741.9111/68
Memorandum of Conversation, by the Adviser on Political Relations (Murray)
| Participants: | Mr. Berle34 |
| Mr. Murray | |
| Mr. Bewley, British Embassy35 | |
| Mr. Hayter, British Embassy.36 |
At Mr. Berle’s request, Mr. Bewley and Mr. Hayter of the British Embassy called to discuss the disagreement which has arisen between the British and Iranian Governments as a result of the reluctance of the Iranians to purchase sterling exchange and authorize the expansion of Iranian currency circulation to meet the needs of British operations in Iran.
Mr. Berle referred to the substance of the British Aide-Mémoire left with Mr. Alling by Mr. Hayter on April 11, 1942,37 in which inquiry was made as to whether this Government would be willing “to cause strong representations to be made in Tehran for the supply to the British authorities of local currency needed for our common purposes against sterling and indicating that failing this, Lend-Lease arrangements must be held in abeyance.” Mr. Berle also referred to the British suggestion that we bring pressure on the Iranians to meet the British demands by threatening to freeze Iranian balances in this country.
Even if measures suggested by the British were practicable on political grounds Mr. Berle felt that they would be useless as instruments of pressure upon the Iranians for the simple reason that the amount of Iranian funds in this country is very small and that a threat to withhold goods under Lend-Lease from the Iranians would hardly be an impressive argument when no such goods have thus far gone forward. Furthermore, if we decided to send goods to Iran under Lend-Lease it would be for our own specific advantage, which we would not be willing to forego for reasons now being put forth by the British.
Turning to the political considerations involved, Mr. Berle felt that a dangerous internal situation might be created if we joined with the British to use the “mailed fist” on the Iranians, which would only serve to drive them further into Axis hands. It had to be remembered that the maintenance of security in Iran for purposes of transit to Russia was of vital concern to us all and that it would serve no useful [Page 305] purpose to take any action that would contribute to a deterioration of the internal situation of the country and thus bring about a greater drain on British military forces to police the country and preserve order. Both Mr. Bewley and Mr. Hayter said they fully agreed with Mr. Berle in that regard.
Turning then to a practical solution which we wished to present to the British, Mr. Berle observed that the present British demands on the Iranians entail certain very distinct disadvantages for Iran and that the Iranians are not unreasonably unwilling to build up further blocked sterling balances. The Iranians are, on the other hand, apparently ready to sell rials for gold or dollars. In response to the British inquiry as to whether we would endeavor to obtain local currency for the British Government against dollars, Mr. Berle stated that the question of increasing the British supply of dollars was now being canvassed by the Treasury and he understood that negotiations were in progress with the British on that subject. He therefore wanted to put forward the proposal for British consideration as to whether they might not be prepared to pay in dollars for the Iranian currency needed in Iran. We, in turn, would endeavor to find some means of insuring the maintenance by the British Government of adequate dollar balances that would more than meet their needs in Iran.
This proposal seemed to be entirely agreeable to Mr. Bewley and Mr. Hayter, and Mr. Bewley said he would put it up at once to his Government by telegraph and give us a reply at the earliest possible moment.
Brief mention was made of the alternative of providing the British with the necessary amount of dollars under Lend-Lease, but it was generally agreed that this would be highly inadvisable and in Mr. Bewley’s opinion might create a situation like that of the World War debts which we all wanted to avoid.
Reference was then made to the question of purchasing certain Iranian military supplies, particularly army trucks. It was felt that there would be no difficulty in making these purchases under Lend-Lease for the British if the need arose. It was pointed out, however, that it would be unwise to deplete too greatly the Iranian supply of trucks since they are apparently needed at the present time for the transporting of food and troops necessary for internal security in the country.
After the conference, I communicated with Mr. Harry White38 of the Treasury and informed him of the discussion that had taken place with the two British officials and of the suggestion which Mr. Berle had made to them as a possible solution of the monetary difficulty being experienced by the British in Iran. Mr. White was very pleased to [Page 306] receive this information as he said he was going into conference this afternoon on the related problem of assuring adequate dollar balances for the British. He said he would appreciate being informed as soon as possible as to the reaction of the British Government to the proposal made by Mr. Berle.