811.20 Defense (M) Spain/683: Telegram
The Consul General at Algiers (Wiley) to the Secretary of State
[Received April 20—5:05 a.m.]
642. From Murphy. My 567, April 6, 7  p.m.30 We have received an informal memorandum from Bataille as a result of preliminary conversations with him and Couve de Murville31 on North African-Iberian trade in which the French position is explained as follows.
- Our desire both for uniting in a common policy of Allied economic warfare with regard to the Iberian Peninsula and for bringing into the framework of this policy North African-Iberian trade is fully shared by them.
- In the future French agreements with the Portuguese and Spanish these ends can be safeguarded if the French and the Allies can agree in advance as to the bases of such agreements, the lists of products and the methods of transfer.
- It is thought preferable to have the lists of products from Iberia in open form, i. e., specifying broad classes of goods, in order to allow the French and the Allies opportunity for maneuvering.
- French representatives insist upon carrying on alone the negotiations with Spain and Portugal once an agreement has been reached with the Allies. The American and British Embassies will be kept informed of the progress of the negotiations. An attempt would be made to bring outstanding balance due the French from old agreements into the new agreement.
- It is considered indispensable by the French that at no time should the governments involved and likewise French merchants be given reason to feel that the French cannot guarantee independently their interests with Spain and Portugal. If we wish to use the commercial corporations, therefore, it is their suggestion that an office commercials be organized by them which could work in close liaison with the USCC and UKCC. They would effect purchases in Iberia through their office commercials
- As a result of existing stocks of French African agencies and merchants in Spain and Portugal, differences in price levels and previous existence of French African credits in Madrid and Lisbon, the general commercial agreements should be concluded before any movement of goods takes place. If exchanges are begun on a ship to ship basis they fear that they will no longer have the power to [Page 29] conclude a long term formal agreement and also the chance to pick up arrears due them on agreements made previously.
- Outstanding credits are as follows: (a) From Portugal approximately escudos 30 million worth of goods chiefly telegraph poles and pit-props which had been bought and licensed for export last November when trade was brought to a standstill. Only five or ten thousand tons of phosphates are owed, (b) From Spain a special credit of escudos 19 million was created by the French for the purchase of cotton fabrics, tea and sugar. In addition a credit of francs 70 million had been raised on their phosphate exchanges up to June 1942, expiration date of agreement. Shipments were continued after July 1942 pending new formal agreement which created an additional credit of francs 20 million. In addition they owe nothing to Spain.
- Conversations were taking place in November to set off French North African credits against the debit of metropolitan France notwithstanding the debits of the former. These credits are considered intact by Bataille inasmuch as a mission from the Metropole has been sent to Spain since that date to purchase foodstuffs and to arrange as a separate item the amortization of their debits.
We consider it imperative that an early start should be made with this trade as lumber and other supplies are desired by the armies. If only the remaining balance of five or ten thousand tons of phosphates were shipped, we do not think as Bataille does that the bargaining position would be prejudiced; however, if Portugal were offered many such shiploads as an inducement to ship lumber here such action would definitely impair the bargaining power of phosphates. This would not obviously be to our interest either. We recommend that the Bataille lists be immediately screened at both Washington and London from the economic warfare standpoint concerning which we are not fully informed here. Afterwards we will screen them ourselves and secure final agreement from the French in order to make an early start possible.
London is being sent a similar telegram by Herbert.32
Repeated to Madrid and Lisbon. [Murphy.]