The Ambassador in the United Kingdom (Douglas) to the Secretary of State
1997. For State, Treasury and ECA. Reference Annecy cable to Department 134, May 211 repeated London 8, and preceding telegrams same subject.
1. British Treasury today confirmed talks beginning with South Africans early next week. Treasury spokesman seemed uncertain of exact present status South African thinking. Felt South Africans groping for ways to cope with situation which is really serious, without having formulated clear plan for procedure. Acknowledged that South African situation very serious, and foresaw stringent import restrictions.
2. Earlier in week, another British spokesman stated UK expected severe drop UK exports South Africa immediate future, to such extent that British not counting on receiving South African gold even in early part 1950. Did not rule out possibility, but thought gold receipts could not be counted upon. Uncertainty arises in part because of technical question involving Article 6 South African loan agreement. Precise analysis present interpretation this section and impact on UK gold receipt prospects following separate ECA cable.2 Spokesman today stated British hoping to receive gold but did not indicate certainty.
3. Embassy representative noted that seriousness of South African position might raise question of new sterling loan from UK in near future. Treasury spokesman had evidently not considered matter. Revealed that South Africans have now made 7 drawings of pounds, 5 million each, under loan agreement, and admitted that pounds 80 million might be exhausted by end of summer. Timing would of course depend on nature of new import restrictions. Embassy representative observed UK had recently rejected South African overtures for floating municipal loans in London, at which time UK took viewpoint that if capital needed, it should be drawn from 80 million pound balance. Observed that with dissipation of gold loan sterling imminent, situation might be so critical that South Africa would seek both dollar and sterling credits. Treasury spokesman observed that of course private investment in mines would continue, but would not hazard guess as to whether South Africa might request, or UK might favorably consider, new sterling loan.[Page 683]
4. Treasury spokesman doubted whether anything definitive would come of talks with South Africans before late in week. Impression gained through British still unclear as to South African plans and general situation. However, Treasury will be contacted again next week, and Bliss will discuss import restriction aspects with BOT Monday, by which time situation may be somewhat more clarified.
Sent Department 1997, repeated Annecy unnumbered.