891.24/3–2145
The Under Secretary of the Treasury (Bell) to the Deputy Army–Navy Liquidation Commissioner (Connolly)
My Dear General: Colonel Stetson56 of your office has raised with us the question of acceptable means of payment for the sale of surplus property in Iran and has requested that we write you the views of the Treasury on this subject.
In view of the urgency of disposing of surplus property in Iran, it is our view that there should be negotiated with the Bank Melli and the Iranian Government an interim financial arrangement prior to the disposal of surplus property along the following lines:
- 1.
- The United States Army will dispose of surplus property for dollars, where possible, otherwise for rials, in accordance with procedures agreed upon with the Government of Iran. The rial proceeds would be deposited in a special account with the Bank Melli in the name of the Treasurer of the United States for account of the War Department.
- 2.
- It would be understood that the rial balance in this account would be eventually convertible into dollars and that as soon as mutually convenient negotiations between the Iranian and the U.S. Governments [Page 568] would be undertaken with a view to entering into a funding agreement with respect to this dollar obligation.
- 3.
- The balance in the account would be guaranteed against exchange risk so that any future alteration in the rial-dollar rate of exchange will not affect one way or the other the magnitude of this dollar obligation.
- 4.
- In the interim period, prior to and during negotiations for
the ultimate liquidation of balances, the funds in the account
could be used for the following purposes:
- (a)
- Expenditures in Iran (other than the purchase of goods for export) by U.S. Government agencies.
- (b)
- Transfers for charitable, educational, and scientific purposes.
- (c)
- Transfers to American financial institutions to be used for personal remittances to Iran from the United States.
- (d)
- Transfers to travelers for traveling expenses in Iran.
- (e)
- Transfers to meet the Iranian currency requirements of American ships.
- (f)
- Transfers for other purposes which may be agreed upon from time to time.
- 5.
- Iran would not be required to pay any interest on the balance in the account.
It will be noted that this arrangement enables the Army to dispose of surplus property for local currency without the necessity of long drawn out negotiations over the conversion of these balances into dollars. It is required only that Iran recognizes that it has a dollar obligation. The arrangement also provides that we would have certain limited uses for the rials we accepted in payment for surplus property.
We understand from Colonel Stetson that he is proceeding shortly to Iran to undertake negotiations relating to the disposal of surplus property in that country. If you so desire, the Treasury Representative57 in Cairo could be instructed to proceed to Iran to assist Colonel Stetson in the financial aspects of these negotiations. The negotiations must, of course, be carried on with the participation of the American Embassy.
Very truly yours,