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chambers of commerce passed a resolution urging the Government to denounce the
existing treaty with the Soviets. Meanwhile, the Soviets reacted strongly to
the boycott by closing down or reducing to a minimum their trading establish
ments in all parts of Persia, and by discontinuing purchases of Persian produce.
The Soviet commercial representative, M. Shevtsoff, was recalled to Moscow
in May.
526. As the dispute showed signs of being a protracted one, the Persian
Government began to take energetic steps to diminish as far as possible its
dependence on the Soviet Union both as a purchaser of Persian produce and
as a supplier of necessities. Persian raw cotton was shipped in increasing
quantities to Hamburg and India, and, with the subsequent Japanese boycott
of Indian cotton, an important new outlet was found in Japan. Increased
imports of Japanese cotton piece-goods arrived in the Persian markets and
replaced or displaced the Soviet product, as well as making inroads into that of
other competitors. Schemes for the erection of cotton mills in Persia came
rapidly to fruition with Government encouragement, and valuable orders were
placed with a British concern for the necessary equipment. Machinery for six
new beet-sugar factories was ordered in Czechoslovakia, and large imports of
sugar from non-Soviet sources were sanctioned via the southern ports.
Prohibited goods of a cc luxury ” type were allowed to be imported against
exports of rice, which had formerly found a market only in the Soviet Union,
and there was even discussion, which came to no result, of awarding a monopoly
of rice export to Dr. Friedlieb in exchange for a monopoly of importation of
prohibited goods.
527. Persian dependence on transit through the Soviet Union was amply
demonstrated by the successful Soviet insistence on the supply of the whole order
for 600 kilom. of rail for the Persian railway, under threat of holding up all the
supplies for the northern section of the railway if part of the order were given
to any other country. At the same time, the transit charges through the Soviet
Union on goods consigned to or from Russia were raised to prohibitive levels.
This action stimulated new interest in Persia in the possibilities of the Rowanduz
route from Tabriz to Mosul, on the improvement of which considerable work was
carried out, and of the Trebizond route, the latter being, however, more dependent
on adequate action being taken on the Turkish side of the frontier. Considerable
quantities of petrol and kerosene were despatched during the summer via
Rowanduz to Azerbaijan by the Anglo-Persian Oil Company to relieve the
shortage caused by the Persian-Soviet dispute, and trial consignments of carpets
and other Persian produce for Europe were sent by both the Rowanduz and the
Trebizond routes. It remains to be seen whether either of these routes can be
economically developed when the Soviet route to Batoum is again open and
competitive transit rates in force, but in the meantime the advantage to Persia
of having alternative, even if not wholly satisfactory, routes available will no
doubt be kept in view. Further confirmation of the advantages of proceeding
with the construction of the new north-south railway will no doubt be derived
by the Persians from the present situation.
528. There appears to have been no weakening of the Soviet attitude and
no further negotiations, but at the beginning of August it was announced that,
“ guided by the advice of the Imperial Government,” the Association of Tehran
Merchants had decided to resume trading relations with Soviet commercial
establishments. Similar advices were received from other parts of the country,
and so the boycott was called off and the Soviets had won one of their two
desiderata as a prelude to negotiations. The dispute was by no means settled,
however, as not only were there few stocks of Soviet goods available for sale in
Persia, but also no provision had been made in the Soviet import quotas for
imports from Persia.
529. A new Soviet Ambassador, M. Pastukhof, was appointed to Tehran
in August, and M. Shustak was appointed Soviet trade representative. At about
the same time it was announced that Karakhan, Assistant Commissar for Foreign
Affairs, would shortly visit Persia, and considerable hopes were built on a
settlement which would result from this visit. The visit took place at the end
of September and produced no immediate results, the official communique
[10152] a