611.9131/135

The Consul at Tehran (Moose) to the Secretary of State

No. 264

Sir: I have the honor to amplify the Consulate’s telegram of October 14, 1940, 3:00 p.m. with a description of the following specific cases which illustrate the difficulties encountered in the sale of American products to the Iranian Government when those products can be obtained, or when the Iranian authorities believe that they can be obtained, elsewhere.

On May 26, 1940, the Automotive Division of the Iranian Ministry of Finance approved a contract with the Firestone Tire & Rubber Co., Akron, Ohio, for the purchase of tires valued at about $200,000. According to the agreement, a credit was to be opened by the National Bank of Iran early enough to permit shipment of the tires from the United States before September 26, 1940. The credit has not yet been opened, and informal inquiries have been made of the local Firestone representative by Iranian officials to learn whether or not pounds sterling would be acceptable to the American firm instead of dollars.

Some months ago, the Iranian Department of Agriculture invited bids for supplying cyanide gas to be used in fumigating agricultural products. The invitation contained the usual stipulation that bids stipulating payment in rials would receive preference. When the bids were opened, a local businessman offering the products of the American Cyanamid Company, New York, was the lowest bidder. He was declared by the Department of Agriculture to be the recipient of the [Page 687] award, and was invited to refer to the Ministry of Finance to sign the formal contract. Despite the fact that his bid had specified payment in dollars, the Ministry of Finance refused to agree to pay any currency other than rials or reichsmarks, and the signature of the contract has been indefinitely postponed.

The two cases described above are typical of many others.

The Consulate has learned of a single case where a credit affecting the purchase of American goods has been revoked. On a date believed to have been June 23, 1940, the Iranian Railways Administration opened a credit for $93,766 in the name of Mr. Michel Saab, a commission merchant, in payment of articles to be purchased from various American manufacturers. Mr. Saab has informed this office that on August 26, 1940 (within the period of validity of the credit), the remainder of $27,000 was withdrawn by the National Bank of Iran acting on instructions from the Iranian Treasury General. The revocation of the credit prevented the placing of orders with the Track Specialties Company, 1775 Broadway, New York City, and with the Warren Tool Corporation, Warren, Ohio. The Consulate has now been informed that on October 16, 1940, the day on which the telegram cited above was sent, the credit was renewed and the order reinstated.

Mr. Saab states that the renewal of the credit was not an act of good faith on the part of the Iranian authorities, but was due to their belief that unless the $93,766 credit were made available in its entirety, the manufacturers would not ship the goods (about $67,000 worth) for which payment had already been made.

It has not yet been possible to learn whether cases such as those described above are due to official Iranian commercial or financial policy, or to current shortage of dollar exchange.

Unconfirmed reports are now current in Tehran that because the Iranian Government has succeeded in converting a part of its sterling reserves into dollars, there will henceforth be less difficulty in arranging for the opening of dollar credits.

It is further rumored that within the last week the operation of the Iranian-German clearing agreement has virtually ceased through failure of the Iranian authorities to grant import licenses for German goods. The Consulate has been able to learn from reliable sources that merchants have difficulty in obtaining import licenses for German products other than iron and steel products, chemicals and pharmaceuticals.

The significance of this situation, if any, is not yet apparent.

Respectfully yours,

James S. Moose, Jr.