File No. 763.72112/3980

The Ambassador in Great Britain ( Page ) to the Secretary of State

No. 6451

Sir: I have the honor to report that on June 19, 1917 (copy of letter attached2), Sir Adam Block requested Mr. Beal of my staff to attend a meeting to be held at the office of the Ministry of Blockade on June 21, 1917, to consider a proposal to tighten the financial blockade of the enemy by obtaining general assurances from neutral banks that they will restrict their business within certain limits and confine their operations to transacting such business with the enemy as will not injure the Allies, as a condition of continuing their financial relations with Allied countries.

[Page 899]

In accordance with Sir Adam Block’s invitation, Mr. Beal went to this meeting, which was also attended by representatives of the French, Russian and Italian Governments, and I enclose herewith, for your information a copy of the minutes, together with a copy of the suggestions (Exhibit A) made by Sir Adam Block at that time. I also enclose herewith copy of further suggestions (Exhibit B),1 which Sir Adam Block has since had written out and which have just been received by Mr. Beal.

I have [etc.]

Walter Hines Page
[Enclosure]

Minutes of Meeting Held at the Office of the British Ministry of Blockade, Lancaster House, on June 21, 1917

  • Present:
    • Chairman: Sir Adam Block, K. C. M. G., Controller of the Finance Section of the Ministry of Blockade
    • France: M. J. Lacoste Seignouret
    • Italy: M. Paolo Conte
    • Russia: M. Serge P. Ermolaieff
    • U. S. A.: Mr. B. Beal

The chairman stated that the meeting should be regarded as entirely unofficial. Lord Robert Cecil, Minister of Blockade, had, however, authorised him to consult the members of the meeting with regard to certain proposals for tightening the financial blockade of the Central powers. Copies of the proposals which were, of course, subject to modification, were in the hands of those present, who would, no doubt, consult their respective Governments with regard to them. Unanimity and concerted action on the part of all the Governments was essential in action based upon the proposals.

It must be understood that so far the proposals had not been officially approved by His Majesty’s Government, and consultation with London bankers would also be necessary.

The action taken in the past with regard to the financial blockade by Great Britain and by France had not been altogether similar. In the main, the British authorities had not placed neutral banks upon the financial black list except where they had used their London accounts in connection with enemy transactions.

[The principle now invoked is similar to that already adopted and in force in regard to goods. As Lord Robert Cecil stated in the House of Commons on March 27: “We can legitimately deprive the neutral country of certain advantages, and in consideration of our granting goods and other things that the neutral country wants from us, we ask them to restrict their trade with our enemies.”

Mutatis mutandis this principle should apply to the financial blockade, and the Allies should be free where considered advisable, to [Page 900] bargain, not with neutral countries but with individual banking institutions in neutral countries, using as a lever the use of the Allies’ banking facilities and the use of British-owned and other Allied cables. The weapon is a most trenchant one, seeing that the Allies now hold the financial centres and money markets of the world, and it is most essential that the weapon should be used, subject always to diplomatic considerations and to the balance between injury done to the enemy and injury done to ourselves.]1

The French authorities have at times already exercised their power in this respect and have placed certain neutral banks upon their financial black list on the ground that they were heavily engaged in enemy transactions.

It may be noted further that whenever the British or the French authorities have taken action against neutral banks, either for involving the Allied banks in enemy transactions, or as in the case of the Banco Hispano Americano for merely having relations with the enemy, the result has almost always been that such neutral banks have been prepared to sign very stringent agreements as a condition of being removed from the black list, and of resuming relations with London and Paris.

The proposals now submitted represented a uniform and united extension on a large scale of the method employed by the French authorities in certain individual cases.

The recent fall of the mark in neutral European countries was, doubtless, in large part, due to the fact that Germany could no longer employ resources in the United States of America and South America, and her more favourable exchange with the United States of America, to acquire neutral European currencies wherewith to pay for her imports from neutral European countries.

It was believed that the steps proposed would lead to still heavier depreciation in the mark, injure Germany’s economic position seriously, and make it more costly for her to obtain supplies from neutral European countries.

It was believed that if the five countries acted in concert, neutral European, banks could not afford to refuse the limitations on transactions with and for the enemy suggested in these proposals, at the cost of losing access to the money markets of Paris, London, Milan, New York, and Petrograd. It should, however, be carefully noted that by the announcement proposed, the five Governments only “hold themselves at liberty” to take the action in question. This afforded a safeguard in the event of any general refusal on behalf of [Page 901] neutral banks, or of inconvenient diplomatic pressure, or of it being desirable for an exception to be made in respect of any particular bank to whom any of the Governments are peculiarly beholden.

The chairman then put forward the considerations outlined in the attached general memorandum with regard to the suggested extension of the financial blockade.1

M. Ermolaieff pointed out that with regard to condition (1) in the proposals it would appear difficult to prohibit the granting of commercial credits to the enemy by neutral bankers, and M. Conte expressed his agreement.

The chairman assented to this view which was generally held.

Those present expressed a wish that a memorandum summarising what had passed at the meeting might be supplied to them for communication with their respective Governments.

[Subenclosure—Extract]2

EXHIBIT A

Suggested Extension of Financial Blockade

Notice to be issued in the Swedish press, say, one clear week before the operative date. Similar notice, mutatis mutandis, to be issued in the press of other neutral countries.

The Governments of France, Great Britain, Italy, Russia, and the United States of America, have decided that it is inexpedient for banking houses in their respective territories to continue to have dealings with any banking house in Sweden which engages, directly or indirectly in—

(1)
The granting of any loan, credit or overdraft, or the increase of any existing loan, credit, or overdraft, to an enemy of any of those five countries;
(2)
The subscription to or purchase of any loan issued by an enemy of any of those five countries;
(3)
The purchase from, or sale to an enemy of any of those five countries of any currencies other than the currencies of countries at war with any of those five countries;
(4)
The transfer of money, credit, or securities between an enemy of any of those five countries and any neutral country other than Sweden;
(5)
The purchase from, or sale on behalf of, an enemy of any of those five countries of any bond or certificate issued by the Government of, or by any corporation or company in, any of those five countries; or of any dividend warrant or coupon payable in any of those five countries; or of [Page 902] any bill, cheque, or draft payable in any of those five countries;
(6)
The collection, discounting, or negotiation on behalf of an enemy of any of those five countries of any bond, note, bill, cheque, draft, dividend warrant, or coupon payable in any of those five countries;
(7)
The transmission of any message, letter, advice, or document of any kind, by any means whatever, between an enemy of any of those five countries and any neutral country other than Sweden;

it being understood that in each and every case “enemy” for this purpose includes any person, firm, or company, wheresoever domiciled, whose name appears in a published list of those with whom the subjects of any of those five countries are forbidden to have dealings.

. . . . . . . . . . . . . .

  1. Not printed.
  2. Not printed.
  3. The two paragraphs in brackets, not in the original copy of the minutes but included in an amended copy supplied by Sir Adam Block, were transmitted by the Ambassador in despatch No. 6848 of Aug. 21, 1917, received Sept. 1. (File No. 763.72112/4629.)
  4. Not printed.
  5. A slightly modified form of this proposal is printed in full in the note from the British Ambassador, No. 249, Aug. 18, post, p. 924.