The Minister in Iceland (Morris) to the Secretary of State
[Received January 30—9:15 p.m.]
52. I communicated to the Icelandic Foreign Office the contents of the first paragraph of your telegram no. 26 of January 22, 1943, after which the Foreign Minister2 sent for me and expressed his appreciation of the understanding arid aid which the Department is endeavoring to lend in the question of fuel oil deliveries. The Foreign Minister showed me telegrams recently received from the Icelandic [Page 305] Minister in Washington which also reflect appreciation of the Department’s efforts to help. Mr. Thor said that the petroleum agencies are threatening to stop deliveries of motorcycles fuels at present prices after February 1 unless the Government consents to a price advance. The Foreign Minister said that he appreciated the Department’s suggestion made informally to the Icelandic Minister to increase prices temporarily against a possible future readjustment in view of the delay the Department is necessarily encountering in consulting interested American and British agencies. He said that he was reluctant to follow this suggestion as it would upset the keystone of his Government’s whole policy which is based on a freezing of prices as reported in my telegram no. 674 of December 24, 1942.3 To ask the Parliament to absorb the present loss on fuel oil prices even temporarily from the general Treasury would be for him a highly undesirable course as it would open to debate the whole matter of economic relationship of Iceland with the United States and Great Britain. Strong opposition to the present Governmental policy would almost surely ensure [ensue] and the Government does not feel itself firmly enough seated to risk itself in the hands of Parliament at present in regard to its retrenchment policy. I told the Foreign Minister that there was obviously little more that the Department would do to expedite matters as was perfectly apparent from the telegrams he had received from the Icelandic Minister at Washington and I strongly recommended that he use his best efforts to induce the petroleum companies to continue delivery at present prices at least up to February 15, by which time I hoped the Department would have been able to conclude its investigations and consultations with other agencies, both British and American. Mr. Thor accepted my viewpoint and said that he would do his best in this sense. I will telegraph as soon as result is known.
As will be understood from the foregoing the acuteness of this question and its importance to the present Government have not abated. I feel confident that the Department will wish to use the most expeditious means of communication [in] order to pursue to a conclusion this question which is of such prime importance to the present government and its policy. Faulty and slipshod methods in the treatment of the provision of fuel oil and related economic questions are apparent in the past. The present Government, however, is not responsible for them and its declared policy is on the right track. I am hopeful that if it is able to solve this one problem without too much exposure to the Parliament and to the public of past errors—which could result in the unseating of this managerial government [Page 306] and a return to the unbusinesslike methods, bickerings, and quarrels of the political parties, none of which enjoys a majority—our own relationship in the economic field will profit thereby.
This whole matter is extremely complicated and I probably have not yet been able to gather in all the loose ends to make a clear picture of just what happened in respect of these liquid fuel deliveries which are tied in with the Lend-Lease fish contract4 for [apparent omission].