Memorandum by the Director of the Office of Near Eastern amd African Affairs (Henderson) to the Assistant Secretary of State (Clayton)

The War Department is anxious to close its books on the Persian Gulf Command, which has completed its mission of aid-to-Russia operation of the Iran State Railway.47 It is necessary to determine whether certain expenses incident to PGC operations should be borne by the British or by this Government. The British have insisted to War, FEA,48 and State on separate occasions that this [Page 565] Government’s assumption of operational responsibility carried with it financial responsibility for the ISR, a position which has been consistently denied by American agencies. The Department should now make a definitive determination of United States policy in this matter.

The attached memorandum49 sets forth the facts in the case, together with recommendations agreed to by LP and ME.50 On legal grounds, it appears that this Government at no time assumed any financial responsibility vis-à-vis the Railway. On grounds of equity, however, it might be argued that this Government should absorb the expenses in question as a part of its overall contribution to the war effort.

I appreciate the difficult financial position of the British which has occasioned the current Anglo-American conversations.51 It may be appropriate to add this matter to the agenda for those conversations. On the basis of any decision reached there, in the light of global US–UK financial relations, the Department may explore the availability of funds from War or FEA to meet all or part of the expenses in question.

Loy W. Henderson

[In a Joint Statement issued at Washington on December 6, 1945, the United States and the United Kingdom announced they had reached an understanding for the settlement of lend-lease, reciprocal aid and surplus property matters, and for final settlement of financial claims against each other arising out of the conduct of World War II. During the course of negotiations leading to the Joint Statement, representatives of the two Governments discussed a claim of $25,000,000 presented by the United Kingdom for freight payable to the Iranian Railways in respect of goods supplied by the Government of the United States under lend-lease to the Soviet Union. No agreement was reached and under the terms of paragraph 6 of the Agreement in Settlement of Intergovernmental Claims, signed at Washington on March 27, 1946, these claims were waived. For texts of agreements between the United States and the United Kingdom of March 27, 1946, and the Joint Statement of December 6, 1945, see Department of State, Treaties and Other International Acts Series No. 1509, or 60 Stat, (pt. 2) 1525.]

  1. See telegram 347, May 26, 10 a.m., from Tehran, p. 373.
  2. Foreign Economic Administration.
  3. Dated October 8, supra.
  4. The Division of Lend-Lease and Surplus War Property Affairs and the Division of Middle Eastern Affairs.
  5. For documentation on these financial conversations, see vol. vi, pp. 1 ff.