811.20 Defense (M)/5347a: Telegram
The Secretary of State to the Chargé in Spain (Beaulac)
88. As indicated in previous telegrams, the Department believes that there are two classes of strategic materials which may be obtained from Spain. The first, presumably limited in number and amount, are those in which Germany has little interest. These commodities presumably may be acquired at normal commercial prices prevailing outside the blockade. Arrangements are currently being made to obtain offers for such materials and in accordance with the general undertaking of the Spanish Government referred to in previous telegrams, it will be expected that the Spanish Government will take the necessary steps to remove all impediments to the free flow of these materials to the United States and will take such affirmative steps as may be necessary to facilitate their movement.
The second class of materials, comprising the most important commodities, are those in which the Axis powers have an interest. As to these materials also, the Spanish Government will be expected to remove all impediments and to take such affirmative action as may be [Page 274] necessary to enable this Government to purchase these materials and to transport them to this country or to the United Kingdom. Recognizing that the prices for these materials will be substantially above the prices obtaining outside the blockade, the Federal Loan Agency has agreed to establish a division, branch or subsidiary corporation with adequate capital which will operate in Spain to bid for and acquire these products. This organization will act in close collaboration with the United Kingdom Commercial Corporation or other corporation or agency designated by the British Government; and purchases will be made for joint account of the two Governments. It is also expected that this branch or corporation of the Federal Loan Agency will be so equipped as to be able to acquire United States goods needed by Spain and to resell them to Spanish consumers or the Spanish Government. This plan has just been decided upon by the Federal Loan Agency and its plans have not as yet been fully developed, although it is expected that they will be completed within the immediate future. It will be necessary for the Loan Agency to send a representative or representatives immediately to Spain, probably accompanied by a representative of the Department, who will remain in Spain temporarily for the purpose of collaborating with you in the establishment of the necessary organization. The Department is not able to state now just when this mission will leave, but every effort will be made to expedite their departure. In the meantime, you are requested to telegraph your views and suggestions as to this proposed action, and any particular suggestions you may have as to the method of creating this organization in Spain.
[Here follows paragraph regarding a personnel appointment.]