852.75 National Telephone Co./281: Telegram

The Secretary of State to the Ambassador in Spain (Weddell)

61. Your 129, June [July] 20, 10 p.m., and 131, July 21, noon.12 It is believed that the opportunity which you will be afforded of talking with General Franco on July 24 will be exceedingly useful.

[Page 840]

You should, of course, make it clear that this Government cannot consent, directly or indirectly, to bargain for the release of the American prisoners, for the entrance of Colonel Behn into Spain, nor for fair and equitable treatment of American interests in Spain on the basis of a conclusion of the cotton credits requested by the Spanish Government, or any other basis. You should say that when this Government was approached by representatives of the Spanish Government with a view to obtaining credits for the purchase of American cotton, this Government expressed its willingness to give favorable consideration to the proposal because of the fact that normal and friendly relations existed between the two Governments and because of its belief that if an agreement were found possible, such agreement would be of value to the commercial interests of the two nations. It assumed that the Spanish Government was animated by the same desire and that the Spanish Government would be willing to signify this desire in a practical manner by expediting the release of the American prisoners still under the jurisdiction of the Spanish authorities, by granting Colonel Behn permission without further delay to enter Spain in order to attend to legitimate interests of his company, and, finally, that the Spanish Government would be willing to give assurances that fair and equitable treatment would be accorded all American interests in Spain in accordance with the generally accepted principles of international law.

You may further state that you are informed that the Export-Import Bank has reached an agreement in principle with the Spanish Ambassador in Washington covering the conclusion of credits for the purchase of American cotton, and that without recognizing that any question of quid pro quo is involved your Government is sure that the Spanish Government, in the same friendly spirit by which your Government is guided, will undertake immediately a favorable solution of the three questions in which this Government is interested, as indicated above.

For your information, the Spanish Ambassador has informed me that he is specifically authorized by his Government, upon the conclusion of the cotton credit negotiation, to state upon a reciprocal basis that the Spanish Government intends to give fair and equitable treatment to American interests in Spain in accordance with the generally recognized principles of international law and with those governing the friendly relations between the two nations.

For your further information, I am informed by the President of the Export-Import Bank that the following are the bases of the understanding reached by the Spanish Ambassador and by the Export-Import Bank for the cotton credit:13 [Page 841]

“Credits will be provided for the purchase of 250,000 bales of cotton to be delivered in approximately equal monthly instalments over a 1-year period. The procedure will be as follows:

In connection with each shipment shippers draw series of eight sight drafts on Banco Espagnol de Credito or Banco Hispano Americano payable at 6, 9, 12, 15, 18, 21, 24, 27 months respectively with instructions to present for acceptance on arrival of steamer carrying merchandise. Documents to be surrendered against acceptance of Bank and endorsement of Ministry of Commerce and Industry. General condition precedent to be a communication from Spanish Exchange Control agreeing to register acceptances as presented and to furnish dollars to cover acceptances at respective maturities.

Each of the first four drafts to represent 10% of the price and each of the last four, 15% of the price of the cotton. Interest at the rate of 3½% per annum.

The arrangement is subject to written assurances from the Spanish Ambassador in the name of his Government that

the cotton shall be exclusively for domestic use in Spain; and
payments for the cotton will be made according to the terms of the agreement and that no claims will be asserted by the Spanish Government, the Bank of Spain or any Spanish financial or other interests against such payments for any reason resulting from the acquisition by the Government of the United States during 1938 of silver of Spanish origin.”

A prompt and satisfactory solution by the Spanish Government of the questions in which this Government is primarily interested will of course be most helpful in establishing friendly relationship between the two countries.

  1. Latter not printed.
  2. Announcement of the arrangement was made by the president of the Export-Import Bank on August 7, 1939.