituted by Turkey because of the immense burden of her defense budget. Mr. Sadak then stated that Turkey would not say to her American friends that unless she were helped she would be unable to bear the burden of this large military establishment. With help or without help, she would continue to maintain her army strong as long as the Russian danger was at her border. How this would be done without help he did not know but it would be done.

Mr. Hoffman then thanked Mr. Sadak for what he had said and said that he hoped they would not exaggerate the extent of his influence. He said that in the matters relating to OEEC he would prefer to let Mr. Harriman speak because he was more familiar with the operation of OEEC. Insofar as he was concerned, he would do everything he could to promote a greater understanding of Turkey and to develop friendship for Turkey in the U.S. This would not be difficult as there had been a great change in American opinion in the last ten years. At that time the attitude toward Turkey, if not unfriendly, had been at least one of lack of interest. Today quite the opposite was the case. He would also give his support to any technical studies that might be of use to Turkey. He cited the recent Iraq study which had resulted in great interest in American investment circles. Ambassador Harriman then stated that he fully understood Turkey’s problems and that his advice was that Turkey include in her program for OEEC a request for the consumer goods that were necessary to finance her investment program and development program under the European Recovery Program. While he was aware of the defense considerations involved he thought that if the Turkish presentation established the relationship between the need of financing the investment program and the import of the consumer goods required to implement this that it would be more susceptible of favorable consideration by OEEC.

Ambassador Harriman added that even if Mr. Hoffman were able to obtain for Turkey all that she wishes, which, he felt sure, would not be possible, there would be no permanence in this as a solution. He felt that Turkey should attempt to attract American capital in the form of private investment by creating a climate which would tend to cause American capital to flow toward Turkey. This would be a permanent development and was far less redoubtable now than it had been in the past when foreign capital had in some cases sought to exploit the countries in which it was invested. Today a new spirit was abroad in American business and there was a realization that foreign capital could not profitably be invested against the will of the country in which it operated and unless it contributed something to the life of the country in which it was invested. It was difficult to define what constituted a favorable climate but Mr. Harriman expressed his willingness together with Mr. Dorr⁴ to advise the Turks how best this could be achieved in general terms. At this point Mr. Sadak broke in to state that the Turkish Government had introduced a bill to the Grand National Assembly guaranteeing foreign investments, guaranteeing their right to transfer reasonable profits out of the country and offering other additional guarantees. This bill might even have been passed and promulgated at the present time but he stated that despite the Turkish Government’s efforts to create a favorable climate, American capital was moving slowly toward Turkey. As far as oil was concerned, the Turks had received several vague and hazy proposals but nothing serious and straightforward. Mr. Harriman repeated that creating a favorable climate was difficult but that he and Mr. Dorr and Mr. Hoffman would do what they could to help the Turkish Government along these lines. Mr. Menemencioğlu then said that inasmuch as American banking circles had told Mr. Sadak that Turkey was too close to the Soviet Union for loans without guarantees in gold, might not the same reply be made by American investors? To this Mr. Hoffman replied that on his return to the U.S. he would bear in mind what Mr. Sadak had told him. Mr. Sadak expressed his thanks and the conversation concluded.

Comment:

Turks were apparently attempting to obtain exception to general rule of Marshall Plan funds for each country diminishing each year by pointing out unusually heavy financial burden Turkey must bear because of necessity for maintenance of a strong army. Outstanding flat declaration of Sadak’s was statement that with or without help Turkey would maintain strong armed forces.

1. Record Group No. 84, Federal Records Center (Suitland, Md.) Accession No. 59 A 543–part–10, Box 3299.
2. The author of this memorandum of conversation is not identified in the source text. The document was distributed by its originator, the European Command, U.S. Army, to the Army Attaché, Paris, and the Army Attaché, Ankara; it was seen by principal officers of the Embassy in Turkey.
3. Paul G. Hoffman, Administrator, Economic Cooperation Administration, and W. Averell Harriman, U.S. Special Representative in Europe under the Foreign Assistance Act of 1948, attended the meetings of the Consultative Group of the Organization for European Economic Cooperation (OEEC), Paris, January 26–27, and of the Council of the OEEC, Paris, January 31–February 1. For documentation on OEEC participation in economic planning in Europe, see vol. iii, pp. 611 ff.
4. Russell H. Dorr, Chief of the Economic Cooperation Administration Mission to Turkey.