352.1153 St 2/10
The Chargé in Spam (Blair) to the Secretary of State
[Received December 30.]
Sir: I have the honor to refer to the Embassy’s despatch No. 665 of December 7th 1927, in regard to the activities of the Petroleum Monopoly recently established in Spain, and to submit a further report on this subject.
In my despatch written this morning No. 679, I transmitted to the Department copies of the Embassy’s Note of December 12th to the [Page 706] Spanish Minister of State in regard to the recent seizures of property belonging largely to American interests, by the Petroleum Monopoly. Copies of the British Note of December 6th and the French Note of December 10th having to do with this subject were also transmitted with this despatch.35
In the Embassy’s telegram No. 135 of December 7th last, 3 p.m., reference was made to the formal protest, dated December 5th, which the Babel and Nervion Company had sent to the Minister of Finance in regard to the partial seizure of its property and its legal rights in regard to valuation and compensation. I am informed that the Company’s protest was drafted in collaboration with Mr. De La Cierva, one of the most able lawyers in Spain, and the Department will note that the Company claims compensation for the value of its trade marks, good will, and the value of its business as a going concern. Mr. De La Cierva advises the Company that these assets have been recognized by decisions of Spanish courts and that the Company is well within its rights in claiming indemnities for intangible values. I am transmitting herewith copies of the Spanish and English text of the Company’s protest above referred to, and also, copies of the Finance Minister’s formal acknowledgment dated December 7th last.36
On page 3 of the Embassy’s despatch No. 665 of December 7th last, reference is made to the seizure of a part of the Alicante plant of the Babel and Nervion Company, and to the fact that at the time of seizure, the Company made a formal protest before obeying the order of seizure. The protests in question were drawn up by the Company’s legal advisers in order that the Company’s position should be clearly set forth in the future, and as I believe these protests may be of interest to the Department, I am transmitting herewith the Spanish text together with an English translation thereof.37
On December 10th last, Babel and Nervion Company received a further communication from the Monopoly Company directing the seizure of Babel and Nervion’s plant at Valencia. I am enclosing herewith copies in Spanish and English of the Monopoly’s communication. I am informed by the Director of the Babel and Nervion Company that the same formal protests will be lodged when seizure occurs as in the cases of Alicante seizure.
As reported in several previous telegrams and despatches, it is more than ever apparent that both Government and Monopoly officials are trying to cope with problems which are far beyond their experience, and the hap-hazard method of seizure, of buying supplies piecemeal, [Page 707] wherever possible, and of administration, all show the utter confusion of the present situation.
According to the Royal Decree providing for the Monopoly, the new Company should take over all operations having to do with the importation and distribution of petroleum products on January 1st. This would seem to be practically impossible, and the situation becomes more confused day by day. The various companies involved take the position that they wish to conform to the strict letter of the Monopoly Decrees, as they believe this method is best calculated to protect their interests. For this reason, they believe it best to close down all operations formally on January 1st 1928, and throw the whole burden of the country’s petroleum business on the Monopoly. They realise that such a procedure may possibly expose them to arbitrary fines, and many difficulties with the Monopoly Company, but their legal advisers maintain that this method will force the Government’s hand and may well produce a Royal Decree taking over the whole properties of the several companies. Such action would to some extent clarify the situation, as the Government would then be placed in the position of having to take over and compensate for the properties as a whole. At the moment the administrative machinery for valuation of the property hardly exists, and yet according to the existing decrees, the valuation should be completed in the immediate future. The Embassy has been informed that the present plan for ultimate valuation is as follows:
“The country has been divided up into seven zones, and each zone has been placed in charge of a commission, and with each of these commissions is associated a representative of each of the companies having property to be expropriated in that zone. These commissions merely make a physical inventory of the properties to be expropriated, noting at the same time the condition of the material, but they do not enter in any way into the question of placing any valuations.
“When these seven commissions have completed their work of inventorying, their reports are then to be assembled in Madrid and a general commission is to be formed with which will also be associated representatives of each of the petroleum companies, and it is this commission which will place the valuations on the properties to be expropriated.”
It would obviously be impossible to complete the valuation along these lines before January 1st, when the Monopoly should officially start operations, and it would therefore appear that seizures on a very extended scale before valuation, and without compensation, are likely to take place in the immediate future. Such a method exposes the property of the Companies to great dangers, and yet at the moment, they are powerless to resist the seizures which are being carried out.
As an instance in point, motor trucks belonging to the Standard Oil subsidiary, Babel and Nervion, have been seized and are now being [Page 708] used by the Monopoly. No appraisal of the value or investigation of the condition of the trucks was made, and it is obvious that in the hands of inexperienced drivers, serious damages to the material will result, of which the Monopoly may, under the circumstances, well refuse to take account.
Absolutely nothing is allowed to appear in the press in regard to the high-handed methods or the difficulties of the Monopoly, in consequence the town is filled with rumors of every sort in regard to future events. Many people still seem to hope against hope that some sort of an internal explosion will occur and that Primo may yet find an excuse to sweep aside the Monopoly. This however seems very improbable at the moment, due to the large, if unwieldy and ineffective, organization which has already been brought into being. The consensus of opinion among diplomatic officers is that the Government has now gone too far to retreat and that although General Primo de Rivera is really disgusted with the whole affair, he will nevertheless do everything possible to save the Government’s face and pretend that the Monopoly is going on successfully.
At the moment no intimation has been received in regard to the attitude which the Spanish Government will take up concerning the protests regarding the seizures which have been made by the American, British and French Embassies. The British and French Ambassadors have, however, promised to communicate with me immediately when they receive a reply to their notes, and I shall keep the Department fully informed by telegram of any developments of outstanding importance.
I have [etc.]