Created: 3/21/1957

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Chief. WHD



The Springfjord Problem




1. The par pose of thisnd Headquarters' current thinking es

forth recent developments Ie courses of action.

pparently Wund Guatemalan reply to the on October 8. Since we speedy relay of lnf ormati to obtain as folly aa-puvsibl of the British "fofmaViote'1 appreciate at alleaction and of

^2 hUrc (e) Own Memorandum to W.. 0 May 1

fOPH NO. el



9 Page two

ouston and3 conn ma at* oa the British Hand area problem. It cone laded:

"IT. Suggested plan of action. Neither the covertfunds from SKIMMER nor overt financial aseUtance fromfeasible. This being tbe case, settlement for soumalao appears aot practicable; in anyppearstba ciaimaats tn all tba clrcamstances are entitled to expecta sum, and it seems likely that they will feeluch smaller one. Accordingly, the coarse ofwith the fall concurrence of ths is,

broadly, (a) to let tho whole problem drag on at It* leisurely tsgalpace, up to the pofavt whore undue delay might riskBritish into overly vigorous action, while bearing in mind alaoterm of office ondand (b) to prepare theK5aHOST, and through him with tha British, for an eventualsettle mostrossly red aeed figure, the sum to boby the Guatemalaond lseaeationalhis conferences with the General Counsel and within October,planned upon his return to

Guaurnala to ask TR&AFAXE, speskwg for SKZhtMER. to suggest to ESGHOST thst ths Guatemalan Foreign Office should ask Kramer, Greenlee and Backus to Investigate the feasibility of raising fundsational lottery or bond lesuc. Mr. Greenlee was to with tba General Counsel, the possibility ofew Torkfirm.

uggested plan of action (continued). FBSAPAKEout to ESOHOST, who will doubtless readily agree, thata much higher figure than the combined claimants shouldexpect, and that, ta aay cass, it would nose formidable financial aadpreblsma for him. ESGHOST, ia torn. esmtrathfuUyshould tWy raiseigari>nW

tossed off by him orallyesture of good will,ectic time when he waa tar too preoccupied with mast pressing internalo study tbe details of ths Sprtagfjord problem. Rs can recite all tba arguments mentioned la this momorsndam to show that tho British claim is much too high, and can plead his serious political and financial problems. At tbe psychological moment, depending upon



events aad tka nature of the British reaction, he would then offergratia settlement for tha lowest possible figure -

Ensossible minimum--callLug on tbe uuate-malan public toond issue (raised overtly Inor which thoro is said to be ample precedent) or to subscribeations! lottery, thereby testifying to the fundamental good will of Guatemala toward Britain. If feasible,ond Issue or lottery should bo devoted towards meeting only, or mainly, the British claims, since ao American cUlseas have suffered aay looses that woro aot Immediately covered by Insurance, whereas the British shipowners have suffered some real hardship la tha loss of tholr inadequately insured vessel (one of the Company's float offnd there Is probably merit In their claimor Disbursements, suchor salvage,or 'crow's lost effects, wages, leave pay aad unemployment Indemnity.'

"It. Suggested plan of actiont is feltHOST, skilfully advised, might even reap political benefit from tha whale affair, or at tba least break even. For local consumption he could plug *combination of themes: that he baa been firm aad skUfoU ta fending off for so loag tba claims of big foreign companies, which once totalled as highad tbat. at the same time, ha has been magnanimous aad has maintained Guatemala's reputation among tha family of aatloaa by voluntasary modest ex gratia settlement.

t tba moment, aay further action la the legal aadfields must wait upon the British reply to the Guatemalan reply to the British Noteould bo vary difficult to predict what this reply may bo. WH Division is also aware that thoro may yet bo unplsssaat surprises aad unexpected developments la store before this complex problem is satisfactorily resolved. Meanwhile, this

tba concurrence of the Office off Ooaoj^ljg '?

; Counsel, who have been most helpful, and your approval to seek ODACID concurrence la the coarse of action outlined above Is hereby requested."

reapane was interviewed oae stressed that he merely carries out instructions, without necessarily knowing tba full background and without feeling qualified to take any initiative oa bis own. He asks that, when and If he is asked to take further action, he be briefed



lu enough detail to enable him lo put the desired line of action across with ESGHOST. Ha said It is Uo definite imprest tou that ESGHOST still be-lieves that ODYOKE, ia aaa way or another, will be picking up tha tab. Asked what might be ESOHOST's reaction to be lag told that no funds would be forthcoming from ODYOKE or SKIMMER, and tbat tba Gas ferns tans themselves shouldond iaaae laKIMMER merelyto facilitate It but Guatemala eventually footing the bill for principal aad interact, be aald ESGHOST 'Would probably blow bis stack.*' Ia tbo aviating state of public opinion towards Britain, ha believes tbo bond issue solution Is not practical politico.

FREAPAhTE then suggsated thatight bo covertly advanced to ESGHOST la monthly In stall meats daring tbe remainder of his term. ESGHOST would than tall tbo British Minister< "It ia politically quite Impossible for mo to deal with tbo British claim overtly. However, oat of my Confidentialould pay yon monthly for the next four years. If aad only if you can take care of Out Load on and aad guarantee aoSGHOST, via Greenlee, couldimilar approach to Blgbazn. This method of handling tba problem weald have at least tent merit a: it would insure the minimum of publicity, aad it would Increase SKIMMER's control over ESGHOST. Tba aeggestiea ia recorded here onlyasis for possible future dla casa loa.

At tba moment, Headaenurtars thought Is tbat, even if tbosavor pay tba rlalmaats anything, tbo Americans aro unlikely to antagonist ODACID by pre sb lag their claim, which they have probably written off long ago, aad the British, ha view ef tbo existing tension soar British Hoadaxas aad la view of tbo whole lnteraatloaal situation, aro aoteeltleo to preas their claim vigereuely. Tbo Britiah mast realise tbat may aroappier position, as regards British Honduras, thanks

to tka overthrow of Arbena, and it la thought thay may be prepared tothoir Springfjord

ESGHOST ask FREAPANE for advice, it Isshould say ha did aot disease tha SprlagQord case walls iashould ask for tbe full text of tho British Note, aad should say baSKIMMER.




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