The Assistant Secretary of State (Acheson) to the Lend-Lease Administrator (Stettinius)

Dear Ed: Mr. J. D. Jernegan of the Near Eastern Division of the State Department has received a telephonic inquiry from Mr. Norman S. Walker of the Office of Lend-Lease Administration regarding our views as to the terms of payment which should be written into the requisitions for certain military items which the Government of Iran wishes to procure under lend-lease procedure for the use of the Iranian army.

The Department is now considering the possibility of negotiating a master lend-lease agreement with Iran, along the lines of our master lend-lease agreement with the United Kingdom, together with a collateral exchange of notes setting forth the terms of payment for certain categories of items more precisely than in the master agreement. Although no final decision has been reached by the Department in this regard, we are considering an exchange of notes similar to the proposed exchange of notes with Turkey,24 copies of which have been communicated informally to Mr. Fred Ecker.

As now drafted, the proposed exchange of notes provides, among other things, that payment for foodstuffs and other supplies for the use of the civilian population “shall be furnished on a cash-payment basis, and these supplies, together with any other goods and services that, by agreement at the time of purchase, may be provided on such a basis, shall be paid for by the Government of Iran in United States dollars or Iranian rials at the option of the United States”.

Thus under the terms of the proposed agreement it could be required that the military items under reference be furnished on a cash-payment basis or on a general lend-lease basis, whichever might be considered more desirable. Moreover, payment could be required either in dollars or in rials. Payment in rials for these items would therefore be consistent with the provisions of the proposed exchange of notes.

This Government needs rials for its purchasing program and for other purposes, and, in fact, is confronted with a probable shortage of rials in the near future. Assumption by the United States Army of the direction of communications in Iran will accentuate our requirements for rials. As you know, the British already are having difficulty in securing a supply of rials sufficient for their needs. It is believed that Iran is willing to make cash payment for these supplies although it might prefer to make payment in dollars rather than in rials.

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For these reasons, this Department believes that we should request the Iranian Government to pay for these items in rials and that the requisitions should be drawn accordingly.

Sincerely yours,

Dean Acheson
  1. For correspondence on lend-lease aid for Turkey, see pp. 677 ff.