1940: Iran

Iran's attention during 1940 was focussed on economic problems resulting from the European war, and particularly warfare in the Mediterranean. The country imports most of its finished goods, and a great share of its production is destined for export. Before the war, Germany was by far the leading supplier and customer for Iran. In the last period for which statistics are available—the 9 months ended March 21, 1939—the Reich took 44.3 per cent of the country's exports and supplied 38.8 per cent of its imports. This trade, like most Iranian commerce, passed through the Persian Gulf and the Mediterranean, and it was cut off suddenly by the extension of hostilities to Mediterranean waters.

Iran succeeded in concluding several economic agreements that partially offset its wartime difficulties. In a technical financial arrangement of Feb. 16, 1940, Great Britain agreed to provide credits to the Iranian government for the purchase of British supplies. A more far-reaching trade and navigation treaty was concluded between Soviet Russia and Iran on March 26, when the Soviet Government granted rights to transport Iranian foodstuffs, clothing, hides and skins, and vegetable oils to Germany and Sweden through the U.S.S.R. This treaty also cleared the political atmosphere of rumors regarding a possible Soviet attack. These fears had persisted ever since January, when Iran and Afghanistan were reported to have proposed to Iraq and Turkey that the Saadabad non-aggression pact, concluded among the four powers in 1937, be converted into a military alliance.

Petroleum is the preponderant export commodity of Iran—fourth ranking world producer of oil—and oil royalties constitute a leading source of Government revenue. In August the Anglo-Iranian Oil Company and the Iranian Government concluded a new agreement under which Iran is to receive a minimum duty of £4,000,000 from the company for 1940 and 1941—representing approximately a 12 per cent royalty increase which will greatly reduce shareholders' earnings. Since the British Government owns a majority of stock in the company, the payment of substantially higher duties to Iran may have political implications designed to safeguard British interests in the Middle East.