835.24/12–3147: Airgram

The Chargé in the United Kingdom ( Gallman ) to the Secretary of State

secret

A–2652. US–UK: Sale by UK of American tanks in Belgium; export to Argentina.

Question of sale of US tanks in Belgium by UK (Emtel 6477 to Dept, 126 to Brussels, Dec. 1529) has been discussed on several occasions with officials of American and Western Division London FonOff. FonOff has made extensive examination of subject with Min. of Supply in London and Brit. Emb. in Brussels. Following views were communicated orally by Head of Western Dept (Belgium affairs) to Emb. officer: [Page 237]

1)
Tanks were sold as scrap to Belgian Overseas Trading Corporation by Brit. Min. of Supply. Large number of tanks of both Brit. and Amer. (presumably lend-lease) origin were sold and, according to FonOff info., a total of around 250 only have been exported to Argentina.
2)
Brit. selling and custodial agent was the No. 3 Brit. Disposals Commission in Brussels.
3)
Sale was made under the general authority of Min. of Supply to dispose of scrap materials.
4)
Sale was as “scrap”.
5)
Sales were made between beginning of May 1946 and end of Aug. 1946.
6)
Conditions of sale included “effective demilitarization by the purchasers, and part payment to UK in high carbon steel to be receivered [sic] from the break-down”. The contract “did not contain any clause prohibiting resale or re-export” because sales of scrap were not regarded as subject to any such restrictions.
7)
Tanks were not demilitarized before sale. Reason that demilitarization was to be carried out by purchaser was “lack of personnel by Min. of Supply in Belgium to carry out any such work.” Until March 1947 “a member of staff of Commission was charged with the duty of supervising the carrying into effect of the terms of the contract. He was then withdrawn owing to general shortage of manpower.”
8)
Sales contract calls for demilitarization and would permit enforcement thereof. Min. of Supply is in contact with Company on carrying out of contract. FonOff is prepared to instruct UK Emb. at Brussels to concert with US Emb. there in any measures thought to be desirable. Company has been asked by UK Emb. to explain “why tanks were not demilitarized.”

During these conversations, FonOff officials were distinctly embarrassed and, while endeavoring to make out as good a case as possible, frankly stated that there might have been some laxity on the part of Min. of Supply personnel. This laxity was ascribed to large-scale disposal activities by the Min. in many areas, lack of adequate personnel, constant demands that MOS personnel be reduced abroad, and belief materials sold were only of scrap value. It was insisted that “UK Govt did not make any exceptional profits on deal as tanks were sold for scrap and scrap prices”, thus “their hands were clean of any profiteering.”

An interesting statement volunteered by the FonOff was to effect that “The Belgium Govt looked benevolently upon the sale of the tanks and tractors to the Argentine”, as a part of the “battle for wheat”. This was further explained by the statement that, while the Company itself must have made a very good profit on the sale, the [Page 238] Belgian Govt was interested in using the delivery of such goods to Argentina in its negotiations for the importation of Argentine foodstuffs. The opinion was also expressed that UK Emb. in Brussels would not get much cooperation out of the Belgians in running down the affair, due to element of the transaction with the Argentine.

Finally, both the FonOff and the Min. of Supply appear to be very embarrassed by this matter and to hope that above explanation will be accepted by US, particularly since none of the exported materials have gone elsewhere than the Argentine and the further exports thereto appear to have been stopped either by Belgian action in requisitioning tanks from Company or by the inquiries made by U.S. Govt.

Gallman
  1. Not printed.