Office of the Historian

888.10/10–2450: Telegram

The Ambassador in the United Kingdom (Douglas) to the Secretary of State

secret
London, October 24, 1950—8 p. m.

2349. For State, Treasury and Eximbank.

A. Wright and Furlonge today read to us personal message from Bevin to Secretary re convertibility sterling for service dollar loan to Iran which will be communicated to Secretary by British Embassy Washington.1 (Embtel 2083, October 92) Message contains following points:

1.
After referring Secretary’s conversation with him in New York, Bevin states that, upon return to UK, he went into whole question of assistance to Iran and is convinced that US and UK between them should do all they can to get 7-year plan quickly and effectively started. Although Bevin would have liked to meet Secretary’s point re convertibility to service Eximbank loan, he agrees with decision which had previously been taken by HMG (namely that UK will guarantee convertibility for 1 year only.
2.
US and UK between them should try to see plan through first 3 years or so, with Iranians playing their part financially as soon as they can. Position would be easier if supplemental oil agreement were ratified, but meanwhile immediate help required.
3.
Assuming supplemental agreement not ratified near future, UK contribution could take shape immediately sterling loan of 2 to 3 million pounds to back additional issue local currency required for expenditure on plan projects.
4.
It is hoped expenditure on equipment required from sterling area would be financed from 8 million pound advance recently made by AIOC.
5.
UK prepared, if Iranians desire and would thereby be assisted, to make up to 6 million dollars available over next 2 years for essential agricultural and other machinery from US not available from sterling sources. UK has no reason believe Iranians will have difficulty in finding sterling to buy 6 million dollars. However, conceivable that Iran Government might be short of funds and if need arises, UK would assure that within 6 million dollar limit, Iran can secure essential dollar requirements. Meanwhile this will give US opportunity establish appropriate machinery for aiding Iran.

B. Following interpretative comments are based on subsequent conversations with interested FonOff and Treasury officials:

1.
Previous UK undertaking provide dollars for first year’s servicing unaffected by foregoing. This undertaking was incorporated in exchange of letters between UK and Iran at time of negotiations re memorandum of understanding.
2.
However, UK unwilling go beyond foregoing commitment. UK looks upon Point A–5 above as enabling Iran to proceed with projects until such time as other means of financing or other arrangements with respect to Eximbank loan can be made. UK action probably based on feeling that US rejection of earlier commitment for 1 year precluded advance under Eximbank loan.
3.
UK Ambassador Tehran being instructed inform Razmara of 2 to 3 million pound loan, but not, pending US reaction, of assurance re availability of 6 million dollars for essential development needs.
4.
Re Point A–3 above, consideration of possible further pounds 5–10 million loan (which is latest working figure for assistance mentioned paragraph 4 Embtel 2023 October 63) being held in abeyance pending further indications likelihood supplemental agreement being ratified.

Sent Department 2349, repeated information Tehran 35, Cairo 47 for Parker.

Douglas
  1. A copy of the message as transmitted to Secretary Acheson by Ambassador Franks on October 25, together with a copy of a message from Bevin to Prime Minister Razmara dealing with the loan referred to in paragraph B3 below, is in file 888.00/10–2550.↩
  2. Not printed; it reported that the British decision on convertibility would be forthcoming in the next few days (888.10/10–950).↩
  3. Not printed.↩