811.20 Defense (M) Spain/671: Telegram

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

927. Your 899, April 14, 10 a.m.,38 and paragraph 5 of your 910, April 14, 5 p.m.

It is believed that the cross trade between the Peninsula and French North Africa should be considered in three phases: (a) a long-term program along the lines set forth in the Department’s instruction of March 16, (b) an interim program also along the lines set forth in that instruction, and (c) the ad hoc phase to cover the period until the interim program is negotiated. This latter phase envisages token shipments of phosphates, coupled with shipments of materials from the Peninsula to French North Africa unless it should prove impossible to obtain south-bound cargo suitable to the NAEB in Algiers. The following comments relate to the ad hoc phase.
You are authorized to make offer to the Spaniards of a token shipment of 10,000 tons of phosphates jointly with the British. Reference your 767, March 30,38 you may invite the French representatives in Madrid to participate in this offer, if you believe it possible to do so. However, every effort should be made to obtain from the Spaniards assurances that they will permit certain limited shipments to French North Africa when and if desired by NAEB.
It is our strong desire that the sale of this 10,000 tons be made through the Commercial companies so that they will derive the benefit of the peseta exchange. It is hoped that you can arrange this through NAEB.
We understand from Lisbon’s No. 45 of April 12, 2 p.m., to Algiers,39 that NAEB proposed leaving in suspense the question of phosphates prices subject to later adjustment. This is satisfactory, but it is not clear to the Department exactly how this will be accomplished. We believe that arrangements should be made whereby the Spaniards agree to pay prices to be fixed in relation to the prices which will ultimately be agreed upon for purchases by the British. In any event, it is important that the Commercial companies obtain a sufficient guarantee from the Spaniards to save them harmless against loss on the transaction.
With respect to possible south-bound cargoes, you should, of course, clear with Algiers to ascertain what materials, if any, are desired. Please also clear with the Department by telegraph all proposed movements including quantities, values and proposed means of financing. It is hoped that any such south-bound movements can be carried on through the USCC and the UKCC. We consider this important, at least until the interim program has been negotiated. In the event NAEB approves any purchases by the Commercial companies in Spain for shipment to North Africa, appropriate arrangements should be made for full reimbursement to those companies, either in pesetas, dollars or sterling.
A later telegram will be sent commenting further on the recommendations contained in your No. 910 of April 14.

Please advise Butterworth of foregoing, and please repeat this telegram to Algiers, Lisbon and London for their information.

  1. Not printed.
  2. Not printed.
  3. See footnote 37, p. 33.