740.00112 European War 1939/8454: Telegram

The Ambassador in the United Kingdom (Winant) to the Secretary of State

3372. For Department and Stone, BEW. At meeting held yesterday of Policy Committee, Hägglöf made following statement regarding Swedish exports to enemy Europe.

Sweden is to large extent committed on her exports to enemy Europe for the rest of 1943. For example, she must deliver certain quantities of wood pulp and paper to Germany in second 6 months, provided Germany delivers 2 million tons of coal and coke in first half year, a condition latter is expected to fulfill. As to iron ore, he stated, contrary to our previous impression that some non-contractual relation existed between this export and deliveries of coal and coke, that no limit to deliveries is provided for, so long as they are paid for in cash through the clearing. With regard to most other commodities, agreements exist with Germany that export licenses up to certain quantities will be issued on condition payments through clearing are received from Germany and goods are available for export by private firms.

Agreements of generally similar nature exist with other countries in enemy Europe. They usually cover the current year, although in certain cases, such as exports of wood pulp and paper to Italy, said agreements are renewable for second half year upon fulfillment of specified conditions.

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Effect of above agreements is that Sweden is bound to export to enemy Europe for last 6 months substantially what she exported in same period 1942, provided imports specified in 1943 agreements are forthcoming. Therefore, according to Hägglöf, no appreciable reduction in exports for last 6 months can be expected.

Foot and others took position we were primarily interested in immediate reduction Swedish exports and therefore particularly concerned with second half 1943. Further that Hägglöf’s statements did not appear to provide even a basis for discussion.

Under pressure Hägglöf admitted that:

Perhaps 10 percent of Sweden’s proposed 1943 exports to enemy Europe were not covered by agreements.
If no credits were given in accordance with our demand, Swedish exports to Germany would decrease by about 35 million kronor in second half year, this sum representing repayment of credits in that period by Germany. (Our own estimate of the decrease to be effected in Swedish exports to Finland during last half of 1943 through elimination of new credits, but not of extensions of credit to that country, is roughly 14 million kronor, not counting reduction which would result from stoppage of credit facilitating Finnish purchases of foodstuffs in Denmark. Latter credit amounted to 5.2 million kronor for first half year.)
German exports to Sweden would tend to decrease somewhat in second half year as compared to corresponding period 1942, with resulting effect on Swedish exports to Germany.

When asked whether Swedish exports could be cut by refusal on part of Sweden to provide shipping, Hägglöf pointed out that his Government was bound to arrange that adequate transportation facilities be made available with regard to certain Swedish exports to the Continent.

We then took position that inasmuch as Germany had found excuses in past years not to live up to her agreements, there appeared no compelling reason why Sweden should not take same attitude now vis-à-vis Germany. On this point Hägglöf gave no ground.

We countered by stating that although Swedish approach to exports was unacceptable, we believed it might be of some use to examine at subsequent meeting exact extent by which Swedish exports to enemy Europe might be reduced in second half year without violation of existing agreements.

When pressed as to other demands, Hägglöf expressed following personal opinions, subject to confirmation by his Government and to our granting basic rations in quantities to be agreed upon but substantially based on amounts offered which are still, in the case of a few key commodities, below figures of combined boards: [Page 770]

He would accept prohibition of credits, certain of our additions to list A and substantial reduction of Swedish exports to enemy Europe in 1944.
He would discuss our demand on exports of arms, ammunition, ships and other means of transport (though the ban on export of arms to Finland presented difficulties). Would also discuss demands on inverted procedure to be applied to certain commodities, abolition list B, processing and barter.

Although meeting far from satisfactory from point of view attainment our demands, British and American delegates agree that Hägglöf is probably prepared to give some ground if pressed hard as we intend to do. In our judgment, at this stage, on the basis of Hägglöf’s statements being proved correct by submission of detailed statistics, about best attainable bargain on principal points (alternative being possible breakdown of negotiations) is following in broad terms:

Diminution of Swedish exports to enemy Europe for second half of this year by at most 20 to 25 percent as compared to corresponding period 1942.
Drastic but as yet undeterminable cut in Swedish exports to enemy Europe in 1944 using our proposed ceilings as basis of negotiations.
Abolition of credits, direct and indirect, to all countries and of extensions of credits to all countries except Finland.
Agreement satisfactory to us on most points involved in demands referred to in A and B above.
Limitations on Swedish exports and other Swedish concessions to apply, irrespective of continued operation Gothenburg traffic. (This in exchange for our substantial compromises on demands and for our providing basic rations, subject to supply considerations, whenever traffic is open.)

Regarding Argentine demand we are doubtful of Swedish acceptance, although still pressing the point. Separate telegram being sent to you on this matter.

It will be noted that possible bargain broadly outlined above does not provide specifically for any reduction in iron ore exports in last 6 months. This is a very serious omission. On the other hand, Hägglöf held out no prospect of our applying 1.75 to one ratio to second half this year.

We intend to keep pressing very hard on iron ore and obviously before even a tentative agreement on our part can be given to any compromise on our initial demands, a settlement must be reached on transits which will be discussed next week and on charter of free ships. However, it would be most helpful to us if you could telegraph your initial reaction to possible bargain we have outlined on assumption that transits and ship question can be satisfactorily settled. We make this request as Hägglöf now consulting his Government and as it is of importance that negotiations should not drag out.