891.113/19: Telegram
The Minister in Iran ( Dreyfus ) to the Secretary of State
[Received 11:20 p.m.]
7. Department’s 1, January 1, and my 421.50 Discreet inquiries fail to reveal any agreement between British and Russians on disposition of output of Iranian arms plants and do not believe such an agreement exists. The entire production will be taken by Russians except that 12 million of the 42 million cartridges will be delivered to Iran.
Prime Minister51 informs me Iranian Government is most reluctant to sign agreement with Russians on arms plants because (1) terms of contract are unfair since Iranians would have to pay for materials and plant outlay while Soviets would pay for finished product at their convenience; (2) factories cannot be brought into production as fast as Russians require; (3) there are many serious shortages including copper, magnesium, rolling stock, trucks, machinery, electric power, sulphur and saltpeter; and (4) huge expenditures of several hundred million rials would further aggravate Iran’s delicate financial structure. Iranians are delaying in hopes of finding some way to prevent conclusion of agreement. Prime Minister states he has instructed Iranian Minister in Washington to approach Department for loan of 30 million dollars through Lease-Lend to finance the agreement.
From American viewpoint agreement seems undesirable on following grounds: (1) Arms plants are now producing copper and rolling stock replacements for Allies. This essential production would have to be abandoned if agreement were signed; and (2) American Army desires to use these plants for repairs of railway equipment and servicing of motor trucks.
Weighing all factors it would seem to be much more simple and efficient and in the interests of all parties to import arms and ammunition from the United States.