Cuts Exports, Sterling Conversion (1951)
| Arash Norouzi The Mossadegh Project | March 24, 2026 |
After the Harriman-Stokes mission to Iran ended fruitlessly, Great Britain announced that to protect its economy, it would be revising its financial terms with Iran.
With this act, Iran was prevented from making or receiving payments in sterling, and could no longer import certain raw materials. The British paid Iran’s share of the oil revenue in sterling only, of which Iranians were only able to
convert a modest percentage.
Simultaneously, the Board of Trade revoked the export of scarce goods to Iran. These included sugar, steel, iron, railway track materials, non-ferrous metals, alloys and certain oils.
In response, Deputy Premier Hossein Fatemi said that the move
broke a currency agreement still in effect for two more months. “I wonder how the British government, which is always accusing Iran of violating agreements, can itself violate an agreement,” he asked.
“These actions are not sanctions or reprisals, but are measures of defence of the United Kingdom economy forced upon H.M. Government in circumstances not of their making”, explained the Treasury. “Normal use of sterling by Persia is
not intended to be interfered with. But the special privileges had are withdrawn.”
The Associated Press, however, framed the British action as “a clear bid to force the already wobbly government of aged Mohammed Mossadegh out of office.” And England’s venerable Birmingham Post absolutely viewed the new
terms as economic sanctions — and justifiably so.
On Sept. 14th, Premier Mossadegh ordered a ban on the exchange of Persian rials for British pound sterling in every bank in Iran. While in New York in October, he had the acting Premier, Bagher Kazemi, issue a strong complaint against
Britain for its “unlawful” obstruction of purchased goods shipped to Iran.
Observed one U.S. analyst: “You can easily imagine the howl of anger and outrage which would rise from London if the American government treated Britain, hard-pressed for foreign exchange, as the British government is treating Iran,
hard-pressed for dollar and sterling exchange.”
• British Foreign Office | IRAN 1951-1954
• Anglo-Iranian Oil Company (AIOC) Archive
British Treasury Statement
In view of the breakdown of the negotiations in Teheran, H.M. [His Majesty’s] Government have been compelled to review the effect on the economy of the United Kingdom of the cessation of exports
of Persian oil, and have decided that they have no alternative but to withdraw certain exceptional facilities which have hitherto been granted to Persia by virtue of the importance of that oil to our economy.
At present, Persia enjoys special facilities—not normally open to non-members of the sterling
area—for the conversion of sterling into dollars. She also enjoys the automatic right to make use
of sterling for payments to and from countries in the sterling area and certain other countries.
The cessation of oil exports from Persia not only removes the justification for these exceptional
facilities but also makes it necessary for the U.K. to spend large sums of dollars on replacement
oil.
In these circumstances H.M. Government can no longer afford to supply Persia with dollars.
For this reason it has been necessary for the Treasury to make an Order under which all sterling
payments to and from Persia will be subject to the permission of the Treasury. Since, however,
the intention is to withdraw only the exceptional facilities which can no longer be justified, the
powers conferred by the Order will normally be exercised in such a way as to allow all
transactions except conversions into dollars, and the payment and receipt of sterling by Persia in
respect of oil transactions.
In addition to these facilities in the financial sphere Persia has hitherto been given the right, in
view of the contribution which her oil has made to the economy of the U.K., to purchase certain
scarce goods which are urgently required here, or could have been sold either for dollars or to
other markets. As a corollary to the action described above, H.M. Government have therefore in addition
taken the necessary steps, by action under the export licensing arrangements, for the immediate discontinuance
of the supply from the U.K. of these scarce goods.
The necessary Orders have been made and will be published as soon as possible. It is H.M.
Government’s sincere hope that the need for these measures will not be of long duration. Their
intention is to limit the harm which has been caused to the U.K. economy by the actions of the
Persian Government, and the measures can be revoked whenever the Persian Government makes
possible a solution to the oil question.
• [Transcribed and annotated by Arash Norouzi]
Foreign Office Statement
In conformity with the economic measures designed to protect the United Kingdom’s economy, which have already been announced, his Majesty’s government have requisitioned 3,000 tons of railway track equipment, and 20,00 tons of sugar,
at present en route to Persia in British ships. These cargoes will be returned to the United Kingdom.
His Majesty’s government accept responsibility for reimbursement to Persian buyers of the sums actually paid for these goods.
Related links:
British Oil Workers Given A Week To Leave Iran (Sept. 1951)
The Annual Register for the Year 1951 | IRAN (Persia)
Sugar (Sales to Persia) | House of Commons, July 25-30, 1951
MOSSADEGH t-shirts — “If I sit silently, I have sinned”
