Foreign Relations of the United States, 1950, The Near East, South Asia, and Africa, Volume V

888.10/9–2950

Memorandum of Conversation, by the Assistant Secretary of State for Europeam Affairs (Perkins)¹

secret

Washington, October 2, 1950.

Subject: Export-Import Bank Loans to Iran

Participants:	The British Ambassador
	Mr. Perkins, Assistant Secretary, EUR
	Mr. Rountree, Director, GTI

Mr. Perkins stated that he had asked Ambassador Franks to call in order to discuss with him a difficult problem which has arisen in connection with our program to extend Export-Import Bank loans to Iran. He recalled that during the Secretary’s visit to London last May, United States and British representatives had exchanged views concerning the political and economic situation in Iran, and the Secretary had outlined to Mr. Bevin a program which the United States had developed for the purpose of contributing to Iranian stability. A principal segment of this program was the extension of Export-Import Bank loans to Iran, and we subsequently have been working with the Iranians in preparing plans for this purpose.

Mr. Perkins said that we had assumed there was no question of the ability of the Iranians to service the Export-Import Bank loans by conversion of sterling received from the British under the AIOC concession. However, the Iranians recently applied to the British Government for permission to convert for the purpose of servicing the surplus property credit extended by the United States, and the position taken by the British, that such conversions did not fall within the terms of the UK-Iranian financial agreement, had raised the question of whether servicing of Export-Import Bank loans likewise would be excluded. While Iranian dollar earnings run in the neighborhood of $18 million per year, only a small portion of that sum—about $2 million—is actually captured by the Government, and this is used for such purposes as diplomatic missions, etc. From the point of view of the Export-Import Bank, there did not appear to be an immediate ability on the part of the Iranians to service the proposed new loans in the absence of British assurance that they would be prepared to convert if necessary.

United States representatives, Mr. Perkins continued, had therefore discussed with the British Government in London the possibility of an assurance that such conversions would be permitted in order that the Export-Import Bank loans could go forward.² The British representatives replied that they would permit such conversions for servicing of interest for one year only, during which time the United States would have to seek alternate methods to meet future obligations.³ This arrangement was not considered by the Export-Import Bank to be adequate, and we are now confronted with the problem that further assurances will be needed before the loan can be announced. The Secretary had therefore discussed this matter with Mr. Bevin in New York on September 28, and the Foreign Minister indicated that he would despatch a telegram to London on the subject.⁴ We wished also to ask Ambassador Frank’s assistance in meeting the problem.

Mr. Rountree added that we had hoped, and the Iranians expected, that an announcement of the Export-Import Bank loans would be made in the immediate future. Ambassador Grady has asked that this be done within the next few days as a political necessity. It was therefore urgent that the British reply be made as soon as possible.

Ambassador Franks said that he would report the matter urgently to London and state that the Department attached great importance to British agreement. He said that he frankly did not know what the British reply would be, but commented that what we are in effect doing is “clamping down on the British Government rather than the Export-Import Bank”. He thought that London officials might be unwilling to assume obligations in relation to the American loan which we ourselves were not prepared to undertake. The agreement which we were asking, he continued, was in effect to guarantee repayment of obligation installments over a period of many years, while it is difficult now to foresee what the British dollar position will be in the future.

Mr. Perkins pointed out that the purpose of the loans to Iran was to increase Iranian productivity, which would mean less dollar requirements in the future. Moreover, an important part of our program in Iran is to persuade the Government to obtain control of their own dollar earnings, most of which now go into flight capital and imports of luxury goods. To the extent of their success, these efforts likewise should reduce Iranian dollar requirements under the Anglo-Iranian agreement.

The Ambassador repeated that he would take the matter up urgently with London.⁵

George W. Perkins

1. The meeting took place on September 29. Drafted by Rountree.
2. Memoranda of the meetings at which Iran was discussed during McGhee’s visit to London are printed supra and p. 593.
3. Embassy London had reported this British proposal in telegram 1820, September 26, not printed (888.10/9–2650).
4. A brief memorandum of Secretary Acheson’s conversation with Foreign Minister Bevin is in file 888.10/9–2850.
5. On September 30 the Department of State informed the Embassy in London that it too should “pursue matter at highest appropriate levels.” (Telegram 1708 to London, not printed; 888.10/9–3050).