Memorandum of Conversation, by Mr. Harold B. Minor of the Division of Middle Eastern Affairs

Participants: Mr. Frank Lee, British Treasury Delegation
Mr. Michael Wright, First Secretary, British Embassy
Messrs. Murray

Mr. Frank Lee of the British Treasury Mission, and Mr. Michael Wright, First Secretary of the British Embassy, called today to discuss [Page 382] the question of the proposed agreement between the Allies and Iran covering financial responsibility for the operation of the Iranian Railways.

Mr. Wright outlined briefly the history of this agreement and said that he understood that the United States War Department has taken the position that the United States Government should not participate in it. He said that he wished to make it clear that the British Government recognizes this is a question to be determined solely by the United States Government.

Mr. Allen explained that a main deterring reason against our participation in the agreement is that we have no basic treaty governing the presence of our forces in Iran, while the British and Russians are carrying out the agreement under the provisions of the Tripartite Pact of January 29, 1942. Mr. Wright said he realized this but did not believe, on the other hand, that the Tripartite Pact excluded United States participation in any agreement.

Mr. Wright said that, whether or not the United States desires to participate in this agreement, the British Government would like to arrive at an agreement with the United States Government by which each would bear its own financial responsibility for the movement of its lend-lease goods through Iran. He submitted a very rough and provisional draft of the British idea of such an agreement, a copy of which is attached.62

Mr. Lee declared that the British feel they are bearing an unfair burden in Iran. They are required to pay 60% in gold and 40% in sterling for rials to carry on Allied operations in Iran, which consist almost entirely of the movement of American lend-lease goods to Russia. This is a strain on the British financial position and an unfair arrangement, considering that the payments are made for American goods being moved over a foreign railway. He made a rough guess that the British have already paid out some sixty million dollars for movement of American lend-lease goods through Iran, and are spending for this purpose currently at the rate of about thirty million dollars a year. In addition, he said, the proceeds of British gold sales in Iran are credited to the United States Treasury.

Mr. Wright said that his purpose in approaching the Department at this time was to state the British position and to suggest the appointment of a small British and American committee to study [Page 383] the facts, which are far from clear, and to endeavor to arrive at a mutually agreeable solution.

Mr. Murray agreed that it would be useful to set up a committee to seek out the facts. He stated that we here in the Department would give the question our consideration and get in touch with Mr. Wright at a later date.

  1. Paul H. Alling, Deputy Director of the Office of Near Eastern and African Affairs.
  2. George V. Allen, Chief of the Division of Middle Eastern Affairs.
  3. The draft reads as follows: “General Principle. It is agreed that the responsibility for the payment of all expenses (including freight) on the Persian Railways in respect of American Aid to Russia and American military traffic, will be borne by the United States Government, and that the responsibility for the payment of all expenses (including freight) on the Persian Railways in respect of British aid to Russia and British military traffic will be borne by His Majesty’s Government in the United Kingdom; each government being free to reclaim payment from the Soviet Government if they so desire.” (891.77/7–2744)