Coll 30/224 'Currency Arrangements in the Arab Sheikhdoms of the Persian Gulf' [‎17r] (41/157)

The Persian Gull Ke-ioency,
Bahrain.
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JjSGiM#.
Mo.58
65/151/49
C(. I^'IDKMTIaL.
Sir
J
4th July, IS49.
a/if, i
m *
I have the honour to submit the following
comments on the report of the Treasury -Henresentative
in the ; iudle East on his recent Persian Gulf The historical term used to describe the body of water between the Arabian Peninsula and Iran. tour.
I have not yet obtained the views of the Political
.agents, Bahrain and Kuwait on the report and may have
further comments to make when I have"done so.
2. The first two chapters of the report ueal
with the question of currency. I fully agree that
it is desirable to replace the Indian rupee with
currency under our own control. I think"it will be
possible to persuade the Rulers to agree to this and
that though there may be some opposition amongst the
merchants, it will eventually be overcome. I am more
doubtful whether the Rulers w r ill be willing to issue
laws making the new currency the only legal tender in
their States. There has been no legal tenuer in the
past and it may be difficult to persuade them that
one is necessary in the future. They mostly allow
their subjects as much economic freedom as possible and
the merchant communities are naturally opposed to all
forms of economic control. Currency in the Persian
Gulf is at present controlled by the banks rather than
the States, as is evidenced by the fact that the Indian
rupee has come to be regarded as the official currency
rather than the Pakistan rupee purely because the banks
refused to accept the latter except at a discount. They
did this on their own account without consulting either
the Rulers or this Residency An office of the East India Company and, later, of the British Raj, established in the provinces and regions considered part of, or under the influence of, British India. . If a nev/ currency is
'introduced, this will have to be done through the banks
and, if necessary, they can be compelled to take such
action in respect of a nev/ currency as may be deemed
proper by a king’s Regulation issuea uncier Article 8o(a /
of the Bahrain lrder-ii-Council, 1949, and the corres
ponding Article of the other Crders-in-Council. The
existing banks in the Gull States are all British com
panies and subject to the Grders-ii -Council..
3 # I suggested to I.ir. Weight that it would be
convenient if a new rupee currency coula be introuuced
into Aden and used in the Gulf because I am of tne
opinion that such a currency would oe accepted as the
natural successor of the Indian rupee. Iije are, to
have a special Gulf rupee a number of difiicult
questions are likely to arise relating to its con-rol
and the design of the notes and coins. I am a\ are tnat
ttisJf procosed at present that *den should adopt
the^astAfrican shilling, the use of rhich here right
not prove acceptable.
a ir . height has stated in paragraph V of
chapter II of his report that “ ^ leant
neitl JJ Jr a currency fohthei? oh Sheikhdoms. _ The
Shaikh of Bahrain did not raise this matter v.hen I
/took Mr. height