352.1153 St 2/96
The Ambassador in Spain (Hammond) to the Secretary of State
[Received July 19.]
Sir: I have the honor to refer to my despatch No. 942 of June 20, 1928, having to do with the Petroleum Monopoly.
In this despatch I stated that I hoped to discuss the latest phases of the expropriation proceedings with General Primo de Rivera in order, if possible, to reach a practical settlement of the matter, and accordingly I saw him on Wednesday, June 27th. After a brief review of the situation during which I informed the President that I was familiar with the various conversations which he and his Finance Minister had had with the French Ambassador, and that my Government was substantially in accord with the French attitude in regard to the expropriations and the payment therefor, General Primo de Rivera reiterated his usual formula that the Spanish Government was dealing generously with the interests involved, that the claims of the companies for compensation were exaggerated, but that nevertheless he would go into the matter again in order to see [Page 872] if a satisfactory settlement could be reached. I accordingly suggested that I take up the practical details of the matter with the Finance Minister, and an interview with Señor Calvo Sotelo was at once arranged by telephone, and took place immediately after I left the President. Señor Calvo Sotelo on the whole maintained his ostensibly friendly but firm attitude, and on broad lines what he said corresponded with his interview with the French Ambassador as reported in the memorandum transmitted with the Embassy’s despatch of June 27th [26th] last.40 I finally suggested that it might be better for the moment to pass over all the legal technicalities and endeavor to reach a practical settlement on business lines. To this end I suggested that in view of the fact that certain Spanish interests had been offered, in payment for their physical assets, Monopoly shares now selling at a premium of 45%, such shares to be taken at par, these interests would receive a substantial compensation for the businesses taken over, whereas the offers so far made to foreign interests only provided for a supplementary payment of 8% over and above their physical assets. I said that I felt sure that the Minister did not wish to discriminate against the foreign interests in favor of Spaniards, that the sum involved to reach a substantial equality of payment was relatively small, and that I hoped that the Minister, in consideration of this, would arrange to meet the foreign interests half way. Señor Calvo Sotelo replied to this saying that he was quite willing to consider some additional compensation to the foreign interests in order to settle the matter, but maintained that the price of the Monopoly shares was somewhat artificial at the moment and he went into this matter at great length. He admitted finally, however, that the shares would always sell at a substantial premium in view of the profitable nature of the business, and in principle he agreed to consider the allotment of additional compensation to foreign interests.
A few days before, in an interview with the French Commercial Attaché, the Minister also agreed to additional compensation and, in reply to a remark of the French Commercial Attache to the effect that it was a pity to compromise the good name of Spain for the relatively small sum of around 20 million pesetas, stated that he would be willing to consider an increase of the Spanish offer by that amount if it meant the settlement of the claims of all the foreign companies.
In the course of the interview I obtained the general impression that the Minister is weakening and that as a result of the very strong American and French representations the question of compensation is no longer a matter of hard and fast principle but is purely one of expediency and that the Spanish Government is now disposed to [Page 873] meet the foreign interests more fairly. My French colleague agrees with this impression and informs me that he thinks that the vague menace of a possible appeal to an international tribunal for French interests has worried the Spanish Government considerably and may well result in some practical settlement in the near future.
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In the Embassy’s despatch No. 942 of June 20, 1928, reference was made to a formal appeal of the Babel and Nervion Company to the Council of Ministers in view of the fact that the Valuation Commission has only allotted the company the sum of 19,000,000 pesetas as compensation, a sum which the company maintains is wholly inadequate. This petition is long and of a technical character and considered on its merits seems to establish the company’s claim for larger compensation. I am forwarding herewith for the Department’s information, the Spanish text together with an English translation thereof.41
The Council of Ministers has not yet acted on the petition of this important American interest, but I believe that the representations made have caused a decided weakening in the attitude of the Spanish Government and I am hopeful that a final settlement may yet be reached which will be reasonably acceptable to all the foreign interests. Such a settlement would be the more satisfactory in view of the obdurate attitude that the Spanish Government has maintained for months past, and I believe that only the constant pressure which has been brought to bear by the American and French Embassies has brought about the possibility of a fairly satisfactory outcome of these lengthy negotiations.
I have [etc.]