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As a result of our conversation Mr. Butler agreed to clear this question through the British Purchasing Commission and to avoid, if possible, the delay in referring it back to London. He promised to let me have an answer as soon as possible.

I hope you will agree with me that it may be greatly in the British interest for us to avoid as far as possible losing our present none too firm hold on the Iranians.

WALLACE MURRAY

811.20(D) Regulations/2942: Telegram

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

WASHINGTON, July 17, 1941–11 p.m. 53. Your no. 61, June 23, 11 a. m. and no. 72, July 14, 10 a. m. Please inform the Acting Minister of Foreign Affairs that the Department is disposed to facilitate the shipment of such articles and materials to Iran as are not urgently required by this Government for the carrying out of its own defense program and for the needs of those governments which we are assisting in resisting aggression. In view, however, of the situation described in the Department's no. 43, June 20, 5 p. m., the Iranian Government should understand that it cannot count upon the United States as a complete source of supply during the present emergency.

You may inform the Acting Minister that the Iranian Legation here is handling these matters efficiently in close cooperation with the appropriate officers of the Department and that requests of the character contained in your telegram under acknowledgment should be taken up through the Iranian Legation here and not through our Legation in Tehran.

WELLES

811.20(D) Regulations/3305 : Telegram The Acting Secretary of State to the Minister in Iran (Dreyfus)

WASHINGTON, July 24, 1941–8 p.m. 59. Your 72, July 14, 10 a. m. Application of June 10 was rejected July 21 but United States Steel Export Corporation has now been invited to submit new application which will be considered in connection with Prime Minister's recommendation.

WELLES

891.248/125 Memorandum of Conversation, by the Assistant Chief of the Division

of Near Eastern Affairs (Alling)

[WASHINGTON,] July 29, 1941. Participants: Mr. Nevile Butler, Minister-Counselor of the British

Embassy
Mr. Murray

Mr. Alling Mr. Butler said he would recall that about two weeks ago Lord Halifax had requested the Acting Secretary of State to restrict the shipment of American airplanes to Iran. He said that he would like now to give some of the background of this request.

Mr. Butler pointed out that the Iranian Government airplane factory located a few miles outside of Tehran was manned to a large extent by British mechanics. He did not know their exact number, but he thought it was twenty or thirty. For a long period the British Government had attached considerable importance to keeping these mechanics in Iran with a view to preventing their displacement by mechanics from Axis Powers. At the same time the British Government, realizing the dangers of a German occupation of Iran, wished to prevent so far as possible any appreciable number of airplanes going to the Iranian Government. The British Government feared that in the event of an Axis occupation of Iran these planes would be used against Allied forces. It was for this reason that the British Government had requested this Government to restrict airplane shipments to Iran.

At the same time the British Government had to keep the Shah "sweet” and it had therefore been necessary to agree that certain British airplanes be shipped to Iran for assembly in the above-mentioned factory. At present, therefore, it is contemplated that during the next year parts for twelve Hurricane planes would be shipped to Tehran to be assembled by British mechanics.

Mr. Murray inquired why, if the British were permitting the shipment of such modern planes as Hurricanes to the Iranian Government, there should be any objection to the American Government permitting the shipment of such antiquated models as the Iranians desired to purchase in this country. Mr. Butler reiterated the arguments mentioned above, that is, that it was necessary to keep the Shah in good humor and also to furnish material for the factory so that the British mechanics could continue to work and operate in Iran. At the same time he admitted that from the point of view of equity it was perhaps illogical to ask the American Government to refrain from shipping planes to the Iranian Government. . . . In any case he

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agreed that spare parts for American planes in Iran should certainly go forward, and he felt it particularly desirable that spare parts ordered from Canada and now in transit through the United States should be granted American export licenses.

It was pointed out to Mr. Butler that the Iranian Government had been refused export licenses on numerous products such as tinplate, automobile tires, etc., and that this Government, too, had to bear in mind the desirability of retaining the good-will of the Shah. The only answer Mr. Butler had to make to this statement was that Iranian good-will was of more importance to the British and that in case we felt that something had to go to Iran the British Government would much prefer to see tinplate and rubber shipped than airplanes.

Mr. Murray said that we would go into the matter further and let Mr. Butler know the eventual decision.

891.248/125 Memorandum by the Chief of the Division of Near Eastern Affairs

(Murray) to the Under Secretary of State (Welles)

[WASHINGTON,] July 30, 1941. MR. WELLES : In my memorandum of July 16, 1941, I referred to my conversation of the preceding day with Mr. Butler in which I suggested the advisability of permitting the shipment to Iran of a small order of spare parts for obsolete planes in order to retain the good will of Iran in view of the possibility of a deterioration of Anglo-Iranian relations in the near future. Mr. Butler agreed to clear this question with the British Purchasing Commission, to avoid the delay of communicating with London, and to provide me with an answer as soon as possible.

A reply from Mr. Butler, however, was not forthcoming, and the Iranian Legation, meanwhile, exerted considerable pressure upon the Department to have the shipment cleared. When it became clear that the suspicions of the Iranian Legation were becoming aroused, it was considered that action could be delayed no longer pending Mr. Butler's reply. On July 28, therefore, two weeks after the request made to Mr. Butler, the matter was referred to Mr. Acheson,23 who issued appropriate instructions for the clearance of the small shipment of spare parts, and for the exportation of a few other pending shipments of a similar kind.

In the course of a conversation today, I informed Mr. Butler of the action which had been taken, and Mr. Butler agreed that spare parts for American planes already in Iran should go forward, as well as

23 » Dean Acheson, Assistant Secretary of State.

spare parts ordered in Canada now in transit through the United States. (A copy of a memorandum of my conversation with Mr. Butler is attached.24)

It is expected that there may be a few more small shipments of the type referred to above, and the suggestion is made for your approval that these shipments be allowed to go forward.

WALLACE MURRAY

[This particular issue of American aid to Iran ended with the Soviet-British occupation of Iran in August 1941; see pages 383 ff.]

PRELIMINARY DISCUSSIONS FOR A TRADE AGREEMENT BETWEEN

THE UNITED STATES AND IRAN 25

611.9131/139 Memorandum of Conversation, by Mr. Cecil T. White of the Division

of Commercial Policy and Agreements

27

. 28

[WASHINGTON], January 21, 1941. Participants: The Iranian Minister; 26

Mr. Amerie, the Iranian Trade Representative;
Mr. Deimel, TA;
Mr. Merriam, NE;
Mr. Lary, Finance Division, Bureau of Foreign and

Domestic Commerce;
Mr. Goldberg, Division of Regional Information,

Bureau of Foreign and Domestic Commerce;
Mr. Shaw, Division of Foreign Tariffs, Bureau of

Foreign and Domestic Commerce;

Mr. White, TA. The Iranian Minister recalled that in reaching agreement with respect to a basis for trade-agreement negotiations two problems appear to present particular difficulty, namely, the Iranian exchange control and government monopolies. The Minister said that in view of Mr. Amerie's long experience with Iranian domestic and foreign trade, he had brought him to the Department to clarify the Iranian position in those respects.

24 Reference is to memorandum of July 29, supra.

* For previous correspondence on this subject, see Foreign Relations, 1940, vol. III, pp. 663 ff. 26 Mohammed Schayesteh.

Henry L. Deimel, Jr., Assistant Chief of the Division of Commercial Policy and Agreements.

Gordon P. Merriam, Division of Near Eastern Affairs.

28

a

The Minister read Article 6 of the Iranian draft agreement handed the Department on September 3, 1940,29 which provides with respect to means of international payment that each country shall extend to the other treatment no less favorable than that accorded the products of third countries, "excepting those with which it has barter agreement”. Mr. Amerie stated that Iranian trade with Germany and the Soviet Union is practically impossible except on a commodity basis. He indicated that while those two countries each have some foreign exchange, necessity requires that it only be used for the purchase of commodities essential to their respective economies. In this connection, the Minister and Mr. Amerie stated it as their opinion that Iran would be very unlikely to enter into clearing or barter agreements with countries other than Germany or the Soviet Union.

In reply, Mr. Deimel pointed out that the Iranian draft left the door open to any further special arrangements Iran might wish to make. He went on to explain that the standard general provisions previously given the Iranian Government are not necessarily the provisions this Government must have in a trade agreement with Iran, and that this Government has been trying to find a formula which would meet the exigencies of the Iranian Government and at the same time give us the assurances we consider necessary. Mr. Deimel suggested that an exploratory discussion of the Iranian trade control system would be of assistance in the search for such a formula.

In the ensuing discussion the Iranian representatives made the following assertions:

(1) German and United States exports to Iran are not competitive and, therefore, the clearing arrangement with Germany does not adversely affect United States trade with Iran.

(2) Germany pays twice as much as other countries for Iranian merchandise and the application of the exchange certificate system to non-German countries merely offsets the artificial value of the mark. (Mr. Lary pointed out in this connection that, as in the case of Turkey and certain other countries, by buying large amounts of Iranian goods at artificially high prices, Germany could

force Iran to buy abnormal amounts of German goods at correspondingly high prices).

(3) With respect to export monopolies, it was stated that they are used primarily for the purpose of standardizing products for export and that they have not, nor would be, used to discriminate against the United States.

(4) With respect to import monopolies, it was stated that they are applied to all countries, including Germany and Russia, and have not been, nor would be, used to discriminate against the United States.

Mr. Deimel thanked the Minister and Mr. Amerie for their kindness in answering questions, and said that he felt that we had a much

20 Not found in Department files, but for draft submitted by the Iranian Ministry for Foreign Affairs, see Foreign Relations, 1940, vol. III, p. 675.

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