by Ronald Weber
Wolfram mines were mainly in the northern province of Beira Alta, a historically poor mountainous region of small villages and granite block homes. Grossly underpaid farm laborers and miners abandoned their work and went prospecting for themselves with picks and shovels for chunks of “black gold.” These were often near the surface, outside the control of the mines, and could be sold or smuggled across the border into Spain, where prices were even better. During an inspection tour of a British mine high in the mountains, David Eccles was struck by panoramic views that “rival any in Europe,” but he lamented the effect of the new entrepreneurship on ore output:
Before the war there was plenty of hungry labour in the surrounding villages… . The men walked over the hills to Panasquiera, brought a week’s food on their back, slept on bare ground, were paid 2s.6d. per day, and deserted whenever they felt like it. Now the great rise in the value of wolfram has made a hundred other ways of working more remunerative than coming to our mine on the old conditions. Down went our labour force and our production.
At the height of the wolfram frenzy some 100,000 people were employed in mining and distribution, and the Portuguese national coffers were vastly enriched through ore sales and tax revenues. But boom times also brought with them inflated costs for basic goods, labor shortages in both agricultural areas and—as Eccles had pointed out—established mining regions, and general social unrest. In Lisbon the term “wolframistas” was born to describe sardonically those who tossed off routine lives in the freewheeling rush for new riches. The Anglo-Portuguese News mildly defended those so mocked by suggesting they were no different than others caught up in the excess of national gold rushes. Moreover, added the newspaper, since many of the “more blatant nouveaux riches” had barely earned a living as rural laborers, it was hardly unexpected that sudden wealth had gone to their heads.
In February 1942 Salazar stepped in and established the Metals Regulatory Commission to bring order to what had been light government oversight of the wolfram business. Now all ore legally mined in the country was purchased by the government commission, then resold to the belligerents at a flat rate under a quota system which allowed them to export a certain amount of production from their own mines together with a fixed percentage from the yield of independent mines and individual prospectors. But what was intended as equitable regulation of the wolfram trade turned out to be fraught with difficulties. Neither warring side was satisfied, and heated squabbles broke out when one or the other appeared to receive favored treatment.
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In 1942 and again in 1943 Allied-Portuguese relations were severely stressed by a series of wolfram agreements between Lisbon and Berlin. David Eccles had preached the need for patience in all dealings with Salazar, though, as he well knew, the virtue was hard to apply. He had lamented to his wife: “When you have a man like Salazar who says, ‘I would rather my people starve then give you a guarantee not to export olive oil to the Germans, not because I like the Germans but because I will not compromise my right to trade with any other country,’ what is one to do?” When at the beginning of August 1942 Eccles was recalled to London to take up a new position in the Ministry of Production, he dismally characterized the present wolfram dealings with the Portuguese as all “dust and bitterness.” “We have lost all benefit of the doubt,” he continued. “If the Germans say, ‘A is true about business,’ and we say, ‘No, B is true,’ the Portuguese incline to A. That’s a handicap I never imagined I should have to carry.”
A Portuguese trade agreement with the Germans in the spring of 1943 was particularly infuriating. It caught the Allies unawares, with an unapologetic Salazar blithely explaining to the British ambassador that Berlin had simply accepted his terms for more than two thousand tons of wolfram plus half of available ore from independent mining operations. To the Americans it seemed evident that Salazar was employing wolfram not only for the huge sums it brought him but also as a main bargaining chip for securing a variety of required Portuguese imports. In supplying such needs the Germans displayed their legendary efficiency. “The fact is,” the American minister informed Washington, “that while German deliveries of a wide range of commodities seem to be maintained with reasonable punctuality and involved no strain on Portuguese shipping transportation, difficulties have nullified to a considerable degree the effect of supply concessions which we made to the Portuguese in the present agreement.” Put simply, Germany was better than the Allies in supplying Portugal with what it wanted, and supplying it on time on overland routes through France and Spain. The new deal called for Germany to provide Portugal with steel, railway cars, artillery and ammunition, and military trucks, all at good prices.
Anthony Eden, usually willing to go the last mile with Salazar, noted that his behavior in the latest agreement with Germany was incomprehensible in an ally. From Washington came talk of reprisals, possibly in the form of restricting oil shipments to Portugal. “Oil is our key card,” Secretary of State Hull told the Lisbon ministry. “Neither shipping nor supply limitations obscure our ability to control its flow.” But at this point the Azores accord intervened and the latest wolfram crisis was defused, the Allies now with reason to be grateful to Salazar. It was possible that keeping Germany supplied with wolfram had even played a role in moderating its response to the pact. Churchill reportedly said that a continuing flow of wolfram to the enemy was all right if it quieted Hitler’s response to the Azores. And keep flowing it did. Despite Allied pressure through preemptive buying, some sabotage actions, and threats to limit Portuguese imports, the Reich, at least through mid-1944, was able to satisfy its needs for Portuguese wolfram.
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After the landings in Normandy, land routes for moving wolfram and other exports across the Pyrenees and through France rapidly closed. Well before that development the Allies had begun pressing Portugal for a total end to wolfram shipments to Germany on grounds they were prolonging the war. Salazar countered with a string of delaying arguments: wolfram was a doubtful factor in continuing the war; in fairness Germany should be allowed production of mines it owned; Portugal had already signed wolfram agreements with Germany, which morality required he must satisfy; it made no sense to restrict Portuguese wolfram without a similar arrangement in Spain; and, finally, a reduction in shipments might be considered but a complete embargo was out of the question. When it suited his purposes, Salazar ended all dispute by vanishing for a time. In February 1944 Ambassador Norweb explained to Secretary of State Hull that he had been trying to meet with the prime minister.
Inability to see Dr. Salazar in regard to the wolfram matter is not due to any lack of perseverance on my part or the part of my British colleague who has been equally assiduous in endeavoring to follow up this pending problem. It appears though that the Doctor, like Br’er Rabbit, is lying low pending developments in Spain.
The Americans and the British also disagreed among themselves about how hard to push for the embargo. The United States believed the Anglo-Portuguese alliance caused Britain to give Salazar too much leeway, the British that the Americans did not appreciate his importance as the leader of a neutral nation and the chaos that would follow if he were removed. Yet since invoking the alliance had worked in gaining access to the Azores, the overall Allied strategy put Britain in the lead in discussions about the wolfram embargo.
In the meantime Britain and America intensified preemptive buying of wolfram in Spain and Portugal, with press reports in early 1944 estimating that they were getting up to 75 percent of Spain’s ore and the lion’s share of Portugal’s. And they tried pressuring Salazar with personal letters favoring an embargo from Churchill, Roosevelt, Eden, and other leaders. The ambassador of Brazil informed him that Portuguese wolfram going to the German war industry was being used to kill Brazilian troops fighting for the Allies in Italy, a message that, so the American ambassador believed, took Salazar by surprise and had special effect since it came from a “daughter nation—a member of the family.”
Finally on May 29, 1944, Ambassador Campbell delivered a message to Salazar appealing in the name of the Anglo-Portuguese alliance for a total ban on wolfram exports to Germany. When Salazar asked if he could fulfill an earlier agreement to ship Germany a hundred tons of ore, Campbell said no. A week later—aware or sensing that his own regime was at stake, and against a background of Spain agreeing on May 2 to sharply restrict but not end the wolfram trade with the Reich—Salazar banned not only wolfram shipments to Germany but to all countries, and closed down the mines. (Britain had earlier announced it would stop purchasing Portuguese ore once the German embargo was enacted.) Salazar’s order went to the printer on the day of the Normandy invasion, and on June 7 the official announcement appeared in Portuguese newspapers:
In view of the fact that the Government of His Britannic Majesty in the name of the Anglo-Portuguese Alliance made an appeal that we should put an end to all exports of wolfram as a means of contributing to the shortening of the war, the Government has resolved to accede to this request and has decided henceforth to cease the exportation of this mineral.
In the House of Commons, Anthony Eden announced the ban to a cheering assembly and added that it matched in importance the Azores agreement. When a question was raised about the Portuguese government having taken a “long time” to act, Eden agreed but referred again to the great contribution of its Azores action. From the State Department came word that the United States had been “active in the negotiations,” though Ambassador Norweb in Lisbon, reporting back to Washington, was certain where the bulk of the credit belonged. He wrote: “In reviewing the course of the wolfram negotiations … it appears to be undeniable that it was the invocation of the Anglo-Portuguese Alliance which finally carried the day.”
For Portugal, upholding the alliance provided a means of bowing to the Allies—as a member of Salazar’s government frankly put it to him during deliberations over the embargo—“without humiliation.” But preserving national pride did nothing to ease the upheaval in the Portuguese economy caused by ending the wolfram trade. Many thousands of men were thrown out of work, and tax revenues plunged. The Economist magazine, summing up the damage, also pointed to “mines wrecked by ruthless methods, miners too enriched by clandestine profits to return to the service of the reputable concerns, and a price level of some 26 escudos … per kilo as against 650 at the wartime peak.” Mining would resume in peacetime, but the heady days of Allied-German competition for supply together with Anglo-American preemptive buying were gone for good. Remaining behind was immense national wealth amassed by the wolfram trade—and linked to it, a developing history of Allied aggravation with the Salazar regime and later Portuguese governments that reached far beyond the end of the war.
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Before the wolfram embargo went into effect the Allies were aware of the role of gold in financing German purchases of the ore as well as other Portuguese products—and equally aware that, with the exhaustion of Germany’s own gold reserves by the end of 1942, the monetary gold used for the transactions had been looted from the central banks of occupied countries. Germany deposited plundered gold mainly in the Swiss National Bank, from where it took the Lisbon route to German accounts in the Bank of Portugal. Thereafter it was exchanged for Portuguese escudos and credited to German accounts in two private banks in Lisbon, where it was available to finance trade arrangements as well as Nazi propaganda and intelligence activity. Some looted German gold also arrived in Portugal via direct purchase from Switzerland. In the latter part of 1944, according to one report, Swiss banks were embarrassed by the amount of Nazi gold accumulated in their vaults and began making secret sales to neutral countries. In turn, Portugal disposed of some of its gold by secret sales to countries in the Far East through its colonial enclave of Macao.
Smugglers likewise moved into Portugal considerable amounts of looted nonmonetary or so-called victim gold, which could be exchanged for currency or reworked into gold bars with Portuguese markings. After the war, when the Allies took control of Nazi assets in Portugal, they discovered within the German legation in Lisbon five thousand gold sovereign coins, which presumably had come into the country under diplomatic cover. In an incident three weeks after the Normandy invasion, Allied agents reported that a German plane had landed in Lisbon, and couriers carrying four diplomatic bags were met by a car from the legation. Each bag, it was later revealed, held four kilos of gold.
As German military fortunes waned over the following weeks, additional gold transfers took place in Lisbon and other neutral countries, causing the British Foreign Office to wring its hands in frustration. “This tendency of the Germans,” said an official, “to transfer nest eggs to their Legations in neutral counties needs watching. But I do not see what more we could do to prevent it.” As well as gold, the nest eggs the Germans were secretly moving were made up of legal wealth and the spoils of massive pillaging in gems, art objects, securities, patents, and all else of value.
In the period leading up to D-Day, Washington had grown concerned that such shifting of assets to neutral safe havens was meant to create a basis for the Reich’s postwar renewal. And not only Washington. The dark possibility of a rekindled Reich had enough wider wartime currency to become, in 1943, the stuff of thriller fiction in Frederick Hazlitt Brennan’s novel Memo to a Firing Squad. A former newspaperman in St. Louis and a prolific writer for popular American magazines as well as film and television, Brennan set his story in Lisbon, where Axis figures have gathered to plot future world conflict from the new Nazi stronghold of Argentina.
The tale is told by Stephen McGibbs, a jaded but—by his own estimate—right-thinking American correspondent who, after losing his position for too much warmongering before America was in the war, has escaped from occupied territory with the help of a resistance group known simply as “the movement.” Now in Lisbon, McGibbs is tied in with the group’s multinational local band, who live and scheme as servants in the nether reaches of the castle of a fascist Portuguese general. When it is learned that an agreement has been signed in the general’s quarters by high military figures from Germany, Italy, Japan, and Argentina to carry on the war after making peace under the idealistic cover of a plan to convert the world to a single and pacified united nation, the movement must get hold of the signed agreement—known as the Lisbon Pact—and expose its evil contents to the world.
The feat is accomplished after much letting of blood, and McGibbs, through the aid of a British secret agent, is taken by ship to London to cable a great scoop. He knows that revealing what he calls a “complete blueprint for World War III” will cause a worldwide sensation and bring him instant fame. Yet he is also cynically certain that both will quickly fade into the Allies blind preoccupation with winning the war. There are other messages in Brennan’s preachy melodrama, but the central one informs Americans that the Axis powers, knowing their cause is doomed, will seek to squeeze victory from defeat.
Back in Washington’s actual world, efforts to block perceived German postwar ambition led to the creation in May 1944 of the Safehaven Program, and with it a mission to Lisbon and other neutral capitals by Samuel Klaus, then a member of the Foreign Economic Administration (FEA). As Klaus described his self-designed undertaking, he intended to look into “German attempts to frustrate anticipated controls over a defeated Germany by safe havens in neutral countries.” Just earlier, delegates of forty-four countries meeting at Bretton Woods in New Hampshire to develop a postwar international financial system had, in a resolution, called on neutral nations to freeze German assets in their countries and turn them over to the Allies. Subsequently the U.S. State Department conveyed the resolution to all its neutral missions in Europe.
A multilingual lawyer in his early forties, Klaus had been a special assistant to the general counsel of the Treasury Department and was considered a tough and persistent investigator, qualities not always found congenial by Washington colleagues. From the start his European journey was plagued by turf disputes among the F
EA, Treasury, and the State Department together with the feeling in some quarters that Klaus was plunging ahead without due preparation and authority. “I made it perfectly clear … didn’t I,” Treasury Secretary Henry Morgenthau, Jr., reminded his staff after Klaus departed for Europe, “that I didn’t know what he was going for, and that he would not go as a Treasury Representative, period… . What is he going over for, anyway?”
In London Klaus realized that the Safehaven Program’s success required full cooperation by the British, but the government, though informed by Washington of his mission, had yet to declare its participation in the American-led venture. Another obstacle was that the mission had become public knowledge after a report in a London newspaper, with the result that Klaus and a State Department representative traveling with him, Herbert J. Cummings, were—as Klaus put it—“marked men in any neutral capitals which had taken notice of the publicity.” While Klaus and Cummings were still in London the State Department had alerted neutral ministries in Europe about their journey but told them the Safehaven project was to be kept secret.
The first stop for Klaus and Cummings after a flight from northern Scotland was Stockholm. As Klaus saw it, the pair were mainly concerned with learning what fact-finding about Nazi safe-haven activity was already under way in neutral ministries, not unearthing new facts, and in Stockholm they were encouraged by the American embassy’s actions. In Madrid they encountered a stone wall. Ambassador Hayes made clear his embassy was not doing, and would not do, any investigation of what the Germans were up to beyond the normal information gathering of a diplomatic mission. Equally plain was that, given Hayes’s firm stance, the Madrid OSS station would not be helpful. Lisbon, however, turned out to be as cooperative as Stockholm. Ambassador Norweb was in full sympathy with Safehaven and placed the embassy’s effort under the general direction of the commercial attaché. Specific investigations of German activity were handed over to the financial attaché.