811.20 Defense (M) Spain/852: Telegram

The Secretary of State to the Ambassador in Spain ( Hayes )

1451. Embassy’s 1261 of May 13, 1355 of May 24, 1370 of May 25, and 1637 of June 23; Department’s 1037 of May 7 and 1156 of May 21;54 Lisbon’s 1377 of June 22.

1.
Department and BEW55 still feel that all other means for relieving peseta shortages and meeting our financial problem in Spain should be exhausted before Treasury is requested to make free exportable gold available to Spain. In order to judge whether the policy now needs to be altered, please telegraph urgently the following information:
(a)
Referring to (b) and (c) of paragraph 3 of Department’s 1011,56 have Spaniards expedited granting of export licenses and pesetas as we were assured in your paragraph 2 of 1355 of May 24 and 1370 of May 25? If not, please explain failure to do so.
(b)
Have you fully explored possibilities as to whether Spaniards may now be willing to accumulate larger dollar balances or accept earmarked gold so that we may acquire additional pesetas in sufficient volume for our purchasing program?
(c)
What has been drain on revolving fund for wolfram since June 15 and what are your anticipated future monthly requirements for wolfram? Please telegraph as quickly as possible position of fund as of June 30. Have the British paid in an additional 17,000,000 pesetas so that, together with our withdrawal of 17,000,000 pesetas from the reserve fund, a total of 34,000,000 pesetas are now available for addition to the fund? Furthermore, do you plan to use the 16,000,000 remaining pesetas in the reserve account for current wolfram purchases?
(d)
If it should prove necessary to permit the Spaniards to acquire free exportable gold, what, in your opinion, should be the volume of the initial transaction and the probable volume and rate of future transactions?
(e)
It seems to us that it might be of considerable assistance in achieving the objectives of our preclusive purchase in Spain without as large a financial outlay as we are now making if we could reduce or cut off granting of Spanish credits to the Axis. This might be done either by asking the Spanish not to grant further credits, or by a formal notification from the British and ourselves that we reserve the right to refuse to treat any credits granted by the Spaniards to the Axis during the war as in any way a legitimate charge against Axis assets and that in any event, such credits would be regarded as ranking below all Allied claims against Axis countries.
2.
The shipment of gold to Spain cannot be considered as an isolated instance to be determined solely on local grounds. This Government [Page 635] has since 1941 consistently adhered to a policy prohibiting the export of gold to European neutrals (a) because it would fall into Axis hands in case of invasion and (b) because it would result in the widening of the credit base on which the neutrals could extend additional credits to the Axis powers. To date the British policy on gold exports has been identical. On these grounds this Government has consistently refused requests for shipments of gold to Switzerland and Portugal. If an exception to this policy is now made for Spain, difficulties would be encountered in refusing to permit transfers to other neutrals. Therefore, unless the benefits to be derived from gold shipments to Spain are such as to outweigh the advantages of this Government’s present policy of prohibiting any shipments of gold to Europe, the Department and BEW would be reluctant to recommend an exception in the case of Spain.
Hull
  1. None printed.
  2. Board of Economic Warfare.
  3. Not printed.