352.1153 St 2/15
The Chargé in Spain (Blair) to the Secretary of State
[Received January 7, 1928.]
Sir: I have the honor to refer to the Embassy’s despatches No. 679 and No. 685, both dated December 14th last, in regard to recent developments in connection with the establishment of the Petroleum Monopoly in Spain, and submit a further report on this subject.
On December 16th, I met the British and French Ambassadors at a dinner at the Italian Embassy, and they both informed me that they had had no reply to their Notes of protest sent at the end of last week. The French Ambassador said, however, that he had met General Primo de Rivera at a reception the day before, that he had called his attention to the French Note of protest of December 10th (transmitted with the Embassy’s despatch No. 685 of December 14th),40 and that he had urgently requested a reply. The French Ambassador said that Primo informed him that he had not seen the Note of protest, but that he would look into the matter at once.
As no reply had been received to the Note which this Embassy had addressed to Primo de Rivera on December 12th, in accordance with the Department’s instructions, before beginning this despatch I asked the French and British Embassies if they had received a reply to their Notes above referred to, and was informed that no reply had been received. The French Ambassador told me, however, that he had just addressed another strong Note of protest to General Primo de Rivera referring to his Note of December 10th, and requesting an immediate reply. The last Note of the French Embassy is referred to in the Embassy’s telegram No. 142 of December 19, 4 p.m. This Note was read to me by the French Ambassador, and I shall endeavor to forward a copy of it to the Department by the next pouch.
[Page 713]In regard to the confidential part of the Embassy’s telegram No. 142 of December 19, 4 p.m., in which reference is made to the desirability of further representations to the Spanish Government, in view of the recent high-handed seizure of the Standard Oil Company’s Malaga plant, I have reason to believe that Primo is being consistently misinformed in regard to developments by his subordinates, who have wished to keep him in ignorance of the serious consequences which are likely to follow the Monopoly’s high-handed methods of seizure, and I believe that if the situation were more fully explained to him, a change of policy in regard to expropriation might well result. The conversation which was reported to me … yesterday confirms this view, and the substance of it is as follows:
Señor Anastasio, the Managing Director of the Monopoly, a well to do Catalan banker, said that the payment of the foreign interests involved would be a heavy charge on the Government, that the Monopoly would have to ask aid of the Government to meet these charges, and that the bankers in the Syndicate could hardly be expected to be responsible for expropriations which were made necessary by the Government’s Monopoly policy.
It seems strange that this most important phase of the matter was not more fully considered at an earlier date, and that the capital of the monopoly was not made sufficiently large to meet all charges, in order to avoid friction. This procedure would seem to show very well that insufficient study was given to the Government’s plans, and that the Government has been badly advised from the start.
On page three of the Embassy’s despatch No. 685 above referred to, reference is made to the Monopoly’s order of seizure for the Babel and Nervion Company’s Valencia plant. On December 14th, the seizure of part of the Valencia plant took place. The seized property consisted of three tanks, a certain amount of miscellaneous material used in connection with the discharge of tank steamers, and about 600,000 liters of gasoline. The Company’s representative at Valencia made the same formal protest before a Notary as in the case of the Alicante seizures (see page 3 of the Embassy’s despatch No. 665 of December 7th).
No valuation or inventory was made of the seized property at Valencia, and the Company naturally anticipates that the property seized will deterioriate considerably before any appraisal is made. From the Company’s point of view, seizure of parts of its plant at various localities is particularly serious, because not only are normal operations greatly hindered, but the natural presumption seems to be that the Monopoly only wishes to take a certain part of the plant for its own use in the future, and leave the rest practically useless on the Company’s hands. For the Department’s information, [Page 714] I am transmitting herewith the Spanish and English texts of the protest of the Babel and Nervion Company at the time of the partial seizure of the Valencia plant above referred to.41
In the Embassy’s telegram No. 142 of December 19th, 4 p.m., reference is made to the latest seizure of property by the Monopoly at Malaga. In this case, the property seized belongs to the Sociedad Española de Compras y Fletamentos, which, I am reliably informed, is owned 45.25% by the Standard Oil of New Jersey, 33.32% by several French capitalists, and 21.43% by Spanish interests. The seizure which took place on the 15th was made without any notification to the head office of the Company in question (the Managing Director of this Company is the Standard Oil representative in Spain, W. L. Brewster), and in consequence, the formal protests before a Notary, which were made in the cases of the Alicante and Valencia seizures of Babel and Nervion’s property, could not be made. This last seizure has very naturally produced a protest from the Company, and I am enclosing herewith the Spanish and English texts of a protest which Mr. Brewster, the Managing Director, has addressed to the Minister of Finance. I am also enclosing the French text of a letter which this Company wrote to the French Ambassador at the time of the Malaga seizure.41 This last seizure, made in an even more arbitrary form than the others, has greatly disturbed the French Ambassador, owing to the considerable amount of French capital involved, and had a great deal to do with his last energetic Note of protest sent on December 19th, above referred to.
In the Embassy’s telegram No. 143 of December 19, 5 p.m.,41 reference is made to the seizure by the French authorities at Algiers of two ships carrying Soviet gasoline for the Monopoly. The Porto Pi Company, which was the first organization to be seized by the Monopoly, has long been engaged in bringing Soviet petroleum products to Spain, and there has always been considerable friction between the Shell, Standard and Porto Pi interests. Apparently the Spanish Government believed that it could profit by the Porto Pi Russian-Soviet contract in order to assure a part of the supplies needed by the Monopoly, and for this reason, the Porto Pi organization was seized in its entirety.
As set forth briefly in the Embassy’s telegram No. 143 above referred to, a strange situation has now developed, owing to the fact that the Porto Pi Company does not really hold the contract. The Spanish Government, which never seems to be well informed in regard to the technical details of organization, apparently ignored the real state of affairs, and received a rude shock when it found out [Page 715] that the actual contract was not held in Spain at all, and had only been used under assort of working agreement. The Embassy has been informed that the French banking firm of Bauer and Marchal advanced a considerable amount of money to the Soviet in the past, in order to secure this contract, and that very naturally this firm wishes to profit by the situation which has arisen and is only willing to cede the contract at a very high price, which so far the Spanish Government has been unwilling to pay.
The question of the supplies which the Monopoly will be able to obtain in the near future is now one of very considerable interest, as many well informed people believe that notwithstanding the boastful statements to the effect that supplies were assured, this is very far from being the case. The Managing Director of the Standard Oil Company believes that not more than a full month’s supply of petroleum products is now in Spain, and this contrasts strongly with the former situation, when the large Companies always maintained a full supply for three or four months. The fact that the Monopoly is negotiating with almost any interest able to supply petroleum would seem to show that it is fearful of a possible shortage. Very naturally, foreign interests involved hope that should the Monopoly fail to secure supplies, General Primo de Rivera may step in and sweep the Monopoly aside. Here, of course, the wish is father to the hope, and it is evident that the Spanish Government is now so deeply committed to the Monopoly scheme that everything possible will be done to make the public believe that it is proceeding successfully.
I have [etc.]