Coll 28/15 ‘Persia. Internal Affairs. Political and Administrative Changes.’ [‎57r] (114/286)

THIS DOCUMENT IS THE PROPERTY OF HIS BRITANNIC MAJESTY’S GOVERNMENT
PERSIA.
CONFIDENTIAL.
September 13, 1937.
Section 1.
[E 5351/20/34]
Copy No.
(No. 340.)
Sir,
Mr. Seymour to Mr. Edeii.—(Received September 13.)
Tehran, August 28, 1987.
OPINION in Tehran is now going through a period of some apprehension
as to the prospects of the next few months. Anxiety is expressed for various
reasons, but the underlying causes of existing and anticipated difficulties are
mainly financial.
*2. There can be no doubt that the financial situation is becoming more
and more difficult, and signs of this are seen in the continual trouble which
foreign experts are experiencing in securing payment of the foreign currency
due to them under their contracts. No recent attempt has been made to
repeat the demand made on the railway contractors to deposit foreign exchange
to cover their rial loans, but I learn that the company undertaking the port
works on the Caspian has been asked to cover their loans in this way. It is
generally believed that the present position of the clearing with Germany shows
a large debt from Iran to Germany (estimated at well over XT million), and the
volume of imports from Germany has for the moment been reduced to very
small proportions. On the other hand, I learn that the debt of the National
Bank to the Imperial Bank of Iran has been reduced, though this reduction
may only be temporary. A further feature which should be of advantage to
the Iranian Government is the rise in the value of agricultural and other
such products, but it appears doubtful whether the additional quantity of
foreign exchange which should result from these increased values will be
sufficient to make very much difference.
3. Another prospective burden on Iranian finance is the possibility, or
even probability, of further railway construction. I am informed that the
Iranian Government have been making enquiries in Europe with a view to
undertaking the construction of the Tabriz Railway. This, it is reported, will
cost about XT2 million, and I am informed on authority which should be good
that a scheme for using the oil royalties as security for this expenditure has
been mooted. It remains to be seen whether the country will he able to bear
the further X12 million for railway construction on the top of the cost of
equipping and maintaining the Trans-Iranian Railway, in addition to
expenditure for military purposes, in which there is no discrimination.
4. The pledging of the oil royalties, if this is really under consideration,
must adversely affect Iranian credit, at any rate for some time. Those who
have done business with Iran on a large scale have felt that as a last resort
there would be the oil royalties in the background.
5. In many parts of the country there is a good deal of nervousness about
the food situation. Last winter the operations of the grain monopoly were not
entirely well advised, and produced a shortage in East Iran at a time when the
exceptionally heavy snow made it difficult to procure supplies from other parts
of the country. This year the necessity for finding foreign exchange has again
led to considerable exports while over a large area of the country lack of rain
has led to short crops. The rice crop is also likely to be short, partly owing to
artificial restriction of the area under this crop, partly owing to a poor season,
and the price is already rising. Transport is also expected to present a serious
problem ; the motor monopoly has been badly managed and the supply of lorries
is insufficient to meet the increasing demands upon it. There has recently
been some improvement, but much headway has to he made up before the
transport system can inspire confidence. The mistakes made last year have
naturally caused some uneasiness as to the prospects for the next winter, as
many fear that exports have been so great as to reduce the available stocks to
a dangerously low level. In the absence, however, of reliable statistics it is
not possible to form an accurate view of the position. It does, however, seem
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