891.24/271: Telegram

The Secretary of State to the Ambassador in the United Kingdom ( Winant )

5534. Your 6015, October 28. Department agrees to text of announcement prepared by Foreign Office, with following minor changes:

Wherever the words “Persia” and “Persian” are used, we would very much prefer to substitute “Iran” and “Iranian”. We suggest this amendment not only because it accords with our own practice but because of the definite preference of the Iranian Government, which would be a party to the declaration.
For clarity, we suggest changing first part of second paragraph to read as follows: “Considering that the responsibility of feeding the people of Iran rests primarily on the Imperial Iranian Government, but that it is desirable, in as much as war conditions may bring economic distress to the people of Iran, and in as much as it is the general policy etc.”

Provided British are confident that necessary shipping will be available, Department suggests that simultaneous announcement be made that British and American Governments will transport to Iran as soon as possible 25,000 tons wheat, which will be stored under supervision of Iranian Ministry of Food in whatever parts of country may seem most desirable, this reserve stock to be used only in event of an emergency and with the approval of a majority of Iranian Food Minister, American Minister, and British Minister.

Department understands there is some apprehension lest proposed joint undertaking with respect to wheat leave Iranians free at some later date to raise new difficulties with respect to currency issue. We assume, however, that provisions of Anglo-Iranian Financial Agreement of May 26 would be adequate, from British point of view, to cover any situation which might arise, provided this agreement were strictly fulfilled by Iranian Government.

As we see it, the difficulty is that the agreement was never approved by the Majlis, which consequently does not consider itself legally bound to take the legislative action required to implement it. Accordingly, you may inform Foreign Office that this Government would be willing to support British in requesting that financial agreement be [Page 179] given Majlis sanction as a condition to our agreement to undertaking with regard to wheat.

We believe, however, that continuous expansion of Iranian currency circulation cannot be considered satisfactory solution of problem. It is pertinent to note that in June, 1941, authorized circulation was less than two billion rials, while it is now three billion five hundred million and it is proposed to increase it to five billion. In view of Iranian fears of inflation, further expansion of note issue at this rate would seem likely to encounter increasing official and popular opposition and might provide the basis for inflationary developments which would be difficult if not impossible to control. Consequently, we feel that urgent consideration should be given to some method of making rials available for the United Nations without repeated new issues. We should be glad to have views of Foreign Office on this matter, together with any information available to British which would shed further light on basic causes of existing situation.