Foreign Relations of the United States, 1958–1960, Western Europe, Volume VII, Part 2

335. National Security Council Report⁰

NSC 6016/1

October 5, 1960.

STATEMENT OF U.S. POLICY TOWARD SPAIN

General Considerations

Importance of Spain

1. Because of Spain’s strategic geographic location, Spanish cooperation is valuable for the defense of the NATO area and of the United States, for the following reasons:

a. Spain offers additional and dispersed bases designed for the use of U.S. strategic air and naval forces which are important to U.S. deterrent and operational capabilities.

b. Military forces based on Spain could influence military operations in all the Mediterranean, the Eastern sections of the North and Central Atlantic Ocean routes, Northwest Africa, and all of Western Europe.

c. Spain can also provide depth in the defense of Western Europe against an attack by the USSR.

The Political Situation

2. More than twenty years after the Civil War, General Franco, who is now 68 years old, is still Chief of the Spanish State and his control has not been seriously contested. His regime is supported by the conservative elements of Spanish society: the officer class of the armed services; the wealthy industrialist, banking and landholding groups; and a majority of the clerical hierarchy. The job-holding bureaucracy of the Flange, Spain’s only legal political organization whose careers are dependent in good part on the present system, and the older generations’ deeply-rooted desire for peace and stability following the chaos of the Civil War contribute significantly to the continuance of the Franco regime.

3. Concurrently, however, there exists a pervasive political malaise in Spain, especially among the younger generations and including elements of the lower clergy. The fragmented opposition groups from the Communist left to the Monarchist right have been unable thus far to provide the catalysts necessary to coalesce this discontent into a coherent and effective opposition. Sporadic outbreaks of active dissatisfaction, which are not expected to lessen, indicate the less than firm basis of Spain’s present authoritarian regime, although its efficient internal security forces have swiftly smothered such outbreaks and currently maintained firm control.

4. Prospects for future stability in Spain following the demise or incapacitation of General Franco are also weakened by the lack of provision for a successor government. Spain is officially a monarchy and at the present time a monarchical restoration appears to be the most likely post-Franco development, at least as an interim government which might ensure a measure of stability during a critical period.

5. Spain has successfully emerged from its diplomatic isolation of the post-World War II period. Following the conclusion of the agreements with the United States in 1953, Spain has moved back into international society and become a member of the UN, OEEC, participates in other multilateral organizations and UN specialized agencies, and has applied for adherence to GATT. It is also seeking to improve its relations with other Western European nations by official visits, trade and cultural agreement, etc. Spanish participation in NATO, however, continues to be adamantly opposed by the Scandinavian members in particular, who regard the Franco regime as ideologically incompatible with NATO principles. At least so long as the Franco regime remains in power, Spain is unlikely to be accepted in NATO. U.S. association with the Franco regime has on occasion been detrimental to U.S. prestige among certain groups in other parts of the world.

6. Serious difficulties may develop between Morocco and Spain. Spain retains the Mediterranean port cities of Ceuta and Melilla and the small Ifni areas as enclaves in Morocco. To protect these interests and those of its nationals residing in Morocco, proper, Spain retains forces in the enclaves and also in Moroccan territory. Morocco is pressing for the complete evacuation of Spanish troops and has asserted claims to the enclaves as well as to the Spanish Sahara.

The Economic Situation

7. A deteriorating balance of payments situation reached a critical point in mid–1959 when heavy inflationary pressures and near exhaustion of hard currency reserves presented the Spanish Government with the alternatives of an immediate deflationary program or economic, probably political, disorder. With uncharacteristic directness the Spanish Government met this problem by consulting with the OEEC and the IMF and, with the assistance and encouragement of these organizations and the United States, developed and energetically instituted an economic stabilization plan. This program has been successful in stabilizing the value of the peseta, halting inflation and the rise of the cost-of-living, improving Spain’s gold and dollar reserves position, and eliminating the heavy balance of payments deficits on current and capital accounts. These substantial gains, however, were accompanied by a slow-down in general business activity, increased unemployment and a decrease in the amount of take-home pay. The Spanish Government is now studying corrective measures which might be undertaken to stimulate business activity, as the continuation or worsening of this situation could lead to active unrest and political turmoil. In this connection, it is in the U. S. interest to encourage a stable and growing economy in Spain as a necessary concomitant to the U.S. use of the joint-use Spanish bases and facilities.

U.S. Aid

8. The agreements signed by the United States and Spain on September 26, 1953, provide for the development and use by the United States of military facilities in Spain, and for U.S. strengthening of Spain’s economic and military posture through economic and military aid. SAC bases have been developed at Zaragoza, Torrejon and Moron de la Frontera; a navy base and naval air station at Rota; a 485-mile pipeline from Rota to Zaragoza; naval fuel and ammunition storage depots; AC&W sites, and ancillary supporting facilities. This base complex is fully operational and construction is virtually completed. U.S. capital expenditures on these facilities up to September 1, 1960, amounted to approximately $352 million, of which approximately $140 million were covered by counterpart funds generated by U.S. aid programs.

9. To support the policy of military cooperation with Spain, the United States undertook a commitment in 1953 to provide a total aid program in the amount of $465 million over a period of four years. Programming for this commitment was virtually completed in FY 1957, but the United States has continued to provide both military and economic assistance in order to promote the achievement of U.S. objectives in Spain and, in particular, to retain the over-all U.S.-Spanish cooperation required for U.S. use of Spanish bases and facilities. Through FY 1960, a total of $420 million in military assistance and $1,281 million in economic programs (including defense support, loans and P.L. 480 sales) had been approved.

10. The initial ten-year period of the 1953 Defense Agreement will terminate on September 26, 1963. Preliminary Spanish views have been expressed informally by some officials that it would be desirable to initiate discussions at an early date for the strengthening and expansion of this agreement. Spain will undoubtedly endeavor to utilize the 1963 date as a lever to obtain concessions from the United States. It is in the best interest of the United States to provide continuing military and economic assistance on the minimum basis necessary to retain Spanish cooperation. It is considered disadvantageous, however, to enter discussion on this point so far in advance of 1963. U.S. base interests in Spain will probably not be threatened so long as the Franco regime remains in power. It is not believed that Spanish policy toward the United States would be drastically altered after Franco’s departure unless the political situation degenerated into prolonged disorder. Any likely successor regime would almost certainly recognize that close cooperation with the United States was essential to economic stability.

11. The Spanish Armed Forces remain firmly under General Franco’s control and the regime continues to rely on their support and influence, principally that of the Army, to assure the maintenance of political stability. Basically, these forces have a capability only for maintaining internal security, for conducting a limited delaying action against a modern well-equipped force and for defending Spanish possessions in North Africa against attacks by forces from the neighboring states. All three of Spain’s Armed Services have shown marked improvement as a result of U.S. aid, but are still far from having a satisfactory capability for defense. The predominance of obsolete equipment, the limited prospects of obtaining large numbers of modern weapons, the low level of education and lack of technical experience of Spanish manpower, and the extremely limited capability of Spain’s present economy to support a modern military force, forecast a continued reliance by Spain on outside assistance to maintain the level of effectiveness which has been achieved since 1953.

Objectives

12. Access to military facilities in Spain required by the United States, and acceptance by Spain of the concept of collective security.

13. Improvement of the capability of Spanish forces to contribute to the defense of the Iberian Peninsula.

14. Maintenance of Spain’s non-Communist orientation and development of close relations with the United States.

15. Improvement of relations between Spain and the NATO nations in order:

a. To tie Spain as closely as practicable to Western plans for regional defense.

b. To obtain Spanish participation in NATO as soon as appropriate, without committing the United States at this time to bring Spanish forces up to NATO standards in case Spain is admitted to NATO.

16. Maintenance of internal stability as needed to accomplish these objectives.

17. Sound economic growth and stability as needed to accomplish these objectives.

18. The evolution of Spain toward more democratic processes.

19. The conduct by Spain of a cooperative and constructive policy in the Mediterranean area.

Major Policy Guidance

20. a. Provide Spain such minimum military, economic and technical assistance as is necessary to promote achievement of U.S. objectives and, in particular, to retain the over-all U.S.-Spanish cooperation required for U.S. use of Spanish bases and facilities.

b. In providing assistance under subparagraph a above, seek to distribute total assistance in such a way as:

(1) To assist in promoting a reasonable degree of economic stability and growth, recognizing their contribution to internal political stability.

(2) To develop forces to increase Spain’s capability to contribute to the defense of the Iberian Peninsula, including defense of U.S.-occupied Spanish bases.

(3) To encourage the reduction or elimination of unnecessary military forces.

c. In discussions with Spain as to future U.S. military assistance, balance Spanish requests for any increases in U.S.-supported forces above the present U.S.-supported force basis against the possibility that some provision for advanced defensive weapons may be required, and against the limited capabilities of the Spanish economy to support modern military forces.

21. a. In both Spain and the NATO countries, encourage closer cooperation between Spain and our NATO allies.

b. Seek to persuade, as appropriate, our NATO allies of the advantages of Spanish membership in NATO.

c. When appropriate, encourage Spain to apply for membership in NATO and support that application when presented.

22. Encourage Spain to follow economic and financial policies designed to promote sound economic growth and stability and to improve the climate for foreign investment in Spain.

23. Recognizing that the United States must cooperate closely with the government of Franco in order to ensure effective implementation of the U.S.-Spanish agreements:

a. Endeavor to avoid any identification with the policies of the Spanish Government not required for this purpose, and avoid steps that could be interpreted as an attempt to interfere in Spanish internal affairs. Maintain broad but selective contacts with all opinion groups including the non-Communist left—consistent with the need for continuous, harmonious working relationships with the Franco Government—in order (1) to encourage their pro-Western orientation and (2) to present American programs and our presence in Spain in terms of their benefits to the Spanish people.

b. Continue to use U.S. influence to persuade Spain to adopt policies consonant with U.S. interests.

24. Encourage discreetly the establishment of a practical and acceptable succession in Spain which would:

a. Assist in maintaining internal stability.

b. Avoid a post-Franco crisis which might jeopardize our access to military facilities and the achievement of related U.S. objectives.

c. Hopefully evolve toward more democratic processes in Spain.

25. Encourage broader educational, cultural, military and technical contacts between Americans and Spaniards in the interest of building up influence within Spain favorable to the attainment of U.S. objectives.

26. Encourage the orderly settlement of problems and disputes involving Spain and African states in order to encourage the maintenance of Spanish influence in North Africa.

[Attachment]

¹

FINANCIAL APPENDIX

[Here follow six pages of tables on projected U.S. programs or authorizations and lists of military equipment scheduled for delivery to Spain.]

ICA Comments

I. Cost Implications of Existing Policies: Summary Explanation and Comments

A. Major economic assistance prior to FY 1959

For the fiscal years 1954 through FY 1958 Spain has been authorized $335 million in Defense Support aid. Of this amount $138.3 million has been used to finance surplus agricultural commodities under Section 402 and $2.9 million for technical exchange programs. The necessity to adjust to existing economic conditions in Spain to meet U.S. objectives dictated the composition of that part of the program which was not Section 402. The start of the economic or “Defense Support” program in September 1953 coincided with Spanish efforts for rapid economic expansion, especially in industry. Thus, in FY 1954 and FY 1955 a relatively high proportion of capital equipment was financed. Beginning with FY 1957, when inflationary pressures had begun to mount, a greater proportion of Defense Support funds was devoted to industrial raw materials in order to help stem spiralling price increases. With the return of price stability in 1959, more emphasis was placed again upon capital equipment. Beginning in FY 1958, funds are provided every year under the Technical Cooperation program which amounted to $1.1 million in FY 1958.

B. Economic Commitments

The United States undertook concomitantly with the signing of the Mutual Defense Agreement of 1953 to provide Spain with a total of $465 million in military, economic and technical assistance over a period of four years. The U.S. has fulfilled its economic commitment, and no further formal commitment exists. The continuation of economic assistance to Spain is expected by the Spanish Government, however, in light of American bases in that country.

C. Economic and Technical Assistance Programs

Defense Support.—Defense support aid in Spain has been designed to assist in maintaining a cooperative Spanish altitude for the operation of the bases which are in use by American forces. In FY 1960 the program was aimed at this purpose by serving a further purpose, that of supporting Spain’s program to stabilize and liberalize its economy. Defense Support aid to Spain of $45 million in FY 1960 was part of a larger “package” of stabilization assistance totalling nearly $400 million which came from a variety of sources.

Of the total of $45 million DS aid, $15 million was used to buy U.S. surplus agricultural commodities under Section 402, mainly corn, barley, soybeans, oilcake and meal, eggs and dried beans, which helped to stabilize the cost of living index. Purchases with the remaining $30 million included coal, crude oil, chemicals, paper, tractors and a considerable amount of capital equipment which served to sustain the production of goods needed to combat inflation. The increased emphasis on capital equipment in the utilization of D.S. aid reflected the import liberalization measures undertaken with respect to raw materials under Spain’s stabilization program. For FY 1961 the Executive Branch has requested $25 million in D.S. aid, which represents a sharp reduction as compared with the levels of previous years. This reduction was considered appropriate in view of the significant gains in foreign exchange earnings resulting from the economic stabilization program and by the availability of loans from international economic organizations, the Export-Import Bank and the Development Loan Fund. However, the FY 1961 Appropriation Act requires that not less than $35 million in defense support should be provided to Spain. The FY 1961 D.S. aid will be programmed as far as possible to support the economic stabilization program.

Technical Cooperation.—The Technical Cooperation program in Spain is designed to support general economic development. It also promotes closer contacts between Spain and the Western World. Specific emphasis is put on participant training. Each year about 300 Spaniards receive training in the U.S. or European countries in a wide variety of fields, such as agriculture, industry, public administration, transportation and civil aviation. Returning participants have been successfully working on T.C. projects in Spain under the guidance of U.S. technicians. It is expected to continue the T.C. program at approximately the same level as during the past three years. The Mission’s efforts will be especially directed toward increasing Spanish interest in modern management, public administration, improved marketing methods and tourism promotion.

D. P.L. 480 Agreements

Under Public Law 480 Title I the first peseta sale of surplus agricultural commodities was negotiated during 1955. Total sales programs to date amount to $458 million. Through these programs serious shortages and runaway price increases in basic food items were averted. The commodities purchased from the beginning of the program through FY 1959 were mainly cotton, edible oils, feed grains, tobacco, some tallow, cotton linters, potatoes and meat. The sales agreement for $64 million concluded in June, 1960 provides for the largest part for shipments of cotton-seed and soybean oil, cotton, and for smaller amounts of tobacco, barley and corn.

P.L. 480 sales agreements concluded to date provide for about 50 percent of the peseta proceeds to be loaned to Spain for economic development under Section 104–(g) of P.L. 480 Title I, while the other 50 percent is retained by the U.S. for its own use.

Spain also receives grants under the Title III program of P.L. 480. Voluntary relief agencies are in charge of the distribution of these surplus agricultural commodities to needy persons in Spain. In FY 1959 cotton was shipped to Spain under a Title II program to be used for the manufacture of mattresses which in turn were distributed under the usual Title III procedure.

E. DLF and Ex-Im Bank Loans

Thus far, four DLF agreements have been signed for a total of $26,850,000 and the Ex-Im Bank has extended loans totaling $102 million.

No active loan applications are on file at this time.

The Export-Import Bank agreed to lend $30 million to Spain in support of the economic stabilization program. Actually, loans authorized during FY 1960 amounted to $51 million. These consisted of two loans totalling $17.6 million for fertilizer manufacturing, two loans totalling $17.9 million for expansion of electric power facilities, a loan of $14.1 million to assist in financing the purchase of three DC-8 jet aircraft, a loan of $650,000 for facilities to manufacture tires, tubes and rubber products and a loan of $750,000 for purchases of U.S. machinery, equipment and services needed for the expansion of an engine plant.

F. Grants and Credits from International Institutions and Other Free World Governments

In July, 1959 the Spanish Government adopted an extensive stabilization program as the result of discussion between the Spanish Government, the International Monetary Fund, the Organization for European Economic Cooperation, the United States Government and private banks in the United States. For the execution of the program the Spanish Government had available foreign aid from the following sources, in addition to U.S. Defense Support, Ex-Import Bank loans and P.L. 480 sales. Only a small portion of this credit was actually used.

OEEC stand-by credit	$100	million
IMF	$75	million2
Private U.S. Banks stand-by credit	$71	million
Consolidation of Bi-lateral debts	$45	million

II. Cost Implications of Proposed Policies: Summary Explanation and Comment

Both the improvement of the Spanish economy which has resulted from the adoption of the stabilization program and the prospects from some long-term improvement indicate that Spanish needs for external assistance after FY 1962 could be met by the supply of capital from normal sources—international and national lending institutions and private investors—and by continuation of the P.L. 480 sales program.

However, in connection with the discussions that will probably start in 1962 for extension of the base rights agreement, it may be necessary to provide, on essentially political grounds, continued loan assistance from the DLF and continued grant economic assistance (presently denominated as Defense Support).

0. Source: Department of State, S/P–NSC Files: Lot 62 D 1, NSC 6016 Series. Secret. NSC 6016/1 comprised a cover sheet; a note by Executive Secretary Lay, which stated that it had been approved by the President on October 5 and that it superseded NSC 5710/1; a statement of policy; and a Financial Appendix. Only the statement of policy and part of the Financial Appendix are printed here. NSC 6016, September 19, was discussed by the NSC on September 29 and revised pursuant to that discussion; see Document 334.
1. Secret.
2. Drawing rights—$50 million. Stand-by credit—$25 million. [Footnote in the source text.]