891.51/560
Memorandum of Conversation, by the Assistant Chief of the Financial Division (Luthringer)
Subject: Proposed Stabilization Agreement with Iran
| Participants: | The Iranian Minister, Mohammed Schayesteh |
| The Iranian Commercial Attaché, Mr. Nemazee | |
| Treasury Department, Mr. E. M. Bernstein | |
| Mr. Luxford | |
| Mr. Gunter | |
| NE, Mr. Jernegan | |
| FD, Mr. Luthringer |
The conference was arranged on the initiative of the Treasury Department to discuss the attached outline82 of suggested provisions for inclusion in the agreement. Mr. White who had been taken ill earlier in the day was unable to attend.
Mr. Bernstein who acted as Treasury spokesman explained to the Iranian Minister that the outline served merely as a basis for discussion and was to be regarded as highly tentative. We were particularly anxious to get their reaction to the proposal.
After Mr. Bernstein had gone through the list of topics and explained each in detail the Iranian Minister suggested that in point (1) the phraseology should be altered to read “to meet the needs of the United States in Iran”, the apparent idea being that we were not to acquire rials under the agreement for sale to other countries for general purposes. The Iranian Minister and Mr. Nemazee also felt that it would be desirable for the Treasury to amend point no. (5) so that Iran would undertake to sell us dollars or gold for rials the United States had acquired under the agreement, rather than undertaking to sell us only gold. This request was explained largely on the ground that it would be more difficult to get gold released from the official reserves than to use dollar balances that might be available.
The Iranian Minister and Mr. Nemazee inquired with particular care as to restrictions on their right to transfer earmarked gold and to export gold. It was explained to them that about the only actual restriction would be on transfers involving enemy interests or transfers to blocked countries. It was explained that these restrictions were essentially defense restrictions. At the same time it was pointed out that the right to export gold or transfer gold under earmark necessarily had to be conditioned by the legislation which Congress had passed. The Iranians were careful to say that they did not contemplate [Page 566] exporting gold that they might acquire but merely wished to be able to explain the matter clearly to their Government.
The Iranian Minister appeared to be well satisfied with the Treasury proposals. He remarked that the agreement was gratifying in that both parties undertook obligations to help the other and that it was a truly “bilateral” agreement in this sense. In the course; of the discussions it had been pointed out that this was the same type of agreement that we would make with any country large or small. Apparently with respect to this the Minister remarked that one of the reasons for this country’s strength and greatness was its policy of treating all on equal terms.
The Minister suggested and Treasury agreed to prepare an actual draft agreement on the basis of the outline.
Note: Prior to the meeting at Mr. Jernegan’s request I had told Mr. Bernstein that our Near Eastern Division had raised the question as to the advisability of making the agreement terminable by either party since the British experience with Iran had indicated that the Iranians might decide to terminate the agreement the first time our needs for rials were large and pressing. I had told Mr. Bernstein that I realized this was a standard provision in stabilization agreements but pointed out that unlike other stabilization agreements the initiative with respect to the purchase of the foreign currency rested with the Secretary of the Treasury and not with the foreign party. Mr. Bernstein nevertheless felt obligated to take up the outline as it stood since he had received specific instructions from Mr. White to do so. After the Iranian Minister and his colleague had left the conference, however, Mr. Bernstein said that Treasury would be glad to consider omitting this provision from the text to be drafted. He said that he appreciated this Department’s point of view but did not know how Secretary Morgenthau83 would react if this provision were omitted. He said that it was not so much a matter of law as of Treasury’s policy. The Treasury was particularly anxious to be in a position to adjust its policy promptly to any change in Congressional policy.