Convertibility

Telegram from the Foreign Office to Bagdad , Iraq on the suspension of convertibility, 18th August, 1947 (T 236/1195)

FROM FOREIGN OFFICE TO BAGDAD

No.690
August 16th, 1947. D 10.30 p.m.                                                     August 18th, 11947
Repeated to British Middle East Office Cairo No.659

sssss
IMMEDIATE
DEPID
TOP SECRET

My immediately preceding telegram.

The following is the form of the communication which you should make.

His Majesty’s Government regret to inform the Iraqi Government that they have been forced most reluctantly by the course of current events, demonstrated with growing seriousness by the heavy demands on them for dollars on a scale impossible to meet, to suspend temporarily forthwith the rights given to countries in the Transferable Account Arcs to transfer sterling to the United States of America and other countries included in the American Account Area, Canada and NewFoundland.

2.This step does not directly affect Iraq, as a member of the sterling area; but the same cause which has led His Majesty’s Government to take this drastic measure, namely the world-wide shortage of dollars which has affected the United Kingdom particularly as they had made sterling transferable, has made it necessary for them to inform the Iraqi Government that, despite the recently signed Anglo-Iraqi Financial Agreement His Majesty’s Government cannot now treat the sterling on Iraqi No.1accounts as in principle freely transferable to the countries referred to in the preceding paragraph.
His Majesty’s Government must instead ask the Iraqi Government, as they are asking other countries in the sterling area, to limit as far as possible their dollar expenditure. With this in view, His Majesty’s Government will have to agree with the Iraqi authorities a ceiling for their dollar expenditure in the immediate future. The Iraqi Government will no doubt review their position most carefully in order to consider what steps should be taken to reduce their expected net dollar deficit in the current half-year. His Majesty’s Government would be grateful for the earliest possible information of the measures proposed to this end. Meanwhile in the belief that the Iraqi authorities will co-operate fully with His Majesty’s Government in facing the emergency His Majesty’s Government hope to be able to provide for  the essential dollar needs of Iraq. It would assist His Majesty’s Government if the Iraq exchanges control authorities would furnish the Bank of England week by week with an estimate of the amount of dollars likely to be required for their requirements for the following week.

3.  His Majesty’s Government deeply regret that they should be obliged to take this step so soon after the signature of the Financial Agreement, but, although, as the Iraqi representatives in the recent discussions are aware, the concern of His Majesty’s Government as to the dollar position had  been growing whilst they were here, the critical stage had not been reached before the Agreement was settled.

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