891.24/425

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

No. 504

Sir: I have the honor to enclose59 (1) a translation of an agreement signed on January 23, 1943, by the Soviet and Iranian Governments by which the latter contracts to manufacture for the former certain arms and ammunition (2) a translation of appendices two and five of the agreement (3) a translation of the covering contract (4) a translation of the protocol concerning the agreement and (5) a copy of Dr. Millspaugh’s60 comments to the Minister of Commerce regarding the agreement. These enclosures were furnished me in the strictest confidence by Dr. Millspaugh. The missing appendices will be forwarded to the Department if they come into my possession. A translation of the original draft of the arms agreement was sent to the Department under cover of despatch No. 439 of January 15, 1943.61

It is suggested that this despatch be read together with my telegrams 310 of March 2462 and 295 of March 2063 and my despatch 499 of [Page 635] March 27.64 Dr. Millspaugh’s comments given in enclosure five provide, I believe, convincing proof that this agreement is harmful to the financial interests of Iran. It seems particularly objectionable that Iran should be required to advance huge sums of money to finance the agreement when the Soviet Government has not yet agreed to any provision for payment for the finished products. It is generally said in informed circles in Tehran that the Iranian Government cannot possibly live up to the agreement and may be faced with paying the heavy penalties provided for in the agreement. Since one cannot accuse the Russians here of lack of practical common sense, the only conclusion to be drawn is that they signed the agreement to obtain a grip on the very heart of Iratiian industry and to prevent plants and mines from falling into British or American hands. The Russians, as suggested in my despatch No 499, may well have prepared this agreement to counter British and American trade infiltration in Iran through MESC65 and UKCC.66

Respectfully yours,

Louis G. Dreyfus, Jr.
  1. Enclosures not printed.
  2. Arthur C. Millspaugh, American Administrator General of Finances in the Iranian Government; for correspondence relating to the Millspaugh Mission, see pp. 510 ff.
  3. Not printed.
  4. Ante, p. 347.
  5. Ante, p. 345.
  6. Not printed.
  7. Middle East Supply Center.
  8. United Kingdom Commercial Corporation.