859A.6363/31

The Icelandic Minister (Thors) to the Secretary of State

The Minister of Iceland presents his compliments to the Honorable, the Secretary of State and has the honor to call the Secretary’s attention to the following matter:

During the last twelve to fifteen years British companies have supplied Iceland with all its requirements of gasoline, oil, petrol and kerosene. This remained so until last September when the United States Navy began to supply Iceland with these commodities, according to an agreement between the Government of the United States and the United Kingdom and of which the Icelandic Government was unaware.

When the United States Navy had supplied Icelandic firms with these commodities for almost two months it became known that the United States Navy was charging considerably higher prices to the Icelandic companies than they had been paying to the British suppliers. As it is the firm policy of the present Icelandic Government to fight the inflation that has occurred in Iceland, and not to allow any raise in prices, the Icelandic oil companies have had to sell the supplies obtained from the United States Navy at a considerable loss. This situation evidently cannot continue to exist and the Icelandic Government is therefore faced with the alternative of giving way to raising the prices unless the United States Navy is willing to sell these commodities at the same prices as the Icelandic companies had been paying the British suppliers.

Gasoline, oil and petrol are very important factors in the cost of production for Icelandic fisheries. It would result in extremely serious consequences should the Icelandic Government be unable to halt the inflation by keeping the prices for these commodities at their former level. In addition the Icelandic fishermen are not able to pay higher prices for these necessities as the price of fish was fixed in a previous agreement with the United States and Great Britain.

The Minister of Iceland has been informed that the Department of State has received details in this matter from the American Legation [Page 304]in Reykjavik and the Icelandic Government would be greatly appreciative if, through the good services of the Department of State, a satisfactory solution could be arrived at in this matter.