The Chargé in Persia (Murray) to the Secretary of State

No. 637

Sir: Referring to the Department’s telegrams Nos. 36 and 48, dated July 24 and July 30, respectively,15 the Legation’s telegrams Nos. 67, 68, and 84 of July 28, 10 a.m., July 28, 5 p.m., and August 6, respectively, the Consulate’s telegram No. 10 of July 31, and the Legation’s despatches, Nos. 604 and 623, dated July 30 and August 26, respectively,16 all referring to the difficulties which have recently arisen in the position of the American Financial Mission in Persia, and which have culminated in a demand, on the part of the members of the mission, for a cancellation of their contracts, I have the honor to inform the Department that I have had two conferences with Dr. Millspaugh on July 31 and September 5, respectively, and one with Zoka-ol-Molk, the present Minister of Finance on September 6, during which the entire matter and the advisers’ demands and the attitude of the Persian Government was fully discussed.

In my talk with Dr. Millspaugh on July 30, he discussed freely the contents of what has been called the advisers’ “ultimata” addressed to the Persian Government on 26 Saratan (July 17) and 2 Asad (July 24) and transmitted to the Department in the Legation’s despatch No. 604 of July 30. Dr. Millspaugh seemed profoundly discouraged over what he considers the systematic opposition during the past six months of the Persian Government to all his efforts to put Persia’s financial house in order. Both the Council of Ministers and the Medjliss had evinced an unwillingness to cooperate with him either in the approval or the passage of his financial projects so that he viewed with the utmost pessimism any chance of success for his financial mission in Persia unless their present contracts were cancelled on the basis of repeated violation on the part of the Persian Government and new contracts were submitted to and passed by the Medjliss granting the Administrator General practically dictatorial powers in questions concerning the budget and an absolute guarantee of military support in the collection of the taxes. He felt that any [Page 535]other solution would be merely begging the question and sure to lead eventually to failure.

It may be added that the attitude of the other members of the financial mission was even more uncompromising than that of Dr. Millspaugh, and that they were averse to withdrawing in any degree, however small, from the original demands on the Persian Government that their contracts be terminated.

In the succeeding fortnight the Prime Minister addressed a conciliatory communication to Dr. Millspaugh, dated 15 Asad (August 6) containing rather vague promises of complete cooperation with the American advisers and requesting fuller specifications from the Administrator General as to exact violations of his contract. The latter was at the same time verbally informed by the Persian Government that a commission of Persian notables was to be formed for the consideration of the advisers’ complaints and to effect if possible a solution of their difficulties.

I was informed on August 9 by Colonel MacCormack that the commission appointed by the Prime Minister which contained, among others, such prominent men as Moshir-ed-Dowleh and Mostowfi-ol-Mamalek, was doing little to get at the root of the trouble, and that even Moshir-ed-Dowleh had frankly expressed the idea that the Persians in general were averse to the plans of the advisers to reorganize completely the financial system and impose new taxation in order to balance the budget, but that they desired rather to have a mission of “advisers” in the true sense of the word who would “advise” the Persian functionaries as to the proper steps to be taken and back them up in the execution thereof. Colonel MacCormack informed Moshir-ed-Dowleh that if such was their understanding as to the function of the American advisers they had employed the wrong men.

Again on September 5, in a conference with Dr. Millspaugh, he expatiated on the impossibility of continuing further his activity as Administrator General of Finances unless a radical change … meanwhile intervened. …

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… In the opinion of the Administrator General, if Persia is to be rescued from her present desperate financial straits, it will be necessary to reduce the budget for the War Ministry one million tomans each year until it has reached the sum of six millon tomans which he considers a reasonable sum for the maintenance of an army of 30,000 to 40,000 men.

… I was interested to note that the advice of the best friends of the American advisers, namely that of Zoka-ol-Molk, the present Minister [Page 536]of Finance, and Sardar Moazzam Khorassani, the present Minister of Public Works, had not failed to have effect on Dr. Millspaugh’s rather inexorable demand that a cancellation and settlement of his contract should precede any discussion of his further remaining in Persia. He now appears more willing to present his “irreductible minimum” to the Persian Government and to negotiate on a basis thereof. I may state at this point, for the information of the Department, that in my opinion, based on a close observation of the present critical situation, this decision on the part of Dr. Millspaugh is a wise one inasmuch as there are several fundamental reasons, which will be pointed out below, why a persistence on the part of Dr. Millspaugh in his original unbending demands would be unfortunate at the present time.

On the following day, September 6, I requested a conference with the Minister of Finance, Zoka-ol-Molk, which he granted me at six o’clock in the evening. After prefacing his remarks with numerous declarations of friendship and goodwill to the advisers which I believe are borne out by fact, he expressed the hope that Dr. Millspaugh could be made to see the wisdom of a more conciliatory attitude to the Persian Government in the present crisis and pointed out two fundamental principles which must not be lost sight of if this crisis is to be allayed. In the first place he felt that while Dr. Millspaugh is in some degree right in his contentions with regard to the violation of his contract, there was something to be said for the other side; sight must not be lost of the fact that Persia is an oriental country that has been for decades in a mire of financial distress and that too vigorous a remedy for the invalid might prove fatal.

The one absolute necessity at the present time was that Dr. Millspaugh should withdraw from his position that the budget of the War Ministry should be reduced. Unless he could see the wisdom of this concession, all would be lost. While frankly admitting that most fair-minded Persians would agree that the expenditures of the Ministry of War were excessive, and a great burden upon the finances of Persia absorbing as it did almost one-half of her revenues, Persians nevertheless realized the great advantages that had accrued to Persia thru the organization by Sardar Sepah17 of the present army and the inestimable advantage which this force had been to the financial advisers in backing up their reforms.

He further referred to the difficulties which Shuster had encountered in this regard and the necessity with which he was faced of organizing a Treasury Gendarmerie in the country, an act which more than anything else had aroused the antagonism of the Russians which led to his expulsion.

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He believed that the present armed force in Persia, while it was insufficient to defend the country from invasion, had to its credit remarkable accomplishments in subduing tribes rebellious to the central authorities and in making it possible for a financial mission to function. Without Sardar Sepah, he said, any idea of an American mission in Persia would have been out of the question.

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With regard to Dr. Millspaugh’s original demand that, before the complete cancellation and settlement of his contract, he could not discuss the matter with the Persian Government, the Minister of Finance made what I consider is a very just observation. In the first place, such an action could not but be regarded as a rather humiliating and high-handed action toward the Persian Government with whom Dr. Millspaugh had voluntarily entered into contractual obligations, and would arouse the suspicion that after such cancellation he would show himself so inflexible that the mission would depart with the entire money settlement for five years in their possession, and secondly, that, given the open opposition of the Russians, the covert opposition of the British, and the general unfriendliness of the Belgians and the French, the concerted action on the part of these Legations, once the contracts had been cancelled, would make any passage by the Medjliss of new contracts an absolute impossibility. In my former conference with Dr. Millspaugh I was gratified to see that he accepted the soundness of the Finance Minister’s reasoning.

The second essential point which he emphasized was that Dr. Millspaugh should carefully guard himself from giving any impression to the Medjliss of a desire to dictate the terms of any new rights in his contract which might be agreed upon between the Government and the Financial Mission. This would be a fatal step on the part of the Administrator General. Unusual powers had been granted to Mr. Shuster during his activity in Persia, but these powers had all been voluntarily granted by the Medjliss which was an ardent supporter of Shuster.

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I have [etc.]

W[allace] Smith Murray
  1. Former telegram not printed.
  2. Neither despatch printed.
  3. Reza Khan.