File No. 825.6374/41

The Ambassador in Great Britain ( Page) to the Secretary of State


7163. The proposal for a concerted policy in regard to nitrate supplies, forecasted in the Embassy’s telegram of September 7, No. 7119, was presented Wednesday night by the Ministry of Munitions of the British Government through the International Purchasing Commission, Commission Internationale de Ravitaillement in London to the representatives of the United States, Great Britain, France, Italy, and Russia, who met together to receive it. The proposed commission is entitled the Nitrate of Soda Executive, and following are the thirteen articles composing the memorandum of agreement suggested by the Ministry of Munitions and passed for the approval of their Governments by the representatives of the countries named:

There shall be constituted forthwith and set up in London a joint Executive, hereinafter referred to as the Nitrate of Soda Executive, for the purpose of controlling the purchase and supply of nitrate of soda in Chile for the Governments represented on the said Executive, of coordinating the action of these Governments in relation thereto, of allocating the available supplies of nitrate of soda in agreed proportions between the said Governments, and of disposing to governments not represented on the said Executive or neutrals such quantities as it may deem to be desirable by the said Executive.
Nitrate of Soda Executive shall consist of an equal number of representatives, not exceeding two, of the British, French, Italian, Russian, and United States Governments, respectively, and subject to the authority of the respective Governments, shall have full power to act on behalf of their Governments.
Subject to the limits and conditions of the financial resources placed at the disposal of the Nitrate of Soda Executive by the Governments represented thereon, the said Executive shall have full power to meet the requirements of the said Governments by the purchase and allocation amongst them of the nitrate of soda available and to make arrangements for its transport with the competent departments of the respective Governments.
No sale shall be made by the Nitrate of Soda Executive to neutral countries which is contrary to the blockade policy pursued by the Governments represented thereon.
The Nitrate of Soda Executive shall, as soon as possible, draw up an approximate estimate of the supplies of nitrate of soda required to be imported by each of the Governments represented on the said Executive over a specified period of time, showing the dates on which such supplies are required and also distinguishing between the various [Page 668] uses to which the required material is to be put. The proportion which the requirements of each Government bears to the sum of the requirements of all the Governments shall, for the purposes of this agreement, be termed the ascertained proportion for each country.
The total purchase for all requirements shall be allocated as nearly as practicable on the basis of the ascertained proportions respectively, provided that the requirements for the manufacture of explosives shall have preference over all other requirements.
The ascertained proportions may be varied by mutual consent from time to time having regard to the total stocks of nitrate of soda held by each Government concerned and in accordance with the relative urgency of their needs and with the amount of tonnage at their disposal.
The Nitrate of Soda Executive shall allocate purchases in an equitable manner and in accordance with the principles laid down in the foregoing articles.
In the event of any of the Governments concerned not desiring or being unable to avail themselves of the share in any of the purchases allocated to them, the Executive may, with the consent of each of the other Governments, allocate the supplies so renounced amongst the other Governments in an equitable manner.
Subject to any general arrangements made between the competent departments of the Governments concerned, the transportation and payment for the supplies of nitrate of soda for each of the said Governments shall be undertaken by that Government.
The Nitrate of Soda Executive shall keep clearly in view the advantages of pooling all purchases and shall arrange for all buying for the Governments represented on the said Executive to be concentrated in one purchasing agency appointed by the said Executive. The Governments concerned will exercise such control over their nationals as will prevent them buying through any channel except through their representatives on the Executive.
The Nitrate of Soda Executive shall be furnished by the representatives of each Government with full information as to their respective requirements and consumption of nitrate of soda, as to the stocks in their respective countries, and with any other information necessary for the performance of their function.
The financing of the operations of the said Executive will be arranged by the Government of the United States of America; the regulations for this purpose made by that Government will form an annex to this agreement.

No representatives other than Italy’s made any comment. The Italian representative is communicating to his Government objections to articles 7 and 10, not against the [constitution] of the proposed Executive but against the manner in which steamship tonnage is allocated to Italy by the International Purchasing Commission and the British Government. The Italian objection is likely to be sustained at Rome because, while it is actually not directly relevant to the question of the control of nitrates, it gives the Italian Government an opportunity to again raise the tonnage question in a general sense with the British Government which has made use of [Page 669] its tonnage control as a part of its political policy at Rome. This would appear to be, however, a local question between Rome and London with which Washington is not directly concerned. Section 13, contemplating financing by the United States Government, was not objected to by any representative and is very strongly supported by the British Government. It had been informally suggested that such financing could be effected through special nitrate account opened by the Treasury in Washington from which payments would be made in Chile and into which deposits offsetting such payments would be made from the proceeds of American loans to the Allied countries, Treasury drafts in dollars being employed by the purchasing agent in Chile to satisfy the invoices of the nitrate purchasers who would employ such dollar drafts by purchasing from their local bankers sterling, dollars or other exchange or currency they might desire. The British Treasury has agreed informally in principle to the United States Government financing purchases but has not been queried on its attitude towards this or any other special method and it is understood that the Department will indicate specifically if the whole of the proposal is accepted before financial plan is annexed to the agreement. The Embassy is asked by the International Purchasing Commission and the British Government if it will, in approving the proposal, immediately suppress all private buying of nitrates, so acting prior to announcing its adherence to the proposed pool in order that speculation and enemy action in securing control of stocks may be prevented.

The Embassy is informed that the British Ministry of Munitions is cabling Thursday to its representative in America with the view of his approaching the Department through the British Ambassador.