Papers Relating to the Foreign Relations of the United States, 1927, Volume III

852.6363/70

The Ambassador in Spain (Hammond) to the Secretary of State

Madrid, October 12, 1927.
[Received October 22.]

No. 562

Sir: Referring to my despatch No. 530, of September 23, 1927, on the subject of the request of Mr. Brewster, of the Standard Oil Company of New Jersey, for an interview with General Primo de Rivera in company with Mr. T. D. Wescott, of the Royal Dutch Shell, I have the honor to inform the Department that I am in receipt of advice from Mr. Brewster that although an audience was twice granted to him and to Mr. Wescott, each time at the last moment General Primo de Rivera excused himself.

The second time this happened the representatives of the Standard and Shell interests left a joint memorandum for the President of the Council. There is transmitted herewith, for the Department’s information a copy of the memorandum, which states in effect that neither organization would be able to enter into any relations with the Spanish oil monopoly looking to supplying the latter with petroleum.

I believe that the Department will find this memorandum of considerable interest, not only in connection with the present petroleum situation in Spain, but also as an instance of the cooperation of a greats American petroleum organization with another great foreign company engaged in the same business, and the adoption of an identic policy when threatened by a government policy which has as an end the restraint of free competition and the absolute monopolizing of a commodity of prime necessity.

I have [etc.]

Ogden H. Hammond

[Enclosure]

Translation of the Memorandum Left With Primo de Rivera, October 3, 1927, by Representatives of the Standard Oil Company of New Jersey and the Royal Dutch Shell Oil Company

1. In view of the continual increase in their business, the “Standard” and the “Shell” are constantly obliged to expand their sources of petroleum supply to all parts of the world where wealth exists; to improve more and more their industrial and commercial organizations and to increase their investments in the countries where they operate, as in Spain, in order to be always in a position to supply the consumption as it increases.

2. For this reason, there can be no better guarantee of supplies for a country, both in time of peace or in war, than the mere fact of the presence in that country of these two Companies.

3. The competition between both these Companies in the Spanish market has resulted in the country’s obtaining the greatest perfection and facilities in the interior distribution, and the creation of stations for the regular supply to the Navy and mercantile marine, apart from the large revenue thereby apportioned to the Public Treasury. This rivalry, in result so beneficial to Spain, has been suspended in view of the threat to both Companies’ interests which the Royal Decree of June 28th constitutes.

4. The great number of bunkering stations which both Companies maintain in the most frequented ports of the world, assures the normal supply of all boats, whether of the naval or merchant fleets, of the nations friendly to said Companies. No other petroleum group in the world can give the same facilities in such an important service.

5. The Companies in question cannot associate themselves in any part of the world with any organization on the basis of a Monopoly, as they know from many years’ experience that monopolies tend fatally to raise prices, and also fatally produce the greatest deficiencies in service, and neither the “Standard” nor the “Shell” can compromise their international prestige by associating themselves with organizations which indisputably produce these results.

6. One of the objects of those groups being an investment of their capital in organizations for distribution and sale of petroleum products, it is evident that they must give their attention and care by preference to the countries in which they have capital invested, rather than to those from which they are forced to withdraw through the ex-propriation of their property.

7. For all these reasons, neither of the two groups, and both categorically make this declaration, can enter into relations with any propositions for monopoly presented at the tender of September 1st and they considered themselves obliged to make this statement to the Government of H. M. the King in rectification of the rumors or insinuations which have been circulated against their determined attitude.

8. In spite of these intentions of both groups, and of this being the attitude which the “Standard” and the “Shell” hold everywhere, they have continued, regardless of the Royal Decree of June 28th, and will continue as long as there is a market open to all activities, to give the best service to the Spanish consumption, as if no grave menace threatened them, not merely on account of due estimation for their Spanish clientele, but because they have confidence in the spirit of rectitude of the Government of Spain, and are sure that the latter will not follow a course which, in their opinion, will harm and retard the industrial and social progress of the country.