800.515/8–1345: Telegram

The Secretary of State to the Ambassador in Portugal ( Baruch )

1388. Your 1721 Aug 13,11 rptd London as 403, raises two distinct questions: (1) freezing of satellite assets and (2) unblocking and dissipation of German assets covered by Portuguese freeze.

As to point (1), no final decision has yet been reached on freeze of satellite assets but Dept fails to see how affirmative decision on this question would create complications if Portuguese are sincere in their undertaking to effectively adhere to and implement Bretton Woods Resolution VI and related Safehaven requests.

So far as point (2) above is concerned, as Emb is aware (see Dept’s 948 June 15,12 rptd London as 4828), series of reports from Madrid in recent months has indicated grave danger Spain would dissipate German assets, public and private, in absence of early indication of ACC13 vesting action. Notification to neutrals of Allied assumption of title or control of German assets was, of course, stopgap measure.

Statement contained in your 1721 to effect that subsequent unblocking of German assets impels concealment and dissipation of liquid resources, considered together with your Safehaven reports nos. 300 and 316 of Jul 19 and Jul 30 respectively,14 indicates that dangers largely comparable to those existing in Spain are now manifest in Portugal. In this connection you should examine Dept’s 1037 Jun 19 to Madrid (rptd to you as 962, to London as 4930) in the light of local situation and be guided by policy stated therein to extent applicable to local situation. In addition, Emb is instructed to consult with Brit and to take following action immediately:

Request Portuguese to permit review of authorizations granted to German firms listed in Safehaven reports nos. 300 and 316. If examination discloses that operations of firms are not limited to domestic activities, licenses should be so restricted. Firms should [Page 901] be permitted to withdraw from their blocked accounts fixed monthly amounts which should be limited to minimum figure necessary to support approved domestic operations. Licenses should contain express prohibition against any alterations whatsoever in capital structure of firm.
Monthly reports of all expenditures should be required from licensed firms and made available to you and Brit for examination. They should be checked carefully for excessive or abnormal expenditures and for transactions which appear to indicate that firms are concealing or dissipating their assets.
Should such reports, or other available info, disclose concealment or dissipation of assets, or attempts to do so, you should first request Portuguese to revoke firm’s operating license. If Portuguese decline to revoke license or revocation does not produce desired results, you should consult with Brit with view to prompt appointment of temporary Allied management having complete power over company, including dismissal of undesirable personnel. You may base authority for such action on Allied assumption of supreme authority in Germany and refer to notification to Portuguese of claim to title or control of German external assets.
You should adhere to foregoing procedure with respect to future licenses granted to German entities for so-called normal commercial operations, except that you should press Portuguese to obtain prior concurrence of you and Brit in granting of initial licenses. See numbered pgh 3 Dept’s instruction 86 Aug 715 (copy to London).

Dept has noted that Emb’s note 60 of May 7 to Portuguese15 did not include an important desideratum, as requested by Dept in model note,16 i.e., that Portuguese authorities should consult with you as to principles underlying licensing of transactions involving assets covered by freezing decrees. Emb should press for exchange of views with Portuguese on this question in order that policies adopted by local authorities in this connection will not negate primary purposes of blocking controls.

Dept views problem in Portugal with great concern. It is emphasized that Emb should do all in its power to forestall any action either by Portuguese authorities, or private interests, which would prejudice the eventual and complete assumption of Allied authority, by means of ACC vesting action, of German assets within Portuguese jurisdiction.

Keep Dept fully informed of action taken on foregoing basis and of significant developments.

Sent to Lisbon, repeated to London 7200.

  1. Not printed.
  2. For text, see Conference of Berlin (Potsdam), vol. i, p. 555, footnote 1.
  3. Allied Control Council.
  4. Neither printed.
  5. Not printed.
  6. Not printed.
  7. See telegram 3158, April 22, 6 p.m., to London, p. 873.