Memorandum by the Chief of the Division of Near Eastern Affairs (Alling)
As stated in the attached memorandum from TA,82 this Division feels that the conclusion of a trade agreement with Iran would be politically desirable. However, at the moment the situation is complicated by the recent refusal of the Iranian Government to supply Iranian currency to the British for their operations in Iran.83 The Department is endeavoring to work out a solution to this dispute and hopes to avoid the use of economic pressure, but it would probably be best not to make public announcement of intention to negotiate an [Page 281] agreement until this matter is on the road to settlement. Such an announcement, it is felt, might cause the Iranians to feel that we are disposed to follow a policy entirely independent of the British and encourage them to oppose any compromise which we may present in connection with the currency problem.
It is understood that, in any case, negotiations on the trade agreement cannot go forward until certain further assurances are received from the Iranian Government. This Division, therefore, suggests that public announcement be held up for the moment.84