Foreign Relations of the United States: Diplomatic Papers, 1943, The Near East and Africa, Volume IV

891.51/556: Telegram

The Secretary of State to the Minister in Iran ( Dreyfus )

Washington , February 16, 1943—9 p.m.

84. Your 166, February 12. Treasury Department has held two preliminary conversations with Iranian Minister and has proposed an agreement including the following main points:

1. Iran would undertake to furnish rials for dollars to meet the needs of the United States in Iran at the rate of exchange in effect at the time of each such purchase of rials.

2. The United States Treasury would undertake to sell to Iran gold for dollars in accordance with the provisions of the Gold Reserve Act and at the price of gold that is in effect at the time of each such sale of gold.

3. Gold acquired by Iran would be earmarked in New York for the account of Iran.

4. Gold held on earmark for Iran could be exported subject to Treasury regulations in effect at the time of each proposed export.

5. Iran would undertake to sell us gold for rials acquired from Iran at a price based upon the rate of exchange in effect and the Treasury price of gold in New York.

6. No change would be made in the dollar-rial rate of exchange without giving an opportunity for prior consultation. From time to time the Treasury and the Iranian Government would discuss the economic problems connected with maintaining stability of the dollar-rial rate.

7. Agreement would terminate June 30, 1943, subject to earlier termination by either party without prejudice to the rights of the other for transactions previously undertaken.

(Provision for termination June 30, 1943 is made necessary by expiration of legislation authorizing stabilization agreements of this kind. However, renewal of legislation is expected and agreement could be renewed by exchange of notes on July 1. Department has requested Treasury to eliminate provision for earlier termination by either party, but it has not yet been determined whether Treasury policy will permit this change.)

The foregoing provisions are similar to those of numerous stabilization agreements previously made by this Government. They represent the terms which we would offer to any nation, large or small.

Treasury has informed British Embassy here of general nature of agreement we are proposing and has explained that we cannot discriminate against Iran by offering less favorable terms than those which we have offered to other nations. Embassy has expressed its understanding of this point of view.

At the request of the Iranian Minister, the Treasury is preparing a draft agreement, based on the above outline, which it is expected to submit for consideration in the near future.⁸⁷ Because of the legal and financial policy questions involved, the Treasury wishes to conduct all negotiations in Washington. It is assumed that Iranian Minister is keeping his Government fully informed and that Millspaugh will have an opportunity to study draft before it is approved by Iranian Government.

Hull

87. The draft financial agreement was transmitted to the Minister in Iran in instruction No. 198, March 5 (not printed). A provision that the agreement might be terminated by either party at any time was omitted from this draft.