Created: 9/16/1957

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. X

Soviet floo sueSupport for Foortocdc PflvolopQent la Turfeer






II - Sunasurr and

III. Banlopasnt of the Bloo Bcnnorio Off anal

17. Bloo trad*

Tradu Agreement*



km Boland



B. Bloo

G. fortlolpatlon In Isalr International Trad* Fairs

D. Bloo CcoBsrclal

A. Trad* vlth th*

5. Trad*th*

DaTelopaaort In

DeTelepaont Progran


TABUC*TK*T3 (Continued)


0. Flroaclng

0. lauannmta


Transportstioo and Fubiia

Mining snd

t* Bel* of ths GoToraaict

r. Ths fiol* of Private

G. Effects ofopnsat rrorraa

h . t SUhlllaaUoo

VII* Western Support for Kcooosdo bsvelopawnt



:*. Expert-Import Bank Loans

t. world Bank

till, co-riot Blea Support for laoaoatte Oovslopaavat

JU CaaahaaOonrakla

B. last Qmramxr




IX. Cvtlook

tabus of co*rorre (Continued)

Table 6,







Appendix III Bloo Goo da Waplayid4 It.slr

Appendix llli turVieh Trade with tha Soviet

Appendix If l Production of Major Agricultural. 56

Appendix Ti Frodoctionor laduxtrial

Appendix YIi Prodnctioa of Kejor xiaarel*

Appaodix Till turn ah Ccecodity Trade with th*

Appondix Villi Tnrklah Ccsxaodity Trade with. 63

Appondlx III world Bonk loans to65

Appendix ZiBloc toooceoe Aaelatancv to6 Appendix Hi Seuroe Eeferene**

I- Introduction,

Sine* th* death ol* Btolinhe Sorlafc Union hupressing for ft mpprocheawn', with Turkey. Tho floriat bid forelation* began In th* Spring3 with an offlolal wrnrwlitlm of territorial clalmo to three ofastern prowlnoos. Tha Sorlat Ctaiao alsoor base righto on tho Turkish Strait*. Following these diplomaticha Joined th* EuropeanInrogram In3 to expand: economic relations with Tar he/. Since that time, tho Soriet Bloo haa boononcerted effort to Increase eoonomio tiea with Turkeyiaw to penetrating th* Turk!oh market end undermining tho western position in thie otratogio area*

A significant exfunoion lntree* with to*loo has mtmtmtrade vltb tb* Blooeak5 and rapreaectado*nt of total Turkish trade la that year. 6 illoo trodoeneral daolloo aod accounted forercent of Turkish trada. Burins tha first Quarter7 Turkish trada with tha Bloo continued at thoa la th* previous year.

furauaot to ita objective of iacreoeed trada. th* Bloc he*ariety of prccntlonali bar* aad* an lsrjaot oa tba Turkish aarkat. Ta tb* lata supaar6 six Bloc countrls* partlolpotad lo the Iaolr Internetair andenerally favorable chewing. Icteneif led advertising of Bloc goode, especially notloeehl* laat year, ha* served to give Bloo product* Increased proKLaacce ln Turkey. Tbe corfllnaloo of trad* agreerarata Utwen Turksy aad aevea Bloo oountrle* elao ha* contributed to the Qxraraloa of ooorxxalo relation* over tha past faa yoer*.

To date* Turkey baa eoceptod capital credit* totallingillioa froa the Bloo. Of tbla sue, tlO oillioo repreoaata the aaouat reaeatly exUT^ad by th* Soriet unioolass feotory. AHhough th* cjoutraot for tha footery baa team aigned, theorelg* baaiatrT haa not yet tin ita aupivrtal for the5 Oseehoelevakia extended ao eiwbt-yMr oredlt0 eillioa for railroad coecbe*eriextile Bill2 aillion credit for aaohlneryegetable oil plant we* accepted froa/ ia IK- . 2/ It la eetlaeted that tb* European Goto Hi to* have eocared oon tract* valued atdllloa for the oonetrectiou of loduatrlal Installation* end the proviaioa of

auxiliary nachlnary and eaulpaaofc. Ia spit*rofusion of offer* froa. tooone of tho preeiOu* off ore hire bean accepted. It now appose* likely, however, that tbs coo,tract for th* constructionillion, glass factory recently signed adll ba implemented andredit Mill be extended for tho projoct. jj Turkey haa received credit offers froa tha Bloc, primarily froamounting to slightly0 aillion.

Fro* world coon trio a, particularly tha United fits tea, Great Britain, and Vest Germany, contlnus to V* tho aajor trading partner* for Turkey a* wall oa the primary sources of oatelda capital forocoo*io Ontted Statoa assistance to Turkey under governmental aid prograaa, totalling aore than fl billionSital contribution tobility bo carry oat ite ambitious development plan* whileefense establishmentwith ita position ln the western 'defense structure. In addition, private investments, erudite, and loansariety of WesternDnlted States, tho GZEC conn-triaa, ths XB3D, aad tho Export-Importcontributed eigaifloantly tocoooalc otpenaien and industrial davalopnont* Certainly they haw* enhancedbility to maintain tha rapid rate ef economic developmamt la ovidonoo

The Bloc eoonoelo offensive- inogen to gain no nmtux3 when Rumanian,Buugartao. end Ibllah trad* umm) gatlooa firstholr iroaoaoo know oa tho Turkish soon*. Tola was only tho toslnninj, however,ll-ertajdsad Bloowhich ieoas* lncrer.nin.ily evident la the letter port The first aixnaoneeatreted Sloe effort vers notices tie at4 IsnlrFair. 2/ Prior to this event, the nine countries bad sent numerous) trade delegations to Turkey which spent ooretidsreUls tlse and effort traveling about Turkey trying to win the confidence of local tusinees-nsnw fj That they not with so<as suooea* ia evident in the feet that while total Turkleh foreign trade4 declined fron the previous year, tbe also lute end relative vela* of trade with the Bloo increased snd reached the highest level recorded up to that Use*

Table 1

* Turkish Trade with the Bloo, In Value andwrceutng* of Total6

Values In


Value at Jeeaaai of Total Ycljp ef Total,reeai

laporta 3 9 3 3

Exjorte 94 1 5 8

Total 2 0 0 7

A .toteMXTthy aspect of th* economic cffenalve la tbat the Bloo haa

notd In douping Itaa the Turkish narket as ccny Turkish

rasrehaata had feared. In one instance, Russia sold cotton textiles at a

very low price Uxt thla prsotio* did not recur. n the contrary. Bloo

cPi.*rekl personnel watch fluctuation* In tha Turkish earkat waxyendhigh prlcee forn treatheeello at prloea bolcM KrTj" prices and nora tmuaalxoclova BJu* prlaea)is ia fair demand andPO prlcwe oa ^oodo in brlait floiaaai Cacch aa eonetreatiooeleotrloelv^'Trf1

U rnto-.ioiflcation of the Sawlei Bloc's eooaoeia offensive in Turkey4 onlnoldederiod of critical foreign firrnatngo ahortaee which van eactoigering the development progrea established by the Turkish foweracant. f rav materials end epaxa porta otuned daleya in the cojisxruction of some projceta under wayew proponed projects wore poatponBd hecruae of the ecereltjr of foreign axuhnngc. Iraaouro to laoreea* trade with th* aloe countries had been proeent in Turkey2he foreign eoEobans*ag* began to te felt. Turkeya auDCwaefbl in aacering oonticelty in the flow ef cop: tai gnoda neededprogram by obtainingoredlt iron various Puropoen count lV for cojasa war goods, however. Turkey bed to tarn to countries oaeawa were wHi.nj to esnhang*i.Turkish exports. Thee* countries were xeinly ones with anise, trad* uaa serried on throuLb bilateral agreeaemai procdoont among thee were th* furopeea Satellites and the Soviet Onion. Turkishrisllata had been searing to incroen* Turklah-Hloo trade teoauas weeteraaxdstoge waa ocarce snd also be-eenae lnporta froa the Bloc wore permitted to do clrcer. whollyhe

private eoatorarg* share of inparta fro* the Vest were pre-empted

by tha

Europesa nkrusota union

erser ooatlnued to sake Increasedof oon-ouaer dooda froa tha Soviat Bloc. Tba countries, forwrlr tb* aoaroo of aojaaur: all od ahljrgmta toecause of bararrears to thao. uj Tba* tb* trend toaard bilateralism la Torkixh foreign trod* and tb* leorooa* In Twikiah trad* vdtb tbo Soviet Hloo hav* teea direct eocooguraceo or Turkey'* foreign exrhege sbortcga. Tb* Bloo countries haro menatios to capltalis* upon tMa altaatloa sine* they ar* villiny to :ir/ bigb-prtoed Turkish jooda tad are able to proid* range of good* vhioh Turkey neede*

Tbe Turkish Dvarnaoot, hovwver, appreciate* tb* denQ'*r* involved ln an exponaloa of eeooojdo ralotiona with the Soviet Bloo. Int aaaaaaaeed ita determination to tax* atepa ta raerleat trede toward the dollar and EF3 areas, effective implementation of thi* nolle? vaa not forthcoming, hoiarvar, and trad* with tba Oca5 reached tbe highest aoaolota and relative level recorded up to that tine. Ia that rear, trade with the Bine representedercent of total Turxdah trade. Iola announced ita lntectioo to reorient trade toward the Vast and eat aireater reaaar* ef aooeoaa aa au.cnc.uont trad* data shoe.

Tnrkleh awTcbanxe) feel that th* Soviet *Hoaitb th* exception of Oseobre of Inferior cnellty with lev durability and poor, a* lans aa they hav* difficulty laof theirriced product* In eastern markets and ln aacurlas foreign eaabscra with which to purchase gcods froa tha Vast, tber have little coo lew tart to handle Sloe produete.

The Bloo has engagedariety of activities specifically deolgnad to expand oooaoadc relatlona ond facilitate penetration of the luxklab. nexket. Tha cooolunion of trade Agreements,participation in the trade) fairs at Is-sir, intensified advertising of Bloc goods, and the eetabllab-sent of permnant ooBaeroisl re presentation hove boon the sain pro notional technique3 utilised by the Bloc in ita trade offensive in Turkey.

A. Trade Agreenenta

Turkey currently has trade agree nan ta with Puller in, Qaeohoslo-vnkia, HunGary, rbland. Rumania, andR. on-sovwrnmontal trade aocord le In force with Beet Germany since the latter le not officially recognized by Turkey. The significance of Turkey's trade agreements with Bloo countries woo enhanced by the shift In Turkish commerolal policy In23 when the post-war trade liberalisation programend oood and encouragement uaa given to trade under bilateral/ The, conclusion of trade agreements with Rumania and East Germanyhe first In tbs post-war period, led to the estehUshaant of closer oosaeTOlal ties with the Bloo snd an increase in trade especially with those two Satellites. gulppr^a

Priorurkish trade with Bulgaria bad beea carried onarter agreement Dentist lonenstigated by the Bulgarians Qj resulted in the ooncluslonrade andBgreeaent uhlah provided for the exchange of Turkishproducts against Dulgarlau eaaufaotured goode to the amount5 ailllon on each aids.he credit limit vas setlthough the Bulgarians hadigher oredlt daring the negotiations. Turkish-Bulgarian trade5 exoeedod the amount anrisagod, however,rotocol was signed in6 vhloh raised the value of trodo toillion eaoh waynd lnareaaed the oredlt limit0 for ono hear, 2j/


arlor/ and Camchc*unv*ilarodo agreement *Moh raiaed tho awinglllloa.Csoch export* lncltfe machin-

ery, textlloa, cad Iron aad atael fredncta In aawhang* for Turilah totaooo, cottoa cadultural prodoota. Tba vain* of th* exchange la notobacco protocol, algmedrovide* for the delivery of Caeca eofieTfler good* to of foot Turkish tobacco export*.hia protocol baa bees reneved annually and roc* ooararrentlj with tb* trad* agreement.

Trade with Eun&ar/ la cjoadceted under an agreement signed9ed ancuall/ since that time. The agreement provide*wing credit ofJlllaa. Principal commadltle* eaabaneed nnder the agreement arevoM-orry end textiles and Turkish cottoa and fruit*. Tb* agreementfor 6IO cillioe la total trad*. In fact, however,uo^arisa trede hastly exceeded thi* oaouat.

4. *blend

Turkeytrede with Inland la conductedrade endps/meat* egreeaent concluded8 and renewed annually20/ The estimated vales of trade vhioh it provides far each wayrotocol signed3he awing limit toil) low, an increase oril Han over the original eaouat. urkey export* fruit, to-occo, andorrou* ustola to inland in return forxttlao, sad aaebinery.

i.wj first poatwar forsal trad* sgrwsnaat with Rnrmnio was signedbmreafter, trad*heoe too oouatriee lncreeeed otmrply, cut still reoalnaairly lav level. It doe* not seem likely, therefore, that trade ln th*ie future will reach th* figurelllioa eeob way a* eradaeged ln th* agreement. 26

Tradeurkey aad the DSffl.onducted under an sgree-eeot signedV The vain* haa not la-en very large,ever. The cumulative veins af trad* both may* for tbaaa lea* than il. till ion. ^

ftft, (karnsny

Taa cWfalopavot of trad* between Turkey aad Boat Cartonylcninrant port of tho development of Turrlafc-^loo trade la cenarel. Cine* TurJury doe* nottho East Gasmant, trada la evaluatedaro-trnul Oleerlng arreng*-aaot. Tha first agreeaont- signedrovidedaring iatt-gla5 nil Una and for trada aaoh no/ enrootingilllon. 'xjhla agreement aaa replaced by another eocord under which tha solas of trad* aaoh -ay droppedilon*rotocol signed Inxt*sded th* agree-aont to&

d. jjaja MTtrtisto

One facet of tha Mao trade offensive hoa teen Intensified advertising of nice cooda end an Inoreaee In th* nxciher of Turkish aerobanto bsodling then, (he*or list) It eppaera thatlma seldoc ndvertlao their Bloola the local preasw Bloo trade deletions or their ooxjerolal attechao ^tt rally porfora this

The first Soviet Bloo odverUaaaant to appearocal novapnpar oceurrod la *hi* edvsrtlaeaeat, designed to solo- lay the Industrialof Huaanln, vos wall tlxed to oolrolde with negotiationsarslan-Bnraalan trade(signed In. During the period,Usnoo ofearalf, the Bloo countries aminoedod In pBMIshtng icproaslvoodv*rtiaea*nia In tao ofsjapors, ftrrrle-rt end Cu-Jairl-.Tit. H/ Displays of Sloe .pods la local Shops lnereeaad daring thla period ea pertulld-cp to the Isslr fair la that year. Eot ell of tho itees sdiertlsed vere to be found on the Turkish narket, bat the publicity eervod its purpose ss propaganda for too ecoooalof the 'loc.

Tha Bloo'a advertising osmpalgn notlooahly Intensifiedonneetlon with6 Isnlr Fair and oontlnuad thereafter, altbooghmller scale. Oxaoh advertising haa baoa partloularly effective and voluminous.vsrtleeaente for Russian, Romanian and Bsat German Emrohandlee haw* appaarad In tha Istanbul prass from tins to tins during tha past fsw months. Tha first ads for Bulgarian goods appeared" In several Istanbul news papers between6. rartlolpatlon In Icalr International Trade Poire

Six Iron Curtain oountries nortlolpnted inh International Trade fair held in Iznlr froa Augusto Tha Soviet Union, wblob had bean absent from5 fair, returned6 to participate, along with five SatelliteCaeoho Slovakia, Hungary, Inland ond Runanla. uj The saae five Satellite- had alao been repreeented at5 Isalr Pair. Ths Soviet end Oseohoslevak pnvillona at6 Pair were outstanding ssong all exhibits in reopeot to size and appearance as well as display content. Both exhibits fsstured largo amounts of sonsumer Goods end heavy maehlne tools. (Gee Appendix/

Creo ho Slovakia and Hungary did not participate In7 lsair fair. Thla move by Hungary le not too surprising in view of the eeonoale difficulties sufferedonsequence of events In tha Palloho Slovakiaecision, however, in quite unexpected alnoc her previous exhibits have been ao impressive and well received. However, lb land, Rumania, Bulgaria ond the OSSR did participate la7 fair.

Moo oountrlos hava placed considerable eaphasls on effective partlolpatlon In the lewlrl Talra. Ttygpportanltles for expanded trods with

escribed earlier, gave added importance to Bloo exhibits. On this tbe Bloo oountrleo wore qoiek to oepltalia*. The variety and quantity of Bloo gooda on diepley'et the fair have bean expressly deelgued to oon-vinae Turkish businessmen that "the Comaanist oountriee are fully oapahle of providing Turkey with ell types of gooda. The expanalon of trede in reoent veaxe offers an indication that Bloo efforte in thie direction have met with eome eucoeoo.

1 number of Bloo oountrleo areosition to take full advantage of tbe opportunities presented by the fair since they ar* not reatreined by tbe factors which have tended to dampen the enthusiasm of Western exhibitors. At5 Fair, Western exhibits were ourteiled by small foreign oxhengo allocations' and by the failure of Turkey to pay for4 displays sold after the Fair, UJ Moreover, Western firs* hod doubts as to the eoonoaio advantages to be gained fron participating in view of Turkey's foreign exchange poeitlona Consequently, many western firm* did not appear at5 fair, nor did the Waited States Government participate. The Bloo eountrlea, however, were not discouraged by thi* aituation} rather, they seised the opportunity to dominate5 fair. &J

he Turkish government enaounced that It would make available spaolal foreign exehsnge alloaations ln order to lnereaea the incentive to Western exhibitorh. In eplte of these good intentions, foreign exchange ol locations were sufficient to covermall part of the cost of th* items displayed, Payments to British and French exhibitors under the allocations made for45 Fairs are still pending, Aa of7 it was not certain when TMymente under th* oHooatlona for the

air will to oodo. Bloc countries eold their goods orhlMtod6 op to their foreign cxoliange allocation, whichillionillion) out of8 at" Ion TarsJaa lira for all countries, rkiwtheloaa, seat of their exhibits vers shipped btofc tcceuow thair value exceeded ths allooatioca.

It la evident, therefore, that fron the el appoint of the Western oountriee, the prestige end propaganda volne of effective participation in the Xxadr Fair toy, for the present, outweigh the cotuerolal advantogee to be sained. This will continue to be the cose until the Turkishplotuxe InproVBB. It tsar bo that soaa fora of govornseat support will be noooaaaryore effectual chewing by Ueetarn flrus at tho laxair fair. Ia any caae, it phould bo reoognlsad that the propaganda and prestige value of participation In the Fair oould be lost by default, horeover, thefor expansion of Kcetarn trede with Turkey doea axial bat reouires an isprovieaout la Turkeyoononle situation ln additloo to the continued all^rzent of Turkey with tha West. There la every reason to believe that thee*jfJJ he fulfilled.

to the Bloo eoonoalc offeaeive ln Turkey baa developed, ocawaarutal rebaa been given aa Increselngly inportant roleore The USSt and eeee of the Satellites wain tain eooewa-olalwho are attoohod to their nwheeaiee in Ankara. Sovietaleo baeu reported in Kara and Istanbul. Caechoalovakia andopeoed new aod larger conenrolal offices in Istanbul afterXaaVr 7air.

el rem hove been oat np under tha trad*Turkey end certain of theRuuenla, although theae groupe naet infroG^raU/ to reviewof theree-aeatB, their exlateace laermanent teniarole baa been enhancedthe Inportanoe which Bloo count ricetrede relatione with Turk*/, an exchange of unofficial trade daleunder tbe noo-ijovarneontal trade eocordetwees Turkey and In nddltloc. Feat Ceraon/ield office of itaForeign Trade Inother Bloo coacerolal groups

appear in Turke/ frca tire to -tine, nenerall* oneing riaelooo. v- fijfcjrfa Trade

urkish trede with tbo Soviet Eloo docllnod eboolatel/ nod relatively oo^mred5 but still remainedlrniflearrt level. (See Appendix HI) Trad* with tbe Bloo dropped2 Billion6 end7 percent of total Turkish trede ea compered9 sHUdb5 which7 percent of Turkey'* trade la that year. To eons extent this deollae refleoted adecline in Turkey'a foreign trndo Total trede wan valuedown aos*ercent from th* previooo raer.

Th* radnotlon in trod* with the Soviet Hloc^bovever, was relative aa well ea eleolata. Turke/'s total iapart* docllnod by IS percentcporte froa the Bloo. however, declined byercent. Turkish esparto to the world fellercent froc5 level vhll* export* to the Bloo declined bysroont. Tbelnw^la TcrkiaS-Jlloo tredecredeaoeeport tbnt.Tarkeyilenrolling trade with the

Iron Curtain countries cacaua* it ia oxarrtaccd Uiai aucn trad* lo not seoaoa-lonl for tho In fact,aa oood paying above world carkotfor iaports froa tho Bloo. Currant regulations remit tho Office; for Control of Icjori Oaodo1 Moos to approveaiaharw IS joroeot ebovo world carket prioea for tcode froa outside tho dollar and RFO ereaa. Sons local laportero claia that dlffcxaatiala up toerccat aotcollv exist. uj Turke/ baa bought froa tbo Sloo at theserlooe, however, teeanoe her weak foreign exchange position haa freouentl/ prevented her fros obtaining certain goods in tho tfeat end aloo tecanao her export prlooa ereatore tha vorld earket.

Turkey's total tredeeficit3 afllloa6 aa compared3 rfllloc Trade with the Bloo, bowter, woa nearly in balance. During the first charterurk lab trede with the Bloo ebouoi aexcess of exporte over lnporte end uaa at about the aovat level oa Curia, the ease period In the previous year.

Ccechoalovckla, East Oeneuv. and Ibland mlntalnod their pooltlon aa Turkey's prioary trading partners within the Soviet orbita they had done In the previous year. The bulk of Turkish-Sloe trade la with the European Satellites Sad la rootedre-Aaar traditional pattern which la likely to persist. TraCt with Coveonlet China Is Inslgalflcant. The pattern of Turkey's foreign trede coDtlnass to be cbarootcrlsed by en exchange of Turkish agricultural pruduoto forcds and equipment. Turkey's Bain exports ere cotton, tobooco, end wheat. vjvu^ctw

the noat Important Turkish export to tbe TOoo during the first half6 wen tobacco, the bulk of which wee Aaerlnaa^vade. Other elr-cLflcont coocodltlesIn' ih* Bloo durlntt this period were wheat, oil coire, and other ecrleultural coaaodities. 5b/ Theee products

probably could have been marketed outald* tbo Bloo IX uwxr prloe bad been to re ooapetltive,

There haalgnlfloaat rise In tobaooo exports to the Bloc


specially of Jjmn-ican-grsde tobaooo, Although aeeurate estlnateo of re-exports are not available. It Is believedarge portion of Bloo imports of Turkish tobaooo are re-exported to the united States. The lemir Tobaoco Herohanta Association estimated that6 eome B;illion Hlograms were exported to the United States via third eountrlae, arge part of tale case fron Bloo eoantrioi.

Bloo purohaaea of Turkish tobaooo, alio at entirely cede by the Satellites3 tons from January throughhe rlelng price of Am*rioan-grad* tobacco haa tended to discourage direct purchases by united States coapenlea. Although the prloe le high, ths Bloo countries oan re-export itiscount because of tbe high prices Turkey pays for Bloo toorohandle* under the clearing agreeaenta and because of the-value they attach to the acquisition of dollar exchange, unitedffiolale have suggested to the Turkish Covernseat that reduced export licensing of Anorlesn-grade tobaooo to tbe Iron Curtain eountrles and aore attreetive tarns for the American ooxpanlaa would alleviate thie situation.ction has yet been taken ln this direction.eport7 Indies tea that the Bloo oountriea are again In the market for large quantities of high-grade Turkish tobaooo far in excess of their own apparent &/ The problem, therefore, threatens toontinuing one. Major Turk lab in ports froa the Bloo Includearoent earn* free the Bloo5ottonercentextilearoontnd variousgoods, (See Appendixlgnlfioant development litpattern of Turkish lmporto fron the

Bloo bns boon ths rise In Imports of caohinaryolremnt. It Is ln their rols asf capital goods that tha Bloo countries oretholr root significant contribution to Turkey's ooonemlo development. During tho firot halfD percent of Turkey's imports of textile machinery came from the Bloo, primarily from East Qermany. In the seme period, CrechoSlovakia was tho eouroe of AA percent of Turkey's Imports of railroad oars* However, the Bloc supplied leaa thanercent ef Turksy'a Imports of agricultural machinery and equipment during this parlod.

B. Trade wi,th,tho Weat

rade with the Pree World6otal value3 aillion and accounted Toreroont of total Turkish foreign trada.5 trado with the Weat representedercent of Turkish trade. Tho United States, Germany and Great Britain era Turkey'a major trading partnoro in the Free World.

Table 3,

Value of Turkish Trade with Major Trading Partners ln



Turkey's primary exports to the West are ootton, wheat and tobacco. -The United States, which buys the major portion of Turkish tobaooo, purohasodercent of Turkey's tobacco export* Franco, Turkey'a best market for cotton, boughtercent ef Turkish cotton exports Italy, the best customer among Western countries for Turkish wheaturchasedercent of Turkey's exports of that item. (See Appendix*')

Tho Wast supplies Turkey with nearly all of its petroleum products.bout ono-third of Turkish petrolaum Icports aaao froa the United States. West Germany, tho United States and Great Britain are Turkey's caln

eouroos of supply for agricultural machinery and transportation ond in duo trial eouipment.

Western oountriea hava bean supplying Tnrkey vlth goodsar groator value than Turkish exports to than oould oovor. Wo at Germany and Great Britain have boon moving farther in thla dirootion than the other Europo an oountriea. arge part of the sxoese of Turkey'arom both oountriea le represented by deliveries under supplier credits, suoh as services and eqnlpment for cement factories and sugar planta from West Germany and tha construction of tho Klrfanll Dsn, grain silos, and other prejeoto by British fires. 6j/

A large part of Turkey's trade deficit with the Wast ls represented by defaults on Turkish payments of supplier credit installments and the creation ofxaorolal arrears in exooas of payments of oldurkey's coesasrelal arrears to its major trading partners in the seat wsre unofficially estimated to5 million aajj/ with West Germany the largest creditorillion. Arrears to tho United States now totalilllon.illlon to US oil coapanlae,illion to movie firms,0 to corxaorolsl

Austria, Belgium, West Osrnany, Denmark, France, Holland, Italy, Swaden, United Kingdom, Switzerland

Turkey has agreamenta concerning arrears with many European countries* which provide that proceeds frca certain Turkish exports to them will ba used toward tho payment of Turkish arrears. The latest

development In these arrangement* occurred lnhrotoool bo tbo agreement with tho United Kingdom, Under tha protocol, tho Central Bank of Turkey will paypeolal account for tho liquidation of arrears,aroent of tho ate rling aamlnga derived fromo the United Kingdom for allew exports, such ss tthoat, ooppor, and chrome. Fifty peroont of pro ceo da from exports of these oocraoditlsa will bo paid Into tho account. Turkey agreed toinimumillion pounds oterllng toward the liquidation8 million of ocemmrolsl dobta outstanding so of The agreementurkey to stretch out psysientseriod of' years aa the government haa long desired to do.

Weat Germany, Turkey's largest creditor, has agreed to anmoot by which6 million worth of aarmraltion will be made by Turkey for oxport to Woot Germanyhree year parlod. One-half of the proceeds of tho transaction are to go to Woot German holdere of Tur kinh It ia expected thateasure will bo successful in liquidating Turkey's commercial dobt to West Germany. v" wlopaant, Jn Turftcy A. Introduction

Since the establishment of tho Turkish Republic, Turkey has bean Intent upon the full development of her resources and th* establishmentxtdern, Industriallxed state. Tbla oosmperatiraly long tradition of ooononlo development, the oonoldorable eoonomio potential of Turkey, ito

in tho defense structure of Uio Proa World, and the substantial ooenomlo expensloa achieved thaa far giroairly' unique poaltlon among tho underdeveloped oountriea of tho world* Tha faot remain a, however, that, laof ita notsMirthy progress, Twrkey la experiencing internal atraina and atrasaea which threaten bar atabUlty and economic viability. Turkey's ambitloua investment program bas otimolated internal inflation, accumulated arrears to free world suppliers, end resultedlgnlfleant rise in tho cost of living. The government of Turkey, despite its awareness of these conditions, has indicated Its determination to maintain tho rapid pace of dovolopmont on which it believes its political future depends.

It ia with thla general picture la alnd that the machinations of the Soviet BlocTurkey oust be analysed In order to arriveealistic appraisal of tha nature and impact of current Bloo economic activities in Turkey as wellrojection of the extent to which Bloo objectives in Turkey are likely to be achieved. It is not suggestod that Turkey's ties with the West are tanuous. Turkey hasooperative and dependable member of the Western (QllsnSe7 snd hasignificant portion of its reaoerceo to support tine defense oataoliahannt. Whatever vulnerafailitlef to Bloc penetration sight develop in Turkey, they are likely to occur as repercussions of ito preoccupation with rapid economic development. It le in thesphere that tho Bloo haa concentrated Ita activities in Turkey. Tho current level of direct Bloo participation

in Turkish econosda development la not largo and, beyond an expansion of trado, lo conflnod to toe constructionew in duetrial The perelstonoo of economic dislocations unchecked by stabilisation measures, tlio drying up of Wootern oouroee of credit, continued difficulty in narkotlng high-prloed exporta in the Weat,ost of other conditions could wellituation in which the Bloo night find its task of ponotration greatly facilitated. It has already boon noted that thoof these conditions has lad to an expansion of Turkish trade with the Bloo in recent yoar a. Any algnlfloantarticipation ln the doTUlopmont of tho Turkish ecbnoayotential throat to Turkey and to tho United States. For this reaoon,lose look at tho oconcealo dovelopmont of Turkey and its resultant strains on tho Turkish eooaecay is nooeessry for en evaluation of tha current Turkish position and tho offoot of prosont and future Bloo oconcede activities in Turkey. B. noglo DeTelorcvnt Pro^pj

Tho eoonomio development of Turkey has bean carried out undor euooessivo five-year plane which began Ins* Tba so broad programs indicated tha emphasis of Investment expendituree by the government and aistod primarily at rapid industrialisation. The gal daf the present offort wore derived from tho broad outlines of an eoonomio developmentenunciated0 tabsn the present Ken doovernment eaae to power and extended4 for another five years. The main point* of thlo

program Includol

emphasising agricultural development

accelerating capital itrfastment

affording security condnolra to prlTata antarprlaa devolopaont 4- oncouraglng Uio import of foreign capital

5* reducing abmlnlstrativo orarhesd

Tho atroaa on agriculture under thlo program repreaonta aehlft in emphasis la Turkish dorelopmont policy. Priorha government had ooncontratod on industrial devolopoent and had neglected tho agricultural sector. ission from tho World Bank, tfilch visited Turkeyeverely criticised this aspect of tho government's. Financing Develorramt

The notable expansion in physical output achieved by Turkey0 haa been sustained primarily by the Turkish government. In theof large private savings, limited by the low level of income, the chief source of inveotraunt capital has been governmental mvenues. Toppid expansion ef produotion, the Turkish government haa pursued policial of eaey credit to agriculture and industry and hasrogram of price supports for the principal agricultural staples. Liberal use of private and credit, both damestlo and foreign, haa also been utilised.od stance from the United States hasrucial role in enabling Turkey to carry on Its development effort and, at the same time,efense effort necessitated by the strategic position tahieh Turkey occupies

in the Free World defense framework*

Moreover, much ef the aid received froa tho united States haa dlreotly

ooetrlbuted to Turkey's oeenomlo development through support for dovelopmont projects allied to Turkish defeneee, eueh ao port faeilltlos, tho devolopmont and modernisation of mines, aleotrio power facilities, snd ether industrial and agricultural proJnots.

In spite of the resultant strains on the, Turkeytoubstantial portion of her financial reeouroos to acool-erated ooonomic development. Ths Turkish budget for Fiscal7 (which, ths largest in Turkish hletory,otaloutlay for eoonomio dovelopmontU aillionillion) which is aboutaroent above the level approved for Por the third successive yoar, budget-expenditurea for economlo development vill oxcood those for national defense which previously topped the list. The followingablereakdown of budgetor eoleoted yeare (Inne

Turkish Budgetor Seleoted Tears


4 0








A further breakdown of expendltureo for eoonomlo devolopoent (in millions TL) follows.

Table 9-

Rrpondituraa for Economic Devolopaont

. off


Transportation and Concunlcation


Publlo Harks

Industry, Mining, Power

Tho total financial oporationa of tho eta to economic enterprises, whichegree of autonomy and fall out aide the national budget, bulk aa large In the ooonoay aa tha national budget ltoalf. Many of theee enterprises are direoUy concerned with economic development pro Jo eta.

0. Achievenenta

. Under thla broad development program Turkey haa made remarkable strides Groia National Product Increaeod by aboutercent0J

Table S

Qroaa National lYoduot (at0 prices, HUllona TL)

* Provisional oatimatos.

Dramatlo gains ln Turklnh produotlon have boon registered0 aa tha following tabla lndloaUB.

Table fe

Produotlon Index of Major) Ztt/






advances havo boon registered in ovory major sector, tho expansion of eoaisl overheadtransportation and ooiauunicatlons network snd public utilities Inboon particularly impreaaivo. The development of these fadlities is vary vital to the long-range balanced growth, of tho .Turkish ooonomy and will provide tbe base necessary for tbo continued industrialisation of Turkey. Agriculture

Of special nets have been then agrloulture ln which approximatelyereent of the Turkish labor ferae is employed. Agrloulture oontinuos to bo the mainstay ef tho Turkish oconomy and its major foreign exchange earner. Cereal growing, to wbioh emre then three-fourths of the tilled land ie devoted, la the baslo Turkish agricultural activity.

.itlon of agriculture is progroeeing, and tharogram includes irtoreasod uso of furtilisera, improved and expanded irrigation faollltios, and improved farming methods.

Total agricultural output0 has expanded slgnifioantlr. Output of key oropo growora rapid rate0of wheat increasedillion aatrio tons0illion

metrio tonsSoe Appendix VI) Throe eucaoBslvo years of poor weather conditione, however, have kept Turk!ah cereal production below3 peak. The current critical Turkish wheat situation, aggravated by drought conditions early in the yoar hao nooessitatod sabstantlAl emergency shipments of wheat froa the united States and Italy.

2. Transportation and Puhllo Works

Inland transportation and port faeilitlee have been greatly Improved and expanded undor Turkey's development program. Of particular importance hao boon tho road building program. All-weather roads and highways In Turkey nov0 solos compared1urther development of transportation, storage, and handling facilities la Important in eliminating Impediments to tha development of larger doaostio markets. Turkey has also made large Investments in irrigation Installations, dams, power planta, and other publlavitalalanced development of the country. Slnoe these seotors do not attract private oapltol invostmont, the burden of their financing hao fallen primarily on the go remnant.

ining ftnA Enfofftrr

Substantial coin* havo also boonIn tho mining and nannfiiotuiiing lnduatrlot. Overall produotlon4 waa aboutpercent higher than Production of oortAln major industrial cosmmdltles has inareaoadSee Appendix Cement production, for example, haa more than doubled Recent official estimates plaoe cemont produotlon capacity by tho end7illion tone.

In rata of growth, aa well aa production, textile manufacturing io tha moat important in due try in/ Private enterprise open tea tho bulk of Turkey's textile planta but state enterprises also havo aehsre In the industry. Production ln state-owned cotton textile on toincreasedillion meters0illion motors Output by privately owned enterprises increased fromillion motors0illion motore Production willo expand as many textile factorioo ourrontly under construction are brought Into operation.

Turkey haaetermined effort to diversify its Industrial baaa and eorrently operating industries include,ood prooosalng, lumber, ooUnless, ehemieels, pharmaceuticals, rubber, motelworking, auohinery, and leather* Special emphasis has been placed on the establishment of sugar refineries and oomont plantsiew to making Turkish production sufficient for the country's needs, thereby saving foreign exchange. cmont

factories havo been put Intondugar planta havo boon constructed during tha pa at throa years. Bp/

articipation by private onterprleo In Turkish lndna-trlal davolopaent had inereasad algnlflcantly,specially in th* food prooes-aing industry and in tha rubber and oonatruction materials industries. Foreign capitalo soma oxtent in the food and choral oal industries. In addition, important Amerioan Invootmenta have boon ma do in tho field of machinery produotlon.

Turk!eh industrial produotlon haa boon soamwhat handicapped by the ohronio foreign exchange shortage ^vhich haa interrupted tho flow of importo of eseentiol epare parts and raw materiale. oorly coordinated allocation system for scaroo materials haa coaaxTunded the dlffioultloa faolng Turkiah In aeveral Instance* this situation has forced many plants to operate nt loos Uian oapaoltyew concerns havo hod to auspond operations temporarily../ This condition tends to discourago private enterprise In Turkey, foreign aa wos domestic.

Turkey has substantial reserves of ooal, lignite, chroma, iron, and copper. Its coal aad lignite deposits and tha availability of water power provide Turkey with an abundance of th* primary souses ol* electrical energy which augurs well for Turkey's future economic development. Turkiah mineral produotlon has increased greatlySeo Appendix VIJJ) Private enterprise has beenreater pert in the development of Turkey'a

minerallthough operations of state enterprises still account for the major portion of total production in this field. hs. poyarp^nt.

In view of the fact that Turkey's eoonomio dovolopoont beganolicy of etatism adopted ins, it is not surprising that tho Turkish government continues to partioipato actively in the life of ths country and particularly In ita eoonomio development. eriod of years tho government hasarge number of etato enterprisea which operate in nearly every sector of tho econoBry.

Ono group of government institutions, ostahlishedaw paGoeds free from tho law of public accountability and their budgets are not subject to debate in the Grand National Assembly. The Sumor Bank, Etd Bank, Agricultural Bank, Office of Soil Productsailways, and tho Telopbone-Telegraph Administration are the more Important enterprises in thisho governmentontrolling Into re otecond group of state eeortomlo enterprieoo which Includes suchaa the Airways, Cement Industry, Turkiah Sugar Peateries Corporation, and others. In addition, there are various other state enterprises with primarily ooonomia functions such, as tho Directorate of Highways, Waterworks, and

Tho Sumor Bank and tho Etl Bank, two of tho more Important government enterprises whose role in Turkey's eoonomio dovelopmont la substantial, merit

opoalal attention. Tha Sxmwr Bank, aatabliohedo outhorised to eiujage In any industrial actlrity In addition to performing normal banking function V. Ths iapaet or thla Institution on Turkey'" ecocosdo oipennlnn oan bo soon from tho foot that2 It was ootlmatod that tho Bank's industrial ostabllshments prodnooderoont of tho nation's cotton yarn,poroont of its cotton tortile a,eroont of tho output of wool yarn,ercent of the woolen textiles produotion, and,6 poroont of thoement. 8h/

Tho Eti Bank, establisheds authorised by law to buy and sell mineral ores and any materials related to ndnoa, to operate ainos, to erect and operate eloctrio power planta, and to buy and aell electrical equipment and ootablloh factorlos for Its manufacture. In addition it io authorised to carry on normal bankingl or.. It le ootlmatod that the Eti Bank'a establishments produce all ef thebituminous coal, copper ondoroont ef itaoroont of thohrome ore, andercent of tho iron ore/

It la evident that the Turkish government has bean and eontinuos to bo tha primary force in Turkey's economic development. Thla situationalutary effect In that as long as the Turkleh Government refuses to countenance aid offers from the USSR, tho chance of elgnifioant partiolpatlon by the Soviet Onion in tho industrialisation of Turkey is not very great. While it is doubtful that comparable aconomia progrees would have occurred

in tho absence of state enterprises, thoy haniixed blessing to Turkey. Tho report of tho World Bank pointed out that thoee enterprises operate Quite independently of each other vlth the roenlto that adequate ooordination of investment ia not aohiovod and consequently resources are not uood most efficiently. Moreover, it la quite possible forventures Initiated by those organisations to bo continued Indefinitely, supported by public funds.

F. The Role of Private Capital,

ho policy of station was losing popular support and pressure developed toider role for privateole also rcooenendod by the World Bank mission* When tho new govorrawnt came to powert pledged itself to encourage private investment and to provide tho security necessary for its expansion. Blnce that time, it has taken steps to Implement this policy with the result that the scope of private entorpriso in Turkey has expanded significantly, although it Is still overshadowed by the wide spread activities of tho state economio0.

A law passed4 abolished all advantages previously aocorded to state mining enterprises and placed them on an equal basis with private entorpriso. While this development has provided eemo encouragement to private industry in tho mining field, state enterprises still remain the dominant producers. In terms of the long range oeonomio development of

Turkey the lncreaeed flow of private capital Into Industrial undortaklnga haaignificant and promising davelopmont.

Tha privately owned Industrial Development Bank, establishedunder ths auspioes of the Turkish government and tho IBRD, hassignificant contribution to the expansion of private industrialin Turkey. By the ondoane had boontho Bankotal ave boon made for

tho followingf enterprises, arranged ln order on the basis of voluma of loansceramics, food, chomlcals, and motelhile tho role of private enterprise has increased, its present influence should not bo exaggerated.

O. Effects of the Dovelomwnt Program

Baaiaally, tha eoonomio and financial difficulties that haveTurkey over the poet few years result from an oxooas of internal demand. In relation to available goods and services. The policies of liberal credit to agriculture and industry, high agricultural price supports, and largo publicareise la money lncomao which has not been matchedorresponding Increase ln docostlo output. In each yearhe money supply and bank credit have risen byercent or core, as again at an average yearly rise over the periodo'6 percent in the total output of goods and Central Bankn7 wore aboutbillion Turkiah lira,illion TL abovu



Internally, one of tho moat aerioua effeota of thla situation hasharp rlaa in price a. Tha ooat of living Index for Istanbul in7) whiohoints above thoear earlier. Tho wholesale prioo index for7 was aboutointe higher than for the sane month In tho previous year. Aa noted earlier,omestic ocoacolo problems have been associatedritical foreign exchange ehortageifficult external payments position. H. Attempts fit StgbtfltflUon

Inha Turkish Prime Minister announced the govern-Dent's intention to take ths following steps in order to put the ooonomyound footing!

restrict now investments to those which will positively and rapidly improve tho balanoo of payjasnts position!

alanced budget j

cut off state econcede enterprises from credit resources of the Central Bank)

establish an economic priority ache dole for

In place of restrictive nonetary and fieoal polloiee, tho govern-oant has rolled on direct controls such aa ioport licensing controls, tame ot foreignnd direct price controls. Cochersocw licensing and exchange controls hare operated to curb icports aoatswbat, but these era stop-gap aoasurws and do not attack Tarkay'e oceanic probleno at their origin. The inport foreign exchangeo* rovacuo erasure incorporated in7 budget, =ayalutary affect on tha econcerr in that tba revenues brought In by it will help cover tbe public eoctcr deficit and thereby reduce theof nov purchasing power to be created by the Central Bank. In view of tho proposed high lorol of spending under the new budget end tha ineroaase in lBVosteeot expenditures, it waa vise to obtain eon* of the additional funds needed by taxation rather than through tho creation of now coney. Tbe sraasure Is,esne of United snd partial devaluation in that it will bring the price of iaporta hot* nearly into line with thoir real veins, but it will not iaprovs the export

ploturo. Moreover, it lo expected to push domeotio prioos up and thereby add to Inflationary pressures. This tootop-gap amaaure, aad it la likely that tho goveriwaant will have to attack tho exchange rate problemore funCiamantal Banner.

Innondaento to tho baoio National rVoteetlon Law were adopted In an attempt to chock Inflation. These amendments wore addreaaed principally to prloo control, margin of profit allowances and lnoreaeod penaltlee under tho baslo law which gives tho Government broad regulatory controli! over the economy. Although tho initial impact of thla legislation woeories of modifications and adjustments has had tho effect of nullifying ita effectiveness, and the current outlook is for continued Inflation.

Ae tho foregoing discussion has Indicated, tho period0 has been ono of impreealve eoonoraio growth for Turkey. The oaonooioachieved, however, haa had attendant coata in tho form of Internal inflationary pros euros as well as serious external payments difficulties. Theee tendencies, if unchecked, will serve to dlacouxage foreign capital and act aa real deterrents to further eooooado development. It le generally agreed that tho remedy for Turkey's economic ilia Ilea partially', at least, in the implementationtabilization program witch will provide the

breaciing ipell no ceo wryeriod of controlled growth0 current ooonoado diolooatlono can be dealt with. In tho past thomont hao not Iranieaentedrogram. Tbe proopeeta for government action along thseo llneo ore not good at ths present time. Thahao staked ita political future on rapid eoonoado development, and, with elections approaching ln tho fall, it io unlikely that it will coma to grips with Turkey'a economic difficulties andation measures at the proaent time. VU. western Support for Sconcclo IVvaloTraent A. Climate for Foreign Investment

The Turkiah political and economic elimate Is basically favorable to foreign invootomt. In view of Turkey's substantial agricultural and mineral roeourooa and Industrial potential, tho countryumber and variety of investment opportunities. At tho prosent time, private foreign capital le somewhat inhibited by Turkey1economic and financial difflenities, particularly tho foreign exchange shortage and inflationaryn the economy

The Government has madeoint of policy to attract private foreign capital to Turkey to assist ln carrying out thembitious davelopmont program. Among tho moaeuroa designed to improve the legal elimate for foreign capital have been tho Foreign Investment Fncouragenent Laws end the Petroleum and Mining Laws*

Under the Law for the Encouragement of Private Investment, approved

ll rights, Incnmltlaa, and fao tilt las granted to domestic capital onterprieee wo made available, on equal terns, to foreign capital and ontarprlooo engaged In tho same fields. 9j/ In sddltlon, it provided for the unlimited transfer of all

aw dealing with tho development of Turkey'swae enacted which opened the way for foreign oil conpanlesfor oil in Turkey and to exploit it, subject to By tho end ofotalxplorationbeen Issued tocmpsnles. Including American, Dutch, English,and Turkishurkey does not grant general tariffconcessions to new Industries, but an exception was made In thofor the duty-free import of all equipment ueoded by the oilthoir operatlone. %f

According to present Turkish mining law, minerals may be explored and exploited only by Turk!oh eltlsens or by companies that are formed aooording to Turkiah regulations. The law does not stipulate, however, that tbe capital used to flnaneo mining operations saiet be of Turkish origin nor does it prohibit foreign companies from working In the mining


fields as lostoso or contractors. 9j/

Innother step was taken in ths government's program to attract foreign capital, especially united States capital. Thie consisted

of an expropriation and oonflooatlon Guaranty Agreement bo two en tho United State! and Turkey which Bakes it possible foro guarantee United States Investors against loss by reason ef An agreement reaohod1 guarantees currencyI. foreign Investment

With tho passage of tho now Foreign Investment lawrivate foreign capital exhibited renewed interest In Turkey. Fromooreign lnvestaent proposals (involving moreillion) had been approved byyumber of foreign firms, primarily American, Hast German and Italian, had made investments in Turkey in suoh fields as chemieale, farm equipment, truck aaaombly, oement, and textiles. Jj/ Although United States private Investment In Turkey le net veryumber of Anerican firms are quite aotivo in Turkey. Tho American Tobaooo Company, General Eleotrlo, Hlrmespoils-Molina, and certain ell companies are among the United States firms 'operating In Turkey.

A few Turkish developmentats have bean started by credits extended by Western European firms. British and French interests have participated In Turkish hydroelectric and irrigation projects. In addition, some projocts involving the expansion ef sugar and oement facilities in Turkey have been partially financed by British, French and West German


Uthougfc completely aocuret* figure* on foreign lnvaefjseats in rurkey during tb* past fir* rears are not available, ths total was probably considerably- below the ascent desired by Turkey. Turkey's inability to attract an adequate supply of private foreign capital la probably dne in large part to the foreign exchange pinch and the general dislocations within the Turkish eoonoay. The long-run outlook for foreign investment, however, will probably laxvovs as stability and balanced growth le restored to th* Turkish economy.

Cm Unitedaalatanos

Turkey did not possess sufficient sUltory and financial resources to effectively counter th* threat of Ccsaannlat expansion posed in the early reet-aor period. Tha united State* responded to this situation by providing aid to Turkey a* part of th* Creek-Turkish lid Program Initiatedfl. Sine* that tine, the United State* haa engagedroad progran ofto Turkey. Total obligations for allf aid have bean6fl. Expenditures during thrlodillion.

Total United States wllltory assistance to Turkey through6 aoownted to Ol adllloo in/ ef mnichaa prorlded under the Greak-Turklsh Aid Program. Of the aaount obligated, approximately igj6 aHlloa has beea exptadsd.

Tha military assistance program propoaod for8 provides/ Slightly more than half ef thie sum lo forof force a. Tho remainder ia for force Improvements. Military aidBBlotanee furnished in tho form of oquipment, supplies, and aorvioea furnished directly to the Turkiah military force a. Unitedilitary assistance, together with aid received from other nato countries, has enabled Turkey to develop andore adequate defensethen it would havo been capable of supporting alone.

United States non-military aid to Turkey cumulative through6 hao amounted0 minion in aotual/ ill probably0 million to this/ Under tho proposed8 prograa, Turkey willillion in norwallltaryillion of which is oornarkod for defense support andillion for technical/ United States defense support to Turkey is designed to Insure tho flow of material essentialontinued defense effort. Under thie program, Turkey rocelvoa row materials, baaio industrial eonrjoditloe, machinery, and spare parte. In too past, aid for the development of vital baaio facilities, auch as hydroelectric projects, haa been extended through defense support funds* Inowever, no defense support funds are proposed for these projeota ea tho assumption that any financing required to continue thorn can be set from ether sources, up/

Included under defense support la tha technical cooperation program

albed States provides training for Turkish personnel. Expendl-

turoe under this program totaledullion throughll/under Fublioor surplus wheat and dairy products shipped to Turkey amounted to Hi million through/

Tho magnitude of United States assistance to Turkey underlines ^tho con timing Interest of the United States In the ability ef Turkey toa defense establishment commensurate with hsr role In the Western defense system and to dare lop the kind of healthyase on which her total effort depends. United States ssaistanoe to Turkey during the paet ten years hasrucial factor in strengthening Turkey's resistance to Communist pressure .

It will be noted that United States ad has not Involved substantial dlroot support for Turkey's ooonomlo development except In the ease of high priority projocte clearly designed to contribute to tho nation's defense effort. The primary objective of United States aid thus Tar has been to ensure that the Turkish sconooy could functionevel necessary toths defense effort. The long-range program worked out by the US Operating Mission onviBagoe two phases in United States aid to Turkeyi

th* Turkish government is prepared to dealits fundamental eoooomlo problems. United Statesbe directed to supplying critical import needs,industrial raw materials and spare ports, andto the completion el high priority developmentunderway.

proper stabilisation measures or* taken and hava on

opportunity to toko effeet,M forahift In emphasis for aid fronolding operation to United Statea supportere fully planned eoonoolo dsvelopaont program-

Total authorized orodlta extended to Turkey by tho Export-Import Bank throughmountedillion. Aotual disbursementsini on by that data. Hoot of these funds vera uaad for tbe oarchaee of Industrial equipment. B. World Sank Aaalatanoo

The World Bank haa authorised loans to Turkey In the amountillion Of this amount,illion went to tho Industrial DoTolopmont Bank for foreign exchange. Thsso funds were, in turn, loaned to private industrial conoerna to cover project requirements of imports of machinery and equipment. Other programs utilising World Bank financing include port dovelopmont, expansion ef eleotrlo poorer facilities, and tbo oanstruotion of grain storage facilities. (See Appendix XX}

VXXI. Soviet Blooor Feonomla

Th* objective of Bloo eoonoaio aotlvltlOB ln Turkey extende beyond on expansion of trade to active participation In Turkey's economic devel-ojcmnt. The Bloo has repeatedly offered te provide machinery and to eon-otruot induatrlal Inetallatlona in Turkey and in some oases has offered favorable credit terse for these projects, Ia their effort to secure contract a, Bloo oouutrlea eometlaea have offered equlpBent atelov th* world aerket and, in at least oneaheidy vas granted to enable the fulfillmentontraotloo agency.

In connectionlass factory to be built ln Turkey by the' Sovietecent report indloated that the Soviet Union quoted primes for th* equipment sold to bearoent below tha world tar eat level,No confirmation of thie information has been received, however. In another lnstanoo, tho USSR van eald to have offered heavy construction equlprenturkiah firm at aboutof its value. oopLsx, thestate agency for export of Industrialuheidy from the Hungarian National Rank for the constructionlour mill In Turkey. /

So far, thes th* only Bloo country which has offered large-Boale,eoonomio old to Turkey. On mariy occasions the Soviet Union bod announced its willingness to extend suoh assistance. According to one report. President Bayar was approachedoviet offer to clear np all of Turkey's financial difficulties in return far bar*volant neutrality. JJj/6 th* Soviet Commercial Attache was said te hove Indicated that the OSS was willing to i* more generous with eoonomio add

for Turkey than It had been with India or Afghanistan. It haa baan tha policy of the Turklah government, however, to rejeat all such offara froat tho USSR. Moreover, Russian approaches to prirate antsrprls* have also boon rebuffed, although It now sseoaa Ukalywoant Soviet offer for th* oonstruotlonlass faotory will be oeoepted,

Tba government of Turkeyot eeea to taks th* sabs negative attitude toward short-term United and spsolflo oradlt offers froa tbe European Batellltes as It dees toward tbs acre general overtures ef then view of this. It is not surprising tbat ths European Satellites thus far have spearheaded thin aspect of ths Bloo economic offensive in Turkey. They haverofusion of offers to construct Installations In Turkey and have been suooeasfnl Inumber of contraots.*

To date the Satellites have extended credits9 million to Turkey. The. largest known oredlt was extended by CzaohoSlovakia5 for the purchase by th* Turklah Stat* Railway* ofailllon worth of passenger railway coaebee on an eight-year credit. / Czechoslovakia has alsoive-year credit7 million, presumablyrivate firm,extile mill la Istanbul. / redlt2on was oxtended by Hungary for maohlnery toegetable oil plant, also in Istanbul. / It Is estimated that th* Eurepaea Satellitesontraots valued stillion for the oonstruotlon of Industrial installations and ths provision of maohlnary and exp^lpDSnt. (See Appendix X) Turkey has received oredlt offers from ths Bloo, primrily

free tha USSR, amounting to slightly0 million.

A number ef oontraots algnsd between Turklah firms and th* Satellites

These are detailed In Appendix X.

may Involve creditsonoi'jmXwm .wonoiiona**wlo not available. The present statue of tbeaa dealings vltb Individual Bloo countries la treated below. A, CgeohoelovBlrla

ontra at was signed between Technoexporturkish comparer under which Czechoslovakia would pro vide complete equipmentarge ootton thread clll to2 ailllon. Dellverj of th*to be assembled under Cseoh eunervlalon, wae scheduled5/urkey wae reportedly receiving complete equipmentrink foatoryo oho slovakia. Credit negotiations between Cseohoand Turkish firms la progress at th* end of6,dlllOB creditire and rollingilllon creditaramiea, andtrle plants totaling8 million far the Uler Bankevaa to sight-year oredlt. ransaction Involvingmillion worths sal anginashree-year oredlt appears to have beea finalised/

The Municipal Transit System of Istanbul la believed te have signed an agreement with Czechoslovakiakoda buses to ba delivered/ This followsurchaseuss*eportedly the first postwar eel* of Bloo busesurkish government agency. Payment for th* first purchase was to be mad* through tha Caech-Turkish bilateral agreement. / It is possible, therefore, that payment for tb* additionalill bs through this arrsagement also.

Recently, the Cieeh ocasasrolal attach* In Turkey announced that an agreement had been reached whereby the Cxeohs willarg* ceramics faetory, toillion Turkishn Canakknlo, located in northwestern Turkey. Inh* at to one.

Gisolioalovakla villotor faotory in Turkey end will provide


equipment for enlarging tba fuoUltiea of tho Sumerbonk'a shoo faotory ln tha Peyfco3/ If thaaa plana mateuiallse, it la likely that Czech toohniolanD will bo proseat ln Turkey to work on tha projeeto.

b. foot, favmx

oat German erujineere vera reported to boraetor hall and water tower onont/ Turkey. In addition, it waa raportedlax and wool spinning mill waa being oet up in Istanbul by an Beat German team

East Germany haa been particularly active in supplying Turkey with textile equipment. urkish firmomplete cotton spinning mill from East Germany. / Kegotlationa were under way5 for the procurement9 million worthinning mill equipment, t was reported recently that-textile machinery of Seat German origin had been Installed or was going to be installed In mills at Manias, Berg&ata, Antalya, Balekoair and Denis/ It appeare quits possible that5 negotiations eenoernod soma of this equipment and that the transaction hasnalixed.

ast Germany reportedly oontraoted Cor the oonatruotiontextile faotoxlea ln Turkey. Total coat of these5 will/ eliverlea, prea^omtbly underamounting0 million arefor the

faotories reportedly will be in dollar curronoloa or through barteroat ion, rrobably ln tobacco.nother cotton mill is scheduled for ehipaant/ Informationhose transact ions Is fragmentary, but those three footer lea appear to be ln addition to the equipment mentioned

Other transactions la which East Germany Isorcelain faotory, forender vos submitted6nd on eleotrlool Eaterlnla plant which was etlll la tha dlBOusslon stage at the end/ Reportedly, East Caraiany le exporting to Turkey couplet* Installationslate glass/ and haa prepared tenderealtoundryractor faotory,lant Baking tins for preaerving seat. jav 0. BenjgaTY

Ihuigary wasontract5 tolour adll Talned8 million. redit vas probably extend ad for tile projeot

at details are not era liable. Inungaryupplier's crediturkish firm0 worth of aaohinsryargarine Plant. The oqulpment has been reported dellTored by tbe end of Inontraot to supply completefor en electric power plant, being flnanoed by the state-owned Uler Bank, was awarded to Hungary/ The cost of the equipment ia estimated atredit waa probably Involved in the transaction.

Ho oontraote are known to have been oo Deluded with To land.olish offer6 toompleteillion foundry en an Intereat-free beats to tbe Hlneapolia-J'ollas Tractor Paotory ln Ankara waa refused. / In tbe some year, Poland6 ell lion creditroup of Turkiah bnetnoBsaonoxpleta foundry.onaortiun of Turkiah firms vas organised to opsrst* the foundry and provide approximately TLillion of the oopltal required. The consortium originally ooneiated af tbe firms


Kshcot Kara la and Tranoturk Ltd. which Java beau imvitM- apreviously. Sofia) government enterprisas, originally involved Inwithdrew from tha aoheme, oatsnaibly because of theirto assume additional floanolol oomelt tment*. / The twoliave subsequently been seeking bank flnanoing to fill the An offioial of Cekop, tbe Follah atate agency exporting

Industrial eanlpmsnt. le reported to have disclosed in6 thatwere still in progress for ths ratal works and that tha entire installation would costillion. / E. t

In addition to general offers ofeoonomio aid, ths USSR has node several offers toao if lo projeota In Turkey.ropoeal was made to oonstruotinning all la on long-term credit.j Ine year, tho USSR engaged In discussions concerning the ere at ionlour mill with an5aoaroni factory to,rick factory valued6/ Hone of these proposals was accepted.

be Istanbul press reported that th* USSR woe prepared to make various types ofn Turkey. Specifically, th* Soviet Onion offered toillion oil raftnarywenty-year oredlt at low interest, ong-terns oredlt0 million to financeteel mill reportedly aleo had been offered by the USSR. / During the last half6 the Soviet Unionrivate firm Inillion) three-year credit to buy machinerylant for the manufacture of aaall motors for water pumps. f th* firm Indicated to US offioial* that they did not want

to deal with th* Russians hut would feel compelled toettor offer froa Anoriean firms waa forthcoming. /

Tha USSR approached off loiala of th* state-owned Eti Dank in6 with an offer of oredlte up0 million for the oon-otruotlon of Inatallatlon* in Turkey-. / The Dank has not replied to this offer which is the largest advanced by the Soriet Onion to date. It Is quite po sal bis that the steel adll offered previously vas ona project envisaged in this offer.

The Soviet praotioe of by-passing the Foreign Ministry bos caused offlolslo to Isoue inotruotlons that all Soviet offore Bust be brought to tho attention of the govurrmmnt. /

It eeoze that th* new Soviet approach Is not ill-conceived. eport that the Soviet commercial attache red* an offer of assistance to Turkeyreaohed the press andinor sensation in Istanbul. hat publication of Soviet aid offers oight hav* eon af feat on Turkish puhlio opinion, ln view of Turkey's eoonooda straits, ounnot bo discounted. Ono Turkish offlolal has indicated to Anerican repreoontatiyea in Turkey that "the United States need have no fear as to the official Turkishof Soviot overtures but that if th* Soviets deolded to publiolce auch offore he was afraid that Turkish publio opinion oight ones* th* government sowe difficulty." Ifr}/ Thus far, however, no serious development along

these lines hpa ooenrred

Inelegation froa the Io Eank^Irxhaetrlnl bank, vent to Moscow to dlaousa Soriet oommsroial offers. oault of theootraot vno signed for Soriet oonstruotlonlass factory, and agreeasnt In principle vas reaohod on oonstruotlonaustic soda faotory. Both foot or loo are to bo soppllodredit baslo with repayment In goodsen to fifteen year period. / If, as appears likely, tbo contract ls apprered by ths Turkish Foreign Office, It will be tbeiet contraot In Turkey In the post-war period. Tb* Turkish Prise Minister has assured American officials tbat this development does not presage any fundomontal change ip Turkish-Soviet relations and that Turkey is not disposed to acceptnn eoonomlo aid. / It appears, however, that tbo Prim* Minister, who Is seeking re-election in th* fall, wants toecord of constant refusals to th* OSSR and that whileSovxnrt aid will not bo accepted, specific Soviet offers to private industry coy be given more serious consideration than they have been accorded In th* past.

Th* last in*tone* of Soviet soonoaio assistance to Turkey occurred4 when Turkey borrowedilllon from the USSR, which was used for ttwporobas* of faotory Installations end otherin various oountriea. The final installment on that loan Is due/ H. Outlook

At ths present time, the multifarious activities of ths Soviet Bloo In Turkey appear to be based primarily on two oonslderatlonsi preservation of good relations on ths dlplomatlo level) and full exploitation of eoonomlo techniques toetter position in Turkey. Th* ultimate Bloo objective la penetration of Turkey to th* point where, itever to be used for th*

eventual detachment ef Turkey froa tbe Waatarn alliance. laeahls expansion In Turklsb-Bloo trade3 and Turkey's aeoeptanoeeu credits froa son* of tbe European Satellitoo, it aeema correct to say that thus for Bloo aoononio penetration of Turkey haa notoint where the Bloo has any substantial control over Turkey'a economicnor oan it exert any appreciable influence oa Turkey's orientation* Turkey is firmly committed to the West but it is also determined to effect tbe jnchurtriallgation and diversification of its econosy as rapidly aa possible. Ao long as Turkey'sff lenities force trade Into bilateral channels, the Bloo, especially the European Satellites, wtjjc probably continue to aooountignificant share of Turkish trade. However, oxupport for Turkiah eoonomio development will probably continu* to cose primarily from the Voet as it haa in the past. Turkey Is not disposed to eooept barlong-term economic aid from the BSSa although it is ontlrsly possible that it will oontlnue to eooept limitedor epeolflo projects from the European Satellites,recent Information Indicates that Turkish officials mayore favorable position on Soviet offers to private industry. However, unless Western support for Turkey's economic development Is severely curtailed and unless the Turkish eoonomio situation coxXedly deteriorates, Turkey ia not likely to abandon its Western orientation and significantly expend eoonomio relations with the Bloo,

Bloo Goods Displayed6 Iaadr Pair

Soviet Union

C so cho Slovakia

Bulgaria Hungary

Poland ICucanla

Lathes, drills, textile aa chinary, textiles, cameras, eleotrio no tor s, pharmaceuticals, power puap a, radios, automotive ltaaa and agrioultural equipment.

Automobiles, isotoroyales, electrical equipment,textile aa chine ry, food pro ducts, glass and ohinawars, Jewelry and lathoa.

Oseoh Foreign Trade organization vhose produota woreod at the Fair were Strojexport, Olas-ooxport, Technooxport, Centrotex, Pragoexport, Ligns, Ferromet, Iocs pel. Koto and KotokoT.

Auto tires, sleotrio meters, lathes, elootrlo motors, rugs, textiles, radios, wire, and steel pipe.

Major Hungarian trading organisations repreeontedi

Hotrimpex, Komplax, Elektrolmpox, Tochxolmpox and Artex. Items shovmi lathes,drill, auto engines, telephone switchboard and equipment, sewing machines, generators, glassware and textiles.

r Polish trading organisatlona represented! Ketal-oxport, Varlmox, Kinox and Mo to import. Goods! eleotrio motors, china vara, glassware, textiles, lathes, mln-erala, pile driver and heavy Industry drill*

Major trading organizationsI Industrialoxport,port. Petrol export, Hotalimport, Bomtram, Techro import. Few consumer goodsmotors, gen-orators, lathee, drills, textllea, cement were major items displayed.

Sourcei State, Izmir. Desp AO,ecret with Unclassified and Official Uee Only Soetlons.










1 1







m m









Production of Major Industrial0 Batrio tona)













2/ otors.

Sonrooi CSCH. Turkey. Twkiah Kcononlo Statistics,

I seg gg

ti i- Ski til

I infill

I it tui ssc es eeeH j






I 5

Appendix VIII

Turkish Gonmodity Trade with5


Tobaoee (unufg)


Wsst Gernanr Italy


Cotton Tranos West Germany Italy

Wheat Italy larael


of Total


6 6

5 10




Turkieh Corcodity Trada with the5




fabric a











. ny


Source. UH Cexaodity Trada Btatlatlaa

World Bank Loans toS)



3- Port dovelorxaeot 4

he Elaotrlo powar

development (Seyhnn



Basic (loan for foreign exch.) 0

Bank (loan

for foreign axeh.) 3



Principal Amount


Wiring LUffttgBd




International Bank for Baconotruotlon andh Annual, lppendixoo,

appendix x

sino-soylot bloo ecoaoalcto turkey (contracts end offers)

cotton thread sill 1/

textlls Kill

ailroad passenger coaches 2/

ceramlob faotory V

lira ani rolling tllll V

hydro also trio plants rJ7 skoda dlaaal engines 1/

dallrary of equlpnantby cush experts.

looatad in istanbul, five-year oredlt

bought by turklah state railwaysear oredlt delltery had been ecxpleted


credit negotiations ender way in

terns one-third oa delivery snd balance at end of one 9/


koda baaei I'J

ls within trade agreemnt, delleored in6



diesel to tor

kqulpnent for enlarging shoe factory

to bs built inillion lira

soser bank's, shoe faotory in eeykoa dlatrlnt.



Pro loot

koda booaa


Kaywithin trada agraaxiaijt aa6 porehaaeuaoa



Cafgfai Contrasts Croc* Ita



ball aod vater

tower IA/ Flax aad wool apinning


Cement plant ii/ Cotton spinningpinning watU equip-

laotrlaal materials

Plata glass faotory Inatallatlona 2J/

Tbrao textlla faotor-lea 2aV

Reportedly purchased4 Ibaaitly oontraotad for6

Stillati oi at and5

Tondar drawn op inapaoity four tona por day

annual produotlon aapaoity0 square aetara

Contraotod fororthillion rubles. Payment either In dollars ar through barter compensation, mainly tobaooo. Dellwerlee planned7illion rubloe






BaewVsM V? *

Coostrr USSt


Steal rillFlour mill 3J/ Macaroni/ Brick faotory 3Ji/ Industrial ]rstw1iat^or-*

Machinery for dieeel water poap


Canatlo soda faotory

Credit offer0 rdllloa ited5 Billion) itod) tted6 Billion) Offer reportedly Bade to etate-evned Etiluolude oil refinery and steel Bill previously reported as offered by Soviets Eeportedly ten*ear no interest creditaycent at end of firstt end of seoond and balance at end ef third year

Tol Billlonite bo paid forears, laplo-Bantatloa of contrast awaits approval by Turkiah Foreign Ministry

Agraexoat reached in principle



Coutreote Off ore


Mlnlsm Total Bloo. Credits

r-lnfarJi Total Mog Offers

* USSR offerillion oil refinery0 Billion steel stf-jg considered to fall0 Billion offer of installations.



gouxogB of Credit Tables

IDA. OSR. Soviet Bloo Eoononio AetiyitisB in the Neara, Afrloa aa of0ecret,

Stats, Ankara. ecret,

WK and1U0.

SUte, Ankara, p. clt.



a, ibid.

Stats, Istanbul. ,.

Air. 8, 0.

Air, Ankara. AF3.

ress Reports on International Trade snd


* -H. Ibjd.


State, Berlin, 5.



EA,Bloo Eoonoaie Activities ina ofp. qlt.





24. OIA.


DSffl and, fF-U,.

State, Ankara. .

State, latojjbul. Dap,

IDA, OSH, pp. olt.


, Secret/



Ankara. p, clt.

OIA. ,


OSR, pp. pit.

Stata, Xatabul. 3.

Stata, Iatanbul, lt.

State, Aiikara. 9


Ankara, State, Istanbul. Dip.

A. State, Istanbul. , Cotawcn, HSDA,.

ICA, Mutual Seeurlty Jrogran. 3 Eatlnatea. at, South Asia ara Africa,,

Stata, Istanbul. 2ffioial Use Only,


Ibid, p. 1.

TVM, P. 2,

Ibid, p. 2.

p. 2.

State, Ankara, 4.ecret.

. 4.

U. State, Ankara. 9ecret.

State, Ankara, ,ecret.

State, Ankara, 1ecret,

State, letonbul. ,2fficial Uae Only.

State, Ankara. 4.ecret.

Jkmt, P. 1.

ibH, p, 9,

p. 9.

Stata, Ankara. ,,ecret.

ibJi, p.

Britain. Sunroxy of World Broadoaato, Part IV,T.


OH. . 4.

JfelO, p. 5.

Stato, Ankara. p.

. p.. 7,

Stato, Ankara. tyoift.


Stato, Ankara. p-


Stato, OK. p.

nkara. .aarat.

Stato, latanbul. . 3,



nkara. . 3.

Stato, latanbul. .

Stato, Iaadr. ,,oorat.


State, Ankara..ecret,

ikia, p. 3.

laadx, ,

Ankara. n., 3.

p. pit,


.p. olt.


Ankara. . 7,


State, Ankara. , Lladted Official


CIA. XI. ,a, 8/

to. plrtfltlgn Pf invflrnnupofll Trade, Annual Data, Pub.


Ankara. ..



nkara. 7..

IBED, Tha Eoodowt of Turkey. Johna Bopklna Presoi

a. State, Ankara. Carp,.

b. nkara. Carp,.,

Ankara. a. olt.

of Turkey. Monthly Bulletin of,nkara. 2..

Evening 8tar,.

76. f Costearce. Invssfoent In Turkey..

Croat Britain, nunnery of World ^rw-deaate,ally1.

Middle Eoet Eoonottlat,.

State, Ankara. 3..


Indus trial Dovelopnent Bank of Turkey. Annuell.



Stata, Ankara..p.





Flxet Rational Citlsena bank of m. Foreign Info Servioe,

IDA. Mutual Sorority Program. 8 Estimates. Kaar East, Couth Asia, and Africa,,eoxot'



Mutual Security Program,8 Eat lea tee,p. olt.





m. jjiid, p. ioi.

ICA. Office) of Stetlatloa and Be porta. Operations Report, Date aa of,

Stato, Ankara, 0ecret.

IU. . /

, S

, 8/

tevy OHI BulletintVG,..

State, Ankara. 1.

Stato, Ankara.


State, latanbul. Dap.

ICl. OSR. Soviet Bloo Economic Activities In tho IE, Africa and Asia as of0loeret.



U3' kie- 8, Confidential.

State, Aiilcara.




FDD Sumury

W2* , S'

erlin. ll,5.

FDD salary m, SeUotad3.


zmir. 6.




UO.SSR and,.





latanbul. .


IDA, OSR eto.

State, Ankara, P. git.


Istanbul. ,.

Stata, Istanbul. 6.


nfo late

Ankara. p. olt.

EA. OSR, JiEa-Sii.

State, Ankara, .

Iatonbul. , op.Ankara.


Ankara. 1.

Ankara. .p. alt.

State, Ankara. .p, olt.

State, Iartanbul. ,.


Ankara. p. olt.

Original document.

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