The Ambassador in Argentina (Braden) to the Secretary of State
[Received September 21—6:10 a.m.]
2235. Recent inquiries on individual fuel problems from Department depend on major policy decision re restrictive economic policy toward Argentina versus food and vegetable oil exports. Following facts control situation:
- Present fuel shortages have brought Argentine transport and power industries to breaking point. Their collapse would surely precipitate economic and political crises.
- Maintenance food and vegetable oil exports depend upon immediate additional imports of fuel oil and coal. Unless these forthcoming promptly, reasonable to expect almost total cessation exports any substance capable use as fuel regardless of existing agreements.
- Embtel 2221, September 19, 9 p.m.93 Press reports indicate British have no intention imposition restrictions on Argentine trade.
- Burning grains and vegetable cakes plus British and other fuel shipments would probably obviate economic crisis or delay it.
- Maintenance of fuel as decisive economic weapon thus depends on success of efforts to obtain effective joint action. Unilateral action would be futile.
I recommend immediate assessment importance of continued foods and vegetable oil exports from Argentina to U.S., and U.K. and liberated areas. If survey demonstrates indispensability Argentine supplies, then recommend joint U.S.–U.K., Netherlands, and South African decision to increase fuel shipments to Argentina to extent and only to extent necessary to maintain procurement programs. We should retain control over fuel exports to Argentina in order to apply coercive measures if and when necessary.
The following represents current situation re Department’s specific inquiries.[Page 551]
Present indications are that Argentina will be unable to supply prior to December 31 in any event more than minimum quantities of flaxseed, linseed cake, and oil specified in agreement, namely 133,000 tons, 179,000 tons, and 88,000 tons respectively. Deliveries edible oils affected by high prices and local market demand (Embtel 2024, August 30, 8 p.m.),94 It is doubtful if deliveries linseed products could be expanded through additional deliveries fuel oil. This might, however, improve delivery prospects for edible oils and other food products (Deptel 1265, September 14),94
Deptel 1297, September 19, 9 a.m.94 Supplies of South African coal thus far received have been almost exclusively for British railroads and British frigoríficos to detriment of American frigoríficos. South African Consul has been negotiating coal-corn agreement for some time primarily due there to critical corn shortage and Argentine Government has now agreed to barter 5 tons corn against 4 tons coal, South Africa bearing freight charges. First shipment 8,000 tons corn loading today. As coal deliveries will be to Argentine Government, British and South African representatives will not have control over distribution and they expect all will be for essential requirements of power companies. Agreement is through balance of year and no commitment made as to quantity coal to be supplied though assurance given of maximum assistance.
Deptel 1277, September 14, 8 p.m.94 To maintain normal production some relief is required by frigoríficos to obtain this, [since?] a special monthly quota of 7,000 tons fuel oil outside fuel oil-linseed agreement would have to be supplied and specifically earmarked for frigoríficos to insure carrying out food procurement program (Embassy’s despatch 481, August 4).94
If additional supplies of fuels cannot be obtained, Argentina will of necessity violate existing agreements and utilize all available fuel supplies to operate railroads, power companies, and other essential services. The Government has already adopted measures prohibiting temporarily exports of wheat flour and drastically curtailing current exports of grains for England, Brazil and UNRRA. Official statement indicates that low stocks 1944/45 corn will have to be used entirely as fuel for production of electric power and possibly other grains will have to be used if additional supplies of coal and oil not promptly available.
Embtel 1941, August 22, 12 midnight,94 The Embassy and FEA have endeavored to secure top priorities for products involved in fuel oil-linseed contract and newspaper articles have stressed continued [Page 552] adherence both Governments. Removal urged of export tax on oilcakes to encourage prompt delivery 40,000 tons Sun Oil. At Embassy’s request 40 Army trucks released for flaxseed transportation and release additional fuel oil obtained for railways. Despite our efforts deliveries under agreement contingent on transportation, which in turn depends on availability fuel supplies (Deptel 1231, September 7, 7p.m.).
Argentine Government fully cognizant of its obligations and Minister of Agriculture96 has cooperated. However, final outcome depends on decision re joint cooperation in possible economic sanctions versus essentiality of foodstuff programs. Due to present critical supply situation urgency of early decision is again stressed. We must not on one hand overlook fact that strengthening procurement program may strengthen existing regime whereas coercion, necessary though it may be, may cut off supplies vitally needed by Europe. But we must face issue that we cannot permit Nazis to continue to develop Argentina as base for third world war.