891.51A/597: Telegram
The Secretary of State to the Minister in Iran (Dreyfus)
272. Your despatch 540, April 29.92 We are in consultation with other interested agencies regarding loan suggested by Millspaugh but cannot yet say whether such a loan would be practicable or advisable. Department would like to have precise reasons for Millspaugh’s belief that it will be impracticable to borrow from Banque Mellie Iran the full amount required to cover budget deficit. It is assumed that it is regarded as necessary for psychological reasons to use the proceeds of a dollar loan as backing for the issuance of one billion rials additional and that the problem is not one of the physical availability of rial currency. If necessary, could not legislation be enacted to permit the Government to obtain the needed rials by loan from the Bank?
In the event it should be found desirable and possible to make a dollar loan, do you not feel that it would be wiser politically to suggest that it be made jointly by the American, Soviet and British Governments? Department has in mind reported Russian suspicions regarding ultimate American designs on Iran which conceivably might be aroused by a straight American loan. Have you discussed Millspaugh’s various proposals with British or Soviet representatives?
As of possible assistance to Iranian Government in the immediate financial crisis, we believe the following may be considered:
- A)
- The Iranian Government should be able to raise a substantial portion of the required local currency by selling gold for rials on its own account.
- B)
- Provided you see no objection, we will recommend to Lend-Lease that articles already furnished or to be furnished Iran on a cash-reimbursable basis be paid for in the form of rial credits with Iranian Treasury or Banque Mellie which would be held at disposal of United States for later use. Department would also be willing to [Page 578] consider asking Soviet and British Governments to postpone or waive their demands for payment for supplies, such as grain, delivered or to be delivered to Government of Iran. We should like to have figures on amounts owed by Iran to Soviets and British and amount of any debts owed Iran by British or Soviets.