Foreign Relations of the United States, 1947, The Near East and Africa, Volume V

891.243/4–3047

Memorandum by the Deputy Director of the Office of Near Eastern and African Affairs (Villard) to the Under Secretary of State (Acheson)

secret

Washington, April 30, 1947.

Conversations with the Iranian Arms Purchasing Mission¹ have advanced to the point where it is possible to give you a brief summary of the status of these negotiations.

You will recall that FLC, after the Iranian approach of last December,² offered to sell Iran surplus non-aggression military supplies on fifteen year terms with interest at the rate of two and three-eighths percent, with the understanding that not more than $10,000,000 could be utilized for combat equipment.³ While the Iranians have not replied formally to FLC’s communication, they have informally suggested a credit of $30,000,000, of which not more than $10,000,000 would be used for combat items. They have asked that the words “loan” or “credit” not be used in the agreement and that the two and three-eighths percent interest be absorbed in the principal without, mention of interest in the agreement; these requests were made to circumvent a constitutional provision which requires that all foreign loans be submitted to the Majlis for ratification.

While the Department and FLC are agreeable to hiding the interest in the principal as has been done in other cases, we hesitated to sign an agreement which might violate the spirit or the letter of the Iranian constitution. If such an agreement were to be held unconstitutional in Iran and repudiated at some later date, the political repercussion might be embarrassing and actually harmful to our policy in the Near and Middle East. After careful consultation in the Department and after consulting with Ambassador Allen we are of the opinion that the agreement should contain a clause providing for Majlis ratification and that no deliveries will be made under the agreement until such ratification takes place.⁴

A draft agreement embodying these provisions is being drafted for presentation to the Iranian Government through the purchasing mission. The draft agreement will also be telegraphed to Ambassador Allen for comment. Although there are still some points at issue, we believe that a satisfactory agreement can be worked out with the Iranians on the basis of our draft.

Incomplete examination between the War Department and FLC of the Iranian arms list indicates that availabilities may be so limited that the Iranians will be able to utilize through FLC only a portion (perhaps half) of the $30,000,000 figure.

Henry S. Villard

1. For the Department statement on the arrival of the Mission in the United states, see Department of State Bulletin, April 20, 1947, p. 720.
2. The official request had been made by the Iranian Ambassador in a note to the Acting Secretary of State on October 15, 1946; see Foreign Relations, 1946, vol. vii, p. 532.
3. The formal offer to sell had been incorporated in a letter of November 26, 1946, from the Foreign Liquidation Commissioner to Brigadier General Mazhari; see footnote 20, ibid., p. 546.
4. Marginal notation by Mr. Acheson: “I agree.” According to telegram 236, April 25, from Tehran, the Iranian Prime Minister, by this time, had informed Ambassador Allen that specific reference to approval by the Majlis would be provided for in the proposed agreement (891.24 FLC/4–2547).