The Secretary of State to the Ambassador in Venezuela (Corrigan)
486. Your despatch 4536, June 19, and 4545, June 24, and your telegram 618, July 12. The Department has just informed the Venezuelan Embassy that it cannot approve the use of United States facilities to transmit funds to Spain in connection with purchase of German Railroad. Resolution 6, paragraph 4, adopted at the Washington Conference contemplates that enemy assets shall be blocked in banks under the jurisdiction of the respective governments of the Western Hemisphere, and the Department does not feel that Venezuela can appropriately delegate its responsibility for blocking enemy assets to a European neutral.
For your information, the Department is unwilling to create a precedent of blocking in European neutral countries; Treasury has indicated that it will not license the remittance; so substantial an increase in Spanish dollar holdings in this country is regarded as disadvantageous to our preclusive purchasing program since the Spanish are presently evincing reluctance to accept dollars in exchange for wolfram and other commodities purchased in Spain, and it is becoming increasingly difficult to secure pesetas.99
Embassy’s view with reference to security problem has been carefully considered. However, the Department feels that the balance of economic warfare advantage lies with rejecting the Venezuelan proposal. Despatch elaborating the considerations involved and enclosing copy of note to the Venezuelan Embassy follows.
You may indicate to President Medina that the Department is attempting to work out an alternative proposal to make to the Venezuelan Government with reference to the transfer of the Railroad that will avoid difficulties with respect to any bona fide pre-war Spanish interests in the Spanish holding company.