World War II Economic Warfare: The United States, Britain, and Portuguese Wolfram

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The World War II alliance forged by Britain and the United States was one of the closest working relationships of the twentieth century, reflecting common interests and special ties of history and culture. This "special relationship" was cemented in the close personal bond between President Franklin D. Roosevelt and Prime Minister Winston Churchill that grew from their frequent meetings and almost daily written correspondence. But these ties did not prevent genuine differences on matters of grand strategy, military operations, economic warfare, and political issues. This study is about one dimension of that relationship: American participation in an economic warfare structure created and administered by the British, the different perspectives that each brought to the problem, and its application against Portugal over ferro-alloys.

Of all the commodities exported to Germany from European neutral countries, ferro-alloys--metallic elements alloyed with iron, including chrome, nickel, manganese, molybdenum, and tungsten--were most important. Wolfram ore from Portugal was particularly critical because it yielded tungsten, the most valuable strategic war metal. Tungsten carbide, the hardest metal made, was essential for tough, heat resistant steel and high speed cutting tools that could machine military equipment 10 to 15 times faster than normal tools. Steel hardened by alloys like tungsten was a vital war commodity. Altogether there were more than 15,000 tungsten applications. Its most important military uses were in armor plate and the carbide cores of high velocity armor piercing projectiles. The Germans had been the first to use tungsten this way, and no practical substitutes were available.(1)

Britain and the United States knew that Germany could be defeated only by a combination of conventional military operations and economic warfare, which included strategic bombing of German economic assets and depriving Germany of essential raw materials. Dealing with the six European neutrals--Spain, Portugal, Sweden, Switzerland, Turkey, and the Irish Free State--was a complex problem at the beginning of the war. While all but the Irish Free State were connected economically to Germany and vulnerable to its threats, they also had to coexist with the Allies, upon whom they depended for imports from overseas. The Allied relationship with Portugal was particularly complex. Its leader, Dr. Antonio de Oliveira Salazar, ruled the country with an iron hand as president of the Council of Ministers and Foreign Minister. He attempted to maintain a scrupulous neutrality, balancing the country's ruling establishment, generally perceived as pro-Axis, against Portugal's special alliance with Britain that went back 500 years. Under the alliance, Britain had the right to force a reluctant Portugal into the war against Germany, but was unwilling to jeopardize vital postwar economic relations with that country by doing so.

In December 1941, the United States joined an economic warfare system that the British had created and administered over the previous two years. American economic defense measures had begun before Pearl Harbor with export controls on essential commodities such as chrome, nickel, and manganese and on the purchase of strategic materials for stockpiling, especially in Latin America, under supervision of the Board of Economic Warfare. American policy favored preclusive buying up of commodities, both to supply future Allied needs and to prevent them from reaching the Germans, and cooperation with the British developed rapidly. The Board of Economic Warfare and the British Ministry of Economic Warfare exchanged representatives, and the two preclusive buying organizations, the United Kingdom Commercial Corporation and the United States Commercial Corporation, collaborated closely. Having initiated Allied economic warfare policy, Britain pressured the United States to make preemptive purchases under their guidance. …