740.0011 Moscow/10–1943

Mr. W. A. B. Iliff of the British Delegation to Mr. John D. Jernegan of the American Delegation

Conference Document No. 28

Dear Jernegan: I enclose two copies of Draft Proposals for a Financial Agreement under Article IV (2) of the Anglo-Soviet-Persian Treaty of January 1942, with respect to the use by the Allies of the Iranian State Railway.

The document has been prepared by the British Delegation as a basis for discussion by the sub-Committee on Persia.

Copies have been sent to the Soviet Delegation.

Yours sincerely,

W. A. B. Iliff

British Proposal for Financial Agreement on Allied Use of Iranian State Railways

The following proposals for a Financial Agreement, under Article IV (2) of the Tripartite Treaty, covering the Allied use of the Iranian State Railways, during the period of Treaty collaboration are put forward by the British Legation, Tehran, for the consideration of the Soviet and American authorities, and as a basis for discussion.

The Allies should guarantee the Iranian State Railway an annual net revenue (i.e. Gross Receipts less operating expenses) equivalent to the annual net revenue in the year immediately preceding the Allied occupation, namely 103 millions rials.
The Traffic Rates to be charged by the Railway should be fixed from time to time by a Combined Rates Tribunal, to be composed of four persons, namely, a Persian, a Soviet, an American and a British representative, appointed by their respective Governments.
The Traffic Rates to be fixed from time to time should be no higher and no lower than may be necessary to produce the annual amount guaranteed by the Allies under 1 above.
To provide the railway with the funds necessary to meet its working expenses, and to enable it to pay the guaranteed net revenue to the Persian Government in monthly installments, the Allies should undertake to make monthly payments on account to the Railway Administration equivalent to 80% or 90% of their estimated traffic bills, and to pay their traffic bills in full as soon as they are rendered by the railway.
The Persian Government to agree that the monthly amounts payable under 4 above shall be disposed of as follows:
To the Persian Ministry of Finance: Rials 8.58 millions (being 1/12th of the annual guaranteed net revenue of 103 million rials); and
In so far as the balance remaining exceeds the amount which the railway requires to finance its monthly cash requirements for operating expenses, the excess should be paid into a Suspense Account.
British and Russian liabilities for freight carried up to date should be discharged forthwith on the basis of 4 above, and the proceeds dealt with as in 5 above.
If in any month the amounts paid under 4 above were insufficient to enable the railway (a) to meet its operating expenses and (b) to earn a net revenue of not less than 1/12th of the guaranteed annual sum under 1 above, then the sum necessary to enable the railway to do so should be transferred to the railway from the Suspense Account. If the sums to the credit of the Suspense Account were insufficient to meet this liability, the Allies would pay into it, in proportions to be agreed between them, the amount of the deficiency. The proportion might be the proportion that Russian traffic bills bear to British traffic bills, at the moment approximating 20/80.
The Suspense Account should be operated under Allied control.
The Allies should at this stage reserve full rights as to the ultimate disposal of any capital assets of the railway provided by them, or at their expense.