740.00112 European War 1939/10856: Telegram
The Chargé in the United Kingdom (Bucknell) to the Secretary of State
[Received May 24—3:42 p.m.]
4168. For the Secretary, the Under Secretary, Acheson, Crowley and Stone FEA only from Riefler. I received the following letter today:59
“On Saturday last you handed me a memorandum of a telegram dated 15th May from the Department of State and FEA regarding economic warfare policy in Sweden.60
As I understand it, your Government wish to proceed as follows:
All the breaches, or apparent breaches of the economic agreement of 1943 are to be raised as soon as possible in the Stockholm JSC. If thereafter the present ball-bearing negotiations reach a satisfactory conclusion, we should seek an amicable compromise on these matters. [Page 551] If, on the other hand, the ball-bearing negotiations fail, we should deliver a joint note to the Swedish Government, complaining strongly of the uncooperative spirit which they have shown, and announcing that basic rations will be suspended forthwith until such time as the Swedish Government have satisfied us that they will carry out the agreement in a cooperative spirit.
This course would mean a complete change in the policy we have hitherto pursued. It may be convenient therefore if I describe at some length the attitude which MEW have hitherto adopted towards Sweden.
During the negotiations last year we came to the definite conclusion, which I believe you shared, that the Swedes were not making an agreement for the sake of basic rations. No doubt the rations are of some importance, but, broadly speaking, the trickle of supplies through Gothenburg is not essential to Swedish economy, and is certainly not an adequate return for the very substantial reductions which the Swedes undertook to make in their trade with the Axis. The agreement involved a reduction of something like a third in Swedish export trade, and a good deal of dislocation and possible unemployment in almost every Swedish industry. Although we did not get everything that we wanted, the Swedish Government went a very long way to meet us. Both you and we are familiar with the furious opposition that at once arises if any American or British Government propose even a small reduction in an existing tariff, and we know the great pressure which is immediately brought to bear. It is not difficult to imagine what your industrialists or ours would have said if you or we had agreed to sacrifice a third of American or British export trade for a period of some 18 months. There can be no doubt therefore that the Swedes were ready to make a very substantial economic sacrifice, in return for which we could give them no adequate economic recompense. What they were anxious to obtain was Allied good will. They signed the agreement for political far more than for commercial reasons.
It is true that the Swedish declaration has not been implemented in every detail, and that there have been a number of breaches, of varying importance. Some of these have already been discussed at the London JSC, and the most serious, the over-shipment of iron ore in 1943, has been the subject of several communications, culminating in the Allied aide-mémoire of March 17. We do not regard these matters lightly, but we cannot agree to the inference which might be drawn from the State Department’s telegram that the agreement has been honoured in the breach rather than in the observance. On the contrary, nearly all of its main provisions have been implemented. In other words, we have secured the substance of what we set out to secure in the negotiations last May. This is a point of such supreme importance that it is worth while recapitulating some of the definite advantages which we then obtained and are still obtaining from the agreement:
- (a)
- The total Swedish exports to Axis Europe were reduced by 107,000,000 kronor in 1943, and are to be reduced by 329,000,000 kronor in 1944. The 1943 reduction would have been even greater if the Germans had not unexpectedly managed to increase [Page 552] their exports to Sweden. The ceilings fixed for the various Axis countries during 1943 have been observed.
- (b)
- The Germans have been compelled in 1944 to repay credits amounting to 55,000,000 kronor, and there are to be no future Swedish credits to Germany. Credits to a further 25,000,000 kronor are in course of repayment.
- (c)
- Iron ore exports to Germany are being reduced by over 3,000,000 tons as compared with last year.
- (d)
- There seems no reason to doubt that after the delegation returned to Stockholm last year SKF were constrained to reduce their deliveries of ball bearings, et cetera, to Germany by 8,000,000 marks during 1943.
- (e)
- The 1944 ceiling for ball bearings represents a reduction of over 50% Compared with 1943. Had it not been for the agreement German purchases during 1944 would almost certainly have exceeded last year’s figure.
In addition the Swedes have, since the signature of the agreement, given us certain further concessions without asking for any return from us. You will remember that in March, Hägglöf agreed on behalf of his Government that (a) deliveries from SKF to Germany should be spaced equally throughout the 12 months and that deliveries in any 1 month should not be more than about one-twelfth of the whole year’s quota; and (b) the Germans should not be allowed to switch their orders from one type of bearings to another.
You will remember that at the end of March MEW were in favour of a secret approach to SKF through Wallenberg, with an offer of large orders in return for a stoppage or a substantial reduction in further ball bearing exports to Germany, especially during the next few months. We still feel that this method would have been more likely to produce results. We deferred, however, to Washington’s view that there should be a full dress approach to the Swedish Government, although we were not sanguine about it. Our information from Stockholm shows that the unfortunate publicity given to our joint démarche and to the subsequent Griffis mission has greatly prejudiced the chances of a satisfactory settlement; and that the Swedes are extremely suspicious of our motives. They are inclined to think that our present demands, if accepted, will be followed by others, and that our real purpose is to embroil them with the Germans and so bring them into the war. This frame of mind is a fact which we must bear in mind in trying to gauge what Swedish reaction would be to further Allied pressure.
For the above reasons we are disposed to query the assumption in the State Department telegram that Swedish reaction to the suspension of basic rations will depend upon the size of stocks now held in Sweden. If we are right in thinking that the Swedes entered into the agreement for political and not for economic reasons, the prospect of losing the rations will not be the chief consideration which will determine their attitude. They will feel that Allied good will is a will-o’-the-wisp which can be endlessly pursued but never caught; and that although they have gone further to meet us than any other neutral country, still further concessions will not save them from being pilloried in future as in the past just as if they had behaved [Page 553] in the same way as Franco’s61 Spain or Salazar’s62 Portugal. In these circumstances I personally feel that it is more than a theoretical possibility that the Swedes might denounce the War Trade Agreement. Alternatively, they may—and this is perhaps more probable—cease to take any effective steps to police it. Their attitude may well be: ‘Thou shalt not kill, but needst not strive, Officiously to keep alive’, and, as you know, we are completely dependent upon Swedish vigilance to enforce their undertakings, especially as regards ball and roller bearings, machinery of all kinds, and goods on List A. We cannot do so ourselves. MEW believe that the loss of the Agreement, either in form or in substance, would be a disaster for us and a triumph for the Germans, who would be able once more to draw freely on Swedish resources. Surely on this point there cannot be two opinions.
The State Department telegram refers to ‘sanctions which are very substantial and which we could use even more freely in the absence of a war trade agreement’, but it does not specify what these sanctions are. Apart from the suspension of basic rations, the only method of pressure of which we are aware is the Black List, We could, of course, put more Swedish firms on the lists. We feel, however, considerable doubt whether the Swedish Government would yield to this form of pressure. Many Swedish firms would dread the possible loss of facilities after the armistice, but they are not, for the most part, immediately vulnerable. Moreover, the postwar threat would not be fully effective unless the Russian Government were prepared to join in.
We therefore stand to lose a great deal by the course which Washington proposes. On the other hand, it is difficult to see what we can expect to gain. If the ball-bearings negotiations finally break down we are not likely to secure a different decision or to obtain a more advantageous war trade agreement by exerting forms of pressure which cannot be immediately effective. If the war continues into next year it may well happen, moreover, that we shall certainly have other desiderata, political, economic and operational, in Sweden. We can hardly expect to achieve them in the atmosphere that will obtain if the course now proposed be followed.
For all these reasons we do not feel that these tactics will produce any useful economic warfare result and we would deprecate them on wider grounds.”
Bucknell
- The Department was informed in telegram 4171, May 24, 5 p.m., from London, that the quoted letter was from the Parliamentary Secretary, British Ministry of Economic Warfare, Dingle Foot (740.00112 European War 1939/10857).↩
- See telegram 915, May 15, 1 p.m., to Stockholm, p. 542.↩
- Generalissimo Francisco Franco, Spanish Chief of State.↩
- Antonio de Oliveira Salazar, President of Portuguese Council of Ministers and Minister for Foreign Affairs.↩