Coll 28/59 ‘Persia. Financial Situation’ [‎234r] (478/842)

L THIS DOCUMENT IS THE PROPERTY OF HIS BRITANNIC M AJESTVS GOVERNMENT
PERSIA.
CONFIDENTIAL.
■» r.
) c n
October 16, 1931
Section 4.
U
[E 5190/328/34]
No. 1.
Mr. Dodd to the Marquess oj Reading(Received October 16.)
(No. 561.)
^' V . . Gulhek, October 7, 1931
AS reported in my telegram No 222 of the 1st instant, the official kran-
sterlmg and kian-rupee rates were fixed on the 30th September on the official
kran-franc rate, varying m accordance with the fluctuations in the London-Paris
exchange market. On the 1st October, consequently, the selling teleeranhic rate
on London stood at 68£ krans to the pound, as compared with 90 previously and
that on Bombay at o07 krans to 100 rupees Indian silver coin also widely used in the Persian Gulf. , in lieu of 666 ' ’
2. This decision was imparted to the banks by the Exchange Control
Commission m virtue of instructions issued by the Cabinet, to whom it had been
pointed out that the continued purchase of sterling at 90 must have the effect
of depreciating the local currency, as the silver export point, with silver at
19J pence, was in the neighbourhood of 85. i F > e at
r 3 - the 2 ;; d October, however, the Minister of Finance seems to have
realised that m selling at 68^ sterling exchange bought by the Government at 89
he would be losing approximately 22 per cent. The Shah is also reported to
have expressed himself very forcibly on the subject where his own exchange
instnmtefTto c0 ?. cernec1 ' On the 3rd October, therefore, the banks we?e
instructed to sell sterling on Government account at 9010, the rupee selling* rate
being brought back to 666 for Bombay. Basra and Bagdad. g
4. The banks, however, were not to buv either sterling or rupees Indian silver coin also widely used in the Persian Gulf. on
mTthTfmLwT 11 *’^ 6 /^ 8 ^° r i Which a ! e free ' The two banks - th e National
a " ; i r penal r wh0 - 1 am , g ! ad t0 sa y’ have worked throughout in the closest
XiTrate7 are bUylng ° n their ° Wn account - hut very discreetly, at the old
q 4 /q? . Vel '- v t f ®, w operations have been done in the bazaars on the basis of
that ini wi 16 P ° Und ' ,^ he P remium on the bank rate being due to the fact
h u-p n h ' 11 j S / i 16 ' nom ™ ]] y all events, only selling to those applicants who
are genppll]^/ 10 1 ^ gul 3 atlons 11 of the Exchange Control Commission. Holders ,
therp Via k ^ lsincd . ne d to sell owing to their confidence in the pound, so that
were has been no panic of any sort. . r ’ J
their*cfovi'i le ^ j0vei nmea t, not unnaturally, are highly exercised over the fate of
with pnnHnr'r/ 111 ^ nro P e - Unfortunately, even those that were placed
is siir] w ^ a !!.' :s UfU e ^ ec ted on a sterling basis. The total sum involved
this cnhiAnf ¥« lll i i0n - . Tehran press has had a great deal to say on
that thpL ‘ Slmfjagh-i-Sorkh " of the 2nd October warned its readers
dutv hnnnri^f 616 P° S roun( ls for anxiety, as His Majesty’s Government were in
Britain rvrv fi ° iei1 ^ • rse sums iovested by the Persian Government in Great
in a far In- lei J. or . 1 §P na l gold basis. The other papers have expressed themselves
in an arfinf °V in ! lst 1 lc and more recriminatory vein, as, for example, the <c Iran,”
m an article of which I enclose a copy.O ‘
is concern pH sltaa ^°P i i § most anomalous where the Anglo-Persian Oil Company
exchange f C > . ^ overnme pt have been living on the company's sales of
rate was I 01 f°l ^ a ^ ear ’ a . nd ^ was practically on that account that the official
buy sterling ti ar fifi c i a lly high level. Yet the Government now refuse to
would be ”. an f C i W1 ] 011 i.Y fake francs and dollars. The result for the company
U i - • they would only obtain 68 krans to the pound,
represen tin . i J / : tne .y wmua only obtain Krans to tne pound,
economies r a month, thereby offsetting some of the far-reaching
that, on infi 01 ■ en ^ orce d in Khuzistan. The Pesident-Director informs me
* luctions from his board in London, he has told the Minister of
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