882.635 Neep/67

The Minister in the Netherlands (Gordon) to the Secretary of State

No. 298

Sir: With reference to my despatch No. 279 of April 13, 1938 and previous communications in the above-entitled matter, I have the honor to inform the Department that Mr. van Nierop called upon me a few days ago and said that he had not yet received the report in question; that as the report was not reaching him quite as soon as he had expected he rather anticipated that the news that the Liberian Government had granted a concession to Neep might reach him concurrently with, if not before, the report itself. If the concession did go through, he would then be in a position to approach Morgan & Company, and through it, the United States Steel.

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I observed that this seemed to change the situation somewhat from what it was at the time of our previous conversation, when I understood his attitude to be that the primary condition precedent to going further with the matter was the receipt of a report which would seem to him convincingly good. Mr. van Nierop was slightly vague in his reply to this, saying in effect that of course he would need a good report before he took any substantial steps forward, but that if in the meantime the concession were granted he might be in a position to approach Morgan & Company tentatively—i. e. upon the contingency of a satisfactory report being received.

In this connection I asked him if there were any independent engineers collaborating in the report, or if they were all on Neep’s payroll. He replied that as far as he knew the latter was the case, though he thought that there were some Swedish engineers connected therewith, who certainly might be expected to have an impartial point of view.

Expounding somewhat further his ideas of approach to Morgan and the United States Steel, Mr. van Nierop said that he felt that if United States Steel eventually should become interested to a substantial extent, either as associate or customer, its bankers, Morgan & Company, might feel somewhat annoyed if they had been ignored in the premises. In any event, he felt that a project of this kind—involving the building of port works, a railway, roads, etc.—would have to be “nursed along” for some time before it became a going concern; during that period it would have to be carried by the joint capital contributions of his bank, the Neep people, and such American capital as might be interested; only when the project ripened into a going concern could there be any question of an issue of securities, at which time the parties who had contributed the capital could take the whole amount thereof out of the securities issued, or could sell as much thereof to the public as they might see fit.

During the conversation van Nierop mentioned rather casually that the controlling interest in the project would have to remain in Dutch hands; but in reply to my query as to why that must necessarily be so—as it would not appear that the Liberian Government was insisting upon this as a condition precedent to the granting of the concession—he did not further elucidate.

This afternoon M. Bouillant-Linet, the director of Müller & Company (see my despatch No. 207 of March 7), asked to call upon me, and came accompanied by the engineer whom W. H. Müller & Company had sent to Liberia to investigate the proposition in 1935 (see page 2 of Mr. Patton’s letter of December 16 to Mr. Cumming17). They said that they understood from Mr. Patton’s conversation with Mr. van Deventer on December 15 that the United States was interested [Page 788] in seeing that only neutral capital should participate in the exploitation of this iron ore concession. I said that I felt sure that Mr. Patton had not made any such statement and that there must have been some misunderstanding; that although I myself had instructions in the premises, all I knew was that our Government necessarily was interested in the future course of a concession that was being sought by a group which obviously had nowhere near sufficient capital to exploit the concession if granted. In this connection I asked M. Linet what his connotation was of the words “neutral capital”; he replied that it seemed quite comprehensible to him that from an American point of view it might be objectionable to have this concession exploited by capital from countries such as Germany, France or England, who might be contemplating too active a part in the development of Liberian resources, whereas capital from a country like the Netherlands would present no such difficulty—accordingly, in that sense he would consider Dutch capital “neutral”.

I mention the foregoing not only on account of its intrinsic interest but also as showing that the nature of American interest in this matter has perhaps inevitably been the subject of a certain amount of comment and speculation.

Bouillant-Linet then confirmed—as reported in despatch No. 207—that, although in the hard times of 1935 his company had not felt able to maintain its interest in this iron ore concession, it was now again definitely interested, if it could participate on satisfactory terms. After considerable beating about the bush M. Linet was disinclined to state what these satisfactory terms would consist of, beyond saying that if the concession had not yet been granted the chances of Müller & Company finding participation attractive would be considerably greater than if the concession already had been granted—though even in the latter contingency the company might still be interested. In reply to my query whether Müller & Company’s interest in participation was predicated upon their putting up—directly or in conjunction with associates—the majority of the capital and having a controlling interest in the venture, Linet replied that this would be so unless his company were given sufficiently attractive rights as selling agents, or for the transportation of the ore, to compensate them for not having a controlling interest in the exploitation of the mines.

During this part of the conversation I inquired what Müller & Company’s rough estimate was as to the amount which would have to be invested in the enterprise. The engineer replied that while any estimate at this stage must necessarily be very tentative, from his investigations on the spot he had concluded that the very lowest amount that could possibly be required would be 15 million florins—which coincides interestingly with van Nierop’s estimate as reported in my telegram No. 17 of February 14.

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M. Linet finally stated clearly that what his company was most interested in was knowing whether or not the concession had in fact been granted. His associates in Germany had told him that they had been informed by the German Consul in Monrovia that it had been granted; Linet said, however, that perhaps the German Consul had only said that he understood or thought it had been granted and that he would be very glad if I could give him definite information on the point. I told him frankly that I did not know; that according to my most recent information the concession had not been granted, though of course that did not mean that it had not been by now. (The last official information I have had in the premises was the Department’s telegraphic instruction No. 22 of March 3.)18 Linet said that if I did receive official information as to whether or not the concession had been granted, he would be very grateful if I would let him know.

It occurs to me that if the Department will let me know whether or not the concession has been granted, it will do no harm if I pass this purely factual information on to Linet, as it may result in some further information from that source as to future developments respecting the capitalization of the project. On the other hand, as the Department is perhaps aware, the Dutch Müller & Company is closely associated with the German company of similar name, so that the possible implications of an investment of its capital—even if it is nominally purely Dutch—in the enterprise are obvious. In fact, during the course of the conversation Linet at one time referred to the non-Aryanism of the four Neep directors as making it difficult for them to do business with Germany, although of course the presumptive principal market for the ores to be extracted from Liberia would be Germany. It is also to be noted that at no point of the conversation did Linet even remotely suggest the participation of any American capital.

All in all, the present attitude of Müller & Company with respect to eventual participation in the Liberian project would seem to be definitely less satisfactory from our point of view than the possibilities of van Nierop’s position.

I shall welcome an expression of the Department’s views in the premises as well as information as to any concrete developments since the first of March.

Respectfully yours,

George A. Gordon
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