888.131/2–2550: Telegram

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


324. Under Secretary Foreign Affairs Ardalan has informed Embassy representative of Iranian Government desire obtain suspension for some years of principal and interest payments due under 26 million dollars arms credit agreement.1 He stated that dollar shortage necessitated such a suggestion and said Iranian Ambassador and Military Attaché Washington instructed similarly approach US Government.

In final terms Iranian dollar position largely depends upon extent to which British will convert sterling into dollars under monetary agreement.2 Outside of oil revenues convertible into dollars it seems apparent Iranian dollar needs much exceed dollar earnings. According [Page 479] to US customs figures, Iranian imports from US during first eight months 1949 amounted to 53 million dollars while exports to US only amounted to 12 million dollars. Further, although Ardalan did not say so, Iranians are undoubtedly facing a situation at present, with renegotiation oil concession still pending, in which they might be very disinclined ask British for such a considerable conversion.

Embassy’s initial feelings are that in view present political and economic situation, it would be beneficial to US interests and policy objectives if some means could be found to grant the desired moratorium.

Embassy suggests foregoing be handled on highly classified basis and Iranian Embassy cautioned to be most reticent. A misunderstanding of factors involved could easily lead to unfavorable publicity at a time when it is essential Iran retain good will created in US by Shah’s visit.

  1. Reference is to the agreement signed at Washington, July 29, 1948; see Foreign Relations, 1948, vol. v, p. 166.
  2. In the memorandum of understanding between Bank Melli Iran and the Bank of England, effective November 6, 1947, and extended to November 20, 1950, the Iranian Government intimated its intention not to ask for transfers from the sterling accounts of Bank Melli Iran and the Imperial Bank of Iran to American accounts except insofar as essential goods could not be obtained as cheaply from the sterling area or purchased elsewhere for pounds sterling and had to be purchased in countries to which American accounts apply (appendix A to the memorandum, March 14, 1950, by George Woodbridge, Officer in Charge of Economic Affairs, GTI, to Mr. Jernegan (GTI), 888.131/3–150).