891.51A/521: Telegram
The Minister in Iran ( Dreyfus ) to the Secretary of State
[Received 10:03 a.m.]
82. Referring to the Department’s telegram no. 75, March 23, 11 p.m., the inability of Iran to dispose of foreign exchange because of lack of importation facilities (see my 66, March 13, 4 p.m. paragraph 1,26) and heavy sterling sales by British here estimated at million pounds monthly have created tendency to raise rial value. This tendency is being supported by a group of merchants represented in Majlis and by part of press. The “devaluation of pound” referred to by British is in fact raising of the rial value and would necessarily affect the dollar as much as sterling. The increase contemplated by those supporting revaluation is reported to be from present 140 rials per pound to as much as 100 rials per pound. United States Government operation expenditures might therefore be increased by as much as 30%.
Any effort to prevent revaluation would undoubtedly and with some reason be resented by Iranian officials as unnecessary and unjustified interference in their internal affairs in a matter not essential to our war effort and would contribute little toward transforming Iran from a “passive appendage” into a “willing partner” as suggested by the Department in its telegram no. 55, March 4, 9 p.m.27 I therefore do not recommend association with the British in this matter (see my 66, paragraphs 3 to 5).
A financial counselor has been added to the British Legation staff in order to prepare the British case. The threat to the Iranians that economic help or shipping space will be withheld in the event of revaluation is a very powerful weapon in British hands and will probably prove successful in preventing such action.