811.20 Defense (M) Portugal/1416: Telegram

The Secretary of State to the Minister in Portugal ( Norweb )

132. Your No. 71 of January 10 and 125 of January 13.

Our military authorities have not as yet indicated that they are prepared to take the risks which would result from the invocation of the Anglo-Portuguese alliance, even on the lesser plane suggested by you. Unless and until there is a change in those quarters, we must resort to other possibly less effective means of limiting wolfram exports.
Department has discussed with British Embassy substance of Foreign Office telegram no. 152 of January 7 to British Embassy Washington as well as British Embassy Lisbon no. 44 of January 9 to Foreign Office (your no. 66 of January 946) as well as more recent telegrams exchanged between London and Lisbon. We have also [Page 88] discussed with British Embassy the substance of this telegram, and they are telegraphing London urgently.
We appreciate that unless the Anglo-Portuguese alliance is invoked, Salazar may refuse to embargo shipments of wolfram to Germany alone, even though we offer him substantial economic concessions. Consequently, we should be willing to agree, if necessary, to an embargo on shipments to all destinations, even though such action would quantitatively penalize us more than it would the Germans. Salazar’s objections to such a proposal will doubtless include the following:
Such action will bring retaliation from the Germans. This is of course possible, but it is also quite probable that the retaliatory action would not go beyond the reduction of German exports to Portugal and the possible sinking of a Portuguese ship or two. Salazar could possibly explain his action to the Germans on the ground that inflated wolfram prices are having a severely harmful effect on Portuguese economy and that he wishes to force prices down and induce labor to return to other pursuits; that experience has proved this could not be accomplished by attempting to control production and prices through the Metals Commission; and that he is consequently forced to embargo all exports, regardless of destination, pending such time as more satisfactory production and price controls can be worked out.
Portugal may lose needed imports from Germany. In reply to this objection, Salazar could be advised that we would be prepared to take every possible step to make available to Portugal the materials she might otherwise obtain from Germany were it not for the embargo.
Unemployment will be caused among those normally engaged in wolfram production. In reply Salazar could be told that the British would be willing to continue a limited production in their own mines (for stockpiling in Portugal) and that we and the British would be prepared to make and increase purchases of Portuguese traditional exports, such as naval stores, cork, textiles, et cetera.
In the event Salazar maintains the position that he must permit Germany to take some wolfram, you could advise him that we would approve of an arrangement which would limit exports to German Europe on the one hand and to the United Nations on the other to a maximum of 250 tons each per quarter during the 6-month period beginning March 1, the Portuguese to reserve the right to cancel the arrangement with the Germans at the end of the first 3-month period. However, we believe it would be most desirable to couple such a maximum quota arrangement with a provision that we and the Germans may export only wolfram produced in our respective presently recognized mines and concessions. We appreciate that Salazar may consider such a formula unfair to independent producers, and we would not insist on this proviso. Nevertheless, it would appear well worth trying, as there should be more chance of policing the German operations if they are legally limited to the offtake of their own mines and concessions. [Page 89] Moreover, Salazar may be willing to consent to such a proposal in view of his previously reported desire to remove the incentive which has led agricultural and other laborers to engage in independent wolfram ventures. In the event of his acceptance of such an arrangement, it would doubtless have to be coupled with some indication on our part of willingness to supply him with materials he might otherwise obtain from the Germans and to increase purchases of traditional exports.
You will of course appreciate that no specific commitments can be given concerning the supply of materials to take the place of imports from Germany, for we do not know precisely what these are. The most we can undertake in that connection is to take every possible step to meet the Portuguese requirements and to give prompt consideration to the matter as soon as specifications and quantities are submitted by the Portuguese. If the matter of shipping tonnage is raised, we would also undertake to give it our sympathetic consideration. Similarly, we cannot give specific commitments concerning purchases of traditional Portuguese exports, but as soon as lists are put forward by the Portuguese prompt and sympathetic consideration will be given them. You can assure Salazar, however, that there is no real doubt that satisfactory arrangements can be made if we substantially cut down German takings of wolfram.
The manner in which this matter is presented to Salazar will doubtless have great bearing on his reaction. In the light of past experience and of your no. 71 and of British telegrams, we believe that Salazar should not be given the impression that we are laying down an ultimatum concerning the complete embargo. It would appear preferable that we take the line that we want to explore with him practicable means of accomplishing what must be a common objective, namely, the shortening of the war by depriving Germany of Portuguese wolfram, upon which material her wartime industry is so largely dependent. We understand that London has approved an approach along this line, but has suggested that in the first conversation with Salazar you should discuss only a complete embargo, leaving the putting forward of the quota formula to a subsequent meeting. We are inclined to the view that you may find it necessary or desirable to put it forward during the first conversation in the event the complete embargo is refused. You will of course be guided by your discretion.
It will doubtless be helpful if you point out to Salazar that as soon as means of communication between Germany and Portugal are cut, there will be no market for Portuguese wolfram on anything like the presently existing scale. Consequently, it would appear most advantageous to the Portuguese to make some arrangement at this time which would cushion the effect upon Portuguese economy of the withdrawal [Page 90] of the Germans and ourselves from the market. If arrangements for stopping or reducing shipments to Germany cannot be made to our satisfaction at this time, we cannot undertake to assist the Portuguese economy when wolfram purchases are completely stopped.
If you approve the course of action suggested above and if your British colleague receives similar instructions, please approach Salazar as soon as possible.
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