891.24/392: Telegram
The Minister in Iran (Dreyfus) to the Secretary of State
[Received March 2—3 a.m.]
221. My 165, February 12. Millspaugh has addressed letter to me in which he urges I recommend to American Government sale of gold instead of dollar exchange to obtain rials for American war expenditures in Iran. He urges use of gold at least up to extent that it can be sold in open market against issued rial currency and believes procedure would have following results of benefit to Iran and United States:
- (1)
- It would relieve pressure for additional increases in note issue and this would aid in preventing further decline in purchasing power of rial. At present, in spite of fixed exchange rate, local purchasing power of dollar is declining with resultant need for ever larger dollar expenditures. Also constant rise in prices is catastrophic for Iranians.
- (2)
- American Government would make huge saving by obtaining rials at present gold rate of 81 rials per dollar instead of paper rate of 32 rials.
Millspaugh states Iranian Government also proposes to sell its own stocks of silver in free market and to sell dollars and sterling freely. Gold if imported should be in coins or small bars. It would be sold through authorized banks. Possibility of coining bar gold into Iranian coins is being considered. Minister of Finance concurs in above proposals.
Millspaugh addressed similar letter with regard to British sterling expenditures to British Minister88 who is cabling London.
British Legation makes following comments:
(1) It is doubtful if British can recede from position that local expenditures must be financed by sales of sterling at controlled rate of exchange; (2) implications of proposal with regard to neighboring countries must be considered; (3) British Legation would prefer that procedure if adopted be considered a direct anti-inflation measure and in no way connected with Allied operation of obtaining rials for war expenditures; (4) gold sales would have beneficial effect only up to point at which public hoarding appetite is satisfied; (5) proposal is an experiment which would have to be carefully controlled and watched as it progressed.
Department’s comments and instructions will be appreciated.
- Sir Reader Bullard.↩