File No. 656.119/72

The Minister in the Netherlands ( Garrett ) to the Secretary of State

[Telegram]

1643. My 1452, October 8, 5 p.m.1 Following facts regarding Dutch-German agreement have just been obtained from Dutch Foreign Office in the strictest confidence.

Holland was forced to capitulate particularly on the question of credit [and?] on the question of the threatened coal famine.

Agreement runs from October 1, 1917, until April 1, 1918.

Holland is to receive 200,000 tons German coal per month at 45 florins per ton and 50,000 Belgian coal at 32 florins and [at?] 50 cents.

Holland is to receive 20,000 tons structural and shipbuilding iron and steel per month. Germany at first required that the shipbuilding steel should be used only for building and repairing ships which [Holland] guaranteed not to charter, sell or trade to or in interest of the enemy during the war. Question not settled and pending settlement parts essential for completion are being withheld. Foreign Office confidently expects that it will arrange that vessels repaired or built with this steel will be allowed to trade to enemy ports if in Dutch interests even when carrying cargo to enemy ports.

Holland’s trade with Austria and Switzerland to be free from all German transit restrictions, see Austro-Hungarian arrangement below.

Germany will grant absolute safety to Dutch colliers which go to England to fetch coal if each individual ship is accompanied by paddle boat. These conditions will make it almost impossible to bring appreciable amounts of English coal except under convoy. For the present, Dutch vessels in small numbers are in practice following convoys both ways with the tacit consent of British. Germany agrees unofficially that tankers of American and Bataafsche petroleum companies on which half capital is said to be owned by Standard Oil and Shell companies, respectively, will not be considered as prize by German courts. This will possibly facilitate trade of these vessels to Holland.

Germany will continue to supply beet seed, salt, agricultural machinery, potash, lime, chemicals, dyes, et cetera, so far as she can spare them in the quantities which Holland requires.

Germany has agreed to widen free passage in the North Sea from present minimum width of two and one-half miles to minimum width of ten miles.

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Holland agrees to make no objection to granting of Dutch credit of 11,250,000 florins per month. Dutch syndicate of importers of German coal is being formed to finance 5,000,000 florins of this per month. Similar syndicate of importers of German steel is being formed to accept 2,250,000 florins per month and export centrale will issue 4,000,000 florins per month of its notes on the security of notes drawn in gilders on the principal German banks for that sum. Netherlands Bank has volunteered to re-discount this total credit at rumored nominal rate of about 90 per cent. It is noticeable that rate of exchange on Berlin has risen in the past four weeks from about 29 to 33 florins per hundred marks. Above credit to be restricted to 33 florins per ton of coal actually imported and 150 florins per ton iron and steel actually imported. Holland agrees to export minimum quantity of butter and cheese to Germany. Exact quantity unknown but Foreign Office and Agricultural Export Bureau state that this requirement is but a sop obtained by German negotiators for their Berlin principals and that the quantity is far below normal and probably actual exports and may be revised downwards if domestic production is below normal.

I have no reason to believe that Germany required anything further of Holland but, on contrary, Germany apparently continually followed [policy] of befriending Holland. However, they showed their teeth early negotiations by stating that they would have no interest in leaving free passage in North Sea open unless Holland satisfactorily settled credit question and also by cutting off coal from August 1 until about October 4 when agreement was finally reached.

Dutch Foreign Office and people apparently feel that they have been fairly reasonably treated by Germans and [expect] renewal of agreement on April 1, 1918.

It is understood that the British had formerly received Dutch credit of 22,000,000 florins for the purchase of Java sugar and just now a further 7,500,000 florins for the same purpose. This credit effected by re-discount of British Treasury notes by leading Dutch banks.

Austro-Hungarian agreement provides that those countries provide Holland with sawed oak wood, pine boards, oak timber, soft woods, 50 cisterns lubricating oils, asphalt, tanning bark, calves’ stomachs, et cetera. In return for which a private syndicate of Dutch bankers understood to be headed by Netherlands Bank and Rotterdam Bank furnish 2,800,000 florins per month credit to Austria and 1,200,000 florins to Hungary. Apparently this separate agreement is considered by Austria-Hungary as species of declaration from Germany and has little other significance except that tanning [Page 1147] materials and lubricating oil are customarily obtained from United States.

Garrett