TIIE ECONOI.ITC DEVELOPMENT OF IRAN By Abbas Ordoobadi Thesis submitted to the :faculty of the Graduate School of the University of Maryland in partial fulfillment of the requirements for the degree of }Taster of Arts 1948 i TABLE OF CONTENTS Chapter .Page I . PHYSICAL AND CLIMATIC FACTORS. .. . . Altitude ? ??? ? .? . . . . . .. ? . .. .. ? ? 1 1 Climate ??? . . Precipitation. . . . . . . . 2 ? 3 II. NATURAL RESOURCES ? ? . 4 General Conditions ?? . . . 4 Agricultural Products . . . . . . . ? ? 5 Indigenous Plants . Mineral Resources . . . . . .. . . . . 9 11 Coal ??? Iron ore .. . . . .. . .. . .. . . . . . . . . . . . ? ? 11 12 Copper ? ? . ? . . .. . .. . .. . . . . . ? ? ? ? ? 12 Red I r on Oxide 1 iscellaneous Mineral s . . . . . . . . .. .. .? . .. 13 14 III . POPULATION . ? ? ? . . . 16 IV ? INDUSTRIES : NATIONAL AND MOD..E R.L~ . . . ?? 18 Textiles ???? ? . . . . . Rugs and Carpets . ? ? . . . . . . . . ? 18 . ? ? ? ? 19 Metal Vlorks . ? ? ? ? Modern I ndustries ?? .. . .. . . . . .. .. .. .. .. . . ? ? ? 20 . . ? ? ? ?? ? 20 Text i l es Cotton ??. . . . . . .. . ? ? 20 Textiles . WSilk ? . o.o le.n .. . . . . ? ??? 21 ? ??? 22 Text iles Jut e . ? ? ? . . 25 Sugar I ndustry ? . . ? . . . . 25 Carmine Indus try ??? . ? 25 Vegetable Oils ?? . ? ?? 26 Portl and Cement. ? ? ? ? ??? 26 Glass Manufacturing. ? ??? ? ? ?? 26 Steel . ? 27 Chemical Industry. ? ? ? ? . . . . . . . ? ? 28 Tobacco Industr y . ? ? ? 29 Miscellaneous Industri es ? . . . . . ? ? JO v. OIL ? . . ? . . . ? ? 32 Historical Background ?? ? .. ? Anglo- Iranian Oil Company. ? . ? .? .? . . .32 ? 32 Dispute bet-vreen the I ranian government and the Angl o- Iranian Oil Company ? ?????? ? 34 Iranian Oil F'ields ??? ? 37 Masjed- Sulaima1 ? ? ? ? ? ? ? ? ? . . . . . . . ? ? ? 37 Gach-Saran ? ? ? . . . . Vlhite Oil Springs . . . . . . . . . ? ? ? ? . .. . . . ? 39 ? ? 39 Aghe- Jari ????? ? . . . . . ? 39 Haft- Kel ???? . . . . . . . . . . . . . ? 39 t'azanum . ? . . . . . . . ~o L4G9G ' J ii Chapter Page Naft-Shah ?? Iranian Russian Oil Negotiation . . . . . . . ??? 40 ? ? ? ? ? 43 VI. Tf'ANSPOHTATION . . . . . . . . . . . . . ? 47 Highways ? ? ? ? ? ? ? ? ? ? ? ? ? . . . . . Railways ? ? ? ? ? ? ? ? ? ? . .. .. . .. . .. . . . . . . . . . . ?? 48 ? 48 Ports . . . . . . . . . . . . . . . . . . . ? 51 Air Transportation ?? . . . . . . . . . . ? 56 VII . TARIW. ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? . ? ? ? ? . . . 58 Historical Background . ? ? ? ? ? ? ? ? ? .?????? 58 The Tariff Convention of 1903. ? ? ? ? ? ? . . ? ? ? . ? ? 59 The Tariff Autonomy. ? ? ? ? ? ? ? ? ? ? ? ? ? . ? . . . . 60 VIII . J:i'Ol/EIGN T}lADE ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? 62 Historical Backgroun d :1875-19111. ? ? ? ? ? ? ? ? ? ?? 62 Trade 1ffith Russia :19111-1931. ? ? ? ? ??????????? 67 Trade Vlith the United Kingdom:1914-1931. ? ? ? ? ? ? ? ? ? 70 Trade With France : 1914-19Jl . ? ? ? ? ? ? ? ?? 72 Trade With Germany: 1914-1931 ? ? ? ? ? ? ? ? ? ? ? ? 73 Trade Wit h the United States :19liJ-1931 ? ? ? ? 74 Foreign Trade Monopoly Act of 1931 ???????????? 74 Foreign Trade Control . ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? 76 DC. Fil' MlCE AND BANKING ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? 79 Monetary Refonns ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? 79 Paper Notes . ? ? ? ? ? ? ? ? ????????????? BJ Bank:iJ1g . ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? U4 Imperial Bank of Iran . ? ? ? ? ? ? ? ? ? ? ? ? ? ??? 85 Banque d' Escompt de ~erse ? ? ? ? ? ? ?????? 86 The Ottoman Bank ?? ? ? ? ? ????????????? 87 The Banque Russo-Persane ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? 87 The Bank Sepah ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? 87 The Bank Melli Iran. ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? 137 The 1 a t i onal Savings ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? 88 The Agricultural and Industrial Bank . ? ? ???? 89 The Mo rt gage Bank . ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? 90 The Industrial and Mining Bank of Iran ? ? ? ? ? ? ? ? ? ? 90 The Budgetary System of Iran. ? ? ?????????? 92 x. LABO H CO.ND IT ION ? ? ? . . . . . . . . . ? ? ? ? ? ? ? 97 Wages . ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ?. ? 97 Labor Legislation. ? ? ? ? ? ? ? ? ? ? ? ? ? ? ?.???? 98 XI . POSSIBILITIES OF FUTUllli m.,'VELOPMEN-rr ? ? ? ? ? ? ? ? ? ? ???1 00 Agricultural Development ? ? ? ? ? o ? ? ? ? ? ? ?? ? 100 The Social Factor ????????????? ? ? ??1 00 'rhe Technical Factor ? ? ? ? ? ? . . . .101 Increase in Area of Cultivated Lands ????????? ? ? 102 New Agricultural Products and Expansion of Present Products ???????????????????? .105 Soil Conservation. ? ? ? ? ? ? ? ? ? ? .107 Agricultural Information ? ? ... ? ? ? ? ? ? . . ? .107 Indus tr .ial Development ? ? ? ? ? ? ? ? ? ? ? ? ? ? ??1 08 iii Page BIBLIOGRAPHY. ? ? ? ? ? ? ? ? ? ? ? ? ? 0 ? ? ? ? ? ? ? ? ? ? ? 111 APPENDIX I . ? ? ? ? ? ? ? ? ? ? ? ? . ? ? ? ? ? ? ? ? ? ? ? 0 ? ? ? 115 APPENDIX II ? ? ? ? ? . . ? . ? ? ? ? ? ? ? ? . ? ? ? ? ? ? ? ? . . 116 APPENDIX III . ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? . ? ? . ? ? 117 APPENDIX IV ? ? ? ? ? . ? ? ? ? ? . ? ? ? ? ? . ? ? ? . ? ? ? ? ? . 118 APPENDIX V? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? 121 APPENDIX: VI . ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? 123 iv LIST OF TABLES page Table r. Production of Tobacco Factory ???????????? ? ? ? ? 7 II. Principal Cities of Iran with their Population ??????? 17 III. The Number of cotton Textile Hills ????? ? ? ? ? ? ? ? ? 21 IV. Steel Consumption in 1940, ? ? ????????? ? ? ? ? ? ? 28 v. Producing Wells and oil production of Iran ? ? ? ? ? ? ? ? ? 38 VI. Anglo-Iranian Pipe-Lines in Iran ?????????? ? ? ? ? 41 VII . Engineering and Geological Data on Iran1 s Oil Fields ???? 42 VIII . Gauge and Approximate Length of Railway Lines now Operating ?????????????????????????? So IX . Volume of :r,.rovement Through Ports Caspian Seaports, Year 191-fo. ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? 51 x. Volume of Movement Through Ports Caspian seaports, Year 1945. ? ? ? ? ? ? ? ????????? 52 XI . Volume of Hovement Through Ports persian Gulf and oman Seaports , Year 1940 ?????????? 52 XII . Volume of Uoveme::nt Through Ports Persian Gulf and oman seaports, Year 1945 ????? . . . ? ? 52 XIII . Swnrnary of Volume of Movement Through Ports ????? . . . ? 53 XIV. Foreign Trade from 1875-1914 ????? .??? ? ? ? ? ? ? ? 0 66 xv. Trade with Russia: 19JJ.1.-1931 ?? ? ??? ? ? ? ? ? 0 ? ? ? ? ? 67 XVI . Trade with United ICingdom: 191lf-1931 ??? ? ? ? ? ? ? ? ? ? ? 70 XVII . Oil ~xport and other commodities :1923-1931 ?? ? ? ? ? ? ? ? 71 XVIII . Trade with France :1914-1931? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? 72 xrx . Trade with Germany:1914-1931 . ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? 73 xx . Trade with the united states :1914-1931 ??? ? ? ? ? ? ? ? ? 74 XXI . Number of Savings Accounts and the Amount Deposited ????? 88 XXII . National Savings ? ? ? ? ? ? ? ? ? ? ? ? ? ? ?? ? ? ? ? ? ? 89 XXIII. Revenues of the Iranian Government, Iranian Year 1325 (I.larch 21, 191-(6 to March 20, 1947) ?? ? ? ????? ? ? ? ? 94 XXIV. i_;xpendi tures of the Iranian Government, Iranian Year 1325 (l1arch 21, 1946 to !.Iarch 20, 1947) ????????????? 95 V PREFACE In the machine a ge, with the advance of mass production, a nevr problem has occupied the minds of economists. This n,ew problem is not the JTalthusian doctrine of inadequate supplies but rather that of a rate of production too high to be sold continually at profitable prices. '.[ith periodic insufficiency of demand industrial countries have faced depres- :::;ions of vcITying duration and intensity, which have continued until the rate of production and demand once more were in equilibrium. Despite increased industrial productivity a lare;e part of the world subsists at a standard of livint:; which provides insufficient food value s and wh.i.ch does not yield a minimum amount of housing , medical care and education. In industrial countries from ten to fifty per cent of the worldng popu- lation is unemployed during depression period s althchugh workers are willing and able to work in order to obtain eoods . In the non-industrial countries , on the other hand, millions of workers are victims of whal:, has been termed lldisguised unemploy111ent. 11 They find themselves at tasks which are much below their potential productivity and consequently yield a standard of living substantially under that which they are capable of achieving . The solution to this problem in the undeveloped areas lies partly in spreadine the gain::; of science , both pure and practical; in combining adequate doses of capital and management with the supplies of labor; and in using the excess of resources originating from technical advances j_n industrial countries . A prograr.1 on this line would at the same time eliminate inadequate demand in the high-standard countries and depressing poverty in the low-standard countries . As far as Iran is concerned, it is necessary to know her economic background before the necessary measures for economic development can be discussed intelligently. In this respect , vi in spite of a few v10rks by Iranian and foreiGn scholars, the materials on the economy of Iran, in :2:!lf;lisll literature, are limited. The result of insufficient and first-hand information or 11 little lmowledgc 11 of some writers has been a distorted picture in which cer tain points are over- emphasized, while the sie;nific ance of others are under-estimated. Statistics, censuses and data in many aspects clI'e lacking. 'rhe absence of statist ics makes the study very difficult . Due to the scarcity of published data on many of the topics discussed in the present study, it has been necessary to secure the desired iruormation and data directly from the !.'.inistries of Iranian Governnent and/or offices concerned . The present economic situation of Iran is the product of an evolution, and can only be under stood by a study of its economic background. Therefore, the application of August Comte I s adage that 11 no conception can be under- stood except through its history" seemed a logical approach in this study. l:'.y appreciat ion is due to Dr. c. J . natzlaff, who generously devoted his time to the direction of this study. The work could not have been accomplished without the aid of his experienced judgment . I am a l so grate- ful to Dr. Dudley Dillard., who mc..d e valuable suggestions, and to Dr . Franklin D. Cooley for his help in the preparation of the early drafts of the manuscripts . Needless to say, however, responsibility for the conclusions reached is entirely nw ovm. Chapter I PHYSICAL AND CLIMATIC FACTORS Between the valleys of the Indus on the east and the Tigris on the west rises what is called the Iranian Plateau. Iran fills the western portion of this elevated tract. It is bounded on the north by Russian Caucasus, the Caspian Sea, and Russian Turkestan; on the east by Afghan- istan and Pakistan; on the south by the Gulf of Oman and the Persian Gulf; on the west by Iraq and Turkey. Its area is about 628,000 square miles, 1 or tlvo-thirds of the Iranian Plateau. In altitude the plateau exceeds 5,ooo feet at Kerman, 5,ooo feet at Shiraz, and 3,000 in the region of the great northern cities of Tehran and Mashad, while Tabriz, in the extreme north-west, exceeds 4,000 feet. Of the central cities, Isfahan exceeds S,ooo feet, and Yazd 4,000 feet. The highest point is :Mount Dama.vand, east and north of Tehran, with an elevation of about 18,Soo feet (S,650 meters) above sea level. 2 The plateau is traversed in places by mountain ranges running generally in a northwest to southeast direction, parallel with the Zagros Mountains which form the western and southern boundries of the plateau. The north- ern boundary is formed by the high Alborz range, north of which are foot- hills fringing the narrow Caspian Sea coastal plaino In the south of the Zagros Hountains, at the head of the Persian Gulf, lies another plain and the valley of the river Karun.3 The valleys, situated between these ranges of mountains are usually green and fertile. From the slopes of l The equivalent of all states cast of the Mississippi and north of and including Tennessee and North Carolina. 2 sir Percy 11i1olesworth Sykes, !: History of Persia, Macmillan and co., Ltd . , London, 1921. 3Karun is the largest river; it flows into the head of the Persian Gulf . 2 the mountains springs of water flow down into th~ valleys. In the central areas the plains situated between the ranges of moun- tains are mostly desert; and because of lack of adequate water and the salty soil, they are incapable of cultivation. The Kavir desert occupies a large part of the country; and it is perhaps the largest absolutely barren desert area on earth. The lowland part of Iran is that situated on the shores of the Caspian Sea and the Persian Gulf. The Caspian Sea1 area contains the most fertile part of the country, while the Persian Gulf region, though i rrigated in part, is not very productive . 2 Iran is a land of extremes in climate. '?he atmosphere is one of the mra t invigorating and delightful imaginable) The climate varies with latitude and altitude; the central plateau being of a semi-arid condition, while the south is tropical.4 The Caspian littoral is sub-tropical with- out extremes of temperature . South of the Alborz Range, which parallels the shore of the Caspian, there is snow in winter , and in summer the temperature may reach 110? Fahrenheit (43? Centigrade ). The highlands have severe winters. Tehran, at a height of 4,ooo feet, has a January maximum of 35? F. while extreme temperatures below o? F. have been re- corded in Isfahan.5 ?he Caspian Sea is at present about 85 feet (26 meters) below sea level, and apparently receding at an average rate of 4 inches (10 centi- meters) annually. 2w.i.1son, Sir Arnold T., The Persian Gulf, an historical sketch from the earliest times to the beginning of the twentieth century, Oxford, 1928. 3sir percy M. Sykes, Persia, Oxford, 1922. 4Wilson, Sir Arnold T., The Persian Gulf, Oxford, 1928. Also : Great Britain Admiralty, Notes on cllmate and other subjects in Eastern Medi- terranean and Adjacent Countries -- and Great Britain Foreign Office, Persian Gulf, H. M. stationery, London, l920. Ssource: Ninistry of Agriculture, Tehran. 3 Precipitation, both as to denisty and distribution, is an unfavor- able climatic factor. The snowfall is variable and uncertain. The high- lands, over 4,ooo feet in altitude, usualfy- are covered by heavy snow, between December and April. In the maritime areas, on the other hand, the fall of snow is a rare occurrence. The rainfall is light everywhere except on the Alborz Mountains, which receive a heavy fall in winter owing to the depressions which originate over the Caspian. At Rasht, the annual average is fifty-six inches, 1 but the amount decreases rapidly eastward to less than twenty inches in the region beyond the eastern end of the range. over the plateau south of the mountains, the annual total is about nine inches in the north; it decreases southward, being only two inches per year at Sistan. At the head of the Persian Gulf, the rainfall is somewhat greater, slightly over ten inches. 2 The rainfall is almost entirely limited to the months of October to May inclusive and is heaviest from December to March. The climatic conditions in the Gulf are profoundly affected by the configuration of the surrounding region. The broad mountain chains which extend to the north and northwest interfere with the free inflow of tempering winds from the north. During the late spring and sunnner the prevailing wind is the Shemal, from the northwest, hot but dry and healthy. 1 Source : Hinistry of Agriculture, Tehran. ~'{ilson, Sir Arnold T., The Persian Gulf , Oxford, 1928. Chapter II NATURAL RESOURCES General Conditions Iran is a wealthy country, having fertile lands, potentially abundant minerals, relatively vast forests, adjacent seas well-stocked with fish, and above all rich oil bearing territories. Lands which a.re either mountainous or salt deserts and therefore not suited to cultivation form not less than 30 per cent of the whole area of the country. Only a.bout 10 to 15 per cent of the total land area is under cultivation. An addi- tional 20 to 30 per cent could be cultivated if irrigation were available. About 15 per cent is grazing land and 15 per cent is in forest. 1 The fertility of the cultivatible land varies considerably, in many places reaches a very h.i..gh degree, but nowhere is it comparable to the fertility of the Nile Valley or the Ukranian black earth. The total area covered by any kind of forest does not exceed J0,000 square miles (about 1/24 of the whole area of the country). 2 Of this, 1/3 is situated on the shores of the Caspian Sea and provides the most important timber which includes: oak, elm, ash, beech, box, cypress and willow. The other two thirds are represented by park-land covering the western and southern hills of Iran. The plains and hills around the plateau of Iran provide good pasture for domestic animals. This has made of Iran an important stock breeding country. L ~ , 7!; . K. Alami, Le Redressement Economique de_!?~, Universite de Paris, 1936, p. 66. Also : B. A? Keen, The Agricultural Development of th~ Middle East, H. M. stationery Office, London, 19460 2The Ministry of .Agriculture, Tehran. 5 A host of species of plants, some of them almost unknown in other lands, grow in Iran.1 During the long centuries Iranians studied their properties and found important uses for them in the fields of medicine and industry. It seems certain that such varieties as pistachios, almond, apricots, peaches and lucerne were introduced to other parts of the world from Iran. The collection and preparation of certain plants which grow wild forms an important part of the exports of the country. Some 4,000 tons of gum tragacanth and 859 tons of gum azafsetida are gathered, yearly, together with 200 tons of material from the henna plant. Color- ing matter comes from indigo, saffron and other plants while atrophenis spinosa, and hedy sarim are used in medicinal preparations. Wild animal life includes tigers, bears, wolves, leopards, hyenas, lynx, wild cats, .fox and jackals. The game birds include bustard, pheas- ants, partridges, francolin, sand-grouse , mallard, teal and snipe. pigeons are plentiful everywhere in the vicinity of cultivation. Of non- game birds eagle, hawks, vultures, bee hoopoos and bluejays abound, and the crow, raven, chough, magpie, starling, bulbul and warbler are common. In the Caspian provinces many species of water birds are to be found. Agricultural Products Possessing every variety of climate, Iran enjoys a great diversity of agricultural products. The most important are the following: cereals, rice, cotton, silk, tobacco, sugar and tea. cereal cultivation is determined according to the degree of irri- gation which is possible. The Caspian Zone , with a rainfall which some- times exceeds 55 inches and produces great hu..."Ilidity, is somewhat of an 1n. Pirnia, ! Short survey of Economic Conditions of Iran, Tehran, 1945, P? 8. 6 exception. The rivers of Iran capable of being worked for irrigation by gravitation are few. The main Iranian plateau is watered by a number of streruns, mostly of inconsiderable length. In such conditions agriculture relies for the most part on irrigation, drawn either by gravitation from those rivers holding a supply from spring to autumn, or more commonly by ghanats, 1 artificial subterranean canals starting from the foothills and collecting water for distances of 12 to 30 miles until they are brought to the surface and the stream directed above ground to the lands to be irrigated. Dry cultivation is also used in cultivation of cereals. The most important cereal product of Iran is wheat, with an annual production of about 2,000,000 tons, followed by barley with 750,000 tons. 2 Rice is largely cultivated in the low-lying strip of the Caspian Sea and to some extent in other parts of the country. The provinces of Gilan and Mazadaran on the Caspian produce nearly nine-tenths of the whole out- put of rice. The annual production of rice is 500,000 tons.3 There is an important export of rice to the Soviet Union. Cotton is grown in nearly all provinces of Iran. The climate condi- tions of the central plateau are best suited for short staple cotton. The production of cotton is estimated at some 150,000 tons.4 Formerly only a small quantity of cotton was used in the local mills and the greater quantity was exported, but during the la.st 10 years many mills and textile factories have been erected in Iran and they absorb a large proportion of the cotton. 1M. Fateh, The Economic Position of Persia, London, 1926. 2S ource: Ministry of Agriculture, Tehran. Jibid. ?i. N. Gupta, Iran, An Economic study, Indian Institute of Inter- national Affairs, New Del.m, -r,m-r-;-- --- 7 Silk production is o:f long duration. In the 16th and 17th centuries the finding of a market for the silk trade of Iran was a source of pre- occupation and pro.fit for the Safavian kings. In the 17th oenttlr"J Chardin estimated the silk crop of Iran to be about 4,000,000 pounds. Up to 1860 1 the total production annually was valued at l,000,000 pounds. The nru.1- berry is grown for sericulture chiefly in Gilan and Mazandaran, to a lesser extent in Yazd and Khorasan. It was formerly grown very extensively .from Isfahan to some JO miles up the valley of Zainderud. The breeding of silkworms from 1864-1890 declined to small proportions owing to the disease "pebrine, '' but, at the end of the 19th century, an import to Gilan of selected sil kworm eggs from Brusa in Turkey led to a revival of the industry. The present production of silk is about 2,000 tons, which is processed largely by local factories. Tobacco grown in the Caspian province supplies the total need of the Goverruoont tobacco factory in Tehran, which produces cigars and cigarettes for the whole country. The tobacco is now produced about as follows: TABLE I Production of Tobacco Factory Type Area Hectares Crop Kg cigare??e B,510 4,500, 000 Pipe 5,650 2, 500, 000 water-pipe 1,115 2,000,oaoi:- *Source: Office of Tobacco Honopoly, Tehran. Many attempts have been made to encourage the growing of sugar beets, providing raw materials for eight sugar factories, which need about 40,000 tons o:f sugar beets a year. The average sugar beet yield is ?1. Fateh, The Economic Position of Persia, London, 1926. 8 7.5 tons per hectare, about one-fourth of what it should yield. Reasons for this low yield are lack of irrigation water during summer months, lack of phosphate fertilizer, and continued growing of beets on the same land without crop rotation.1 The consumption of sugar in Iran is anrrually 110,000 and the production of sugar beets is enough to produce only 30,000 tons. Tea is grown in some of the northern provinces, and its cultivation is growing rather rapidly. The area between the cities of Ramsar and Astara, and between the mountains and the Caspian Sea is particularly well adapted to the cultivation of tea. It is estimated that -within this area there are 8,000 hectares, not now cultivated for tea, where it can be grOlm. The national annual consumption of tea is 10,000 tons; the pro- duction is 4,ooo tons. Some of the tea factories which serve the present producing area are privately o,med, others are operated by the Government. The fisheries of the Iranian littoral of the Caspian Sea are a valuable resource and also a source of revenue to the State. In 1868 they were leased as a monopoly, to a Russian firm. The upheaval caused by the World ?war I having resulted in failure of the concessionaire to pay the royalties, the concession was withdrro-m by the Iranian Government in 1918, but leased to another Russian firm. The concession was termi- . I I nated by IID1tual agreement, and Societe Mahi Iran, a new corporation for the exploitation and marketing of all products of the fisheries was established. In the new co11)oration Iran and Russia have equal rights, but the president of the Societe should always be an Iranian. The Iranian Government has established and operates a fish-canning factory at Bandar Abbas principally for sardines. 1Report ~ Program for the Developmen~ ~ Ir~, Prepared by Inter- national ~'ngineering Cor:ipany, Inc., San Francisco, California, U.S.A., for Horrison-YJ1udsen International Company, Inc., July 1947. L 9 Indigenous Plants Iran abounds in indigenous plants including medicinal plants, fra- grant plants, resiniferous plants, plants yielding coloring matter, and oil-yielding plants. The most important medicinal plants are the foil owing: Absinth, Senna, I.1astic, Vild Rue, Fleawort, Origarnm, Plantain, White Succary, cat?s Paw, Haidenhair, Parsley, Thyme, l?anna Tighal, Persian Manna, Purgative Hanna, Salep, Colocynth, Rocket, Santonica, Fennel, I rusta.rd, Liquorice, Rhuba.rl>, Aniseed, Hyssop, Cumin, Sumac, Jujube, Hermodactyle, Negella, ::edge 1'Ustard, Tamarix, 1,1anifera, Lar joram, Buglose, Morning Glory, and r.:-yrtle. Fairly large quantities of the above natural products are exported from Iran and the country is well supplied to meet any increased demands in the future. Fragrant plants provide the basis for the perfume industry of Iran, which dates back to ancient and medieval times as shown by the numerous references to its famous rose and other perfumes in Oriental tales . More recently it has fallen in the background with the result that its products , in the form of rose and orange-blossom perfumes of which fai!ly large quantities were formerly exported to India, Iraq, and other neighboring countries, now barely suffice for the needs of the country itself. The best rose perfumes are now manufactured in IV:aiman (Fars) and Kashan. In view of the great variety and special fragrance of its flowers, the per- fume industry of Iran can easily be revived and large quantities of rose and other perfumes and essences made available for export to foreign countries . Spearmint and penny-royal. are other important fragrant plants which grow profusely in most parts of Iran, especially in the Caspian Sea areas, for which a large foreign demand exists. 10 'l'he most important of the r esiniferous plants of Iran is Tragacanth. This plant which provides Iran with one of its important e:>q>0rt items grows wild in most parts of the country, especially in Fars, Isfahan and Kermanshaho Large quantities of Gum Tragacanth, obtained from this plant, are exported every year to Europe, United States of ,America, India and other countries where it is mainly used in the textile and pharmaceutical industries . Gum Arabic and Gum Asai'oetida are other intportant products of the resiniferous plants of Iran. In 19Lrl as nmch as 251 tons of Gum Asafoetida, valued at Rls. 2,175,372 was exported from the country, mainly to United States of .America, Great Britain, India and Iraq. 1 As to plants yielding coloring matter, the more important of the indigenous ones are: Indigo, Madder, Henna and Saffron. The coloring matter obtained from the root of the Madder is used in Iran in the carpet industry; but some quantity of !.:adder roots , as well as Indigo leaves, is also e)...'POrted abroad where they are used in the manufacture of dye- stuffs. The exports of Henna from Iran in 1941 amounted to over 758 tons, valued at Rls . 3,595,hJ.4 and the buying countries were Russia, Afghanistan, Germany, United s tates of Ji;nerica, Turkey, Syria, Iraq and India. During the same year 5,575 ldlograrranes of Saffron, valued at Rls . 8,SoL., 773, was exported from the country, mainly to Egypt, Iraq, and India. 2 The important oil-yielding plants of Iran a:re the olive, sesame and castor . Olives are grovm extensively in the Caspian Sea areas and its annual produce is about 40,000 tons of which the greater portion is used for marrufacturing olive-oil for home consumption. 0esame and castor are 1Annual Reports of custom Administration of Iran, Tehran, 1941. 2Ibid. '~ 11 cultiv-at,ed on a large scale in most parts of Iran and the Greater part of their annual produce of about 6,500 tons and 5,ooo tons respectively is exported abroad. 1 The remainder is used locally for manuf acturi..,g oil. l,inseed is also ['; rown to some extent in Iran; and the oil extracted from it is used in the manufacture of paintso The cultivation of the above oil-yielding nlants can also be developed extensively and their products ? nmltiplied several times.- :;,;ineral Resources Coal The principal coal mining regions of Iran are located on both slopes of the Alborz l,lount.J.in north of Tehran, and east and southeast of ,. a.shad near the border of Afganistan . Coal is also found in the vicinities of Tabriz , Isfahan, and Kerman, and is extracted and sold locally. out- cropping of coal seaJns have also been observed in many other localities , but they are either too thin to be worked , or demand or transportation is def icient . Of the known coal deposits of the country, those which have been exploited to the 6reatest ext ent are ln Alborz 1,tountains north of Tehran. These deposits lie in the ruGged region on the north and south slopes of the mountains, and because o: the rugged folding , they are nearly devoid of structure and when mined produce slack or powdered coal. The .foldi..rJg has at times been accompanied by heat,, with the result that some of the volatile matter has been driven off and the coal does not pro- duce good coke . The coal sea.ms of the Alborz }'ounta.ins are u sually 1 Annual Reports of customs Administration, of Iran, Tehran, 19hl. 2 sre l?,ghtesa.d , Official Journal of the Chamber of con:icrce of Tehran, Vol. I, lfo. 1, Tehran, September 1946. 12 thin and average only about 60 centirneters. 1 The lmown number of coal seruns in the coal measures vary with the region, and also with the amount of exploration in the region. All of the lmovm coal deposits are located in steeply dipping anticlines and synclines. 'l'he angle of dip varies from about 30? at Kerman, and 35? to 40? near Mashad, to 90? at Zirab. 2 The thinnest vein worked commercialzy- occurs near Tabriz., where the seam is between 10 and 18 centimeters thick. The thickest vein recorded occurs at the Chasheh-Gol Hine near Hashad, where there is an average thiclmess of 2 meters. The veins of the principal mines near Tehran have an average thickness of about 6o centimeters. 3 Iron Ore Approx:i.matezy- 200,000 tons of hematile is mined near Sernnan. The mining has proceeded entirely by following the veins of ore and m..-tldng no attempt to outline or explore the deposit by means of core drill holes. All problems regarding the mining of iron ore are, and must be, purely speculative depending upon the Govcrnrnentts decision as to the construction of the steel mill. 4 Copper Copper is found in Iran in three main mining districts which are located near the towns of Anaralc, Abbasabad, and Zenjan. Present mines \eport ~ Program from the Development ~ Iran, Prepared by Inter- national Engineerinc CoL'lI_)any, Inc., San Francisco, California, U. S.A., for Horris on-Knudsen International Company, Inc., July 194 7 ? 2Ibid. 3In 1938 the Government began to erect an important iron and steel furnace near Tehran, but had to abandon the project, possibzy-, temporarily on the outbreak of world War II . 4 !Io Pirnia, ~ Short survey ~ the Economic Conditions of Iran, Pub- lished for the Economic Information Bureau, Tehran, March 1945;-p:- 61. 13 are substantially the same as those of ancient times, and are now operated at depth. Iran1 s copper deposits are very large but are mostly of very low grade?. The present method at Anarak, of mining by II filled stope, n is the most expensive method which can be usedo The average concentration of the Anarak deposit is about 0.25%, although concentrations are lmmm to occur in the deposit in considerable vorume having an average value of &;1,o 1 Concentratiosn of 1% may be economically worked in large volume by methods of 11block caving." It is believed that by careful coordi- nation between testing laboratory and field forces , ore having sufficient value to permit extraction by modern machinery and by some method of mass- excavation may be blocked outo The mines of Abbasabad have been operated for many years by 11 open cut" methods. Recently copper values have been found to be reducing with depth of worldngs, and exploitation of the mines of the area was dis- continued in the spring of 1947. The Government has begun the exploration of the district. Red Iron Oxide Red iron oxide occurs on Hormoz Island, which is offshore from Bandar Abbas . The materiaJ. as found is of such purity that it can be used as pigment for paint and as such is purchased by English interests. The availability and quality of the product is not generally lmo"l'm and the amount produced by the limited forces working on the island is between 1,000 and 1,200 tons per year. As the material is found in the pit there \r. Pirnia, A Short survey of the Economic Conditions of Iran, Pub- lished for the Economic Information Bureau, Tehran, March 19[.5;p":" 61. are several feet of waste which must be stripped from the deposit. Be- low th.is there are several feet of the oxide which is fairly high grade, but is not of paint quality. This material could be used as iron ore. The oxide of paint quality lies below this lower grade material. The quantity of the oxide on the island is enormous but has not been accurately measured. Production of the oxide is entirely by hand methods and after mining it is roughly crushed by wooden mallets. Miscellaneous Minerals Iranian mines contain and produce many items of commerce, such as chromium, sulphur, lead, arsenic, magnesite, gypsum, quartz, feldspar, salt, etc . Many of these items are produced in small amounts by private operators and at unit prices far above the corresponding world prices. They are produced and sold at these prices principally because very small amounts are required for Iranian industry, and also because of the diffi- culties of shipping the material into the country from abroad. Sulphur occurs in large amounts in an :impure state in many parts of the country. The amount r equired per year will undoubtedly rise as a result of the increased industrial program. At present, less than 100 tons are required per year. This amount is provided by crude furnaces in the desert using sulphur for fuel and producing a surprisingly pure product. Salt occurs in many parts of the Kavir and Lut deserts , and on Hor moz and Gishm Islands. The domestic requirements are produced from the former sources. The l atter are admirably situat ed f or world markets and deposit s are of excellent quality. Lead occurs in small amounts in several locations , including as the most promising, one at Anarak. L 15 The turquoise mines of Neishboor are very famous and have been worked for the past 800 years. 1 There are also turquoise mines in Kerman arrl Sane. Petroleum deposits are well known to exist in many parts of southern, northern and western Iran. Because of its importance the petroleum deposits are dealt with in a separate chapter. 1 M. Fateh, The 'll,:cono.m;i.Q. Position QI Persia, London, 1926. L Chapter III POPULATION The population of Iran is officially estimated to be about 16, 550,000. Obviously, therefore, the country is very sparsely populatedo Its large areas and abundant natural r esources with proper development could sup- port a considerably larger population. r-Jat ural conditions account for the northern and western parts of the country being more densely populated than the central or southern parts. Of the total population of Iran, t he nomadic tribes constitute prob- ably three million. 1 They are of' considerable economic importance to the country for they produce a number of principal articles of commerce, namely, rugs, lambsldns, dyestuffs, and medicinal herbs. As great cattle breeders they provide the towns with the products of their flocks; milk, meat, but?l;er, and cheese. In fact, the towns depend for their living upon these products . This became apparent when as a result of the inter- ruption of the traditional tribal life by the tribal settlement program there occurred a serious shortage of animal products in the t mms . The tribal elements are scattered throughout Irano The most important among them are: 1<:urds, Lurs, Turks, and Qashqais. The distribution of urban population is indicated by the table which fallows: ?;lgin Earl Groseclose, Introduction to Iran, New York_, Oxford University Press., 1947 . Also : w. s. Haas , Iran, Columbia University Press , New York, 1946. 17 TABLE II Principal Cities of Iran -with their Popu}.ation (1947)?~ flame of city Population Tehran 850,000 Mashad 250,000 Tabriz 214, 000 Isfahan 205, ooo Shiraz 129,000 Rasht 122 , 000 Hamadan 104,ooo Kermanshah 89, 000 Ardebil 64,ooo Rezayeh 64,ooo Yazd 60,000 Kerman 60, 000 Ahwaz 60,000 Ghazvin ss,ooo .Arak 55,ooo bad.an So, ooo li:arae;heh So,.ooo Burujerd 46, ooo Kashan 4S, ooo Ghom 40, 000 Zenjan 40, 000 Dezful 40, 000 Pahlavi 38,000 Khoi 35, ooo Babel 31.t , ooo rnal:zyer 33, 000 Sanandaj 30, 000 I3Ushehr 28 , 000 Najafabad 21, 000 Ghochan 25, 000 Saghez 2s, ooo Kazerun 24, ooo Shah Reza 24, 000 Shahrud 24, 000 Shushter 24, 000 Senman 23 , 000 Niriz 23, 000 Jahrom 23, 000 I3ehbehan 23, 000 Jorjan 21, 000 Golpayegan 21, 000 Sari 21, 000 Lahijan 20, 000 Khonsar 20, 000 Khora.ma.bad 20, 000 Boraz j an 18, 000 Behshahr 11 , 000 Zabol 16, 000 Lar 1s, ooo Bandar Abbas 14, ooo -r.?neport ~ Program for the Development of Iran Prepared by Inter- national Engineering Company, San Francisco, California, U. S. A. , for Uorrison-Knudsen International Company, Inc . , July 1947, p . 18. Chapter IV INDUSTRIES: NATIOIJAL AND MODERJJ National Industries?:- In the 19th century the national industries of Iran, which had been developing were hampered by an invasion of cheap foreign manufactured eoods.1 Consequently domestic industries were not in a position to com- pete with foreign goods. In consequence the national industries of Iran declined considerably. During the last twu decades, however, owing to the goverrnnent encouragement and protection the national industries are improving in quality and increasi ng quantitatively. Some of these industries which have, by their peculiar artistic qualities and modernized technique, survived the competition of the new industries are discussed briefly below: Textile s The evolution of weaving techniques in Iran and the consistantly high level of her achievement in this field bear a definite relation to the fundamental characteristics of her artistic expression. Her creative works in all periods are distinguished by a rich and subtle sense of color, and by an extremely sensitive feeling for beauty of line. Iranian love of color, especially in varied and sophisticated combinations , ?:?By national industries is meant the local industries which have existed in Iran from ancient times, and have been created by Iranians themselves. \ r. Fateh, The Economic Position of Persia, London, 1926. Also : Tariff p . -SS. resulted in textiles that are remarkable for the many different shades in which the designs are woven. 1 n.u6s and Carpets The most :important textile fabrics are the rugs and carpets, which has a world fame . The time involved in manufacturing the rugs is responsi- ble for the high cost. Since rugs are entirely made by hand, it takes thirty hours to finish a square foot of rug. The principal manufacturing districts are Kerman, Kashan, Fars , Khorasan, Tabriz, Kordestan, Isfahan, Ya.1,d, Arak, and Nain. on a smaller scale such manufacturing is carried on throughout the nation. Each district holds to its ovm traditional designs, colors, and materials. About ten years ago the Iranian Carpet Company, a government corporation, was formed. At first, it was charged with the supervision of all carpet looms in the country. This i dea was soon abandoned, 2nd the Company became a manufacturing and selling concern. Because of its size the Company exerts considerable influence in the industry. It seems that for some ti.me to come the greatest single foreign market doubtless will be the United stat es . For the years 1932 to 19h3, the United States took rugs an::l ca.rpets to the value of about 51,000,000 rials per year. 2 Next in value to carpets are the woolen fabrics (which produce the beautiful shawls of Kerman), the silk fabrics (the manufacture of which is centered in Yazd, Khorasan, and Kashan) , and the 11Ghalamkar fabrics" 1N. Andrews Beath and E. B. Sachs, Persian Textiles, and Their Tech- nique from the Sixth to the Eighteenth Centuries , New Haven, Oxford University Press, 1937. Also: l,iehmet Aga-Oglu, safawid Rugs anc! Textiles, New York, Morningside Heights, Columbia University Press, MCMXLI . Also: R. M. Riefstahl, Ph. D., Persian ~d Indian Textiles, New York University, New York, 1923. 2 nnual Reports of the customs Administration of Iran, Tehran, 1932 to 1943. (One rial is equal to 3.2 cents.) 20 or chintzes block-printed on cotton or silk tissue (which are make in Isfahan) o The latter, small quantities of which are exported abroad, are corrnnonly used for curtains and tablecloths. Amongst other textiles is "Naghdeh, 11 with small compact floral and personnage designs . Naghdeh consists of strips of gil~-silver woven flat. The brocaded plain cloths or taffetas is also among the famous Iranian textiles. However, their production are greatly reduced in amounto 1 Metal Works Metal work has been one of the most renO\med of Iranian industries in the ancient period and survives in some sections on a reduced scale. The enamelling in gold, silver or copper is the best surviving relic, being still practiced at Shiraz and Isfahan. At Zanjan, Burujerd, Isfahan, Kashan and Shiraz the work in the precious metals is carried on. At Shiraz and Abadeh a very ingenious and artistic mosaic of bone and ivory, metal and co_lored woods arranged in minute geometrical desiisns, called "Khatamtt are executed. Iranian ingenuity has always excelled in carving and at Abad.eh carved materials are a notable production.2 Modern Industries Textiles - Cotton There are now in Iran 26 mills, some of which spin and weave, some spin only, and some weave only. The index of the spinning industry is the number of spindles, as given below: \eath and Sachs, Persian Textiles, Oxford University Press, 1937. 2u. Fateh, The Economic Position of Persia, London, 1926. Also: H. Pirnia, A Short Survey of the Economic Conditions of Iran, Tehran, 1945, PP? JL-T~ - -- 21 TABLE III The Nwnber of Cotton Textile trills output ou/sut Area ownership Nills Spindles Tons Tons Spindle :e~r y~a, :e~r Ysiar Isfahan Private 9 50,000 4,600 .092 Various Private 15 84, ooo 5,100 .061 l,iazanderan Government 2 54,ooo 1,100 .020 Total 26 188,000 10, eo0i~ -i:-Source of figures, The Hinistry of Connnerce and Industries, Tehran. The Government plants now operate only one 8-hour shift, and the private plants two 10--hour shifts . Operating efficiency is low as seen by the output per spindle. Plants and mills need r epairs. There are around 2, 000 mechanical looms in Iran. 1 It is not exactly known how many hand looms there are in Iran, but it is estimated that there are about 5,ooo, producing about 2,000,000 meters per year, or about 400 meters each.? Since each should produce 8 to 10 meters per 10-hour day, the estimated product ion Y~uld indicate that the average hand loom is operated about 50 days per year . The hand looms are utilized during the periods when other work is not pressing, hence representing an important source of supplementary income to the operators . They are not in a position, however, to compete economically with mechanical looms . BecauBe of their supplementary income value, the encour agement of their use nevertheless seems desirable . Textiles - Woolen There are 10 fairly modern wool spinning and weaving plants in Iran, 1source: The Mini strJ of Commerce and Industry, The figures are approximate, but are believed to be substantially correct, year 1946. 2r bid. 22 5 of which are also engaged in cotton weaving, and have been listed under that heading . In addition, there is an unknown number of small, hand- operated spinning and weaving units, which probably produce about twice the amount of woolen cloth that is produced in the mills. It is estimated that the total annual production is 9,000,000 meters, including woolen cloth and blankets, but excluding rugs and carpets.~- The Iranian wool is coarse , and its products are inferior to those made from the soft Australian wools . In the p~t, some Australian wool has been imported for making fine woolen goods locally. Iran1 s own manu- facturing will require approximately 20,500 tons of raw wool annually, as compared with a present producti on of 26,000 tons . Many attempts are being made to improve the quality and quantity of native wooi by the importation of better sheep from other countries (i.e . Australia) and by cross-breeding. Silk In Iran the silk industry dates back more than 2, 000 years . However, only within the last 10 years has the industry heen modernized and mecha- nized, by the establishment of a large filatu.re and weaving plant at Chaloos , with capacity of 1, 000, 000 meters per year , by the establ ishment of grain (egg ) station and laboratory at Rasht, and by the construction I of about 20 "Sechoirs" or worm-ld.lling and cocoon drying stations in the Gilan area. The cocoon producing area centers around Rasht , and extends east along the Caspian coastal strip as far as Ramsar . There are also several weaving plants at Rasht. In all, Iran has a sizeable investment 1source: The ~~inistry of commerce and Industry, Tehran, 1946. ~:-It is estimated that the total annual consumption is at 12, 000,000 meters, with the difference made up by imports of finer British woolens. This gives a total annual consumption of .8 meters per capita, as com- pared with 5. 7 met er s per capita in the United States . 23 in the silk manufacturing industry, with approximately 75,ooo laborers employed either part or full time. The sericulture is an important phase of agriculture in the Gilan and Eazandaran areas . Mulberry trees are often grovm along ditch banks, and in small fields not adapted to other uses. The labor required is seasonal, lasts for a short time each year, and is only a fraction of what is required for most other crops. Sericulture is therefore important in providing use for land otherwise non-productive, and in affording an outlet for labor during slack seasons. Its encouragement in spite of the recent developments in making rayon and nylon seems advisable. The Government conducts the laboratory and grain station at Rasht for reproduction and selection of grain, which is distributed to the worm rearers at the time the nrulberry leaves are at the proper stage of growth for feeding . Another function of the laboratory is the examination of grain by microscope for diseases. The laboratory is a vital part of the silk industry since promiscuqus reproduction of eggs for the following crop by the rearers would invite propaeation of diseases . The central control and attention in cocoon production is not adequate, resulting in an amount of third and fourth grade cocoons. Generally cocoons are sorted into four qualities: first, cocoons which are perfectly clean and pure; second, cocoons which are otherwise good but which have been stained by crushed cocoons; third, weak cocoons; and fourth, cocoons crushed and badly stained from within. At present only the first and second cocoons are used at Chaloos and stores of the second and third class cocoons have accunrulated at the sechoirs . It is stated by experts that under well-regulated producing conditions, the third and fourth grade cocoons would form only a very small portion of the total. 24 The modern silk-weaving plant is located at Chaloos. The plnnt was located at this point, so as to be close to a supply of clear water and also to provide employment for the people of Chaloos. The advantage of the present location is that it is closer to the Golandrud coal mines which produce coal almost exclusively for use at this plant. On the other hand, the disadvantage is that the plant is considerably removed from the cocoon producing areas, necessitating additional transportation charges. There are five main divisions in the silk plant: (1) the fila- ture section where the silk is unwound from the cocoons; (2) the spooling section where the silk is unwound f rom reels and placed on spools and bobbins for weaving; (3) the weaving section, vn.th 270 looms; (4) the dyeing and printing section; and (5) the inspection, ironing, and packing sections . The capacity of the plant is l,000,000 meters of cloth per ] year, but it actually produces only about 300,000 meters annually. There is also a small hosiery department which produces about 90 pairs daily. This department has additional equipment on order which is not yet installed. There were originally four filaturo sections at Chaloos, each employ- ing about 800 laborerso In order to take advantage of a supply of labor at Rasht, the equipment of one filature section has been moved to Rasht where it is no,v stored , and plans are made for moving a second . The silk thread to be produced at Rasht will be sent to the chaloos factory for weaving. one of the principal needs of the industry, in order to produce salable products in competition with rayon, is more attractive designso ?he inistry of Cor:imerce and Industry, Tehran, 19/..i.6. Also: Report on Program for the Developm.ont of Iran, Prepared by Internatio1_1al 1<;nr;1- nccring Co., Inc. , San Francisco, caiifornia, U. S. A., for Horrison-J~nuclsen International Cor:ipany, Inc. , July 19h7, p. 2750 25 TextileR - Jute Ther e are two jute spinning and weaving plants in Iran, one Govern- ment-owned at Sha.hi, and one privately-owned at Rasht. The Rasht plant has a capacity of 3, 000 tons per year, and the Sha.hi plant 2,200. In Iran jute is used for sacldng rice, wheat, suiar , cotton, and for miscellaneous other purposes. Governmental requircr,1ents in 1941.i. were estimated at 3,000 tons. No estimate is available as to private require- ments , but it is probable that they were about 2,000 tons. In 1945, 556 tons -vrere imported, at a cost of about 4,660 rials per ton.1 Sugar Industry There are seven factories for extracting beet sugar in Irano They produce 30,000 tons of sugar per year , but have a capacity of 48, 000 tons. An eiehth plant at Varrunin, not now operating, has a capacit,y of 5,000 tonso Iran consumes 110,000 tons of sugar annually, and at present im- ports about 80, 000 tons of sugar annually. 2 In general the beet sugar factories are in need of repairs and extension. The establishment of a sugar-cane growing industry, for the establishment of cane-sugar factories is under considerationo Canning Industry Iran produces a large tonnage of perishable fruits and vegetables . 3 The present canning and preserving facilities are inadequate to meet consumer demands , and some amount of canned goods is imported each year. Now there are some half a dozen firms engaged in the canning industry, 1The Annual Reports of the customs Administration of Iran, 1944-1945. 2Ho Pirnia, A Short surve~ of Economic Conditions of Iran, Tehran, 1945. 3R. N. Gupta, Iran, An Economic study, New Delhi, Indian Institute of International Affairs, 1947. 26 producing quantities of canned fish, meat, vegetables, jam and pickles. r:1e Governr.i.ent-ormed fish canning factory at Bandar bbas produces 2,000,000 tons of fish. 1 vegetable Oils The oil pressing and refining plant at varamin near Tehran has a capacity of three tons of olive oil and twenty-five tons of cottonseed oil per day. There are also several small cottonseed oil plants , and oil from some is shipped to Varamin for processing. Portland cement At present there is only one cement plo.nt in Iran at Tehran, which produces ahout 230 tons per day, and the demand exceeds the supnly. 2 Portland cement is basic to most industries because it is necessary in all sorts of construction, and, of course, industrial machinery cannot operate until it is placed on foundations and housed . The demand for cement :may be expected to increase steadily, particularly if a national development plan is carried out . The r aw materials for cement are found in rn.a.I\Y parts of the country in large quantities. The expansi on of this industry appears necessary. There are no figures available to indicate the normal annual demand for cement . rt appears, however, that a use of 32 kilograms per inhabitant (totaling 483,000 tons) is rather conservative . Glass Manufacturing The largest glass factory of Iran is located at Tehran, producing a variety of dishware , tea glasses , bottles, lamps and lantern globes . The 1ir. Pirni , .A Shor~ survey: of Economic Conditions of Iran, Tehran, 1945, pp . 61-62. 2The Anglo-Iranian Oil Company alone imports about 50 000 tons annually, (Annual Reports of customs Administration, 1939-40-41). ,...___ _ -, capacitJr of the factory is ten tons per day of a variety of domestic and industrial glassware. Work is in progress at this plant for the instal- lation of a window glass unit for producing 5,000 square meters of window glass per day. The crushing facilities for this unit will also supply the present glass maldng operations. The raw materials used, in glass manufacturing in Iran, include quartzite rock from Malayer, near Aral<:, shipped to Tehran by rail; sodium carbonate , now obtained from England; 1 sodium sulphate f rom Ghom; sodium nitrate from Harnedan; bora.-x: from Soviet Russia; and zinc oxide from the United States . Steel At present there is no steel or iron producing industry in Iran. Iron ore deposits are known t o exist in the country, and some 200,000 tons of hematite have already been mined near Semnan, but the deposits have not been explored thoroughly as to quality and quantity. Many deposits of coal are known and are being worked , but the production is small. other coal deposits are reported to exist but have not been in- vestigated. rt is known that Iranian coal produces poor coke , but it is not known whether it_ can be so handled as to produce a satisfactory coke essential to making steel. petroleum is available in any desired quanti- ty, but so far no petroleum coke has been developed anywhere suitable for making steel. 2 Before the outbreak of World War II, the Iranian Government con- tracted with a German firm for the construction of a steel plant at Karaj , a short distance west of Tehran. Some of the foundations were built, 1Attempts are being made to obtain sodium carbonate local ly. 2Ibid., P? 24 28 but no equipment was provided and none inst.:tlled when the war stopped the work. The project has not been resumed . The normal annual steel consumption in Iran is not exactly known. Durine; 1940, the last year unaffected by abnormal world conditions, I ran had :i.mported as .follows: TABLI!: IV steel consumption in 1940 Tons Castings , sheet , shapes , bar , etc . 23 , hlO nails , bolts and nuts 2, 797 Uanufactured articles and tools 1, 079 other iron products 34, w74 Total 61, 760l:- ,:-The Annual Report of the customs Administration of Iran, Tehran, 1939-1940. 'l'he annual potential consumption has probably increased in the last few years , and probabl y now would be at least 100, 000 tons anrrually . A local reliable source of steel at suitable prices would further stimulate demando 8hemical Industry This industry is very little developed despite the large range of raw materials found in Iran, chiefly because of the limited factory facil- ities and shortage of water . It is estimated that Iran has need for product ion of the follo,.d.ng chemicals: ammonia, 7, 500 tonG per year; sulphuric acid , 25 , 000 tons per year; nitric acid, 9, 000 t ons per year; ammonium sulphate, 15, 000 tons per ? ear; chlorine, 10,000 tons per year ; soda ash, 15,000 tons per yeax?; caustic ash, 12,000 tons per year; and Godium sulphate , 12,000 tons per year. 1 The raw materials for these pro- ductG fall into two general groups. First, ammonia, sulphuric acid , nitric 1neport on Program for the Development of Iran, Ibid, Po So 29 acid, and unrnonium sulphate can be produced wholly or in part from the hydrogen Sllphide and the hydrogen available at the Khuzestan Oil Fields. Secondly, the caustic soda, chlorine, sodium sulphate, and soda ash are all basically sodiW!l products or produced (chlorine) from sodium compounds (salt) . Alcohol Industrial alcohol produced in Iran is chiefly the by-product of the manui'acturc of nitrocellulos at Pa.rchin, near Tehran. There are a number of small plants producing pure alcohol for beverage, pharmaceutical, and medicinal p.rrposes. It is also used as solvent for surf ace coatings and for cosmeti::s . While Ln other countries a number of different raw mater ials are used in alcohol production, in Iran the bulk is made from molasses, a by-product of the beet sugar industry. It requires 2 1/2 gallons of molasses to produce one gallon of 190-proof alcohol; it is, therefore, economical to haul the finished alcohol to the point of di stributi on than to haul the molasses to a distillery near the same point.1 The demand for alcohol for industrial purposes i s increasing in Iran, and additi onal distilling capacity is required. Tobacco Industry The manufacture of tobacco products is in the hands of a Government monopoly, which provides a large percentage of government revenues . The only tobacco factory is located in Tehran. I t manufactures about 350, 000,000 ciearettes per month, nearly all of whi ch are consumed at ?he r.Ihistr:t of Commerce and Industry. JO home. The supply just about equals the demand. Approximately 350,000 kg. of nnarghileh11 (water-pipe) tobacco are exported annually, principally to Egypt.1 It is estimated that the net profits from the tobacco monopoly are now Rls. 700,000,000 annually, or about $21,800,000.2 If the monopoly be granted funds to expand its operation, foreign markets could be expanded. Afghanistan (the neighboring country), for example, raises almost no tobacco and, therefore , provides a profitable market for cigarettes. Miscellaneous Industries Hides, Skins, Furs Hides are pelts from large animals, such as cattle, horses, and camels. Skins are the pelts of small animals, such as the sheep, goat and calf. The local supply of hides is short of the country's demand, while there is an anrrual exportable surplus of approximately 3,.500 tons of skins.3 The local supply of sheep and goat skins could be use more gainfully if instead of being exported they were processed at home into articles of use, such as gloves, luggage, and belts. The fur industry in Iran is confined mostly to famous caracul, or new-born lamb pelts . Much of the domestic tanning is performed in small shops, pr eparing about 2,300 tons per year . The largest modern plant is located at Hashad. The chemicals required for the tanning processes are obtainable for the most part in Iran. ?he An.nu.al Report of the Cmitoms Adininistr at ion of Iran, 1945. 2 The M.im. st ry of Finance , Tehran, 1946. 3The .Annual Report of the customs Administration of Iran, 1939-194.5. 31 soap and Glycerine Fourteen factories produce annually JOO tons of toilet soap and one thousand tons of laundry soaps . In addition, a Government-owned factory opened near Tehran in 1939 has an annual capacity of 1,200 tons of soaps and seven hundred and twenty tons of g~cerine. }18.tch Industry The largest match factory in Iran is located at Tabriz. The present annual output of the country is 100,000,000 boxes. 1 1 H. Pirnia, P:_ Short survey of t he ~conomic Condition of Iran, Published for the Economic Information Bureau, Tehran, ruarch 1945. Als?o: Gupta, Iran, New Delhi, 1947. Chapter V OIL Historical Background The existence of mineral oil in Iran has been kno\'m since ancient times. Herodotus described how oil was collected from pits at Qirab, 57 miles northwest of Shushtar . 1 Petroleum has been oozing from these springs during a period of at least 2400 years. Bitumen pits have been known from time immemor ial, and their prolonged output is the basis of the be- lief that they must discharge from an extensive aubterranean supply. In 1872 an English adventurer, Baron Julius de Reuter, obtained from Naser-Ed-Din Shah an exclusive right to develop all mines except gold, silver and other precious stones. This doubtless included oil, for, in a second concession granted to the same person, exploitation of the oil fields of Iran is explicitly envisaged. In 1884 a certain Ur . Hoftz , resident in Bushehr, obtained from the Iranian Government a limited con- cession. He drilled a rather shallow well in Dalaki, but without result. The first practical steps, however, were marked under the D1 .Arcy Concession, beginning in 1901. Anglo-Iranian Oil Company In 1901, William Knox D' Arcy, an Englishman who had made a large fortune in Australia by the promotion of mining enterprises, smelled the oil in Iran. He negotiated with Mozaffer-Ed-Deen Shah, and obtained a concession for the exploration, refining, exporting, and sale of oil, natural gas, asphalt, ozokerite throughout the kingdom, with the exception \ . Fateh, Ibid, P? 6. 33 the northern part. 1 The concession was to run for a period of 60 years. 2 The Iranian Government was to receive 16% of the net profit arisins from the enterprise . 3 The Iranian Government pror.rised to furnish all the government lands which were necessary for the Company's construction pur- poses.4 The concessionaire was authorized to promote one or more con~anies, with whatever capital he deemed advisable, for exploring of oil.5 Upon the incorporation of the company, a sum of 40, 000 pounds sterling, half in cash and half in shares, was agreed upon to be offered to the Shah by the company. 6 The Iranian Government reserved the right to appoint an agent, at the cost of the company, for the supervision and examination of the accounts of the compa.ny.7 Two years after the grant of the concession, a company called "The First Exploration Company" was formed with a capital of 600,000 pounds sterling and inm1cdiately started investigation. In 1904, two producing wells were brought in, but since these wells were about 600 miles from the Persian Gulf, the exporting was unprofitable . By 1905 DI Arey and his associat es had spent all their investments, however, they were highly optimistic as to the presence of oil of commercial value . Therefore, they began to obtain new capital. The Burma Oil Company gave financial assistance, and further exploration was carried on in the Bakhtiari mountains , marked by a temple called Uasjed-Soleyma.n, in May 1908, a ~ ext of Concession, League of Nations, Official Journal, December 1932, Art . 6. 2Ibid, Art. 1. Jibid, Art. 10. 4Ibid, Art. 3 5Ibid, Art. 9. 61bid, Art. 10. ? Ibid , Art. 11 34 "gusher," which shot the oil accompanied by gas, high into the air, brought success to D'Arcy. 1 In 1909, the Anglo-Iranian Oil Company, Ltd., was registered in London, and three years later, upon further expansion of the Company, the British Government decided to provide the additional capital in order to acquire the controlling interest in the Company. With an investment of 2,000,000 pounds the British Government became the majority stockholder. With World War I and the tremendous demand for oil on the part o:f Britain, nev, capital was invested by the British Government and the indi- vidual investors. 2 Dispute between Iranian Government and the Anglo-Iranian Oil Company On November 28, 1932, the Iranian Government at a meeting o:f the Council o:f Ministers announced the cancellation of the D'Arcy concession for the following reasons : 1. The original concession had been obtained under pressure. 2. 'rhe amount of royalty paid had been un:fairly calculated. 3. The Iranian representative had not been permitted to check the accounts. L~. The Company had refused to pay royalties during the war. 5. The Company had refused to pay- income tax to the goverrunent. 6. The Company had charged high prices for oil sold in Iran. 7. The Company had failed to exploit its Iranian oil fields. 8. The Company had refused to send a representative to settle the claims of Iran when the Iranian Government had demanded it.3 1 Anglo-Iranian Oil Company, 11 The Persian Oil Industry.11 2 Anglo-Iranian Oil Company, Report of Directors and Balance Sheet, 1932 0 3Nevr York Times, December 14, 1932. 35 The parties of the dispute directly concerned were the Iranian Government and the Company; but the British Government intervened, and on December 8, 1932 sent a note to the Iranian Government stating that unless the cancellation was withdrawn within a week, she would refer the dispute to the Permanent Court of International Justice 11 as a matter of urgency.n The Iranian Goverrunent contended that the Permanent Court of International Justice could not deal with a dispute between the Iranian Government and a private corporation, such as the Anglo-Iranian Oil Company. It was mutually agreed, however, to bring the matter before the League of Nations . While both parties were preparing to present the case before the League, the president of the Company, Sir John Cadman, arrived in Iran to reach an agreement with the Iranian Goverrunent . 1 In April 1933 a new concession was granted to the same company and was approved by the Hajlesso The new concession is for a period of 60 years, ending December Jl, 1993. 2 The area for the Company's operation is restricted to a maximum of 100,000 square miles which the Company is allowed to choose within 5 years from the map which is annexed to the concession. 3 The Company has the privilege of exporting oil and allied products from the country free of duty. It also exempts from all l evi es the import requirements of the Company, -which are exclusively used for construction work in Irano4 1teague of Nations, Official Journal, December 1932. 2 Ibid, .Art . 26 of the new concessiono 3rbi~, Art . 2. 4_rb_id , Art.?. 36 The Company is required to pay as royalty to the Iranian Government 4 Shillings per ton of oil produced in the country, in addition to 20% of the annual net profit of the Company after distributing 671,250 pounds st erling as dividends to the common stockholders. 1 The total annual royalthy must never fall below a mini.mum of 750,000 pounds. 2 After the termination of the life of the concession, or in case the Company abandons the concession, 20% of the reserves of the Company accumulated since the date 0 f the new concession are to fall to the Iranian Government. Besides the royalties, the Iranian Government receives in the form oft axes during the first 1.5 years 9 pence per ton on the first 6,000,000 tons 'and 6 pence per ton on any excess over that quantity.3 During the follo . 'Wing 15 years, the Company is required to pay 1 shilling per ton on the i'"l .rst 6,000,000 tons; and 9 pence per ton on the additional quantity.4 I~or th e remain:i.ng JO years of the life of the concession agreement will be niade between the two parties in the year 1963. The aggregate sum in the f orm of t axes to the Iranian Government is never to be less than 250,ooo pounds during the first 1.5 years, and never less than 300,000 Pounds during the following 15 years. 5 For the settlement of the claims of the I r anian Government, t he Com- Pany agreed to pay a sum of 1,000,000 pounds within one month from the date of the concession. 6 In regard to the sale of petroleum and allied ---------- \eaeue of Nations, official Journal, December 1932, Art . 10, A, B. 2 ~, Art . 10, G. 3 ~rb?,' Art. 11. 4 _Ib_id, A.rt. 11, G. 5Tb?c1 ... 1 , Art . 6-- 11, B, D. -I-b-:I'd;_ , Art . 23 . 37 products in Ira."1, the Company agr,e,.e d to 6ive the Iranian Government a discount of 2.5~, and the Iranian dealers a 10~6 discount from the average market price . The new concession ?was advantageous to the Compnny for two notable reasons, nan~ly, the concession cannot be legally cancelled as it is approved by the :r.iajless; and the period of concession is extended. Iranian Oil Fields Iran, currently the largest oil producing area in the Middle East, has seven producin2 fields - ::;ix oil fields and one gas field. The estimated proven reserve of this country is 6 billion barrcls.1 There are about 55 producing wells in the fields with a total daily production of ho6,ooo barrels, as indicated in Table v. In 1938 the country produced 215, ooo barrels daily. Iranian fields include 1:asjed-Sulaiman, Gach-Saran, "'ihite Oil Sprinbs , Agha-Jari, Haft-Kel, Pazanun (gas), and Naft-Shah. f:, ach of these fields will be discussed briefly below: l.!asjed-Sulaiman, a large elliptical anticline, was discovered in r,:ay, 1908, and covers a proven area of some 36,ooo acres. until the end of 19h3 about 280 wells had been drilled, of which 258 reached the main producing horizon. All but 95 of these wells were abandoned. Of the 95 wells, 21 produce oil, 19 are shut-in wells , 13 are gas wells, 6 are preasure observation wells, 9 are oil-water contact . observation v~lls, 9 arc gas-oil contact observation wells, and 28 are inactive. Of the 21 oil producers, only 3 are on artificial lifts. The Asmari lime of the 1.,iocene- Eocene age is the principal oil producing zone. Top of the pay ?he Oil Weekly, rrorld Oil Atlas, 1946,, TABLE V PRODUCING WELLS AND OIL PRODUCTION OF IRAN* oiI weIIs at ena or I9I:i5 Daily at Year Proaucing End of Year Year of Tot al 1946 1945 1946 Discovery Shut- In Fl owing Producing Barrels Barrels Barrels Agha-Jari 1937 -- 9 9 92,000 17,698,372 30, 687,696 Gach-Saran 1926 4 3 3 40, 000 14, 415, 855 14, 178, 684 Haft-Kel 1925 1 23 23 194, ooo 71,698,927 66,058,746 }Jasjed-Sulaiman 1908 11 29 29 60, 000 20,210,814 27,797,484 Paz a.nun 1937 3 -- -- ---- 240,000 204,282 ';[hit e Oil Springs 1934 - 1 1 17,000 2, 523,094 5,265,936 Naft-Shah 1923 - 2 2 3,000 620,435 703,638 Total 19 67 67 406,000 127,407,581 144, 896,h66 *The Oil Week}s", 1947 World Oil Atlas . \.,.,.) co 39 ranges from 900 feet on the crest of the structure to 3,500 feet on the flanks. The average thiclmess of the pay is about 100 feet. At the end of 1943 the field had produce 810,923,596 barrels of oil, of which 107, 696,813 barrels of fuel oil had been returned to the reservoir, giving a net production of 703,226,783 barrels. Daily average production in 1943 was 78,215 barrels of which 51,2.59 barrels were returned to the for- mati9n. The g;ravity of the oil is about 37 degrees (API) . Gach-Saran was discovered in 1926 and the structur e , an anticline, is 18 miles long and about 2 1/2 miles wide . At the end of 1943, 13 wells had been drilled including 4 dry holes. Two wells were producin~ oil and one was a gasser . Daily average production in 1943 was 20,500 barrels, while cumulat ive production at the end of 1943 was abo'..lt 20 million barrels . Production is from the Asmari lime in the Miocene-Eocene age. The pay aver ages 1,000 feet thick. White Oil Springs was opened in 1934 and at the end of 1943 had 2 gas wells producing from the Asmari lime in the Miocene-Euocene age from about 4,000 feet. Agha-Jari, discovered in 1937, had 3 oil wells and one gas well at the end of 19hJ. The number of wells, however, has increased considerably since that time . The anitcline is about 20 mile s long and 4 miles ,vi.r Pahlavi) on the east. Breakwaters extend out to sea on each side of the mouth of the estuary. lJovshahr is located near the center of southern coast of the Caspian Sea, directly north of Tehran. 'l'he town was located and the port built entirely new just before the World War II. The harbor works consist of tvro moles vrith converging curvature, one about 1 , 200 millimeters long and the other 850 millimeters, extending out into the Caspian. The entrance width hetween mole heads is 180 millimeters . The construction is of heavy rock (up to 20 tons) and 12-ton concrete blocks . The ship docks are at the shore ends of each mole , and are built of haavy cut-stone masonry, JO millimeters wide and about 200 millimeters long. During the vrorld War II the port was used to capacity, but at the present time the .traffic amounts to, about J small ships per month exporting rice and lumber . Air Transportation At the present time, Irari_ is served by the Iranian Airways Company., which maintains service between important Iranian cities , as vrell as an international service to Bagdad, Cairo , Lydda, and Europe as far as Paris . The following European airlines also provide international service to Tehran: B. o. A. c. (British), Ae B. A. (Swedish) , Air France (French), 2nd Russian Airvrays (Russian) . 57 Since Iran is sparsel:r settled ,-rlth isolated centers of population separated by long distances, hie;h mountains, ridges and great deserts, and 1?,lth inadequat~ ~xistine communications, air transport is the logical developll1Cnt to connect the country and knit it into a national unit . Fur- thermore , Iran occupies a strategic geographical position. Since ancient t:Lnes , the trade routes bet-ween the east and the west have flowed t!:rrou.;h the ~orridor between the Caspian Sea and the Persian Gulf. Iran stands at the gutew.:iy to India and PaJcLstan from Europe and, in the air age , Ir~n is at about the half-way point on the great circle routes from ~;;urope to India. It is an excellent position to profit by the development of co1,uuerc1.. al av.i at ?1 .ono l ~v. s. Haas , ~ , C:olumbia Ul'liversity Press , New York, 1946. Chapter VII Historical Background Before the nus so-Iranian war of 11:328, Iran hG.d no national tariff. The only duties levied on t.rade took the form of tolls , road ta,"{es, and town octrois . These taxes were l evied on imports, e)q)orts, and transit t;oods , ,,Jithout any invidious discrimination. No allowance was made for similnr fees already paid in other parts of the country. Under this system the more distant the? locality to which the merchandise was destined, the hie;her vrere the chn.rgos ? The existence of internal troces was one of the chief reasons why Hussian merchandise could not flow freely towards southern Iran to compete with British goods, and vlce versa. After the conclusion of the treaty of Turkarna.nchai on February 22 , 1828, it was a greed that the goods imported into or e){l)or ted from Iran by Hussian subjects should be liable to 5% ad valorern duty. Therefore , the Russian merchants were i n a nruch more advantageous position than the merchants of other countries having mercantile inter courses with Iran, because Russians were exempted from all the internal duti es . The British, ?who naturally objected to this discrimination, demanded. and received a corresponding "Farman",} in 1838, which put British merchants and goods on t 1i 1e s rune f oo t?1 .ng as Russ.i an. 1 The only tax the foreigners had to pay was 5 per cent ad valor cm. The Iranina merchants were , in additi on to the 5% duty, subject to all -i:-Decree . ~ . Bo Yaganegi, Recent Financial ~d Monetary Hist ory of Persia, ;:Jew York, 1934. --- 59 the internal charges. Therefore , they were at a disadvantage as compared ?Tith forciGn merchants . The Tc1.riff Convention of 1903 T'?1c ta.ri.ff regime founded on the Treaty of Turkamanchai in 1828 pre- vailed until 1902, when Russian demanded a revision of the customs tariff. Tl1e resulting tariff, effective February 8, 1903, was placed on a specific basis . Export duties were largely el:i.minated, and the duties on Russian :i.!nports into Iran were reduced to negligible rates. This tariff convention, which was forced on Iran, was desi gned entirely in the interest of Russian domination of the commerce and in- dustry of Iran. Uorgan Shuster, in hfs "Strangling of Persia, 11 states that the tariff was 11 absolutely prejudicial to the interests of Persia and so grossly partial to n.ussian interests and trade as to render it the most conspicuously_ unsuccessful tariff in the world, from the view point of the people in whose behalf it is supposed to be framed. 111 However, the tariff convention of 1903 v;as not entirely disadvantageous to Iran. The limited advantages may be stated under the headings of: (1) the abolition of 5% export duty which for over three-quarters of a century had penalized exports and had therefore prevented the development of the export trade o:f Iran; (2) the abolition of internal truces on merchandise which -were a great burden on the consumer of both domestic and imported articles, and an addition to the cost of exports which consequently reduced the foreign trade of Iran; and (3) the abolition of the old system, and the organi- zation of centralized customs administration. \r. Horgan Shuster, strangling of Persia, The Century Co., New York, 1912, P? 313. 60 on February 9, 1903, an agreement similar to that of the Russo- Iranian Convention of 1902 was signed between Iran and Great Britain, 1 and subsequently with other countries. The decisions of the Convention were in force until 1920, when a new tariff declaration was signed by Iran and Dritain., The object of the new tariff was to raise the rates of these comnodities imported from Russia. The Tariff ? utonomy The Second International Con:.:erence on Opium, on 1.':arch 12, 1926, dis- patched a League of Hat ions Commission to Iran, to study the opium question, w-lth special attention to the problem of substitute products. 2 The Com- mission after studying the problem in Iran, presented its report to the Lea.Gue . In order to promote gradual restriction of opium cultivation, the Coilll'!'lission recommended the encouragement of home industries, and sub- stitution for opium of silk, wool, sugar, dried fruits, lime, cement, etc., rith a view to curtailment of the imports of these products by Iran. 3 The Irani2.n representative explained that the carrying out of the Commission's program of substitution of other crops for opium vras considered by the Iranian Government to be in the existine; tariff situation an "expensive experiment. 11 The representative of Iran to the League declared that un- less Iran had an independent t ariff to protect newly established indus- tries , the Iranian Government could not submit to the HajJ.ass (Parliament) a program for opium reduction. Iran requested the League to give its consideration to the question of Iran's ta.riff autonorrv as vital not only 1 .? c. J; illspaugh, The .American Task in Persia, The century Co., 1925, P? 59. -- - ? -Lea?ue of Nations Officin.l Journal, 1928, Supplement Ho . 64, P? 258, 3League of Nations Official Journal, 1927, Supplement No. 59, PP? 18- 27. .., I 61 ? to the solution of the opium question, but to Iran? s economic independence as vrell.1 In September 1927, a special Commission was appointed by the Gener al . ssembly of the League to study the problem, with special attention to the views of the Iranian Government . 2 This Commission accepted the views of the Irr1.nian Government regarding the necessity of tariff independence and, on September 13 , 1927, the General Assembly unanimously accepted the proposals of the Iranian Government . After this success, the Iranian Government proposed to the Hajless an autonomous tariff. ccordingly the 11ajless voted a new tariff law on Eay J, 1928, authorizing the Government to negotiate treaties with foreign countries for a period not to exceed eight years. Tho now tariff consists of a maximum and a minimum schedule. Practically all the coun- tries ?with which Iran has trade duly signed the new agreements. The min:iJnum tariff has generally prevailed ever since the execution of the law. The tariff consists of both ad valorem and specific rates, but the specific rates are more commono The mininmm ad valorem levies do not exceed 2.5%. (There are three exceptions: articles made of gold and silver c arry a rate of SO%, tobacco and cigarettes a rate of So to 60%, perfu111es a rate of SOr~o) 1,rhe Eichteenth quarterly Report, APP? 3, League of Nations Official Journal, Supp. Ho. 59, 1926-1927, p . 18. 2League of Nations, Corrnnission of inquiry i.nto the production of opium in Persia. (I . Observations of the Persian Government on the Report of t 11e Commission... I I. F.xtract from the minutes of the sixth meeting _ of t he forty-fourth session of the Council) , Geneva, Imp. Atar, 1927 also: League of Nations , Commission of inquiry into the production of opium in Persia. Report to the Council. Chambery, Imp. reunies, 1927 also: League of Hations, Commission of inquiry into the production of opium in Persia. Report of the Fifth Committee to the Assembly, Geneva, Inv. Jent s. a., 1927. , Chapter VIII FOREIGN TRADE Historical Background: 1875-19:1.h In the early days, owing to its geographical situation and the existence of two navigable seas at its border, Iran played a prominent role in the mercantile intercourses between east arrl west. The ancient caravans travelled across the Iranian deserts and plateaus and conveyed merchandise from India and China to the I.tediterranean. Phoenician and '}reek marines landed on the shores of the Persian Gulf and exchanged their products for Persian silk and pearls. For five centuries after the post- Islrunic: period, the . ?abs, 'Qenoese, Florentines, Venetians, Turks, and \rmenians successively established trade relations with Iran. In the beginning of the sj_xteenth century, the Portuguese flag appeared on Per- sian waters, and for a period of over a century the Portuguese held an absolute monopoly of all trade on the Persian Gulf. 1'hey were succeeded in the early seventee nth century b~r Dutch marines and merchants , who received p~rmission from Sha..ri Abbas II to settle in Hormoz and opened factor ies in Bandar Abbas . In the middle of the same century, a Jutch envoy visited Ispahan and secured a monopoly on the spice and sugar trade of southern Iran. Numerous attempts had been made by the British, both from the north and from the south to acquire trade concession and privileges, as earl y as 1598; 1 but while all possible f avers were granted by the Iranian 1...)ee G. N. Curz on, Persi a and the Persian Question, London and Ncr, York, Longmans, Grt=-en and Co., !8"9'2-;-yor.-II,-p . 574. lso: Jonas Hanway, 1JJ Histo ?ical Account of the British Trade over the Caspian sea, London, 1:751~. --- --- - 63 f monarchs, most of the earl.,v conuncrci::l.l expeditions of the British were d oomed to failure , largely on account of Russian competition in the north and Portuguese and Dutch ascendancy in the south. It was not until towards the close of the eighteenth century that Great Britain, after a series of war with !Iolland, succeedect in acquiring all the colonial nocsessions of 11e r gr e n.t rival in the eastern seas; and she thereby also established her s upre1.1acy in t he Persian Gulf . In 1763, British agents selected Bushehr a s t he headquarters of the Gulf trade. At the beginning, only one vessel ?:rt:s dispatched ammally to Bushel1r with a ca.r6o of iron, muslin, and about one hundrecl bales of cotton fabrics . 1 I n 1 800, Sir John Halcolm '\'ras sent t o the court of Fath Ali Shah, and a commercial and political treaty was necotiated, by which gnglish and Indian merchants were permitted to settle and transact business free of taxes in any Iranian port . They _ were to be protected by government agents in the exercise of their trade, 311d they were allowed to import British and Indi an i r on , steel, l ead, and broadcloth f r ee of duty. As a consequence, the trade between Iran and r;reat Britain increased rapidly, until in 1810 the importation of British ~otton goods alone amounted to six hundred bales . During the nineteenth century as a result of improvement in the art of navigation, the cheapening of maritime freight rates, and the opening of the Suez canal (1869) , the British succeeded in conquering the whole s outhern market of Iran. By the last decade of the nineteenth century out of a total IrRnian trade of 7, 500,000 pounds, England and the British possessionn absorbed 3, 000, 000 pounds trade of which 2, 000, 000 pounds consisted of impor ts . 2 1curzon, Persia and the persian 9uestion, London, 1892, Volo II , P ? 553 . 2 statesmanr s Year Book, Macmillan and Co., London, 1890. 64 Tr.e British predominance in the southern provinces was balanced by / the Ru <-? sian ascendancy in the northern and richer provinces. By the ~'reaty of Goles t an, wl ich gave Russia the sole right to maintain vessels i n the Caspian Sea, the Tsar? s subjects were placed in a much more favor- able p osition than those of any co,npetitive power. The monopoly of the Ca spian Sea was confined again by the Treaty of Turkamanchai of 1828; and the Rus sians, as a result, created a large merchant marine in the Caspian. The final subjugation of the Caucasus , the connection of Tiflis and Batum by rail with Baku, and the construction of the Trans-Caspian Railvray across southern Turkes tan, opened new gateways into Iran, and made Russian avenue s of approach both by land and by water, for easier and less costly tha n those of their competitors. The expansion of the oil industry in 3aku, the nearest Russian port on the Caspian Sea, was another factor which gave impetus to the Russo-Iranian trade in the north. Conse uently, ~ussia claimed out of the total trade of Iran in the nineties, about 1 ? 2, 000, 000 pounds a year , of which about one-half consisted of imports. Aside from Enr;lioh and Russian interests , there were other minor ~uropean comwercial interests active in Iran in the nineteenth century. As early as 166h, the French East India company sent two representatives t o I ran, who received commercial privileges from Shah bbas II . 2 Th is was the beginning of the Iranian-French trade relation.? In 1708, another 11 Farrnan11 ?:? was granted to tr. !.'itchel, a commercial envoy from Louis XIV? Durinc the time of Napoleon, the trade relations between the two countries r eached a climax. From then on in the face of English and Russian compe- tition, the ~rench trade began to decline . 1Ibid, Statesman 1 s Year Book, p. 63. 2curzon, Persia and the Persian uestion, London 1892, Vol. II, P? Sl-1-8. ?:-Decree 65 I The Ger ma n 2nd Austrian fac t ors appeared in Iran in t he latt er part of the nineteenth cent ury and initiated trade relations . The f ormer supp lied a gr eat deal of manufactured articles, and the lat t er , t he major p::i:rt of tne matches imported into Iran . In return, they bought Persian silk, lamb skin nnd c arpets. It is only since the begi nning of t he t vrentiet h century, as a result of the i ntroducti on of Pers ian r ugs into America that the volume of trade 7fith the United St ates has been growing . 'l'he f i gures for the external t rade of Iran from 1875 to 1911.i are given in Tabl e J,IV . The outstanding feature of t he foreign t r ade of the country as dis- clo s,;;d by t he (hta in Table XIV i s its continuous and steady growth . In the course o:f t he twe nty-five years from 1875 to 1900, the total trade in torr..s of sil ver l:rans more t han tripled . The r;rowth of exports , how- cv-1r , did not keep pace wi th t he growth of i r;i:ports . Durinb this peri~d, vre find that the imports i ncreased from 60, 000, 000 Krans to 12,5 , 000, 000 r:rans . The mai n reason for t his lag in export s seems to be the existence of an export duty of 5:~ ad valorem, established after the Treaty of Turkamanc r.ai . This duty penalized t he marginal exporters , which often coul d not p r of i tably engage in foreign trade under the burden of such charges . Another reason per haps as important, was t he fact that whil e in the lat ter p art of the nineteenth cent ury t he t echnique of product i on and trans portation and the Art of Navigati on had improved in other parts of the world , Iran was eneul:fed in pol itical t roubles , and, moreover , was ruled by the 1:1onarchs who were not interested in the promot i on of trade -2.nd commerce . The t hi rd r eason is that the sil k trade of the cou.r1try, Yrhic h had pr8viously played an import ant r ole in its expor ts , had failed 66 TABLE XIV Foreign Trade from 187.5-1914 Year Imports Exports Total 1,000 Krans 1,000 Krans 1, 000 Kr ans-::- 1875-1877 60,000 60,000 120,000 1877-1880 6o,ooo 40,000 100,000 1880-188.5 126,000 100,000 226,000 188.5-1890 11~.5, ooo 100.,000 245,000 1890-1995 1.54,ooo 110,000 264,ooo 189.5-1900 250,000 12,,000 375,ooo 1900 255,380 li+?,323 402,703 1901 298,557 150,598 449,17.5 1902 273,)~43 189,020 462,463 1903 38.5,036 254,775 639, 811 1904 349,91.5 247, 961 597,876 190.5 386,463 293,143 679,606 1906 431,.040 353, 377 . 784,717 1907 408,434 317,081 ? 72.5,SlS 1908 372,484 ? 326,207 698,691 1909 442,429 371, .526 813,9.5.5 1910 48h,5o8 375,427 8.59,93.5 1911 570,208 420,487 990,995 1912 .567,.576 436,333 1.,003.,909 1913 647,165 455.,840 11 103, 00,SiH:- ?~12 . l-1-0 Krans = one dollar. -r.-i:-Compiled from the following sources: From 187.5-1900 from British Consular Reports, Statesman's Year Book, and Lord curzon1 s npersia and the Persian Question. 11 From 1900-1914, Annual Reports of customs Adminis- t r ation of Iran, Tehran. in 1878, 1 owing to a blight, and no attempts were made for its revival. From 1900 to 1913, we find that the rate of growth of exports has been faster than that of imports. Total exports rose from li+7,000,000 ix ans in 1900 to 456,000,000 Krans in 1913, or more than 300%; while im- ports showed a gain of only 250~& or from 2.55 million Krans in 1900 to 647, 000, 000 Kr ans in 1913. The Russo-Iranian tariff convention of 1902, which abolished the S;~ ad valorem rate on exports, seems to be the ex- p lanation for the rapid growth of the exports . 1statesman1 s Year Book of 1880, Macmillan and Co., London. From 1875 until the beginning of Y{orld .'far I, with the exception of the first two years , 1875-1877, we find that cormnodity imports have always exceeded the comrnodity exports; and this ad.verse trade balance has shown a constant increase. From 1877 to 1900, the average yearly excess of visible imports over exports amounted to some 52,000,000 Krans. From 1900 up to 1914, the adverse figures practically doubled. Durinc the latter period, this adverse balance averaged 101,000,000 Krans annually. Foreign Trade : 19JJi.-19J2 The figures of trade with Russia from 1911i to 1931 are given in given in the table below: TABLE XV Trade with Russia:1914-1931 Imports Exports Total Year 1,000 Yi.rans 1,000 Krans 1, 000 Jail 1.le of l.m ports as comp,a red with 1919, is noticed? Thi? was due to th" 192 about thi se of rty-fi,re per cent in elCChange ,ra 1 u e of ster~~~~~cr 5 ? 1 \'ias d 8' the l?m ports from the united Kingdom droPl'ed shaI'P Y? Thi drop U.e t e declaration of tariff antononzy- by rran, and the raising of 0 th 71 rates on practi. cally all importso In 1931, the iJ!lports fell to about f'f l typer cent of the year 1930. The main reason for this was t he enforce- ment of the Government Trade Monopoly Act and exercise of strict regulation on? J.Jnports and exports. Iran1 s exports to the United Y..ingdom continually increased duri?ng and after the war, untii 19230 In 1923 matters reached a stage wh ere exports exceeded imports. This is due to the growth of Anglo-Ir arn. an Oil Company as a result of which the volume of oil exports to the United Kingdom annually exceeded considerably the total of all cominodities exported from Iran to the latter. The following figures show the excess of oil export o":er all other 0Jrpo:rted commodities . Before the World war I, Soviet Russia surpassed TABLE XVII Oil Export and other Commodities: 1923-1931 -----------=-oi r 1 ~Ex-po-rt- ----~~~A~ll o:th;e:r :]!):(prortcs :;-- ~192 3~---___;~~1~,0~0-0- -K--ra~n1s .::::8::::5~,9:.::1.,c00~02 :K.r:a:n:s; __ __ 1921 317,701 7 1925L~ J67,o5lr 85,993 359,004 79,964 1926 115,c31 1927 439,068 356 978 91,h 7? O 1928 , 103,859 1929 432, 919 102,325 1930 661,313 143,553 1931 509,452 ic'B, 5&? 512,544 7 9 19 23--11:-9A3.n1n ua1 Reports of the customs Ad.ministration of Iran, Te hr an , 0 the D K? nited Kingdom in Iran? s foreign trade, but after the war, United lrigdorn c an1e to the fronto However, i. f o'il be excluded from the expor t s t o the d United Kingdom and the capital goods imported from the United King- om for ? d Use by the Anglo-Iranian Oil Company too, then it will be notice th at Sov-? let Russia holds the predominant place in the foreign trade of Iran. 72 The following figures show t.he trade of Iran and France during the years of 1914-1931. During the iorld War I, owing to the international TABLE VIII Trade w:i.th France:1914-1931 Imports &"{ports Total Year 1,000 Krans l.?000 Krans l.!000 Krans 19JJ.~ ll, 096 1,121 12, 217 1915 311 509 820 1916 1,910 15 1,925 1917 1,172 48 1,220 191 8 828 75 903 1919 2,637 1,256 3,894 1920 3,552 1,970 5,523 1921 8, 634 5,162 13,796 1922 20,694 11,599 32,293 1923 22,74h 9,346 32,093 1924 32,363 8,103 40,466 1925 24,446 22,636 47,072 1926 37,621 45,105 82, 726 1927 33,759 86,258 120,017 1928 39,835 80,099 119,934 1929 61,360 118,234 179, 594 1 930 27,185 81,477 118, 662 1931 14,572 9,195 23, 769-1:? * Annual Reports of the Customs Administration of Iran, Tehran, 1914-1931. s i tuation, trade with France and her colonies fell to a negligible figure . s tarting from 1919, both export s and imports began to recover, until 1922 t hey r e ached the pre-war level. Devaluation of the franc was re- sponsible for the rise of imports ai't er 1925. The collapse of the J(ran toget her with the trade restrictions in Iran caused the sharp fall of 1930 and 1931. The figures of trade between Iran and Germany are given in Table DCX . During and immediately after the World war I , trade between Iran and Ger many ?was reduced almost to nothing. From 1918-1923, currency inflation and rising prices in Germany retarded the growth of trade. After the 73 rehabilitation of the Hark, both exports and imports showed a continuous and steady increase. The rising of import duties after the declaration of t ariff antonorrw by Iran does not seem to have aff ected the imports from Germany. The main reason for this was the fact that during the per- iod the Iranian Gover nment was buying each year from Germany most of her r e quirements for the construction of the Tr ans-Iranian Railway. Moreover, Germany during this period w-as the chief source of munitions and war supplies f or I ran. The increase of e:xports was chiefly due to the sale of oil t o t hat country. TABLE XIX Trade with Germany:1914-1931 Imports f.Scports Total Year 1,000 Krans 1,000 Yirans 1,000 Krans l9Jl~ 17,795 1,410 19,206 1915 401 116 517 1916 1,442 1,442 1917 26 26 1918 30 30 1919 Jhl~ 144 1920 536 175 711 1921 3,004 239 3,243 1922 8,L.85 354 8,839 1923 17,671 1,064 18,736 1924 23,069 1,908 24,977 1925 32,690 1,831 34, 527 1926 39,349 4,503 43,883 1927 32,215 33 ,660 65, 876 1928 47,236 41,628 88, 865 192? 60,086 60,180 120,267 1930 56,777 55, 991 132,768 1931 42,oho 63,427 105,L~67;:- ;:- nnual Reports of the Customs Administration of Iran, Tehran, 19lh-19Jl. Trade with the United States, Wl.ich before the '{orld "far I formed only nineteen per cent of the total yearly trade of Iran, since then it shows growth. Table XX shows the trade with the United states. The ... .. 74 grovrth of trade between the United States and Iran is due to the in- cr easing demand for American automobiles, trucks , and tires, in the Iranian market, on one side, and the increasing absorption of Persian rues and carpets in the ,American rnarket on the other side. TABJ.,E XX Trade with the United states:1914-1931 Imports Exports Total Year 1 , 000 Krans 1, 000 IS,: ans 1,000 Krans 19:Lu 432 4,l.i.13 4,845 1915 268 8,440 8,708 1916 286 9,418 8,705 1917 415 7,271 7,686 1918 113 2, 387 2,,00 1919 6,41.9 13,009 19,428 1920 5,122 22,844 27,966 1921 5,483 29,529 35,062 1922 5 , 553 61,193 66, 8h6 1923 3, 531 58,979 62,,10 1924 6,233 53,S!.iB 59,782 1925 10,255 69,741 79, 997 1926 20, 669 76,660 97,330 1927 24,961 81,0)-1-J 106,004 1 928 39,213 80,686 119, 900 1929 72,692 86,534 159,226 1930 25,091 66,265 91,357 1931 42,756 79,715 122,472?:- o:? nnual Reports of Customs Administration of Iran, Tehran, 1914- 1931. Foreign Traice of an. , on such a basis, would be determined by the international Possibi.. silver and not by the value of exports an:! ;.mports, except -..,y, withi? n short periods of time? ala.nBeey th. 0 1? me hod commodity exports and in,ports were ultimately b icense t basi din 19 ? but still the !(ran was se].li.nS in the -ket on the 32 content. There was a fair preroiwn on tll? J{ran, but ne s of its ? 1 si ver on imported commodities was far below V-erth eless its p urc h as1.. ng power What expected it to be. Th? pegg;.ng device, v,ith the aid the le g?i slature of the Trade Monopoly Act; would have been far wore effective for J:t~oreign stab:i.? 1:?i .z. foreign exchanges, had the Government ear-marked J.ng the Kr an on Pbae:er-nt O. f?i ts ster li?n g balance in London 2 earlY in 1930, and had it then l. ?git?W J.U? any moment to sell sterlil1ll bills to thO?? whO ,,ere J.ng at "as l.rnate 1y i. n need of them. stabilization of the ](ran, as lo!1ll as it based on silver, would have been possible only by stabiliz;.ng th? P:t-i ce of ? In order to achieve the latter, as long as silver was silver :re ?cll:'dect a commodity by all the ;.mportant countries of the world, it as l'ltiuJ.ct been ? This hav-e necessary to stabilize general coJ1l!llOditY prices. Ste ti Was naturally beyond the power of rran, or anY other countrY as v,ell? GoJ.d Stand ard on].y The possible w,zy of stabill.?;.ng the ](rall on the foreign exc ha ng e l Idani 2 ' p. 62. Gov-e I'nlnent Savings from the Ang10--1ranian oil companY Royal-ti??? 82 Winnanset od iacthea'-n?g e the currency unit from silver into gold. on ]Jareb 18, 1930, the Ma . -'.Y after the foreien exchanges came under government control, hanianJ1 e ss passed a gold standard bill, changing the legal unit of currenc a new unit called the Rialo - A Rial :was to contain -3 Y i. nto 66 1191 grams e gold. A gold twenty-rial piece, named Pahlavi, of f in 1 Wast o contain -3 2382 grams of fine gold and was to be equal to one 7 2 Soir esre?ig n. The fiduci? ~ , coins were to consist of the following: <>,,...,r (1) l. V-er R ? containing 4.5 grams of fine silver, equivalent to the 1 als P!'e\ri f>actoi us standard Kran, representing a gold Rial; (2) multiples anrl laJ. Poiencs of si.l ver Ri. als, consisting of two-Rial, five-Rial, and half-R_? the f es, vvh.1. .ch were to be legal tender,? (3) nickel and copper coins -- 2 to be orme r, with denonu. nations of one and tYIO Dinars. These coins y,ere Al leltgi. a.l tender only to the amount of two Rials. c "is ? n:i.mum re se rve equ.i valent to the total outstanrlJ.. ng subsidiarY 0 ll) theW f ast be ke pt by Bank Melli rran either in its vaults in rran, or . o be "Penotr m of deposits in foreign banks. ) Th? aaver-nt mint wes to \v:" 8 to b o . the publi c for unliJllited coinall? of gold; but coinage of si. 1 v er ti,. lJnp e the exclusive privilege of the Gover-nt.4 The Act prohibited Bank ~tn?i on of silver, but gold could be irllPorted free of duty. S i':i_ l. Iran . th .; ,,. ed to purchase ne gMe1ld1 ? ~ ' as government representatwe, was au or- ltt log,%0 6 t he public at a rate not e,cceeding 2121. 35 aials per J...f"OTJl ? Accorging to the Act all fiduciarY issues were to be backed l .A:r-t 2 ? III of the Act. 0n e nl?. nar i 8 equal to one-hundredth of a Rial? 3 4A rt ? 9 of the At Ibid C. 5~' Art. 1.i. Ibid 6~' Art. 12 Ibid ? ---:::::, Art . 1 3. BJ 100% by gold ? On I.1arch 13, 1932, an amendment was made to the original Act . The relation of the Rial to the Pahlavi was modified. The weight of the gold Rial, the standard coin, ,nra.s reduced from .3661191 grams to .07322383 grams, and was to be equal to one-hundredth of a Pahlani, instead of one-twentieth. The pure silver content of the subsidiary silver Rial, representing the gold Rial, was reduced from 4o5 grams to 4.ll.r grams. 1 At present, theoretically, Iran has a gold standard, but in practice, there is no obligation on the Government to pay out gold in return for 2 notes. The former gold coins are treated as bullions and their value is determined by their demand . The currency in circulation consists of paper I note s , and silver and nickel coins. The bank notes are issued by Bank 1.'elli Iran in demoninations of 5, 10, 20, 50, 100, 500, and 1,000 Rials. There are also subsidiary coins of bronze of 5 and 10 Dinars, while the minting and circulation of token silver coins of 1, 2, 5, and 10 Rials were authorized by the Majless in December 1943. Paper Notes The bulk of the currency in circulation in Iran is in the form of bank notes. The total amount of paper money in circulation in Bahm.an 1325 (February 1947) has been about 7, 800 million Rials.3 The Iranina Currency Law of November 1942, provides that all notes issued in excess of a total of 3,500 million Rials must be covered to the extent of their 60% value by l Art . I . 211uerel y specifying by law that the currency unit shall consist of so muc h gold is insufficient, however, to establish the gold standard effe~- tiv ely. For the gold standard really to exist, in the sense that gold is the true standard of value, it is necessary that the value of the currency unit ( any unit) and the value of the defined weight of' gold be kept equal to one another." P. T. Ellsworth, International Economics, The Macmillan Company 1938, p. 177. JBank Melli I ran, Bull. No. 86 (February-March 1947) Vol. XIV, Tehran. 84 ,old . And the remaining 40% must be covered by foreign exchange con- vertible in~o gold. I The bank note s are bac ked by t he follo,ving items: l 3 old in Bank Helli Iran, Tehran l,176,6h3, 871/25 Rials ?,old in foreign countries 2, 822,353,195/00 Rials '., ? 1ver in Iran 310,477, 874/75 Rials ? oreign Exchange l,457,341,593/85 Rials 1 ; r mm Jewels 344,201,581/20 Rials J ovcrnment Liabilities secured by e xcess value oi' Crown Jewels 1,400,000~000/ 00 Rials1 During the war years , because of t he occupation of the country by the arrnics of the United .:>tates of America, the Union of Soviet Socialist cpublics , and the United Yingdom, t her e was a very marked eJ.'J)ansion in ?-ne total amount of paper curr ency in Iran. Before the wa:r, the paper currency in circulation amount ed t o about 1,400 million Rials. By October 1943, this amount had increased to 4, 838, and by Ma:rch 1945, to 7, 500 1ni l linn Rials. The expansion of -currency was necessitated by the colossal, tlen , Allied expenditures i n I ran. The economic and financial cr isis, during this period, may be traced to the following causes: (1) increased p rchasing p ower of t he mas s e s; (2) unbalanced budget resulting in large borrowi__ngs by the Government from Bank Helli Iran; (3) the failure of the Government i n price controls; and (4) speculation and hoarding of goods. Ban ci ng-r.- Eodern b anking in I ran began in the year 1888 when the New Oriental 1-:sank ?m:e lli I ran , Bulletin No . 87 (April-May 1947) Vol. XV, Tehran ? .,~Ge nerally speaking, banks in Iran have developed on the ttbranch- bank11 basis , rather than on the "unit" basis 0 85 Banking Corporation, Ltd. established itself in the country and opened branches i n Tehran, Mashad, Tabriz, Rasht, Isfahan, Shiraz and Bushehr . 'I'his bank did not acquire any concession from the Iranian Government, arrl e g aged itself in ordinary cormnercial business. Its business was taken over by the 13ank Shahanshahi Iran, 1 which purchased for 20,000 pounds the r;:'chran l ease and the 'M"lole equipment of the Bank, 2 in 1890. Imperial Bank of Iran This bank was established in Iran in 1889, under a omnibus concession g iven by t he Shah t o Bar on Julius de Reuter on the 25th of July in 1872. T- e conce ssion was o.f such a monopolistic and all-inclusive nature that it -ms found politically impracticable . It included full trading rights in addition t o banking, the exclusive right of note issue under prescribed s eguards, exemption from taxation, and the exclusive right of mining exc ept as to pre cious metals and precious stones, and without prejudice to exi s ting mining concessions . The mining rights which were to lapse if and in so far as they were not exercised within ten years were not in fact exercise d and they lapsed accordingly. The banldng concession, including the note issue , was for sixty years. The royalty payable to the Iranian Government on the profits of the mines was to be 16% and the bank r oyalty was fixed at 6~i of the net profits . The Imperial Bank was established in u ctober 1 889 . Its capital of l,000,000 pounds was subscribed fifteen t i!llcs over, at a premium of 2 pounds per 10 pound share, which was paid to Baron de Reuter as the price of the concession. Until the year 1928, ??rhen the Iranian Government started its own bank, the Imperial Bank 1 Imperial Dank of Iran . 2 ::ir Arnold T. Wilson, Persia, p. 266 I 86 constituted the sole trustee of the Government's banking affairs and the principal channel of the financial concerns of the public. It advanced loans to the Government and enjoyed the sole right of the note issue. It e arned record profits and made its reserve fund swell to many times its p aid-up capital. Under an agreement dated May 13, 1930, its right of note issue was withdrawn, in consideration of the payment to it of 200,000 \ I p ounds by the Iranian Government . At present the bank has its branches i n all principal towns in I ran. Its credit, in 1945, amounted to 10 nu?.. u?io n pound s . l Banque d 1 Escompt de Perse The year 1889, which gave birth to the Imperial Bank of Iran, re- c ords also the opening of the Banque d' Escompt de Perse, a subsidiary of the Russian State Bank. The bank with a capital of 30,000,000 Roubles l s tarted its operation. It was mainly a political instrument of the Tsarist government , its object being cut-throat competition with the Imp erial Bank of Iran. Since it was a polit ical institution, its opera- t ions rere not by any means conducted along legitimate business lines ? .. s i de .from loans to the Government, the bank also extravagantly extended c redit , on f rozen assets, to various influential people of the country. I n 1906 it was reported that the outstanding investments of the bank on 2 frozen assets in the city of Tehran alone amounted to 16,000,000 Roubles. The Soviet government, in the Russo-Iranian Treaty of 1921, not only can- cGlled the gigantic loans, but also offered the remaining assets of the bank as well as all the Russian investments in Iran - both public and 1i1 . Pirnia, A Short Survey of the Economic Conditions of ~, Tehran, l ?arch 194.5, P? 22; - -- 2 Jamal Zadeh, Ganje Shayegan, Kaviani Press, 1916, p . 104. Also see: '. ? 1 fschar, La Politique Europeane en Perse, Berlin, 1921. 87 pri vate -- except the Caspian fisherie s, as a free gift to the Iranian people . The bank i s stil l in the process of r e alizing the old debts and settling the claims of depos itors. I t, hovrever, transacts no business and may be said to b e under liquidation. The ottoman Bank It is a Britis h owned bank constituted in the year 1863. This bank has branc hes all over the Middle East countries. It has two branches in Iran, at Kermanshah and Tehran, opened in the years 1921 and 1923 respec- tively. The Banque Russo-Persane It is a Soviet bank, opened in Iran in 1924, and now has its branches at all i mportant towns in the north. This bank is mainly concerned with the f inancing of Russo-Iranian trade. The Bank Sepah The capital of thi s bank was borrowed from the army pension funds. The bank does a moder ate internal business in loans, discounts and inland bill s . The cap ital of the bank is 4 million dollars and a total of 40 million dollars of c redits. The Bank Melli Iran1 The autono:nzy- in the financial structure of Iran begins with the establishment of t his national enterprise. It was established by an Act of the Hajless p assed in September 1928. The capital of the bank amount- ing to 300 million Rials has been provided by the Government, and it is 1 ~ o A. Pour Homayoun, La Banque Nationale de 1 1 Iran et son Role dans le Developpement Economiqueau- P=ay-s-, -Pa-ri-so- - -- - - - -- --- -- r 88 n ow the principal r epository of the Government 1 s internal balances. ~ince 19JO, t he bank has enjoyed the sole right of note issue. It has its branches throu ghout t he country. The total aroount of credit guaran- teed by the bank in 1945 amounted to 3, 700 million Rials of which about 2, 500 million Ri a ls were provided by the Government. The gross profit of the bank for the year 1325 (llarch 21, 1946 t o march 20, 1947) amounts to 452 million Ri als which exceeds the gross profit of the previous year by 31 mil.1.ion Rials. The net prof it of the bank is 231 million Rials which, compared to the .figures of t he previous year, shows an increase of 16 nillion Rials ? 1 The national Savings Bank The rati onal Savings Bank was established by virtue of a legislative act i n 19313 . The number of saving accounts in the country with the total amount deposited i n the1i since that year until the end of 1325 has been recorded as shown in Table XXI . TABLE XXI Humber of Savings Accounts and the Amounts Deposited Year Number of Accounts A;mounts 1318 (1939-1940) 22,307 22 , 433,000 Rials 1319 (1940-l941) 55,153 37,862,000 Rials 1320 (1941-1942) .54, 647 30,933,000 Rials 1321 (1942-1943) 65,405 53,594,000 Rials 1322 (1943-1944) 97,416 144,747,000 Rials 1323 (1944-1945) 144,781 296,646,000 Rials 1324 (1945-1946) 201,623 4.54, 891,000 Rialsi, -;:-Bank 1.:elli Iran, Bulletin No. 82 ( June-July 1946) Vol. XIII , Tehran. ?ank relli Iran, Bulletin No. 88 ( June-July 194 7) Vol. XV, Tehran. 89 ornparison of the f igures in Table XXI will clearly show that the number of saving accounts and the balances of deposits have increased in a satis- .factorJ manner . The National savings Bank has endeavored to encourage the habit of 5avin;:; among the people . In accordance with Article 14 of the c 0 '1.llation concerning the national Savings Dank, approved in 131_8 , by the council of Linisters , it is provided that " ??? seventy- five per cent of the not. profits of the Savings Bank shall be divided every year among the depositors in the form of prizes awarded by lottery :,o that the number of prizes shall form one-tenth of the number of saving depositors." The total arnount of prizes which was 400,000 Rials in 1318 rose to 1,500,000 Rials in 1324. Table XXII gives a complete comparison of National Savings deposits since 193D. TABLE XXII National SavingSi} Tlcposit Number of Depositors :;alance f"or Tehran Other In All Tehran Other ~.r? all Iran Province Branches Iran Prorince Branches L 22 , ld,J ,265. 65 12,108,319.75 10,324, 9Li5. 90 22,307 11,604 10,703 lj J?, 862 , 8ho. J5 18,930,757.60 18, 932, 082 . 7.5 .55,1.53 21,110 34,043 ' ( ?- , 30, 933 , 377 . 85 14,788, 883 . 15 16,141.1.,L.94. 70 .54,647 24,.591 30,056 '~ , - ? J... 53, 594, 592 .70 26,li2J , 569o7 0 27,171, 023 . 00 65,405 28,480 36,925 , . ) lltl-+, 7w 7, 298 .ho 79,730, 579 . 35 65,016,719 . 05 97,416 31,176 66,240 296, 646, 205 . 65 11 19, 334,477 . JO llr7,312, 728.35 144,781 .58,682 86,099 ? <' ?( 451.~ , 891, 771.70 231,231,970. 75 223,659, 800. 95 211,044 82,694 128,3.50 -;:- J ank 1:clli Iran, Bulletin No . 82 (June-July 1946), Vol . XIII, 'fehran. The Agricultural and Industrial Bank The bank was established in 1933, mainly with the object of er anting credits for agricultural improvements and industrial developments . It has a capital of 300 million Rials of which only 180 million has been 90 pa:i.". d ? 1 The tota l amount of credits granted by this bank- to agriculturists and manu f acturer s , up to 1.:a.rch 1945, amounted to 250 million Rials o The J.Iortgage Bank This bank was established in 1939 with a capital of 200 million Rials for providing t he capital to peopl e for t he purpose of construction. A,ccordine; to the balance sheet of the bank f or the year 1325 (1946-1947) t he amount of loans paid out by the b ank against real estates was approxi- mately- 240 million Rials , and the 1valu~ of t he mortgaged estat es amounted t o 1, 097 million Rials ( at the minimum rate of evaluati on)? The gross profit of the bank for the year 1325 amounted to 28 million Rials and the net profit h as been 14 mil l ion Rials . 2 The Industrial and Hining Bank of Ir an 'fhis bank was established in 1945 with a capital of 2,500,000,000 nials entirely subscribed by the Government and represented by the esti- mat ed price of the factories and other indust rial establishments owned by t he Government and the spec i al rights and privileges apper taining to t hem. The shares of the bank a.re t here fore entirely owned by the Govern- I!'.ent and not transferable except by special law and then only in favor of Iranian c i tizens . The principal duties of the bank are: (1) manage- nent of t he industrial establishments, government factories and mines, ( 2 ) application of t he general industrial policy of the country, ( 3) crea- t ion of new industries and provisi on of necessary f acilities for the ex isting industries, (4) f oundati on of companies for or participation 1 R. N. Gupta, I b i d, P ? 6. 2Bank Melli Iran, Bulletin No. 88 ( June-July 1947) Vol. XV, Tehr an. I. 91 in mine exploring operations, and (S) foundation of companies for the exploitat ion of mines and provision of necessary credits for t he purpose. The bank is aJ.so authori zed to perf orm t he following banking transactions: (1) granting credit facilities to industrial establishments and ovmers of indu s t rie s, (2 ) purc hase or provis ion of credit facilities for t he purchase of machiner y , spare parts and tools on its ovm account or on account of industrial establishments, (3) payment of advances to producers of r aw mat e r i als on i ts own account or on account of industriaJ. establish- ments , (4) purchase and saJ.e of shares and s t ocks of industrial companies on account of ot hers , (S ) sale, purchase, acceptance as security, irrrpor- tation and exportation of industrial and mineral products, and (6) issuance 1 of loan bonds subje ct to the previous sanction of the Council of U nisters . Iran and t he International Bank for Reconstruction and Development . Small nations try to avoid borrowing from foreign countries . This p r e caut ion is, of course , quite natura l . The International Dank of which Iran is also a member (and one of the shareholders) , is happily like a joint s tock company which be longs to the ovmers of the shares. 2 I!", V'ery member- country, indeed, possesses votes in proportion to the number of its share s and has prop ortionate authority and responsibility. The dif- fer ence bet?ween bor rovring from the Bank and from a St ate is , that no ill influence can be exercised by the Bank, since its assets do not belong to one Government alone . Iran has notified the International Bank of her intention to appl y for ,p 2So,ooo,ooo t o develop her resources . In accord- ance w:i. th the statutes which have been approved by the Parliaments of the i 1Asr e bghtesad, Ibid, P? 11. 2 Iran has subscribed 2L.O shares, t he price of which is ??r 2L.,OOO, OOO. I Iran ? s number of v ot e s is L.90. see : Intern? 1 Bank for Reconstruction and iJeve l opment, s econd Annual Report 1946-19L.7, Washington, D. Co & 92 r? ember- countries, t he b ank cannot grant a loan to a member -country unless it know~ t he pur p ose f or which the loan is asked. Loans must be spent on p roduction schemes . ,,.Tith r egard to the assurance that t he amount t o be p rovided s hould be exclus ively applied to productive e:>..l)enditure , the I r anian Council of Mi nist ers has passed a decr ee contai ning t wo important p oints . This decree was sanctioned at the ses sion held on t he 19th of 1 or d ad 1325 (1946-1947) . Section five and s ix are as follows : section 5, t o p r epare b ill s to be provisionally approved by t he Council of Ministers and finally sanctioned by the Parliament to t he ef f ect that all credits r e lated to the execution of the plan shall be exclusively applied t o t hat purpose and t hat no other expenditure shoul d b~ payable from t he said credits? s e ction 6 , drawing up of a bill concerning the Statute of a Com- mittee of Control in the executi on of the plan. 1 The Iranian Government c ontemplates , after taking into considerati on the urgent needs of t he country in the order of priority, to submit a bill to the Majless for an e c onomic plan . The Government of Iran ha s not yet taken a decision and c annot contract a loan with the approval of the Majless . The only step vrhic h has bee n taken so far is, that Iran has asked t he I nt ernational Bank for credit up to ~250, 000, 000, to carry out projects for economical and s ocial reforms . 2 The Budgetary System of Iran I n order to study the budgetary system of the country, it is neces- sary to define the fiscal year . The fis cal year begins from Farvardin ?ank Jv1elli Iran, Bulletin No. 86 (February- March 1947), Vol. XIV, Tehran, P ? 1100. 2The reader ' s attention is al so c alled t o Appendix VJ,. ,. ( pril) of each year and ends at Khordad ( JUne) of the next year. In o ther words the period of the fiscal year is fifteen months (21 March - 21 June of the next year) . Iran? s State income is divided into two sections, name?1y, 11General Incomes" and "Special Incomes." out of the gener a l incomes all expenditures approved in the budget are paid and from specia l income only special expenditures are spent according to special law f or each special income . The }!rinistry of Finance in the first seven months of each year tries to collect figures and information of next year? s revenues. Having obtained -the total approximate revenues, it then det ermine s the amount which could be spent on each item of the budget. such f. res are conmnmicated to the ministries and independent department s , and t he y prepare their budgets within the limit of the connnunicated figures . The General Budget Department of the Hinistry of Finance is in charge of ex arnining the various budgets of the ministries and to make notes in so far as the ? additional items a.re concerned. This Department prepares a r eport for the Council of Ministers 0 After investigating the report and the budget, which is prepared by the General Budget Department, the Council of 1;1i nisters prepares the bill and submits it to the Majless for approval. Tables XXIII and XXIV show the revenues and expenditures of the 'J- overnment . TABLE XXIII Rev-enu es o.f Iranian Government, Ir a.ru? an .v1 .ear 1325 (Harch 21, 1946 to March 20, 1947) Di~ ""('ect '.rv-el"?h?l.( es c ??Opo 1,_ R. 011 -v evenues 141, 581.J, 000 R~a1.s ,b, oyaa:i_J ty f l'om tehc tect t m-u Customs . l 234, 000,000 R~als 1'330, BlO,OOO R~als t y fl'oin_ the A.ngl o-rrani an Oil Company ' 676, Bll,400 Rials Il.e~d. f l'oin th e. Caspian Sea Fi sheries co. Il.e~l'lues of e Fishing Concessi on in Riners . 6 Jl 7 000 Rials IIl.le.e~~e ??lluu..eess of fhe Ceded Est at es and of the Domains ., of t he Posts 125: 000:000 R~als '1'e~Ue8 fl' he Tel egraphs JO 000 000 Rial s om 90:000:000 Ri als Ot'hle~l"< lnsact.~.. o ns thfe Commercial and Economic Re"enu O the Government 497,096,000 R~al s es of the Country 366,051.J, 800 Rials ~ 5, 416, 706, 500 Rial~ ~~t - - - ----- ---- - --------- gul'es fl'om the Mi nistry of Finance, Tehran. 95 TABLE XXIV Expenditures of the Iranian Govermi1ent Iranian Year 1325 (:tv!arch 21, 1946 to March 20, 1947) The ImperiaJ. . Court 1.'.inistry, the Hajless, and the Prime Minister, s office 52,661, 600 Ria.ls The J J.nistry? of Labor and Propaganda 42,586,800 Ria.ls The J. ? nistry of Interior, the Genda.rmerie , the Police and the census and negistration 1,307,168,500 Rials Department The Hinistry of ,Jar l,5Ll,500,000 Rials 'l'he Hinistry of Justice 131,824,900 Rials The Hinistry of Hea.ltl}, including the Pasteur Institute 177,98L,5oo Rials The Einistry of Foreign Affairs 77,630,600 Rials The Ministry of Education 516,935,000 Rials The Ministry of Commerce and Industries 39,197,000 Rials The Ministry of Roads, Railway Construction, Administration of posts , and the 0A'J)enses 230,644,200 Ria.ls of asphalting of roads The Uinistry of Finance (General Budget ) 311,9LO,ooo Rials The Customs , Monopolies, ceded Estates, 'Mint, Construction, other exploitation charges 986,266,900 Ria.ls and extraordinary expenses Other general expenditures of the Country 565,376,600 Rials Total 6, 093 ,773,100 RialSl(- ?:-Figures from the Ministry of Finance , Tehran. Chapter X LABOR CONDITION Wages The socio-economic development of Iran envisages a social evolution which involves the life and labor of the toiling population in agriculture, handicrafts, and modern industry. 'fhis evolution is continuing in full vigor . But perhaps it is unfinishable in the sense that an immense number of the peopl e wil+ remain in agriculture and handicrafts, even though there are signs that industrialization is assuming increasing importance arrl will undoubtedly draw more workers to i t s ranks in the days to come . The migration of the peasants and the artisans to the city in order to engage in modern industries is of rather recent origin. Therefore this? mode of lii'e and its special problems is also of recent root. Certain fundamental problems of the peasants, the handicraft smen, and the city workers are basically similar, that is -- low wages. The social process in which a special group of people attempt to adopt themselves to a new s ocial environment is revealed, ,vi.th their success and their failure . Agricultural workers receive a very low wage . 1 payment is often made in kind, accor ding to an invidious ancient tradition which divides the produce of the land into five parts , to be alloted respectively to the o mer and to the suppliers of water, draft animals , seeds, and labor. The peasant who provides the labor may receive as little as one-fifth, while four- fifths may go to the landlord. 2 During the period of wartime, however, 1 Lionthly Labor Review, September 1946, P? 3640 2 rdem, P ? ? 97 t he agricultural workers were better off, they probably obtained more food than city workers and did not l ive or work under conditions as cro ded and insanitary as those in the citi es . ''[ages of tovm workers have varied wide l y f r om pl ace to place, even within the same city, for the same type of work. The cost of living at one time rose to a peak of 1 ,100 (1936-37 = 100) , 1 and in April 1946 stood at 816 , while Yfages lagged far behind. An unskilled industrial worker ri:,ceived about 30 rials per day in 1936. However, in addition t o money ?ages, during the war some wor kers received allotments of sugar, tea, br e ad, and clothing . Wheat and rice wer e bought by t he Government and sold to industrial worker s at the pr ice of September 1941. Piece rates have been pr evalent in the textiles and rug industries . Dot h labor and management favor piece rathern t han time r ates , however , the unions contend that the piece r at e s are very low and that raising hem would resul t in gr eater out put . Wages of industrial workers have been somewhat higher and wor king conditions better in the north than in the south of the count ry, probabl y with t he exception of textile f actories in Isfahan. The difference may be attributed to the fact t hat many northern plants are Government- owned and union activities have been gr eater j n the north? .'[ages have been the chief c ause of industrial disputes in r ecent e ars . Substantial increases were obt ained , largely as a result of union activity, between 1943 and 1946 . After a strike against the Angl o- Iranian Oil co., Ltd., the cash wage was nearly doubled in June 1946 (from 18 to JS rials a day) , but payments f or lunch, sugar, and tea, and special 1&u.1et i n Bank Melli Iran, Tehran, Years 1936, 1937, 1941, and 19460 98 prices for certal.n goods in the company 1s stores , were cancelled. There is a diversit y in the practice of payment for national holidays I or for Friday, the traditional religious day of rest. Some workers have I received a 2-weeks' paid annual vacation. Labor Legislation Prior to the labor law of 1946, little labor l egislat ion had been passed i n Iran. A worlanen ' s compensation law in 1943 replaced a previous statute which provided for a relief fund financed only by worker contri- butions . Factory construction and sanitation was regulated by a law of 1936, but enforcement of safetY: provisions has been intermittent. The l abor law of 1946 specifies duties and obligations of employers and employees . The same law assures worker s in the same factory or trade the right t o for m unions . These unions nrus t register their articles of association. As a penalty for exceeding it s rights or disturbing the public peace, a union may be required to elect new off icers, or may be dissolved or suspended . Viol ence i n connection with strikes is forbidden . To aid in the settlement of dispute s, factory councils are to be established, representing the wor kers , the employers, and the Ministry of Labor . Disputes involving a number of workers or a union, if not settled by the factory council, shall be r eferred to a J-member arbitration board composed of a representative of eac h p arty_ and a third member selected by the other two . Failing an award within 20 days, the dispute is to be referred to a higher board, s et up in t he locality, the avrard of which is to be i'inal and binding. Pending action by these bodies , strikes and lock-outs are prohibited. "The law also establ ishes a Mi nistry of Labor, with power to make ca.fety and health regulations and to f ix mini rrrum wage r at es, which, it is 99 specified, shall cover the living costs of a family. Hours of work are fixed at 48 a week, overtime to be paid at 35 per cent above the regular rate, w-lth regulation of the total amount of overtime to be permitted. The granting of a weekly paid day of rest (Friday) and a paid annual vacation is required . In addition, the workers are to be paid for 6 speci- fied holidays . The law regulates employment of women and children, sets a minimum age of 13 years , prohibits night work, provides for maternity leave and factory creches, and sets up contributory funds for social security pur- , poses . It also regulates the payment of wages, requiring equal pay to men and ,mmen for equal ,vork, and, in certain cases, notice and compen- sation for dismissal. Chapter XI POSSIDILITICS OF FUTUH~ D;:;v.i::LOPT':!~JJT In previous charters the present economic conditions of Iran were :::n.irv-eyed. In this chapter an attempt to appraise the possibilities of future? e conom.i c development will be at.te1i1pted . The discussion is divided into tw,0 t s; il. ri.c ultural l. par 0 Jevelop111cnt and Industrial Development . Aericultu r a 1 Development A2;ricu1ture i3 the industry o:f food production and, like any other industry ? , it can benefit by utilizing the resources of modern technology. 1 ut aGricu lture is more than the industry of food production; in the case of Iran ?? t i? , l s also a way of lifeo In order to improve the agriculture of the country, a combination of sociolo?;ical and technical advances should be achieved . In the follow-lnc pa.;os the obstacles to agricultural dev-e1 opment are discussed. These will be treated as follows : tho social factor , tJ1 e technical f actor, the increase in the cultivated area, and new a,., . c 0 ricultural products . Tho Social Factor ?~l Land tenure is based on an ancient and complicated system. rhcro should be a radical chanie in the system of land tenure before there can be much hope for airicultural development . It is futile to expect al,'ri- cu1tura1 improvements , or a higher level of livinG, so long as the ancient -----------t -::-The produce of land is usually divided into five p.'.l.I'ts each b~ing _ he return for one factor in production. Viz : land, water, l~l.Jor , lL~Jl e- ,nents ,Tl.th clrau,:ht animals and seeds . 'l'lle peasant who provides often ~nly lauor receive~ as litt le as one-fifth, while four-fifths will go to he landlord. ,Jc c : \;ancljabi, .ssaisur 1, 1~conomie .Rurale et le Regime Ac;raire de la ~ , ?aris, 19]';:-.--ATso: ,l ;;in ,,arl nrosecTose, Jn'.froduchon to Iran, .ew York, Oxford Univer:::.ity press, 1947, PP ? 196-197. f' , I 101 system is permitted t o renain. The very security of the nation and of every I r anian citizen within the kingdom is seriously threatened by this long outmoded form of land tenure . A country which is predominantly agri- cult ural and which derives a high proportion of its national income ?from the productions of its peasants cannot afford to neglect such a valuable asset . According to the best estimates at least 80 per cent of the people of Iran a.re engaged in agriculture , and they produce about 90 per cent of the national income . 1 There are t wo essentials for the cultivator on which the rural betterment nru.st be founded: security of tenure, and, with it , the knowledge that it is worth his while to improve his ovm holding . 2 But not all the land is in the possession of large landlords or absentee ovmers; there are numbers of peasant propriet or s as well. The Iranian Government is seeking a method in order to ensure an orderly change . In 1946 the Government issued a comprehensive decree ?or the encouragement of small land owners . 3 The Technical Factor The technical disadvantages of the old system of farming are great. In Iran agriculture should become mechanized as soon as possible in large dry-land farming areas and in irrigated valleys where populations are low. The amount of available labor, size of individual farms and ty-pe of crops produced should govern the degree of mechanization and the tYPe of imple- ments to be introduced. ].fuch money and time will be saved if all equipment is standardized on a comrm.mity or village basis . This will bring about interchangeabil:Lty of t r actor parts, tractor attachments and tools , and ~ . A. Keen, The Agricultural Development of the lliddlc East, London, 1946. 2H. B. Allen, studies in Rural Education in Iran, by Authority of the Imperial Government' oI' !ran, Tehran, 194.3.- -- 3Bank I,Telli Iran, Ibid, p . 8!3 . 102 will reduce the amount and number of repair parts to be maintained for l efficient operation of all pieces of equipment. In small farm areas, I garden ty-pe tractors with suitable tillage, seeding and cultivating attach- I ments , and harvesting equipment, will suffice . Types of mechanical equipment urgently needed are: tractor-drawn pl ows, small self-propelled combines that will operate in small tracts of land without destroying any of the standing grain, tractor-dra,m seeding and planting equipment, land levelling equipment, and cultivating equipment suitable for row crops . 1 A misguided mechanization program will waste mil lions of rials of money and r e tard for many years much of the mechanization progress which should take place in I r anian agriculture . It seems advisabl e that the Agricultural I,iachine corporation of Iran in the Ministry of Agricultur e should have responsibility for the establishment and the direction of the proe;ram. Increase in .Area of Cultivated Lands An increase in area of cultivat ed lands is essential in agricultural development of Iran. Only ? about 10 to 15 per cent of the total land area is under cultivation. A further 20 to 30 per cent could be cultivated if irrigations were availabl e . 2 The i r rigation possibil ities of the country have hardly been touched. A program of reclamati on shoul d be instituted immediately, starting with t he s impl er and more obvious projects ) The larger and more expensive pr ojects c an be safely under taken only aft er the ?ep.ort on program f or the Development of Iran, Ibi d, p . 8. 2 B? A. Keen, Ibi d , P ? 101. 31.I. Ezekiel and others , Towards Worl d Prosperity , Harper and Bros., London and New York, l 9L.7. lOJ appropriate area~ ~ are mapped, and adequate information has been acquired as t 0 the precipitation an::i s t ream flow. A. large par t of Iran is irrigated with water obtained from "ghanats.111 1,?' !'">.';- '-hten . . ance is, in many cases, quite expensive because of continual caving. The fl ow f rom most ghanats tends to vary with the precipitation, and they are nat llrally wasteful of water , because they flow all the time regardless of W-h tl e ler water is needed. Many of these ghanats should probably be replaced b . . Y wells, which would be pumped only when necessary; the water t hus rema-; ,....;ng ~.LL in underground storage when it is not needed. In the case o:f Iran probably the most important of the essential measure s for agricultural development, as wel l as indus try, are the con- s t :ructi on and maintenance of irrigation works . No amount of know-how and improved management can have any considerabl e effect where water is serious1,y limited. 2 In recent years a few irrigation projects have been completed . The Khuze t s an project vras started when ~he Aericultural Bank f ounded the .A.ericultl lral Corporation of Khuzestan. Befor e t"hat time there was only a dain constructed by the Department of Agriculture . The corporation pre- P\\ f\\-\ 0 0 \'-.~~ ~.J~"1D ~\ 0 o \.$fAt-1A? f v \.J D~-:z, ,{,~TAN }1 I\ f: 1,A yp;o o tj't-r 0 $1-'lfl - y.,\\ ~ ? MftSJfD- SoLI-H/\1.4.N ~~ i\ ? AG.>1A -rn~r I~ ~~ ~ $ o Kt=RM RN ,l' $#A ""'K '/I .,j<\ 1pt>DA~- \ o !, HI RRZ 'ZAHJ::DAN \ o Kfl7,f~UN ~ ~ ~ $HfH~ APPENDIX III ~'-f ,.. BRNDIIR-ABB/1.S Iran Railways , Ports and Industrial q ~ ~ Senters ~A - \\ i:; ~ ~ --J --=-- I~ l l 8 APPfillDIX I V The For e i gn Trade in 1324 ( 21 l arch 1945 to 20 }iarch 1946) Tho total f or e i gn t rade of Iran in the i'i nancial year 1324 (21 I.larch 1945 t o 20 ]larch 1946) amourrt,ed to Els . 11, 237, 167, 282 rnade up as follows : A- .. XPORTS : 1. Val ue of commercial exports ( actual exports ) HlG . 1, 698, 268, 907 2. Valt1e of exports of petroleul'l products o:f Anel o- Iranian Oil Company 5, 611, 698, oLi6 3. Value of exports of Iran Fishery Company 8, 789, 673 Rls . 7, 316,756, 626 13-J:1.:PORTS : 1 . V~lue of comn~rcial imports (actual imports i nc l uding imports of col d and silver) nls . 3,106, 600, 888 2. value of r;oods exempted from payment of custom duty 759, 377, 042 3, l.365, 977, 930 c-valuc of Commercial goods that pas secl through tho countr y in tr.'.ll'lsit or were returned to t he country of origin 51, 145, 434 D- Value of commercial goods returned to the country of oritin or other countries without customs entry or transit fornal ities 1, 213, 757 E- Valuo of commer cial goods trans- shipped j_n Iranian waters . ~:- 73, 535 Total Rl s . 11, 237,167, 282 ?:-Iranian official statistics arc kept in t wo parts , the one r elating to so- call ed II commercial" i mports and mq)orts , the second , to other ir,rports and expor ts . The Iranian authorities do not incl ude in the statistics of "commercial" imports the values of t hose eoods which arc impor ted free of ll8a duty, viz. materials, etc., imported by the Anglo-Iranian Oil Company, the Societe Mahie Iran, Government departments, banks, etc. Similarly in the case of 1-ranian II commercial" exports the statistics do not include the values of oil exported to various countries by the Anglo-Iranian Oil Company or of fish exported to the Soviet Union by the Societe Mahie Iran. The justification for excluding from the statistics of "cormnercial" trading the values and quantities of the imports and exports of the Anglo- lranian Oil Company, and similar considerations presumably apply in the case of the Societe Mahie Iran lies in the fact that the Company pays the Iranian Government an annual lump sum as a condition of its concession., and the Company's imports required for the efficient operation of the conces- sion as well as the exports df oil products affect primarily the finances of the Company and only indirectly the finance of the Iranian Government . 119 COMPARISON OF EXPORTS AJl'D IlH-'ORTS HI 1324 WITH THE FI GURES FOR 1323. Exports in 1324 117 ,oss ,o41 Kilogr ammes Rls. 1,698 ,269, 907 Exports in 1323 61,/ili7,131 II 792,066 ,080 Difference 55 , 637,910 II Rls. 906 ,202, 827 Imports in 1324 151,241,163 Kilogrammes Rls. 3,l06,60o, u88 Imports in 1323 126 , J4tl ,975 II 2,956, 789,304 24, 893 ,ofHJ II Rls. 149,811,5tl4 As shown by the above f igures, an increase of over 100% has been obtained in both the weight and value of t he exp0 rts of 1324 as compared with the previous yea r and t his increase cover s all the export items of the country in almos t equal proportion. Food pr oducts, urgently needed by most of the foreign countries, rank first as regards t hi s incr ease of export and the experts of dates , raisins and rice show an inc r ease of about 10,uuo, 5,ooo and 18,ooo tons respectively . The e:x:ports of wool and carpet s al so show an increase of approximately J,000 tons each . This increase of exports is the result of the conclusion of the ?world War and the re-opening of the commercial rout es . As re gards imports also, although t he quantity of gold and silver imported in t he year 1324 was les s as compared with the pr evious year, neve rtheless an increase of over 24,000 tons as re gards weight and about l 50,000 ,000 rials as r egards value was obtained. The increase in the imports of the year 1324 was also due to the conclusion of the war and the need of the local market for various kinds of goods . Of course, the sale of the allies ' army surplus goods to Iranian merchants at the time of evacuation of the country also affected the increase in the quantity of goods imported. 120 The Actual 1''oreign Trade of Iran in 1324 in United States Dollars at the mean rate of Rl.s. 32 . 50 to the dollar: Value of Imports u. s. i~5 , Sb 7,710 Value of Exrx,rts II 52,254,4aJ Total U. S. ~pl47 ,842,13o?- *Asre Eghtesad, Official Journal of the Tehran Chamber of Commerce, Tehran, September, 1946. APJ:-'ENDD C V COMJ:-'OSITION OF FOREIGN TRADE l. List of Iranian Export Commodities. Ca rpe t s - S o ft Ski. ns (1a mbs, sa bl e, s t one-marten, beaver, fox, etc ?) Gum Tragacanth - Gum Arabic - Opium - Sheep and Goat skins - Cotton - Wool~asings - Ifap - Raisins - Petroleum Products - Crude Pearl - Mother of J:-'earl - Turquoise - Dried Fruits - Sultanas - Red Oxide - Asafoetida Almonds - Pistachci..os - Vfalnuts - Hazelnuts - Wild Almonds - Edible Oils Silverware - Timber - Tobacco - Tombac - Lemon Juice_ Roasted Nuts - Millet - Wild Rue - Bones - Fleawort - Dried Cherries - Dried Prunella pried Plums - Pomegranate Seeds - Dried Figs_ Origanum _ Scr~p Iron and Broken Machines - Plantain - Tobacco Leaves - Engraved Brass Work_ White Succary - Flax Seee - Wild Pistachio - Dried Quince _ Quince Pips - cat's Paw - Feather - Maidenhair - Pomegranate Peel - Poppy Peel _ Pigski.Jl and Hogskin - Walnut Shells - Pennyroyal - Onion - Refuse Pieces of Lamb skins_ Sunflower Seeds - Cotton Seeds - Mellon Seeds - Vegetable Seeds - Eggs of Domesticated and Prey Birds - Pumpkin Seeds - Castor Beans_ fa r sley Seeds - Thyme Seeds - Lucerne Seeds - Persian Manna - Turcoman Belts _ Dried Mulberries - Salep - Jaj eems - 'foollen Sacks - Tan Bark - soapwort - Henna - Colocynth - Rocket Seeds - Poppy - Mustard - Dates- s antoniaca - Truffle - Fennel - Ox Casings - Vegetable Oils - 0ilk and T Xtiles - Blanket - Table Cloth - fuadder Root - Liquorice -Vfoollen e M . _ Indian Wheat - Barberry - Orpiment - Saff ron - Aniseed -Rhubarb aize . 1 Hoofs - Juiube - Calcinated Salt - Hermodactyle - Nigella Hyssop - An ima u H rns - ~ianna Tighal - Purgative Manna - Mushroom - Seeds - Dried Apples - o ?ct Ghalamkar - Tar - Dried Whey - Sesame - Hedge Mustard - Embroi ery - _ Rosewate r - Dried J:-'ears - Bole Armoniac - Violet Tamarix - Manifera _ Rose - Carbonate of Lime - Buglose - Morning Glory Fl owers - Marjoram 122 Crude Sulphur - Gives - Fish ( fresh, smoked or dried) - 1Iyrt hle - Shallot - Hair (horse mule and pig) - Beeswax - Medical Herbs - Goathair - Starch Spearmint - Salt. 2. List of Iranian Import Goods. Cotton and Woollen Piecegoods - Silks - Hosiery - Harberdashery - Stationery - Paper - Toilet Requisites - Tea - Sugar - Machinery and Tools - Trucks and Touring Cars - Automobile Tyres and Accessories - Bicycles and Motor-Cycles - Electrical Equipments - Electric Refrigerators - Agricultural Machinery and Implements - All kinds of Metals and Ironwares - Phannaceutical Products and Surgical Instrument,s - Optical Goods ..., Dentistry Requisites - Bu ilding Materials - Chemicals - Spices - Pepper - Miner~l Cil - L~dies' and Gents' Hats - Umbrellas and Raincoats - Crockery - Cutlery - Telephones and Accessories - Radios and Spare Parts - Window Glass - China and Glass Wares - Aluminium and Enamel Vlares - Looking Glass and Mirrors - Electric Lamps and Bulbs - Kerosene Lamps - Heating Stoves and Cooking Ranges - Sewing Machines - Safety Razors and Blades. 123 APPEN'DIX VI Iran and International Bank In 1946, the Majless authorized the Government to sign and deliver to the government of the United states of America the document purporting the approval of the Bretton Woods Agreement, concerning the establish- ment of an International Monetary fund and International Bank. In this connection the Majless approved the following articles: r. The Government is authorized to take part in the International Monetary Fund, hereinafter called 11 The Fund, 11 and in the International Bank for Reconstruction and Development, hereinafter called "The Inter- national Bank," the statutes of both of which were drawn up as given in the annexed protocol., at the International Conference held at Bretton Woods in the United States , with representatives from Iran tald.ng part in the proceedings. II. The Government representatives for the Fund, and the Inter- national Bank and their substitutes shall be nominated by approval of the council of Ministers upon the proposals of the Ministry of Finance. III. The Government, or its representatives, cannot ask for a change in the parity rates of Rials in relation to the currencies of other countries which are members of the Fund, or agree to any such change, or accept any modification in the shares allotted to Iran in the Fund and International Bank, without the previous approval of such change by the Majless. IV. use of resources of the Fund and the financial facilities afforded by the International Bank can be obtained solely through, or with concurrence of, the Bank Helli Iran, and any deposits belonging to the International Bank or the Fund, shall be kept at the Bank Melli Iran. 12).i V. The Issue Department of the Bank Melli Iran (Banknote Reserve Control Committee) is authorized to deliver over gold to the Fund on account of the 25% share thereof allotted to the Iranian Government in accordance to the Statutes of the Fund, and amounting to six million two hundred and fifty thousand dolJa.rs. The receipt document obtained by the Banlc Melli Iran from the Fund against the said gold shall be considered as part of the gold bacldng held in reserve against banknotes. VI. Upon call made for payment of the remaining 75% of the share allotted to the Government, the Bank Melli Iran is authorized to put Rials, up to the limit of the equivalent of 18,750,000 dollars, at the disposal of the Fund and, when necessary, to turn over to the Issue Depart- ment of the Bank Melli Iran any foreign exchange or credit obtained from the Fund against the said Rials. The Issue Department is authorized to have such foreign exchange or credit obtained in the above-mentioned manner credited to the account of the bacldng held against issued bank- notes. The Government may issue non-interest-bearing, untransferable deben- tures up to the limit of the above amount and to hand them over to the Fund on account of its Rial share in the Fund. VII. The Issue Depart:roont of the Bank Melli Iran is authorized to leave on demand at the disposal of the International Bank up to the limit of ~19, 680,000 from the gold or foreign exchange reserves, on account of the 18% remaining share of the Government in the Bank. Non-interest promissory notes, given by the Government to the Issue Department of the Bank Melli Iran as the counter-value of the share of Iran in the International Bank shall be counted as part of the backing held against banknotes. 125 VIII. Currencies of countries which are members of the Fund shall be acceptable as part of the reserve backing held against issued bank- notes, provided that the same should have been obta:ined at the t:i.Joo when the member-country was entitled to have the benefit of the resources at disposal of the Fund.1 1:aank Melli Iran, Bulletin No. 79 (December 1945 - Jarruary 1946) Vol. XIII, Tehran.