891.00/1933: Telegram

The Secretary of State to the Minister in Iran (Dreyfus)

306. Your 350, October 30. Department is advising London that we agree to Foreign Office draft announcement, with two minor changes of phraseology. Principal change is substitution of words “Iran” and “Iranian” for “Persia” and “Persians” throughout.

Provided British believe necessary shipping will be available, we are proposing that announcement be accompanied by simultaneous public statement that American and British Governments will transport to Iran as soon as possible 25,000 tons wheat to be stored under supervision Iranian Ministry of Food in whatever parts of country may seem most desirable, this reserve stock to be used only in an emergency and with approval of a majority of Iranian Food Minister, American Minister, and British Minister.

We are suggesting to Foreign Office that future currency needs would seem to be adequately assured if terms of Anglo-Iranian Financial Agreement of May 26 were strictly fulfilled by Iranian Government. To guarantee this fulfillment, we are suggesting that agreement be formally approved by Majlis, thus binding that body to take whatever legislative action may be necessary to carry out its terms, and we have offered to support British in requesting such approval as condition to our agreement to wheat undertaking.

Department feels this procedure would be less offensive to Iranians than suggested four-power currency board and would also present fewer administrative difficulties.

We are not inclined to favor British Minister’s proposal that we guarantee Iranian wheat needs for duration of war, as this would commit us too far in future and would also remove some of incentive for Iranians to put own house in order.

Department is somewhat puzzled at recurrent need for ever-larger Iranian note issues. Unless United Nations expenditures and general price level have risen to a point far higher than we have understood, it is assumed that the cause must be failure of currency to complete normal cycle and return to banks for reissue. Please let us have your comments on this, taking into consideration following points:

Is currency hoarded by laborers and farmers who receive it in first instance?
Is it hoarded by merchants, landlords and others of upper class who are unable to spend it and distrust banks?
Have prices risen to such an extent that increased note issue is absorbed in normal circulation?
If notes are being hoarded, what measures are being considered to bring them into circulation?

[Page 178]

Department feels that urgent consideration should be given to some means of ensuring supply of rials to United Nations without continuous increases in currency circulation, which will soon be more than double June 1941 volume, and we are expressing this view to London.