File No. 854.85/32B
The Acting Secretary of State to the Ambassador in Spain ( Willard)
1348. For Chadbourne [from War Trade Board]:
No. 167. On July 9 McFadden cabled us proposals of Austria to Switzerland respecting proposed purchase Austrian ships and informed us he had transmitted same to you. Our assent to Switzerland’s purchase of Austrian ships was confined to ships in Spanish ports and we should prefer not to extend this to embrace ships located elsewhere, as it might interfere with other negotiations.
Referring to important terms by number:
- (1)
- Approved.
- (2)
- We approve sellers bearing expense of putting ships in condition for service, but their representatives overseeing this work and handling funds must be neutral and subject to approval of Allied Governments.
- (3)
- Approved.
- (4)
- Approved if Belgian Relief included.
- (5)
- We deem option upon use of half of space in ships during first nine months succeeding conclusion of peace objectionable and believe it should be eliminated.
- (6)
- Approved as to option and terms of repurchase, subject to final approval of contracts before final ratification by Allied Governments.
- (7)
- Approved.
- (8)
- Approved.
- (9)
- We are opposed to the deposit of purchase money in Spanish banks, believing this money may be used in Spain for enemy propaganda which might result in such internal disorder as to close the lead and pyrites and other mines upon which the Allies are dependent for essential materials, and we think Switzerland should insist upon deposit of this money in their country. Respecting this, we cabled Madrid directly on July 17.1
- (10)
- We approve.
- (11)
- We approve of the purchase price if the ships can not be obtained cheaper, but it does not correspond with the price paid by us for Japanese tonnage which was about one-third less. You will use your discretion as to disclosing the fact that we paid this much less for Japanese ships, as we do not believe that fact ought to keep Switzerland from closing trade at higher price.
Referring to McFadden’s 250, Embassy’s 4430 to Department July 11, noon, about Bank Hispano-Austro-Hungaro copy of which was transmitted by him to you.1 Our answer above to paragraph 9 is applicable. In our opinion, blacklisting bank and individuals is not sufficient to prevent payment being deposited in Spain, and steps should be taken to notify Switzerland that we cannot approve the transaction if deposit is made in Spain. If deposit is made in Switzerland, blacklisting of bank and individuals may make transfer to Spain and improper use of money more difficult and perhaps impossible. We have asked McFadden to consult with Crosby about this phase of the situation before taking any definite steps.