<RZ 208/31847/046> 30 May 1926 Sir P. Loraine to Sir Austen Chamberlain.—(Received June 21) (No. 261.) Tehran, May 30, 1926. Sir I HAVE the honour to inform you that Jarolimek, the Tehran representative of the Junkers Company, called on me on the 25th May to inform me of the progress made in his negotiations to settle the terms of the contract to be made between his company and the Persian Government on the basis of the Bill approved in February by Parliament, copy of which was transmitted to you with my despatch No, 88 of the 11th February. 2. M. Jarolimek submitted his draft contract on the 30th March and has since then been engaged in a maze of argument on every point. His chief difficulties have been the objection of the military authorities to the use of military aerodromes (there are no others in Persia) by Junkers aircraft, the obstructiveness of the Ministry of Finance, the insistence by the Persian members of the commission on their own estimates of the distances on which the subsidy is to be calculated, and the selection of the third member of the Court of Arbitration which is to decide disputes. All these difficulties, M. Jarolimek thinks, are in a fair way to being resolved. The military authorities have agreed to allow their aerodromes to be used for six months, during which Government will provide the company with ground suitable for the construction of their own aerodromes; the Ministry of Finance has agreed to pay the subsidy for the two lines, Tehran—Pahlavi and Tehran—Guraitu (but pleads inability to subsidise the Tehran-Bushire line at present); and it is probable that it will eventually be agreed that the third member of the Court of Arbitration should be appointed by the Hague Court. 3. M. Jarolimek left with me copies of the draft contracts, drawn up by himself in the one case and the representatives of the Persian Government in the other, and he has promised to furnish me with a copy of the text in its final form when agreement has been reached. This I shall not fail to transmit to you. The draft contracts contain nothing on which it would be profitable to comment at this stage, but the following qualification in the Persian Government draft of the monopoly of aviation granted to the Junkers Company may be of interest as an indication of the attitude of the Persian Government to this question :— “II est bien entendu que l’aviation sur ces trois lignes reste libre a l’égard des avions du Gouvernement imperial de Perse ainsi que des avions du sport ou autres qui arrivent des pays etrangers en Perse sans faire le commerce du transport des voyageurs, bagages ou marchandises, soit dans l’intérieur du pays soit au moment du retour; à l’exclusion des voyageurs, bagages et marchandises transportés par ces avions au moment d'arrivée, qui pourront voler en Perse sur les mêmes avions." In the draft prepared by the Junkers Company the words in italics are omitted. I may here mention that I have not yet received a reply to the note I addressed to the Persian Government asking for an assurance on this point, copy of which was transmitted to you with my despatch No. 219 of the 7th May. 4. M. Jarolimek further informed me that he has made little progress in settling the terms of the agreement under which the material and personnel of the Junkers Company will be placed at the disposal of the Persian War Office in times of crisis, in accordance with article 8 (a) of the Bill approved by Parliament (see enclosure to my despatch No. 88 of the 11th February). 5. M. Jarolimek gave me a brief outline of the present financial position of the company. It appears that in the crisis that occurred in December, to which reference was made in your telegram No. 255 of the 9th December, the German Government had insisted on taking over the larger proportion of the shares, against the wishes of the company, who had in view a more welcome arrangement with Vickers. The German Government had then introduced controllers into various departments of the business, whose interference has, according to M. Jarolimek, so seriously hampered the efficient execution of the company’s operations that another, and more serious, crisis occurred. The closing of the company’s factory and the abandonment of all Eastern enterprises were seriously considered. The latter was, M. Jarolimek believes, averted solely by the strong representations made by German representatives at Constantinople and Tehran regarding the damaging effect such a withdrawal would have on German prestige. M. Jarolimek understands that the financial situation is now easier; he has himself received a very welcome and long-overdue
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