NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

The Allies, Spain, And Oil In World War II

"Franco was forced to seek accommodation with the Allies, and in return for an allotment of oil that amounted to about 80 percent of Spain's consumption before the Spanish Civil War, Franco acceded to the Allied demands for neutrality."

Do economic sanctions levied by one nation against another for political purposes work? In An Elephant in the Garden: The Allies, Spain and Oil in World War II (NBER Working Paper No. 12228), researchers Leonard Caruana and Hugh Rockoff study records documenting the Allies' control of Spain's oil imports during World War II and find instructive answers.

The United States and Britain imposed oil embargoes of various degrees against Spain for several reasons. Foremost among these was the Allies' desire that Spain remain neutral throughout the war. They also hoped that sanctions would discourage Spain from allowing German spies to operate in Spain, that Spain would withdraw its "volunteer" troops fighting alongside the Germans on the Eastern front, and that Spanish Dictator Francisco Franco would rein in his nation's virulently pro-Axis press. Not least, the Allies wanted Spain to halt its exports to Germany of crucial raw materials, particularly tungsten, which was used in armor-piercing shells. The Allies also feared Spain's re-exporting petroleum products, especially aviation fuel, to the Germans. By analyzing month-by-month and product-by-product shipping records in the Spanish Archives, Caruana and Rockoff track the Allied economic pressures on Spain throughout the war. In doing so, the researchers identify three phases of sanctions. They also determin e that the effectiveness of each phase depended largely on the goals of the nations imposing the sanctions and on the degree of accord between those nations.

To begin with, fearful of a pro-Axis Spain possibly capturing Gibraltar and other strategic Mediterranean sites, Britain enacted a program at the outset of the war whereby shippers in every port around the world had to obtain clearance from the British consul for every shipment to Spain. Royal Navy inspectors who maintained a blockade around Spain enforced certification of cargo. The Americans, who at that time were still neutral in the war, protested the British action at first. But the United States eventually began to cooperate with it. With the fall of France in June 1940, the British asked the United States to halt its considerable oil exports to Spain, and the Americans complied.

Spain panicked, the researchers report, fearful for its transportation systems, fishing fleets, and industries. The country had no other access to oil, and appeals to Germany, which was concerned about fuelling its war machine and industries, were of no avail. Franco was forced to seek accommodation with the Allies, and in return for an allotment of oil that amounted to about 80 percent of Spain's consumption before the Spanish Civil War, Franco acceded to the Allied demands for neutrality.

This "First Embargo" held until the latter half of 1941, when Germany invaded Russia and Franco announced that Spanish "volunteers" were to fight alongside German forces. A second phase of sanctions, which the researchers called "the Squeeze," included a one-third reduction in Spain's allotment of oil, and American demands that its inspectors be allowed on Spanish soil to monitor the importation and consumption of oil. The Americans also wanted Spain to recall its troops from the Russian front. The British were less enthusiastic about these demands, worried that they might interfere with Britain's crucial imports of iron ore and potash from Spain. For its part, Spain swallowed the humiliating conditions imposed on it, but delayed withdrawing its troops from the east until October 1943 - and even then did not recall all of them.

In addition, Spain's press remained avidly pro-Axis, and Spain was allowing straying German planes to land and refuel on its territory, while Allied planes were impounded and their pilots interned. Most importantly, Spain was still supplying tungsten to both the Nazis and to the Allies. As a result, the Allies in January 1944 imposed a "Second Embargo." This phase, the researchers say, proved the least effective. On the one hand, Spain paid lip service to the demands placed on it - such as withholding tungsten from Germany -- but turned a blind eye to the smuggling of the ore to the Nazis. On the other hand, the United States and Britain differed on how hard to press Spain, with the British deeply concerned about its investments in that country and about its post-war trade relations. Churchill and Roosevelt were soon at loggerheads over Spain, and at one point the British even threatened to "go their own way" on the oil issue. Churchill, in a clever turn of phrase, told Roosevelt that the Americans, with their lack of concern about long-term British interests, were acting like "an elephant in the garden." The Allies made efforts to smooth over their differences, but the Second Embargo, according to Caruana and Rockoff, at best achieved only part of the Allies' goal.

Based on their study of "the Spanish Experiment," Caruana and Rockoff conclude that the outcomes of sanctions can be hard to predict, because the factors that influence outcomes are so diverse. The researchers also maintain that, "the choice of goals that can be monitored effectively is an important determinant of whether goals can be achieved." Finally, Caruana and Rockoff state emphatically: "Cooperation among the countries imposing sanctions is critical for success.

-- Matt Nesvisky

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