Foreign Relations of the United States: Diplomatic Papers, 1944, Europe, Volume IV

811.20 Defense (M) Spain/1275: Telegram

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

Washington, March 24, 1944—midnight.

816. This is the instruction referred to in our no. 815 of March 24 and should be read in the light of that telegram.

1. Department and FEA have reviewed the situation as seen from here. We appreciate that if wolfram shipments to Germany are to be stopped over a long period of time, the Spaniards will wish to find some excuse to enable them to offset possible German retaliation and to make it appear that they have made a satisfactory deal with us. We are accordingly prepared to resume petroleum shipments and to undertake certain purchasing commitments as well as to increase certain supplies to Spain, provided effective long-term arrangements are made to prevent any further wolfram shipments to the enemy and provided the Spaniards meet us on our previously stated desiderata and on certain other economic objectives, such as the cessation of olive oil, wool, and woolen goods exports to the enemy. Our action would be predicated on the assumption that effective steps will be taken by the Spaniards to enforce strictly all export prohibitions, including the prevention of smuggling.

2. It appears to us that unless producton of wolfram is drastically reduced, it will be extremely difficult to control the situation for large stocks will overhang the market and might fall into the hands of the Germans. Consequently, we should urge a drastic reduction in production as the way out. How the Spaniards bring about such a reduction is up to them, so long as it is effective. It could presumably be accomplished by severely reduced prices or by restricting mining to prewar producers, and in prewar amounts, or, preferably, by a combination of the two.

3. The British Embassy’s objection to the approach suggested in this telegram is stated in our preceding telegram. They apparently feel that the Spaniards expect that, once the wolfram problem is settled, we would be willing to continue our past trade program without change. The Spaniards may expect this, but we consider that the military situation is so changed, that we can be much stiffer in our trading position. Although we are prepared to continue and enlarge our trade program, we must emphasize that our reason for doing so would be solely for the purpose of enabling us to attain full satisfaction of our various objectives.

4. The foregoing paragraphs are for your general background. The following paragraphs set forth the suggested line of approach to the Spaniards.

5. Although you have doubtless emphasized to Jordana and he must be aware that the present Spanish wolfram production and price structure are abnormal and wholly unjustified, it should again be pointed out to him that prewar production of wolfram was insignificant to Spanish economy, being, according to our best information, between 300 and 400 tons per year. Consequently, there could be no ground for complaint from any source, other than possibly the taxing authorities and a handful of individuals now reaping exorbitant profits, if production were limited to prewar levels. As to the taxing authorities, they have already generously fed upon this wartime bubble and even if we should be willing to have conditions continue as at present (which we definitely are not), it would only be a short time before the bubble would burst completely by reason of the severance of communications with Germany and our withdrawal from the market.

6. In the light of the foregoing and in view of our willingness to make other purchases, it would be to Spain’s own definite advantage not only to prohibit further shipments to Germany but to reduce drastically the production of wolfram in Spain, confining it possibly to those few producers who were traditionally so occupied before the war and only in prewar quantities. Such a decision by the Spanish authorities would have about it a finality that would indicate that Spain wished once and for all to solve the problem of a dangerously inflated industry whose end in any event cannot be far distant and whose uneasy continuance may disrupt relations with those nations upon whom Spain must rely in the future for trade relationships based upon sound economic principles.

7. If Spain will prohibit further shipments to the enemy and reduce production to prewar levels, we would be prepared in return to undertake the following specific commitments:

(a) Make a single lump sum purchase of all wolfram stocks in Spain not now owned by the United States or the United Kingdom at a price to be negotiated but considerably in excess of the commercial prices set forth under paragraph 8 following;

(b) Purchase normal prewar Spanish production, at a rate not exceeding 400 tons per annum, for the balance of 1944 at commercial prices comparable to those set forth in following paragraph 8;

(c) Make substantial purchases of other staple Spanish commodities, such as textiles and woolen goods and olive oil, at prices to be mutually agreed upon as reasonable (which in the case of textiles, would be somewhat above domestic U.S. prices but below the prices asked by Carceller), which would in fact provide real cushioning to Spanish economy against the time when wartime products will no longer be in demand;

(d) Facilitate the purchase and acquisition by Spain of goods from outside the blockade, including commodities that Spain now secures from Germany, as indicated in paragraph 6 of our 730;⁸¹

(e) Continue to permit the import into this country of the large quantities of traditional Spanish exports such as olives, wines, and brandies.

8. The commercial price for wolfram now prevailing in world markets ranges from approximately $1,000 to $1,500 per ton, c.i.f. American ports. The prices which we have had to pay in Spain and even the price of 70 pesetas per kilo reportedly paid by the Germans prior to our entry into the market (your 632, February 23⁸²) are ridiculously out of line.

9. As a part of any such enlarged trade program, Spain would doubtless wish a marked increase in her raw cotton imports. This could be arranged, but we would have to receive satisfactory assurances against exports of textiles, wool and woolen goods. Similarly, if we are to permit the shipment of fats and oils through the blockade, we would insist that no olive oil go from Spain to Germany. In other words, the position which we will take with respect to all Spanish imports through the blockade can and will be much stiffer than has heretofore been the case. We do not intend to permit imports through the blockade which can be used in any way to enable Spain to export to Germany either those materials, derivatives thereof, or products in any wise similar thereto. Moreover, we would expect active Spanish cooperation in achieving our various economic warfare objectives.

10. In view of the fact that any such trade program would require real familiarity with prevailing U.S. views and conditions, it seems highly desirable for us to despatch one or two representatives to assist in the negotiations. This we are prepared to do promptly provided the Spaniards speedily give sufficient assurances that they will in fact reduce wolfram production and effectively prevent it going to Germany.

11. Please telegraph your comments on this telegram urgently in the light of our reference telegram.

Repeated to London as Department’s no. 2271.

Hull

81. Dated March 16, 9 p.m., p. 364.
82. Not printed.