Coll 28/39(2) ‘Persia. Printed Correspondence, 1937–’ [‎52r] (103/320)

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Letter from Mr. Seymour, to Mr. Eden, No. 340, dated 13th September 1937.
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
mere 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 £l 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
probabilitv, 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 £12
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 be able to bear the further £12 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
had 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 be made up before the transport
svstem 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 probable that next
winter will be a difficult one and that the ingenuity of the Government will be
considerably taxed in meeting the problems of finance and supply which will have
to be faced. The forebodings which I have summarised in the preceding paragraphs
have, there is no doubt, increased the unpopularity of the present regime, but it is
almost impossible under present conditions to imagine any effective opposition or
even criticism of the Government policy. If bad times come they will have to be
borne, but there is, no doubt, a large volume of opinion which holds that the burden
which is being placed on the country is becoming almost intolerable.
M UStE VD