852.6363/76
The Ambassador in Spain (Hammond) to
the Secretary of State
Madrid, October 24,
1927.
[Received November 5.]
No. 583Sir: I have the honor to refer to my telegrams,
No. 105 of October 21st, 11 a.m., and No. 107 of October 22nd, 10 a.m.,
having to do with the recent Royal Decrees to put into effect the
Government Petroleum Monopoly, and I am now transmitting herewith the
Spanish text of the two Decrees, Royal Decree-Law No. 1753 dated October
20, 1927, and Royal Decree No. 1782 dated October 21, 1927, together
with English translations thereof.
For the last few weeks it has been taken for granted that the Government
would carry out its original determination to put the Petroleum Monopoly
into effect, notwithstanding considerable opposition from important
elements in Spanish business and industrial life. The appearance of the
Decrees has therefore occasioned little comment in the press, and it
would seem that the uselessness of past criticism as well as the
increased activities of the censor have both contributed to the passive
attitude of the press and of public opinion.
The motives which have influenced the Government to make effective the
measure which, to all appearances, is very unpopular among the more
educated classes of the country are still obscure, and so many varied
reasons have been given, many of which have been referred
[Page 676]
to in past despatches on this
subject, that it seems useless to go over them at this time. Briefly
stated the outstanding and most plausible reasons of the Government are
as follows:
- (1)
- A desire to obtain an increase of revenue without increasing
direct taxation. Most business men in the country believe that
the Government will be unable to accomplish this result without
an increase in price, but the Government still maintains that an
increased revenue will be obtained.
- (2)
- The belief that overproduction of petroleum now existing may
enable Spain to take advantage of the keen competition now
prevailing between the several oil producing companies.
- (3)
- The Government’s well known policy of making Spanish industry
appear to be national in character, and giving advantages to
Spanish capitalists to the detriment of foreign
interests.
At the moment it is not possible to foresee how the Decrees will operate
in practice, and the foreign interests affected by the first Decree
above referred to are awaiting with considerable anxiety a move on the
part of the Government. In my telegram No. 107 of October 22nd I
referred briefly to the point of view of the several foreign interests
in Spain, and I am now awaiting the Department’s instructions in regard
to the action to be taken should American interests be unjustly treated
by the Spanish Government. In the meantime I believe it may be of
general interest to the Department to have the views of both Spanish
Government officials and private citizens who are either favorable to
the Petroleum Monopoly or are neutral. These views have been put before
me by Mr. Lewis Proctor, Vice-President of the International Telephone
and Telegraph Company (and Manager of the Spanish National Telephone
Company), an American in whom I have great confidence and who, being in
touch with representative men of all classes in Spain, is thoroughly
conversant with both sides of the issue in question. They are as
follows:
It is believed by leading business men that the oil Monopoly is a
hazardous enterprize and that the chances are it will not succeed. It is
thought that about two years of experience will prove the futility of
the plan.
The Minister of Hacienda, Señor Sotelo, was looking for new revenues to
balance the budget. A friend of his suggested an oil monopoly; he seized
upon the idea and persuaded General Primo de Rivera to back him up. The
original Decree of June 28th was eventually issued. The nominal head of
the Monopoly is Señor Ruiz Seren, the manager of the Urquijo Bank, and
the operating manager is Señor Fierros, the head of the Match
Monopoly.
The syndicate of bankers financing the Monopoly is required to hold 60%
of the stock, the balance being sold to the public. The
[Page 677]
interest on this stock is to be guaranteed
by the Government, making the stock a safe investment.
The Spaniards who are favorable to the Monopoly claim that the action of
the Government is not unfair to any interests; that Spain has a perfect
right to maintain an oil monopoly; that all companies in Spain being of
Spanish origin it is merely a family matter; that if any foreigners are
hurt through the loss of good will, etc., many Spaniards through our
prohibition law lost all of their good will and business in the United
States and did not receive any compensation.
It may be of interest, also, for the Department to know that the reason
why the Shell interests suddenly withdrew from the situation was because
of a personal quarrel between Señor Ruiz Seren, the recently named
Financial Manager of the Petroleum Monopoly, and the representative of
the Shell interests, the latter being asked to leave the bank when the
quarrel occurred. This quarrel was occasioned by a matter in no way
connected with the oil Monopoly. The Standard Oil Company’s refusal to
join the Monopoly is based, I understand, on the position that company
has taken as being opposed to monopolies and refusing to take part in
them.
My sympathies are enlisted on the side of such companies as the Vacuum
Oil Company and the Atlantic Refining Company, which have built up an
excellent business as selling agents but with practically no physical
assets to sell, their trademarks, good will and selling organization
being their only assets.
Other elements will enter into fixing the compensation for property taken
over. The Shell interests claim they have never made money in Spain
owing to the low price of gasoline here. The same claim is made by the
Standard Oil Company, hence any compensation that might be made to the
companies will only include such physical property as may be of use to
the Monopoly.
I am following the situation closely and shall report to the Department
by telegraph any developments of importance.
I have [etc.]
[Enclosure
1—Translation]
Royal Decree-Law No. 1753 of October 17, 1927,
as Published in “Gaceta de Madrid” of October 20,
1927
In accord with my Council of Ministers and on the recommendation of
the Minister of Finance, I decree the following:—
- Article I. Until the
establishment of the Petroleum Monopoly, the General Stamp
Tax Bureau shall have full authority, in accord with Article
No. 19 of the Royal Decree of June 28th last, to regulate
everything concerning the supply, distribution and sale of
petroleum and petroleum products, it being its special
business:
[Page 678]
- 1.
- To intervene in the distribution of mineral oils
already imported or which, until the establishment
of the Monopoly, may be imported into Spain,
adopting the measures which may be necessary to
avoid partial shortages, undue hoarding in storage,
or any other disturbances of the public
consumption;
- 2.
- To propose to the Minister of Finance the
provisional seizure of the installations,
distributing lines and industrial elements connected
with the service of petroleum when, in his opinion,
it may be expedient to do so for the safeguarding of
public service; and
- 3.
- To adopt all such measures as the supply of the
national market may demand, dictating the necessary
decisions and making arrangements in order to
guarantee the needs of consumption.
- Article II. The Minister of
Finance shall submit to the Council of Ministers the
proposal referred to under No. 2 of the previous article,
and the Government will agree upon the seizures which it may
consider necessary, with due regard to the indemnification
applicable to each case, the amount of which shall be fixed
in accord with the provisions of Article 10 of the Royal
Decree of June 28th last.
- Article III. The General Stamp
Tax Bureau shall be empowered to levy on all those who
oppose its orders, fines up to 25,000 pesetas. However,
these fines may be protested before the Minister of Finance,
within the period of ten days.
- In case of extreme gravity or repetition of the offence,
the Council of Ministers, at the recommendation of the
Minister of Finance, may levy fines in amounts superior to
that above mentioned, without prejudice to the criminal
responsibilities which may be imposed.
- Article IV. The number of
officials necessary to carry out the work entrusted to the
General Stamp Tax Bureau shall be assigned to that Bureau
until such time as the Monopoly commences operations.
- Article V. The necessary
dispositions for the application of this Decree shall be
dictated by the Ministry of Finance.
Signed in Ventosilla
(Toledo) on October 17, 1927.
Alfonso
The Minister of Finance,
José Calvo Sotelo.
[Enclosure
1—Translation]
Royal Decree No. 1782 of October 17, 1927, as
Published in “Gaceta de Madrid” of October 21, 1927
In accordance with the decision of the Commission studying the
tenders and the full Council of State, on the recommendation of the
Minister of Finance and in accord with my Council of Ministers,
I decree the following:—
[Page 679]
Article 1. The administration of the
Petroleum Monopoly is adjudicated to the firm which the
representatives of the Banco Urquijo, Banco de Bilbao, Banco Hispano
Americano, Banco Herrero, Banco de Vizcaya, Banco Español de
Credito, Banco de Cataluña, Banco Hispano Colonial y Banca Marsans,
signatories of the first of the propositions presented to the public
tender, offer to constitute.
This adjudication is made in accord with the general conditions fixed
by the Royal Decree-Law of June 28th last, with the benefits offered
by the proposition in reference and with the following special
conditions:
1. The premium of collection which the Company holding the Monopoly
may receive shall consist of 4 per cent of the net product of the
income, whatever may be the amount of the latter.
2. The associated banks signing the proposition shall guarantee the
non-transfer to any outsider, during a period of six years, of 60
per cent of the capital, subject to the deduction of the shares
given in payment for the expropriations, to which effect the form
and characteristics of this guarantee shall be specified in the
contract which the Monopoly company shall make with the State. The
shares which may not be transferrable to outsiders may be held in
the Bank of Spain in accord with the regulations which will be
stated in the contract of which mention has already been made.
Furthermore, the associated signatory banks shall assume the
obligation to cover the increases in capital which may be necessary,
during a period of ten years, up to a maximum of 75 millions of
pesetas, always on condition that the increased capital enjoys the
same rights and profits as the initial capital. The temporary
prohibition of outside disposal of shares, established in the
previous paragraph, will not be applicable to shares representative
of this increase in capital.
3. On the Board of Directors of the Company to be formed must be, as
directors, two representatives, at least, of Spanish firms dedicated
to the industries monopolized and which, either by initial
subscription or by expropriation agreed upon, shall be holders of
shares to the value determined by the company statutes.
4. The designation of regional and provincial representatives of the
Company shall be carried out in the manner, and in accord with the
regulations, as determined by the Minister of Finance.
5. The losses or damage suffered by the monopolized product may be
deducted only from the total received income, for the establishment
of the net credits, when such losses are due to accidents which are
fully justified. The contract with the State shall determine what
may be considered as accidental cases, for matter of reference.
6. The expenses of soundings, tests of distillation and the
organization of technical specialists will be considered as included
in the
[Page 680]
fifth paragraph of
Article 11 of the Royal Decree of June 28th last, the rate of yearly
amortization being fixed at 1 per cent for drillings and
distillation tests, and 10 per cent for the organization of
technical specialists.
The amount of these amortizations, together with that of the other
set forth in that paragraph, shall in no instance exceed 20 per cent
of the gross yearly receipts of the Monopoly.
7. The contract shall determine what expenses, based on their
character regardless of their amount, may be made with the sole
approval of the Government Delegate in the Monopoly company.
8. The Monopoly shall recover the amounts which, on the basis of
Article 13 of the Royal Decree creating the Monopoly, it has to pay
to local corporations interested, by means of an increase in the
price of the monopolized products sold in the terms allowed by the
scope of jurisdiction of said corporations. Said increase in price
will become ineffective when the corporations renounce the charges
in question.
9. In the contract which the Monopoly Company has with the State
shall be included the clauses necessary to effect the guaranteeing
of liberty of action in the military and naval services, subject to
the proposal submitted by the Commission considering the bids;
and
10. The adjudication of the service to the Monopoly company shall
become ineffective if, for causes due to the latter, the Monopoly
should not commence operations in the period between the date of
constitution of said company and January 1, 1928; but from the
publication of this Royal Decree it shall answer for the normal
supply of the national consumption.
Article 2. Within the five days following
the publication of this Decree in the Gazette, will be published in it the propositions presented at
the public tender held for the adjudication of the administration of
the Petroleum Monopoly, the decision given by the Commission and
that pronounced by the Full Council of State.
Article 3. The regulations necessary for
the application of the present Decree will be made by the Ministry
of Finance.
Given in La Ventosilla
(Toledo) on October 17, 1927.
Alfonso
The Minister of Finance,
José Calvo Sotelo.
