891.51A/845: Telegram

The Minister in Iran (Dreyfus) to the Secretary of State

894. Millspaugh is encountering severe and stubborn opposition in Majlis to income tax project and his already enacted regulation providing Government grain monopoly. Deputies bitterly oppose grain monopoly as it prevents them and entrenched classes they represent from hoarding wheat and making huge profits in free market. In spirit open rebellion against him they now threaten take jurisdiction over foods from him and return it to Ministry of Food which though defunct has not been legally abolished. They further threaten cause fall of Government if Soheily fails support them against Millspaugh; an interpellation on grain matters signed by 15 Deputies is being presented in Majlis today. While Soheily wants compromise and is endeavoring to get Millspaugh yield he told me yesterday he will back US advisers and stand or fall on this issue.

Neither Millspaugh nor I can conscientiously recommend granting of credit to Iran by US44 unless a suitable income tax bill is enacted and without such a credit he feels he cannot accept responsibility for Iran’s finances. He further feels irreparable harm would be done to his prestige and program as well as to grain collection plans if responsibility [Page 536] for grain matters is restored to Food Ministry. For these reasons he feels, and I concur, that he must take an adamant stand on these two questions. He realizes that such a stand may cause fall of Government or even his eventual withdrawal but feels there is no feasible alternative.

Time seems to have arrived when Millspaugh must face an important test to determine if he can carry on with any hope of success or whether interests of the selfish privileged classes will continue to prevail.

  1. For correspondence relating to this subject, see pp. 561 ff.