611.59A31/46
The Department of State to the British Embassy 10
Memorandum
Reference is made to the memorandum of the British Embassy dated July 29, 1941, proposing to the United States cooperation in fulfilling parallel obligations to Iceland. It was pointed out that the British Government must continue to carry fish and fish oils from Iceland to the United Kingdom, but that “most of Iceland’s requirements must to an increasing extent be drawn from the United States and Canada.”
Reference is likewise made to the conversations had between Mr. Hugh Cumming of the Department and Mr. E. Wyndham White [Page 764] of the British Embassy, from which proceeded the memorandum of the British Embassy dated September 5, 1941.11 That memorandum stated that the British Government would welcome “an arrangement whereby the United States Government would purchase, in United States dollars from Lease-Lend appropriations charged to the British account as defense aid, all future imports from Iceland to the United Kingdom apart from those covered by the recent Fish Agreement between the British and Icelandic Governments.” As respects the latter, should the Icelandic Government press for inclusion of that contract under the Lease-Lend arrangements, the British Government would be prepared to consider such a suggestion favorably.
The Department has been in communication with the Icelandic Government, and discovers that the Icelandic Government now presses for inclusion of the Fish Agreement under the proposed Lease-Lend arrangements, as well as the other future imports from Iceland to the United Kingdom.
The Government of the United States, in view of the very broad obligations assumed by it under the exchange of messages between the Prime Minister of Iceland and the President of the United States, considers that the only practicable arrangement is the purchase by it until further notice of all imports from Iceland to the United Kingdom, these to be supplied to the British Government and charged to the British account as defense aid. The difficulty of taking only a part of these importations is obvious, particularly in view of the importance which the Icelandic Government attaches to this feature, and to their unwillingness to increase further the balances of blocked sterling which have been accumulated in London.
The Icelandic Government has also drawn to the attention of the United States the existence of an agreement made between Iceland and Great Britain on the occasion of the sale by Britain to Iceland of approximately $2,000,000 of Canadian and United States exchange last summer. That agreement calls upon Iceland, out of the first incoming dollars she might receive, to repurchase blocked sterling and thereby replace the amount of Canadian and American dollars sold to her.
The Icelandic Government has indicated that it feels this requirement is oppressive since it had already shipped goods to Britain represented by the blocked sterling; and is now obliged to ship further goods against American purchase under the Lease-Lend operation, and required to use the dollars to repurchase the blocked sterling. Further, since in effect this would result in an allocation of Lease-Lend funds part of whose purpose would be to purchase blocked [Page 765] sterling, the officials of the United States Treasury Department have indicated an objection. The United States Government, accordingly, believes that this agreement exacted from Iceland should be waived.
Finally, the Icelandic Government has raised the question as to whether some use might not be made of the very large balance of blocked sterling accumulated in London and from which, at present, the Icelandic Government can derive no benefit. Specifically, it is suggested that Iceland be given an opportunity to pay off or acquire the Icelandic debts held in Britain and there payable in pound sterling. Note is taken of the fact that £510,400 from this blocked fund is to be used in paying off the balance of the Icelandic 5½ percent loan of 1930. There remain, however, upwards of £800,000 of loans which are held in Britain and which could, perhaps, be reacquired by Iceland against proper debit to her blocked sterling account.
In view of the need for prompt flow of supplies to Iceland, the United States Government is proceeding on the basis of the arrangement accepted in the memorandum of the British Embassy of September 5, referred to above; and will send a representative of the Lease-Lend organization to Iceland in the near future.
It is planned to take over all of the unexpired contracts by which Iceland is obligated to supply goods to Britain, and by agreement with Iceland the goods naturally are to be made available to Britain. Those goods which are not under contract but which are currently supplied, such as fisherman’s cargoes, can be arranged for on the ground between the representative of the Lease-Lend organization and the British representatives there.
As the unexpired contracts run out, the Government of the United States will be glad to confer with the British Government.