891.24/12–947: Telegram
The Chargé in Iran (Somerville) to the Secretary of State
1213. Embassy has discussed with Ebtehaj whether feasible Iran meet condition for arms credit of advance payment possibly totaling dollars 25 millions for packing shipping charges1 (Deptel 740, November 22).
[Page 994][Here follow details of discussion.]
In Embassy’s opinion payment of dollars 25 million could be made without serious adverse economic effects only if British convert sterling in accordance November 6 financial agreement (Embtel 1102, November 132). Ebtehaj considers British would be obligated to convert since Iran would be purchasing goods at low price in US and transport and packing charges should be regarded as part of cost of goods. Present total exchange resources in Banking Department Bank Melli (including sterling available for conversion) are equivalent approximately dollars 72 million and would be reduced to dollars 47 million by dollars 25 million payment. This would not unduly strain Bank’s position. Suggest Department refer pp 29–30 Embassy report 195, August 23 for analysis position as of March 21, which rather closely corresponds present position.
On other hand, in absence convertibility sterling payment, this magnitude would be definitely detrimental Iran economy since it would use up nearly all free metallic reserves. Bank Melli in this [these] circumstances would be extremely unlikely to consent to payment.
Re point 4 Deptel 740, any consideration of arms credit has been entirely overshadowed by current Cabinet crisis (Embtel 1211, December 93 and previous) and as far as we are aware, there is no evidence credit is being used as political football or in fact is element of any importance in present political situation.
- In telegram 776, December 13, the Department informed the Embassy in Tehran of estimated sales prices of materiel selected by the Purchasing Mission for the Iranian Army, as follows: “sales price equipment for Army $6,400,000 (original cost $40,000,000). Packing and transport to shipside $5,400,000. Repair of equipment not ready for issue $2,050,000. Loading and ocean freight $10,800,000. Total $24,650,000. Payable under credit $6,400,000. Payable in cash $18,250,000.” (891.24/11–2547)↩
- Not printed; it reported that an agreement, initialed at London on September 3 by the Bank Melli Iran and the Bank of England, was subsequently approved by the Iranian and British Governments, to come into operation from November 6. The agreement restored convertibility of pound sterling as of July 15 and additionally provided for convertibility to American accounts for current transactions. This latter was qualified by a clause whereby the Iranian Government would not seek transfers to American accounts except to purchase goods it considered essential to its economy which could not be obtained in equivalent terms respecting price, delivery date, and quality in the sterling area or elsewhere for sterling (891.5151/11–1347).↩
- Not printed.↩
- Not printed.↩