891.515/93: Telegram

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

260. My 221, March 1. British Legation has recommended to Treasury sale of gold in Iran under following conditions.

1.
Sale in open market through authorized banks in Tehran and provinces at rate not to exceed 100,000 sovereigns monthly until further notice. Bank commission one rial per mille.
2.
Minimum price set at 12 pounds an ounce equal to 367 rials per sovereign (present Tehran bazaar price is 660).
3.
Minimum price and monthly quantity to be reconsidered in light of experience.
4.
Gold sufficient for 3 months should be shipped to Tehran at once from South Africa.
5.
100,000 sovereigns will be obtained by exchange of British bullion for gold coins held by Banque Mellie (bill permitting transfer has been passed by Majlis, see my 165 February 12). Minting of gold coins here being investigated. Small bars might be obtained in India in exchange for bullion. United States Government might be requested to supply gold coins in exchange for bullion in South Africa.
6.
If United States Government also decides to sell gold United States and British sales should be coordinated. British alone might sell during first few months leaving United States to sell later if demand rises above British capacity to provide.
7.
Gold should also be sold in Palestine, Syria and Iraq as deflationary measure in those countries and also to minimize arbitrage by smuggling of gold from Iran.
End of British proposal.

I support Millspaugh’s recommendation that gold be sold in open market as one means of combatting inflation. If Department approves program should be initiated at once. Gold for purpose should be in coins or small bars. Absorptive capacity of this market for gold is unknown and British program is admittedly based on guess work. We should therefore be prepared to supply large quantities if necessary.

Dreyfus