The Chargé in Spain (Whitehouse) to the Secretary of State

No. 1125

Sir: I have the honor to refer to my despatch No. 1092 of December 10, 1928,2 relative to the indemnities to the companies which have been expropriated by the Petroleum Monopoly, and to submit a further report thereon.

No reply has as yet been received to this Embassy’s note No. 665 dated December 3 [2], 1928.3 The French Ambassador has, however, had a number of official and informal conversations in regard to this matter, and on December 28, received a brief reply from General Primo de Rivera4 to his note of November 30 (the translation of which was enclosed with the Embassy’s despatch No. 1092 of December 10, 1928).

I am enclosing herewith the French text and the Embassy’s English translation thereof of General Primo de Rivera’s letter dated December 28 [27], 1928.2 The French Ambassador considers this reply entirely unsatisfactory, particularly having regard to the President’s statement that he did not consider arbitration applicable to the case under discussion. He considers, however, that the final paragraph of the letter in which the President states somewhat vaguely that he is still disposed to consider any more workable solution, to mean that in the last analysis the Spanish Government may be willing to make better proposals for settlement. The Ambassador, therefore, addressed another note to General Primo de Rivera dated December 28, in reply to the President’s letter, of which I am enclosing herewith the French text and the Embassy’s English translation.2

The Department will note that in this letter the French Ambassador disputes the President’s refusal to accept arbitration under the [Page 769] 1904 Convention,5 and after making some rather scathing references to the Spanish Government’s procedure in the entire matter, defines what he considers equitable treatment and asks the President to give effect to such treatment in accordance with the last paragraph of the President’s letter of December 28, 1928.

In an explanatory footnote which the Embassy has made and included in the translation of the French note of December 28, 1928, the French Ambassador refers to a recent offer of the Petroleum Monopoly to pay off the Compras y Fletamentos company in Monopoly shares. These shares are now selling at a premium of approximately 50%, and as not only certain Spanish but foreign interests as well, have been offered payment in these shares, the Ambassador requests that cash compensation on the same basis shall be given to the other companies for the value of the good-will and the trademarks of their business. Settlement along these lines would, of course, be satisfactory to the French and American interests involved, and the French Embassy believes that ultimately the Spanish Government will decide to make additional compensation on a cash basis to the companies already valued to an extent which while it may not amount to the premium of the Monopoly shares, will nevertheless, be a substantial advance on any amount offered up to the present time.

In the meantime, apparently tired of wrangling, the Shell Company has decided to accept final payment for its properties, and on December 8, 1928, received an amount of some 1,110,000 pounds, this sum being calculated at a rate of 29.23 Ptas. to the pound sterling in accordance with negotiations which had taken place between the British Embassy, the Spanish Government, and the Shell representative. The Shell Company has turned over to the Monopoly all of the deeds and documents having to do with its properties and has signed a receipt for the payment without reserves. It has, however, at the same time sent in a petition to Gen. Primo de Rivera stating that the settlements were made under duress, and that it makes reserve of all its rights in case other foreign companies should receive more favorable treatment. In the opinion of competent lawyers here, this petition has no legal value, and may only be of use in view of General Primo de Rivera’s promise made in writing over a year ago to the American, British, and French Embassies, that all interests would receive equal treatment.

The Shell settlement, of course, weakens the case of the other companies which are unwilling to settle on a similar basis. The French [Page 770] Embassy maintains, however, that the Spanish Government is sure to make concessions in the end, if continued pressure is applied by France and the United States, and here the matter rests for the time being.

The guaranteed rate of Exchange which the Shell Company has received is, of course, helpful to the other companies as it establishes a useful precedent, and even if no better terms are ultimately obtained, it means a slight advance on the amount of pesetas which will be paid to the other companies on the basis of the valuation approved by the Council of Ministers last summer. (Exchange is today quoted at 29.75 to the pound sterling in the open market, and the rate given to the Shell Company of 29.23 to the pound therefor, is equivalent to a profit of about 1½%.)

I am enclosing herewith for the Department’s information a copy of the above referred to petition sent by the Shell Company to General Primo de Rivera at the time that final payment was made.6

I have [etc.]

Sheldon Whitehouse
  1. Not printed.
  2. Quoted in telegram No. 100, December 6, 1928, Foreign Relations, 1928, vol. iii, p. 877.
  3. Marqués de Estella, President of the Spanish Council of Ministers and Minister for Foreign Affairs.
  4. Not printed.
  5. Not printed.
  6. Arbitration convention between France and Spain, February 26, 1904; British and Foreign State Papers, vol. xcviii, p. 1180.
  7. Not printed.