811.20 Defense (M) Spain/1165: Telegram

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

3066. Department’s 2194, October 15, 9 p.m. In view of the importance of wolfram in creating Spanish purchasing power and revenue and as a weapon by which Spain has exercised pressure on the Germans to obtain armament, I believe it would be a technical error to propose prohibition of wolfram exports in return for making American wheat available. The British Embassy agrees.

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The supply of wheat to Spain by the U.S. at market prices is a convenience to Spain because of shipping considerations which the Spaniards consider to justify American prices. It is not a necessity as Spain can obtain this commodity in Argentina and, with the dollars we agreed to make available for pesos, can pay immediately.

If you concur, I will discuss the question with Jordana along the following lines: Spain to prohibit exports of wolfram; to either prohibit export of fluorspar, strontium and zinc or to agree to transport to the United States in Spanish bottoms such tonnage as have accumulated from previous purchases and as may be purchased in the future. As a counterpart the United States and Great Britain would (a) suppress price averages imposed by purchasing agencies on petroleum products and commodities originating in the United States and British Isles; (b) increase purchase of commodities which enter into traditional commerce between Spain and the United States and Spain and Great Britain and/or commodities which may be consumed in liberated areas at least to an extent which would represent the cost at present prices less taxes of the volume of wolfram purchased during the present year; (c) in the event that purchase of the United States and Great Britain produce a volume of exchange in excess of the cost of materials obtained by Spain from dollar and sterling areas, the difference would be made available to Spain in free gold.

Traditional commerce would be understood to include citrus fruits among other commodities. Disposition of the forthcoming orange crop presents a serious problem for the Government and since normal markets not now available, pressure from producing areas may force it to grant Germany certain compensating advantages in return for substantial orange purchases.

In the event the Spaniards are unwilling to agree to the above proposals, I would indicate that this may make it necessary for us to reconsider supplies under future programs. It is possible that the Spaniards would make certain counterproposals which we should be prepared to consider if they involve prohibition of wolfram exports.

When I informed the British Embassy that I was considering these proposals along the above lines, they expressed the hope that I would not discuss the matter with the Ministry of Foreign Affairs in detail until after they [garbled group] next Monday who is probably bringing certain definite British proposals.

British Ambassador informs me he has not discussed this specific subject with Jordana although he implied he might make some brief reference to it today.

Hayes