Foreign Relations of the United States: Diplomatic Papers, 1943, Europe, Volume II

811.20 Defense (M) Spain/1172: Telegram

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

Washington, December 4, 1943—midnight.

2572. We refer to proposed discussions with Spaniards concerning wolfram embargo (see Department’s no. 2571 of December 4).

1. Any discussions on this subject must be coordinated closely with the British. It is apparent from your 3177 of October 30⁹⁵ and 3449 of November 22, as well as from past experience, that unless there is a frank and full exchange of information and views between the British and ourselves, the chance of attaining our joint objectives will be seriously impaired. We have advised the British Embassy here of this view and it is in agreement. We have requested it to so advise London and to obtain for us a detailed statement as to their proposed program of purchases in and supplies to Spain. We assume that such a statement will be forthcoming promptly. When it is, the United States and British programs can be properly correlated to ensure maximum effectiveness and to minimize crossing of wires.

2. The British requirements of citrus fruits is the most immediate problem of concern to them which protracted negotiations might affect. If we could assure the British of their supplies from United States sources, as suggested by you, it would obviate the difficulty. However, we believe such a guarantee impracticable and therefore we should not ask the British to assume the substantial risk of losing their supplies.

3. Purchases of a nonessential nature, however, and discussions with the Spaniards concerning traditional trade, should, it appears to us, not be pressed until an overall plan is agreed upon between the United States and British representatives both in Washington and in Madrid.

4. The FEA is preparing urgently its suggestions for a possible enlarged trade program, including purchases for liberated areas. As soon as completed, you will be advised. In meantime, you should be guided by following general observations in any discussions with the Spaniards:

(a) In view of fact that a large part of our wolfram expenditures in Spain have been due to grossly inflated prices, we do not consider it desirable to undertake to increase traditional or other purchases to the extent of wolfram expenditures during present year, less taxes (your 3066 of October 21). FEA estimates that the total cost of wolfram in 1943, excluding production tax, will approximate 50 to 55 million dollars, of which the United States share is half. It would seem particularly undesirable to couple such an undertaking with an agreement to suppress surcharges and to make payments to Spain in gold. It is, of course, quite possible that we may be prepared to make such large expenditures in the future for purchases of textiles, etc., but we should not undertake to do so at this juncture.

(b) It should be borne in mind that, with a few possible exceptions, the Spaniards have the benefit of purchasing in a price-controlled market in this country.

(c) We consider it wise to retain the principle of surcharges, for the present at least, as it is an excellent bargaining weapon. Moreover, you will appreciate that the suppression of surcharges in Spain has a direct bearing upon such surcharges in Portugal. In addition, it has been agreed between the United States and British authorities that preemptive losses shall be shared jointly and consequently that each shall receive an equal share in profits, including surcharges. We therefore cannot stop surcharges on United States products without agreement with the British.

If it is finally determined to eliminate overpricing, this should be balanced by an agreement on the part of the Spaniards not to impose new taxes or to increase prices on commodities which we may wish to purchase. We would presumably have to agree in advance upon the list of commodities. In addition, FEA has suggested that it would be desirable to obtain a reduction in Spanish prices and taxes at least to the levels prevailing during the latter part of 1942. It is recalled that the Spaniards increased taxes on several commodities when we imposed overprices.

(d) We consider it desirable that no real hope be held out to the Spaniards at this time for increasing the quantities and types of materials to be made available to Spain. Rather, we believe you should stress the importance to Spain of retaining the advantages already being derived from trade relations with this country, and on this basis to secure the wolfram embargo. In other words, the Department prefers to secure the embargo without any other quid pro quo.

(e) As to wheat, the situation is becoming increasingly serious. The principal difficulty lies in moving wheat from the producing areas to ocean ports. The Combined Food Board’s views on wheat have been sent by separate airgram. (A–525, November 26).⁹⁶

(f) FEA would prefer not to have an export prohibition on strontium. It states that production is tied up for some months and that the United States needs not less than 500 tons monthly for supply reasons.

(g) FEA states that we can use 3,000 tons of fluorspar per month. However, it considers preemption more important than supply and if our continuing to obtain Spanish fluorspar will result in Germans getting substantial quantities, the total export prohibition would be desirable.

(h) FEA considers it desirable to have Spaniards carry strontium and fluorspar, but does not believe this as important as in the past. It feels that United Nations vessels could be used.

(i) FEA states that Germans have licenses for 20,000 tons of zinc, and states that unless total export prohibition will nullify these licenses, such a prohibition would not be of much benefit. If licenses could be nullified, FEA considers it desirable. The United States could use Spanish zinc if carried in Spanish bottoms.

5. As any substantial change in the nature and quantity of supplies to be made available to the Spaniards will take considerable time to develop, we are planning to request the interested Combined Boards and supply authorities to allocate for Spain for the first 6 months of 1944 a schedule of materials based upon the schedule approved for the last half of 1943. This should, of course, not be divulged to the Spaniards at this time. In the event you consider it necessary to have the supply authorities prepared to make available additional materials or larger quantities of materials presently being made available, please advise in detail by telegram.

6. Butterworth⁹⁷ is generally familiar with the Washington views on this matter and he will comment in more detail upon his arrival. He expects to depart over the weekend.

Repeated to London.

Hull

95. Not printed.
96. Not printed.
97. W. Walton Butterworth, Jr., First Secretary of Embassy in Madrid and of Legation in Portugal; also Director General for Operations in the Iberian Peninsula of the U.S. Commercial Company.