811.24591/11–2444: Telegram

The Ambassador in Iran (Morris) to the Secretary of State

868. Paiforce33 and British Embassy Tehran have received instructions from London to consult with Persian Gulf Command regarding [Page 368] ultimate disposal of American and British immovable assets in Iran in order to concert joint Anglo-American approach to Iranian Government in this connection.

At meeting held here November 21 between chief administrative and financial officers of PGC and Paiforce with representatives of British and American Embassies present as observers, following points were tentatively agreed subject to approval by respective War Departments in Washington and London:

All articles and materials which can be moved and which are needed for military operations elsewhere will be removed. Military needs will in principle override other considerations. However consideration should be given to cases where need for equipment elsewhere is not urgent and where its removal from Iran would render valueless an installation otherwise useful to Iranian Government. Under similar circumstances equipment might also be left for bargaining purposes. In such cases opinions of two Embassies should be sought.
If one foreign force abandons an installation desired by another Ally, the latter should be given first call on it. (A concrete example has arisen in case of American Kazvin Camp which Soviets wish to take over. As reported my 845, November 15, PGC has recommended to War that in these cases definitive transfer should be made from American Army to British or Russians. I have already expressed opinion that this is unwise and that it would be preferable to lend installations in question with proviso that they should ultimately be sold or transferred to Iranians for account of American Government. Department may wish to discuss this with War.)
Both British and American military wish to reserve right to withhold from sales negotiations certain installations. PGC has in mind Sultanabad Hospital (my 710, September 2634). British War Office has specified three categories:
Installations which may be needed by other British agencies;
Oil installations;
Communications installations which may be of future strategic value. (Department will appreciate possible implications in class c. British military here profess to be ignorant of what is intended by these reservations.)
Subject to paragraphs 1, 2 and 3 above all fixed assets should be offered first for sale to Iranian Government. If not purchased by Government at reasonable prices some properties might be sold to private individuals provided customs duties or taxes are not prohibitive. Failing sale, installations should be demolished. Virtually all British and American leases have provisions permitting demolition of buildings erected by our forces. Main reason advanced for demolition [Page 369] was that it would prevent Iranian Government from acquiring installations by default and so would strengthen Allied bargaining power in asking payment.
Basis of pricing should be fair value of installation as it stands to buyer for use to which he will put it. It was recognized in some cases this value might be nonexistent.
Very high percentage of structures represent expenditures by both British and American Governments. Paiforce and PGC should work together in these cases to assess proportion contributed by each, and any proceeds received from sale should be divided accordance this proportion. Because of this intermingling of interest, it was believed most negotiations for sale would have to be conducted jointly by British and American authorities.
PGC and Paiforce will draw up lists of installations involved, determine original cost and agree upon proportion contributed by each. (PGC has already done some work on this line for submission to War.)
Both British and American military felt negotiations with Iranian Government should be undertaken by Embassies on diplomatic rather than military level. British Embassy appears to agree. Suggestion was made that Iranian Government should be informed at once that it cannot expect to receive installations free of charge. (British Embassy proposes to convey this informally and orally to Lewis of Millspaugh Mission, to which I have agreed. I hesitate however, to make formal communication to Iranian Government without formal instructions from Department regarding its policy in this respect.)

Paiforce and PGC are cabling London and Washington setting forth points listed above and requesting approval. Except as already noted, I see no objection.

I believe British agree with us that in some instances it may be necessary to cede installations to Iranians in exchange for cancellation of claims against us. British also appear willing to consider special political aspects of individual questions as they arise. Everyone here agrees we cannot hope to recoup high percentage of investment in view of rapid depreciation and fact that military installations may have little peacetime utility.

British Foreign Office has expressed opinion it is not necessary to consult Russians at this time regarding disposal arrangements. This is technically correct since there is little or no overlap between their installations and those erected by British and Americans. However, both General Connolly and I think Russians should be advised that study of problem has begun, so that they may offer their views if they wish. Connolly is informing local Russian commander informally, [Page 370] and Department may wish to instruct me to convey formal notice to Soviet Embassy. I think this is important so that they may have no opportunity later to complain that they were kept in dark regarding our policy. It is obvious they could create difficult situation if they should adopt entirely different line in disposing of their assets.

I requested [request] Department, after consulting War, instruct me on following additional points:

Is it agreed that in principle we should insist upon payment by Iranians, with demolition as alternative? May I formally notify Iranian Government?
Decision regarding cession of installations from American Army to Russians or British.
Does Department wish joint or parallel American and British approach to Iranian Government?

  1. British military command, Persia and Iraq Force.
  2. Not printed.