891.113/20: Telegram

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

58. Department’s 26, January 13. Prime Minister informs me his Government has virtually agreed to sign within a few days the contract with Russians on operation of Iranian arms plants and that final details are now being worked out. He states this action is being taken because Iranians feel they can no longer withstand Soviet pressure, backed by implied threat to cut off food and other supplies from north. He revealed, however, that terms of final agreement are less onerous for Iran than those stipulated in original draft (copy of which was sent Department with despatch no. 439, January 1557): Iranians will receive 20% of output of plants and the financial burden on Iran has been reduced.

Generals Connolly and Ridley, Military Attaché, Kidd58 and myself at meeting yesterday to discuss this question agreed substantially as follows:

(1)
The contract cannot possibly be fully or promptly met by Iranians account lack of raw materials, technical knowledge, machinery and especially skilled labor; for same reason operation of plants by Americans is not feasible;
(2)
Little if any shipping space will be saved;
(3)
Plants could be used to better advantage by American Army in making spares for railways, producing copper and in maintenance of trucks;
(4)
It would be more economical and efficient to import the arms and ammunition from United States.

Despite these considerations, it was felt that Iranian action in agreeing to contract makes it useless and inadvisable to examine further into possible alternative uses of plants or consider whether Russian operation is desirable. It was consensus of opinion of all except Kidd that matter must necessarily be considered closed; Kidd expressed opinion American Government should endeavor to persuade Soviets to abandon project. General Connolly stated that while these plants [Page 634] would have been useful to him, he does not consider them essential since he has established other facilities at Andimeshk.

It seems not unlikely that Soviets are taking over these plants for political reasons in order to gain control of Iranian economy and entrench themselves more solidly in Iran or at least to prevent plants from falling into hands of British or Americans.

Dreyfus
  1. Not printed.
  2. Philip C. Kidd, chief American Lend-Lease representative in Iran.