Part III: The Rationing System and the American Embargo (cont'd.)
Chapter 26: Sweden under the Rationing System, 1916
Swedish domestic politics. – The restraints upon Swedish trade examined. – Why consigning cargoes to government departments was thought objectionable. – The Swedish government's resistance to the doctrine of derivative contraband. – The Swedish government's other acts of retaliation. – Why the Swedes had power to embarrass every industry in Great Britain. – The Swedish government decide to negotiate. – An agreement provisionally concluded; the Swedish deliberations upon it.
After our authorities refused to ratify the draft agreement with Sweden, essential commerce between the two countries was regulated by a rough system of exchange, (whereby we secured a supply of iron and pit props for ourselves), and by a general, and not very satisfactory, guarantee that goods for Russia should be carried across the Swedish railways. The second guarantee proved insufficient, and it will be shown later, that, although large quantities of goods were sent to Russia, during the year 1916, the Swedish authorities did, nevertheless, raise such obstacles, from time to time, that the apprehension of a total stoppage was always present. On the other hand, the general trade between the two countries flowed freely throughout the year; for, at the end of it, our exports to, and our imports from, Sweden were only reduced by that proportion, which the general circumstances of the times made inevitable. It must therefore be remembered, at the outset, that the controversies of the year 1916 were never accompanied by anything that could be called commercial warfare. During a period of sharp disputes upon trade and commerce, 432,000 tons of Swedish ore, and one and a half million loads of sawn timber were delivered in British ports: commerce between Great Britain and Sweden flowed as easily as commerce between Great Britain and any other neutral.
But Swedish domestic politics, which had made a general settlement impossible during the previous year, continued to exercise a dangerous influence. The Riksdag was not sitting, when the first negotiations with Sweden failed. Being thus liberated from parliamentary pressure, M. Hammarskjöld and his cabinet came under the influence of the court party, during the winter months, and were by them persuaded to prepare a plan for dissolving parliament, for governing the country by decree, and for mobilising the army. Naturally enough, this project of a general mobilisation gave great anxiety to the allies; but it became apparent, upon inspection, that, if ordered, mobilisation would be a move in the party game, and that the cabinet intended only to have all the armed forces in the country at their command, when they embarked upon this experiment for enlarging the king's power and for depressing the democratic opposition. When Riksdag assembled, therefore, the popular managers were exceedingly watchful and critical of the government; but the government's plan for dissolving parliament, although suspected, was not immediately discussed. Thinking it better to use known and admitted facts for their attack upon the Hammarskjöld cabinet, the liberal and socialist leaders represented this unsettled controversy with Great Britain as a manoeuvre by the court party for providing a pretext to intervene later. Following the lead thus given to them, the managers of the party press urged all private associations of traders to thwart the government's manoeuvre, by themselves coming to an agreement with the the [sic] allied powers.
In the first months of the year 1916, therefore, Swedish intervention was being discussed with as much heat and violence, as it had been a year previously. The danger of it was, however, growing steadily less; for no person in neutral Europe  then thought of intervention as he had thought of it a year before. The educated and the common people were alike horrified at the carnage, and the court party in Sweden were losing influence, as this disgust at the havoc and slaughter was infecting all classes of society. In addition, all the commercial magnates in Sweden, and everybody dependent upon them, had been so often reminded of the British restraints on commerce, during the previous year, that they were well able to appreciate what the country would suffer, if Sweden were blockaded, as she would be from the instant that any Swedish government declared war upon Russia. Finally, the great profits that were being taken in some neutral industries, and the high wages there paid were, even then, beginning to make a privileged class among the common people. These well paid artisans and their leaders were, in consequence, becoming more and more concerned in manoeuvres for increasing their political influence, and less interested in military projects; for they knew that these, if executed, would at once remove them from their factories, workshops, and political clubs, and reduce them to common soldiers. The original weakness of the court party thus became an increasing feebleness, which they could do nothing to remedy. Their sentimental clamour about what they called the tidal wave of slavdom, had failed to rouse any passion, when the common people might still have been excited by the appeal of military glory: it roused still less, when the mass of the nation perceived the war to be a dull, mechanical affair, and when their thoughts were turned to other matters. This decline of the court party in Sweden was not a thing proved by any particular report or despatch, but it was nevertheless well understood by the Foreign Office authorities. In an appreciation that was circulated at the beginning of the year, the line of conduct recommended was that we should occasionally relax upon particular points, by removing a few Swedish traders from the black list, on promise of good behaviour, and by being easy with export licences for woollens; but that the whole system of detaining cargoes, of refusing letters of assurance, and of ordering embargoes should be enforced without flinching. This paper was cordially endorsed when circulated, and the recommendations in it were substantially adhered to.
On the other side of the North sea, however, M. Hammarskjöld did not find it so easy to keep on the course he had chosen. Very little is known about his project for governing without parliament, with the king and the army supporting him; but, before the session had been sitting for a month, the plan was certainly abandoned. After being very terrified by it, the liberal managers spoke of the plan with great contempt; and, just because the project was abandoned rather feebly, the liberal opposition perceived the weakness of their opponents, and continued to urge, in every paper that they controlled, and in every utterance they made, that the commercial magnates of the country should follow the example of the Danish, Dutch and Norwegian importers. This manoeuvre was successful; for our minister was satisfied, that a number of commercial houses were bringing great pressure upon the prime minister, during the first months of the year; at one time, they thought he would yield to it.
Being thus compelled to outmanoeuvre his opponents, or to see himself, his policy, and his government fall into universal discredit, M. Hammarskjöld succeeded in passing a special bill, called the war trade law, which was intended to bring this movement for private agreements with Great Britain to a check. He secured support for this law, by representing it as a measure for empowering the government to enforce a strictly neutral conduct upon all traders and trading associations. The liberal opposition were united only in their dislike of M. Hammarskjöld's domestic policy, and a section of them favoured the bill as being likely to secure the ends proposed. The measure was therefore passed by a substantial majority. It forbad all persons or corporate bodies to make any engagement, or contract, which imposed restraints upon Swedish commerce, if such restraints were of a nature to serve the interests of a foreign power. More than this, any person or persons supplying information, or commercial intelligence, which served the interests of a foreign  power, was liable to a fine or imprisonment. On the other hand, permission could be obtained to sign trade agreements, and, when given, these agreements were enforceable in the Swedish courts; those who broke them were liable to a fine or imprisonment. This bill, the first of its kind passed by a neutral government, was not intended as an open defiance to our system, nor was it so understood; but it was admitted, on all hands, that, as the executive alone (and not the courts) were empowered to decide what did, or what did not, serve the interests of a foreign state, so, the bill might be used as an instrument of retaliation and reprisal, if politics demanded that it should be. The measure therefore caused great misgivings, even among those who had allowed it to pass. The liberal opposition moved amendment after amendment, but quite fruitlessly; for M. Hammarskjöld announced that the government would resign, if a single one of the amendments were accepted, and the opposition, fearing that the government's resignation would revive the plan for dissolving the Riksdag and governing by decree, allowed the bill to become law.
It would not be accurate to say, that the British authorities ordered special restraints to be imposed upon Swedish trade in retaliation for this bill; the general stiffening of the whole system did, however, synchronise roughly with the passage of the war trade law, and the months following upon its promulgation were the months during which the coercive machinery, letters of assurance, forcible rationing and refusal of licences, was operating at its full strength. It will, therefore, be convenient to inspect this operation, both in the gross and in detail, in order to discover how far the war trade law impeded it.
First, as to the parts of the machinery which most contributed to the coercion. There are precise statistics for the holding and prize courting of cargoes, and these statistics show that this cannot have contributed much. A rather lower proportion of cargoes in the Swedish trade were held than were held in the other neutral trades; and, in any case, the interceptions and prize courtings were mostly ordered against cargoes of coffee, dried fruits, and miscellaneous goods; the consignments of meat, cereals and ores that were stopped were only a small proportion of the total shortage. The same can be said of the embargoes: it is true, that, in a list, they look formidable; but the following figures show, that when British goods were ordered to be embargoed, the order was leniently administered. During the whole year 1916, that is, during the period when economic war was being waged with the greatest rigour, British exports to Sweden were actually more valuable than they had been during the previous year, notwithstanding that the most valuable export, coal, had fallen by over a million tons. The losses in respect to coal, jute, and other exports were made good by considerable rises in exports of cotton piece goods (21 million tons as against 131/3 normal); and by rising exports of woollens, one and a half million tons as against a normal of 640,000. Wool tops, noils, and so on, were, it is true, below the normal, but they were well above the 1915 figures. The re-export trade in foreign and colonial merchandise was down, but not by very much, as the losses suffered by reducing the cocoa trade to a proper volume had been made good by a great expansion in the tea trade - 6½ million tons as against a normal of 375,000 tons.
It was not, therefore, by intercepting and holding doubtful cargoes, nor by withholding licences, that Swedish overseas trade was reduced to the quantities shown in the statistics of total import. The thing was effected by the two remaining instruments of coercion, bunker control and navicerting. It is regrettable that the calculation cannot be pushed further, and that the precise amount of goods withheld by each of these great organs of the system will never be accurately estimated. Their general coercive power is, however, both remarkable and  impressive. During the year 1916, Sweden's normal imports of food and forage were reduced by twenty per cent.; the reduction in meats and meat products was seventy-seven per cent., in metals and ores eighty-five per cent., in animal and vegetable oils twenty-three per cent., and in wools and woollen manufactures thirty-eight per cent. No other neutral was so severely treated. This attack on the Swedish trade was, moreover, so conducted as to prove how great an advantage it was to any country that it should have made agreements. The only Swedish agreements were in respect to oils (which were controlled at the source by agreements with the American companies); and to cotton, which was controlled by agreement with the cotton spinners' association. The oil imports were roughly normal; the others were thirteen per cent. higher than normal.
Sweden was, therefore, rationed, notwithstanding that the Swedish authorities refused to sign a rationing agreement; and if, as seems probable, M. Hammerskjöld [sic] had hoped that the war trade law would force the British government to come to a composition, and relax their system, then, his calculations were wrong. As has been explained, the two imports that were the least restricted were oil and cotton, and the first consequence of the law was that both were endangered. The oil agreement was with the Vacuum company, whose directors reported to the Swedish authorities, that the law forbad them to ascertain those facts about consignees and their business, which they were obliged to communicate under the agreement;1 and that, as the British government had only promised, that shipments of oil would be allowed to proceed as rapidly as military exigencies permit...... for so long as the agreement was in force, so, severe detentions of oil cargoes were henceforward probable. In addition, the law made it impossible for Swedish shipping companies to comply with all the bunker regulations, or for Swedish importers to deposit the guarantees, which were then being demanded, when licences for wool and jute were granted. The Swedish government therefore discovered, that, in its operation, the law was only restricting their supplies still further, and after a great deal of argument on technical points, they drafted regulations that made the cotton and oil agreements, and the bunker regulations, legal. But, as the war trade law became operative in May, and as a settlement on all points was only reached in the late summer, this opposition only accentuated the growing shortages, and forced the Swedish authorities, by a natural sequence, to adopt their second expedient: that of making government departments, such as the handelskommission and the ministry of war, the consignees of great cargoes of oils, cereals and textiles. This was first resorted to in May, and, as the Swedes were always very stiff on the point of honour, they informed us they could not give us any information about the firms to which the goods would be distributed; and that their assurance that nothing would be exported must suffice.
It would be unjust to say that the high officials in the Swedish government were then giving undertakings which they intended should be broken; but we could not, in the circumstances, be satisfied. To give but one example. The Swedish war office was ordering great quantities of wool from South America, stating, which was doubtless true, that the wool was required by the army clothing department. But our experts knew, which the Swedish war office did not, that the firms shipping and selling the wool were closely connected to a great Berlin syndicate, and, from the evidence collected, it seemed certain, that the army clothing department of Sweden were being used as a cover for a consignment in which the Berlin syndicate were interested.2 The same suspicion naturally attached to other cargoes consigned to Swedish government departments, and the matter became so critical, that the Swedish government were compelled to consider whether they would stand upon their contention, or whether they would not, after all, give us the information we desired.
 The holding of the steamship Liguria was the test case. The vessel left New York on 20th April with a cargo of oleo, lard, and cotton-seed oil. She was chartered by the Swedish government, and the entire cargo was consigned to the victualling commission. On 13th May, she was brought in to Kirkwall, and the Swedish government were asked to give the names of the ultimate consignees, and a guarantee that the goods would not be re-exported as they stood, or in any other form. This was refused, and a long correspondence followed, which was, in fact, a digest of all the matters in controversy between the two governments. It was curious, however, that this consigning to a government department strengthened, rather than weakened, our legal rights to hold the ship and cargo. Had the consignees been ordinary commercial firms, against whom nothing was known, then, the only grounds for detaining the goods would have been that the normal imports of each commodity had already been allowed to go through. This, however, raised another question; for, as there was no rationing agreement with Sweden, so, neither side could agree what was a normal import. The point was, indeed, argued at great length in the notes exchanged. An impartial arbiter would probably have decided in favour of the Swedish calculation; for it is beyond question that the Swedish supplies of these  goods were short. As has been said, however, consignment to a government department strengthened our case; there were no precedents for it; but the law officers saw in it a modern adaptation of an old practice: that of protecting vessels against visit and search, and putting them under convoy. Their report ran thus:
In our opinion no neutral government is entitled to extend its protection over its own commerce in such a way as to defeat belligerent rights. The victualling commission is not engaged in supplying the Swedish government and cannot rely upon its position as a government department to enable private merchants to escape from the belligerent rights of this country. The objection is in principal the objection which prevailed against the claim formerly put forward by neutral governments to protect the ships of their nationals from visit and search by the convoy of public vessels.
The second point upon which the British and Swedish governments were in controversy can only be explained by a retrospective survey.
During the early months of the year, when forcible rationing was first being attempted, M. Hammarskjöld explained, at great length, to representatives from the press, and to the parliamentary leaders, why no neutral state should submit to the British system, if they had the power to resist it. In these various statements M. Hammarskjöld admitted, that what the federal navy had done during the civil war might be said to constitute a rough precedent for what the allies were then doing; but he argued, that, as the American practice in regard to contraband and blockade breakers had not been recognised as legal, but had, on the contrary, been much disputed, so, it was not competent for the allies to claim, that their enlargements of these disputed American doctrines were justifiable in law. Now the practice that M. Hammarskjöld considered most objectionable was the practice of insisting upon guarantees against the re-export of raw materials, and of the goods made from them; for he maintained these guarantees could only be demanded in respect of goods that a neutral received from a belligerent, and could not properly be demanded for goods that were sent from a neutral to a neutral. To give an example: M. Hammarskjöld agreed, that, if the British authorities allowed, say, wool and woollens, or coal, to be exported to Sweden, then, they could demand whatever security they thought sufficient to prevent those woollens from passing to the enemy as clothing, as blankets, or as army equipment. But M. Hammarskjöld would in nowise admit that similar security could be demanded for cotton and oil that were imported from America, or for meat and corn that were imported from the Argentine; and, by enlarging upon this distinction, and by representing the British practice as new, unjustifiable in law, oppressive in itself, and humiliating to the nations that were compelled to submit to it, M. Hammarskjöld had committed himself to opposing it stiffly. In the notes about the Liguria's cargo, which was shipped in America, the British authorities demanded guarantees, that neither the goods nor their products should be exported, and so raised the very issue that M. Hammarskjöld had argued so stiffly, whenever he had seen an opportunity, during the past half-year. The only possible way of estimating the strength of M. Hammarskjöld's contention is to determine how far the British doctrine and practice was then agreed to.
 It will be remembered, that, in their first circular note to the neutral powers of Europe, the British Foreign Office announced they would negotiate for guarantees against the re-export of overseas imports, and of goods manufactured from the most important contraband metals. The doctrine of derivative contraband was thus enunciated at the very outset of the campaign. The subsequent negotiations with neutrals had, however, been negotiations for ensuring that neutral prohibitions of export should be maintained, and that no evasion of them should be permitted. The doctrine had, therefore, been but little elaborated in the first agreements. Nevertheless the following rules were established:
(i) By the third article of the Anglo-Swedish agreement of December, it was laid down that the Swedish prohibitions of export should be maintained:
Not only against the raw materials in question but also the half-finished products made from these raw materials, in so far as their inclusion may be necessary in order to prevent evasions of the prohibition of export of such raw materials, and further, finished products of the same which are specially proper for purposes of war.
(ii) By the third article of the Eyre Crowe-Clan agreement it was laid down:
The prohibition of export in the case of raw materials should cover not only such raw materials but their alloys and half-finished products (where this is necessary to prevent an evasion of the prohibition) and also wholly manufactured goods where a raw material, or its alloys, forms an essential part of the finished article, and could genuinely be used to replace the raw material itself.
(iii) By the first article of the Dutch agreement the Netherlands trust guaranteed:
That all contraband addressed to the Netherlands overseas trust arriving in Holland, will be for home consumption, such home consumption to apply to the contraband material as well as to any article manufactured thereof.
As the first agreements were only intended to stop German supplies of contraband, the Foreign Office officials were thinking more of metals, and of the machines made from them, than of ordinary raw materials, when they negotiated these clauses. The doctrine was, naturally, of far greater importance when the allies issued the March order and proclaimed unlimited economic warfare; it was consequently incorporated in the following agreements for enforcing the order:
(i) In the consolidating agreement with the Netherlands overseas trust it was stipulated:
That the guarantee of home consumption applied not only to goods so imported, but to all articles manufactured or produced therefrom.
(ii) The first article of the agreement with the Danish guilds provided:
That the guild's guarantee should only be given, when their guilds were satisfied that any goods imported into Denmark were intended for home requirements and would not be exported in any form from Denmark......
(iii) The seventh article of the règlement intérieur of the société suisse provided that:
L'exportation de toute marchandise arrivant en suisse, consignée a la société de surveillance suisse, ainsi que des produits qui en dérivent, est défendue.
(iv) In the cotton agreements with the Industrieraad, and with the Norwegian and Swedish cotton associations, it was provided:
That neither the goods, nor any manufactures thereof should be re-exported.
(v) In the agreements with the Norwegian shipping lines (ten in all) the companies undertook to deliver cargoes only when they were satisfied:
That the goods and their products were for consumption in the country of destination shown in the bill of lading.
(vi) In the rationing agreements with the Scandinavian oil refineries and margarine makers, it was provided:
That the raw materials, their products and by-products were to be consumed in Scandinavia.
 (vii) Similar clauses were inserted in all agreements for controlling American supplies from their source; the oil companies, and even the Chicago meat packers, raised no objection to them.
From this it will be clear, that, when M. Hammarskjöld started his belated opposition to the doctrine, it had been universally accepted; and that, by common consent of neutrals, it was admitted, that a ration of raw textiles could not be re-exported to Germany as textile piece goods; that oils, and lubricants could not be re-exported as soaps, fats, jellies and glycerides; and that oil seeds and nuts could not be re-exported as artificial forage. The Swedish opposition was, in fact, ill timed.
As was to be expected, the Swedish government were obliged to yield on every point, and to give all the information asked for. Their surrender was on a particular case, the Liguria's cargo; but the authorities concerned probably realised, that the difficulties would repeat themselves indefinitely, for so long as they refused to admit that the rationing system, and everything consequent upon it, was so well established that resistance to it was hopeless. The Swedish resistance was not, however, entirely futile; for it did not consist only of refusing to countenance existing practice. Realising how important it was to the allies that large quantities of goods should be transmitted to Russia, the Swedish authorities impeded the transit throughout the year, and thereby caused considerable anxiety. Their first refusal of transit was in the matter of parcels mail to Russia, which they stopped as a retaliation for our treatment of neutral mail bags. This was annoying, but not dangerous, as the goods sent by parcels mail to Russia were mostly luxury goods from France. Nevertheless, a considerable amount of drugs and hospital stores, which the Russians greatly needed, were held up for many weeks. Transit was next refused for consignments of coffee. During the first months of the year, the German agents in South America sent enormous shipments of coffee into Scandinavia. As these cargoes came into Europe soon after forcible rationing was sanctioned, they were stopped wholesale. The Swedish authorities at once refused transit for coffee consignments to Russia, in retaliation for our stoppage of coffee cargoes consigned to Sweden. This was more serious than their refusal to transit the parcels mail, because, although coffee is not a foodstuff, it was much drunk in the big Russian towns, where the common people were beginning to grow restless. Also, during the autumn of the year, the Swedes refused transit for lathes and machine tools, saying that these were munitions of war, and that the royal decree of January, 1915, forbad the transit of munitions to powers at war. This caused great anxiety; but it should be added that the Swedes never stopped the transitting of lathes and machines tools altogether; they merely granted licences sparingly, and so kept down the Russian supply.
In addition to all this, the Swedes ordered a reprisal that was not much felt at the time, but which became important later. Since the beginning of the war, a number of British ships had been confined in the ports of the northern Baltic, and in the gulf of Bothnia, which they did not care to leave, for so long as the German naval forces commanded the approaches to the Sound and the Belts. In the spring of the year, when the growing shortage of shipping was giving anxiety, a syndicate for releasing these ships was formed, and it was arranged, that they should steam down the Swedish coast in driblets, and avoid capture, by keeping inside territorial waters as far as cape Falsterbo, after which, they were to hug the Swedish shore, along the Kogrund passage, and, finally, make for a Norwegian port. A first detachment was brought out in June, and by July, twelve of the imprisoned vessels reached British ports. In order to stop the escape of the remainder, however, the Swedes laid a large minefield in the approaches to cape Falsterbo, and forbad any  but Swedish vessels to pass through it. This made it impossible for any more shipping to be extricated. As the ships confined in the Baltic had been out of service for so long, the shipping authorities were, at the time, more inclined to be satisfied that some had escaped, than irritated at the confinement of the remainder. This act of retaliation was, however, strongly protested against, and genuinely resented.
These were the principal acts of retaliation and resistance, which the Swedish Government ordered during the long controversy; and it is patent now, and must then have been patent to the Swedish authorities, that they were not powerful enough to make us relax our system, or to make us admit, either as an abstract principle, or as a matter of practice, what the Swedes had contended during the negotiations of the previous year. They had then obstinately refused to agree to a rationing system: in the event they were rationed, and their resistance neither increased their supplies, nor weakened our system of control. For this reason, it will always be a matter of surprise, that, having determined to resist us, the Swedes never used their most powerful weapon, of which a short explanation should be given.
It will be remembered, that, before the negotiations of the previous year were undertaken, it had been decided to secure our supplies of Swedish pit props, iron and steel by agreement, if it were possible. Now, when the war trade law was passed, and the Foreign Office suspected that the Swedish authorities were preparing an organised resistance to our system, they asked the ministry of munitions to report what Swedish supplies were still essential. The ministry's reply was alarming in the circumstances then prevailing. They reported, that the pit props, and the sawn timber, which had been deemed so important during the previous year, might be obtained from America, France and Portugal; and that Swedish iron might also be dispensed with; but that, if supplies of it were refused to all the allies, and not merely to Great Britain, the consequences to Russia would be extremely serious. The ministry also reported, that, although it could not be said there were no alternative sources of supply for Swedish zinc, and aluminium, our supplies from all sources only just satisfied our demands; so that, if the Swedes cut off their contribution, the fuse and cartridge factories would be severely embarrassed. More important than all this, however, was the Swedish supply of ball bearings for industrial machinery. The ministry estimated that they needed 234,000 per month for ourselves alone; they received these supplies from two contracting companies, one of which, the Skefko, was little but an agency for the Swedish branch. The raw materials necessary for making ball bearings in England could, it is true, be obtained; but the manufacture of them was a Swedish specialisation, and the plant necessary for concentrating the whole manufacture in England could not be obtained and set up in less than a year. Even this estimate was found later to have been too hopeful; for, during the autumn months, the air ministry stated they would need a much larger supply of ball bearings than they had originally demanded, if their programme for the coming year was to be executed.
It requires but little thought to realise what tremendous damage the Swedes could have done by restricting the export of these ball bearings; for the restraint would at once have embarrassed every firm that was contracting in chief, or subcontracting, to the government. Presumably the French and Italian factories would have suffered equally. This ball bearing supply was, indeed, to the whole industrial north, what a chart, a sextant, and a chronometer are to a ship at sea: insignificant items on the whole lading, if their weight and value are alone considered, yet so essential, that a vessel becomes little better than a wandering derelict, if they are lost or destroyed. Nevertheless, the Swedes never impeded, or even  threatened to impede, the export of these ball bearings; and it will always be something of a mystery why they neglected to use such a powerful weapon, when they were in sore need of every weapon they possessed; for, by the autumn of the year, our pressures upon their imports left them very pinched for cereals. Of all shortages this is the most dangerous, as it inflames the poor against the rich, and makes them ready for any mischief. It must never be forgotten, therefore, that the operation of forcibly rationing Sweden was sanctioned by officers of state, who knew that this retaliative weapon was in the Swedish armoury, ready for use; they sanctioned the operation knowing the risk, and they executed it with reminders pouring in on them that the risk was increasing. They cannot justly be accused of being too timid, or too cautious.
The Swedish authorities determined to come to a composition without attempting this formidable retaliation. They have never divulged the deliberations of their secret councils; but the circumstance which obliged them to negotiate is easily understood. It was that M. Hammarskjöld had hoped he would raise the credit of the king and of the court party by resisting the British blockade; and that, in the early autumn of the year, the very people he was endeavouring to serve, realised that further resistance was hopeless, and that they were losing credit by allowing M. Hammarskjöld to persist. It is certain, at all events, that the resolution to negotiate was taken by a secret committee, over which the king presided, and that the king strongly advocated negotiation. When taken, the decision was hard to execute; for it provoked fierce dissensions in the Swedish cabinet. Having secured the king's support, and detached him from M. Hammarskjöld, M. Wallenberg thought himself powerful enough to prepare the bases of negotiation and to present them to our minister. M. Hammarskjöld was not, however, to be outmanoeuvred so easily; for he persuaded the secret committee, and those who were appointed to negotiate, that the bases drafted by M. Wallenberg were too binding: they were therefore withdrawn, which greatly embarrassed the minister for foreign affairs and damaged his credit.
The Swedish envoys reached London in the first week in November, and the negotiation that followed will best be understood by reviewing the issues, which, though unsettled during the previous year, had yet been regulated by pressure of circumstances, and those other issues, which were, even then, quite unregulated.
The negotiations of the previous year had failed, because the Swedes then refused to operate a rationing system as the thing was then understood. They agreed to reduce their imports to normal, but refused, obstinately, to discuss figures of normal export, or even to define the phrase, saying that their dignity forbad them to negotiate upon matters so wholly within their competence. The principal consequence of the forcible rationing imposed during the year was that the Swedes had been driven, by force of circumstances, to abandon this contention altogether. During the negotiations for making the cotton and oil agreements legal, the Swedes discussed and investigated figures of normal import; during the controversy about consignments to government departments they had done the same thing again; and, on the eve of the negotiation, they were discussing figures of cereal imports, for five large grain ships were then being held. The Swedish government had, therefore, yielded before the second negotiation began, and nothing more was heard of their old contention on the point. The same can be said of the Swedish opposition to what was then known as the products clause. It has been shown that the general doctrine was well established, when the Swedish premier was declaring it to be illegal, and it seems tolerably certain M. Hammarskjöld decided to admit it, when he sanctioned negotiations. At one of his longest conversations with our minister, at all events, which took place about a month before the decision to negotiate was finally taken, M. Hammarskjöld said, merely, that a guarantee for products was superfluous, if  rationing and home consumption were accurately defined. Transit to Russia, the other matter that had been so closely investigated during the previous year, was, however, quite unregulated. As has been explained, we had hoped to secure transit rights to Russia by an exchange: we granting licences for the export of certain goods that the Swedes required, and the Swedes granting an equivalent number of transit licences. This arrangement did not secure for us what we hoped to secure; for, when the negotiations began, we had a credit balance of over a million pounds in this exchange account, and the Swedes were still refusing transit for consignments of coffee and lathes. In addition, our endeavour to divert the domestic exports of Holland, Norway and Denmark from Germany may be said to have raised an unsettled issue with the Swedes. M. Hammarskjöld and his ministers watched these negotiations carefully and realised, that, although, outwardly, we only claimed that the normal distribution of these exports should be restored, we were yet determined to reduce rations of corn and forages, if these exceptional exports of meat and dairy produce continued. Now Sweden, in common with all the northern neutrals, had been exporting large quantities of butter, cream and meat during the year; and M. Hammarskjöld and his ministers, anticipating a demand that these exports to Germany be reduced, had determined to resist it. The reason why the first bases of negotiation were withdrawn was, indeed, that M. Hammarskjöld determined to make this freedom of domestic exports a point of honour, just as he had made statistics of normal imports a point of honour during the previous year.
On the British side, the Foreign Office, who now realised that a rationing system was virtually agreed to, were anxious that the receiving, or guaranteeing, body should be a commercial corporation, and that Swedish government departments should no longer be consignees. The risks we were running in the matter of ball bearing supply made it incumbent upon us to secure the supply by a binding agreement. Over and above this, however, it was realised that some concession would have to be made to the German exchange system, because this, like the rationing system, was then an established practice. Finally, we desired some regulation of the Swedish fisheries; for the Swedish trawlers were then carrying their catch to Denmark, and, as has been explained, the Danish trawlers were receiving their lubricants from the central empires, and were working in the German service. It is curious, in view of what happened later, that the minefield in the Kogrundsrännan, and the British ships confined by it, were not included in these negotiations for a settlement.
The agreement concluded by the negotiators would probably have been ratified and made operative, but for an unforeseeable turn of events, and the following points were held or yielded by each side. The rationing system, and all that it implied, was admitted in the first clause; by agreeing to it, the Swedes abandoned their long opposition. The home consumption of raw materials was expressly stated to be the consumption in Sweden of the materials, of their products, and of their by-products; no concession whatever was made to M. Hammarskjöld's contention, that manufactures made from raw materials that were produced in neutral countries, were different in kind from manufactures made from raw materials produced in Great Britain, France, or Italy. On the matter of the importing association, the Swedes gained their point. They insisted, throughout the negotiation, that several, independent, associations should be formed, and that the Swedish departments of state should continue to act as general consignees. This was conceded, but it was provided, also, that consignments to a government department should be included in the ration. Transit to Russia was secured by a stipulation that not less than three thousand tons of commodities should be carried every week by the Haparanda line, winter and summer, and that the other lines should carry not less than three thousand tons a week, for so long as the ports in the  gulf of Bothnia were open to navigation. The Swedes also agreed, without contest or bargaining, to supply us with specified quantities of balls and ball bearings. The danger to which we had been exposed, throughout the summer and autumn, was therefore laid. Possibly, the Swedes never realised how much we had been in their power, and that, by stopping the export of goods, which were only four hundred and twenty tons in weight, they would have exerted as much coercion upon us as we were exerting upon them with our vast machinery. In addition, the Swedes undertook to supply us with specified quantities of iron, steel, pit props and perchlorate of ammonia, all which the ministry of munitions considered very important. These articles in the agreement were pure gains for the British negotiators. The concessions to the German exchange system were not considerable; we agreed that small quantities of tin, nickel, aluminium and rubber might be exported to Germany, in return for manufactured articles containing equal quantities of the raw material; we also agreed that articles manufactured in Sweden, and containing a very small proportion of these metals, might be exported.
The figures of normal import were examined and settled by M. Marcus Wallenberg and Mr. Harwood; the discussions were long and tedious, but it does not appear that there was ever the slightest danger of a breakdown. As finally drafted, the list was as comprehensive as that agreed to by any neutral association. There was, however, one omission: no ration for cereals was negotiated, because this ration was connected to the regulation of domestic exports, which was also left unsettled for the following reason. Our negotiators realised, from the start, that, if Swedish domestic exports were to be regulated, the thing would have to be done by a separate agreement, and M. Marcus Wallenberg agreed, in conversation, that an arrangement for restoring the normal distribution of domestic exports would not be objected to in Sweden. The experience of the past year had shewn, however, that of all regulations this was the most difficult to arrange, and that, if the thing was to be done at all, it was best effected by establishing purchasing agencies in the neutral country. It was not thought advisable to negotiate for the establishment of these agencies, until the receiving and distributing associations provided for in the agreement had been set up, and were in operation. No attempt was therefore made to regulate the Swedish agricultural exports by the agreement negotiated: the matter was left over, after due note had been taken of M. Wallenberg's admission. It followed from this, that rations of cereals and forages were also left unsettled, as the quantity that could be allowed could only be calculated, after assurances had been given and tested, that a certain agreed proportion of the country's dairy produce would be sent to Great Britain. A ration for maize was agreed to, but that was all. This omission was the defect in the agreement. M. Hammarskjöld, the king and the court party had presumably decided to abandon their long opposition to the rationing system for more than one reason; but it may also be assumed, that their strongest reason for yielding was that the country was running short of cereals, and that no supply could be counted upon, for so long as the British authorities continued to treat Swedish imports as severely as circumstances allowed. The Swedish envoys therefore returned to Sweden with this very important matter still unsettled; and it was partly because the agreement gave no satisfaction on the point that it became entangled in Swedish domestic politics, and was never ratified.
The principal Swedish envoy, M. Hellner, returned to Sweden early in January; both he and M. Wallenberg were then confident the agreement would be ratified. After their return, however, the agreement was submitted to a secret commission of the Riksdag. Nothing has ever been divulged about their deliberations upon it; but it is known, for certain, that the conservative representatives on the committee advised for ratification. By then, however, the agreement no longer offered what it would have offered, if it had been negotiated earlier in the year; for, a few days after it was laid before the secret committee, the German government opened their  final campaign against commerce. This immediately caused the greatest confusion, and left every neutral government doubtful whether they would secure their supplies by any means; for a great mass of shipping abandoned the routes between Europe and America, and remained in harbour. The secret committee of the Riksdag, in common with the Swedish ministers, were therefore examining an agreement that was not operable in the circumstances then obtaining, and it is not surprising that their deliberations were drawn out, and inconclusive.
Meanwhile, M. Hammarskjöld's government was labouring heavily, and the opposition were gaining strength. Late in November, the population was put on a bread ration, which gave the popular managers a new opportunity for discrediting the government before the people, by saying that this arbitrary ministry were forcing the population to endure what no other neutral population was suffering. When it was discovered that the draft agreement did not assure the country's supplies in cereals, the liberals pressed their criticism the more strongly. The sudden fall of the tsar's government, and the abdication of the tsar himself (March 15th), increased the ferment; for, in every country in the world, and in Sweden in particular, this very much stimulated the managers of the democratic factions, by giving them an opportunity of exciting hatred against any government that could be labelled antidemocratic, which was the great catchword of those times. Henceforward, the opposition in Sweden were more concerned with using this opportunity for enlarging their influence, than with considering the advantages and disadvantages of the agreement; and this clamour for more parliamentary control was what they chiefly relied upon for driving M. Hammarskjöld from office.
Nothing was decided about the agreement, at all events, when the Swedish government asked the Riksdag for additional credits for the military forces, a proposal which inflamed the controversy between themselves and the popular leaders still further. The credits were voted; but the opposition advanced a number of motions for ensuring that the Riksdag should supervise and control the expenditure of the credits. M. Hammarskjöld resisted these motions, and during the debates upon them, his government were defeated. Thereafter their days were numbered.
While the conflict between M. Hammarskjöld and the parliamentary
opposition was thus raging fiercely, M. Wallenberg twice said the
government would ratify the agreement; but the question of ratification or
no ratification was by then quite overlaid by more pressing matters: Mr.
Howard was satisfied the opposition did not make it an issue, during their
last struggle with the Hammarskjöld cabinet. Late in March,
M. Hammarskjöld and his ministers resigned. His successor was
M. Schwartz; M. Wallenberg's was Admiral Lindmann. The
German campaign against commerce was then being prosecuted with great
fury in all European waters: the new ministry were thus confronted with a
state of affairs so different from that which the former ministry had
attempted to regulate, that it is small wonder the agreement was little
spoken of, thereafter, and was abandoned, without ever being formally
1The clauses which became inoperable were 5 and 8; they ran thus:
5. The Company undertake to use their best endeavours to secure that all lubricants, oils, and paraffin wax sold by them shall actually be consumed in the country in which they are documented for discharge; that all such commodities shall be imported directly into Denmark, Norway or Sweden, and not indirectly through one or the other, or through Holland; and, further, to use their best endeavours to prevent any such commodities from being used in any way to the detriment of Great Britain or her Allies, or from reaching countries at war with Great Britain. Before distribution the Company shall obtain from the agents, dealers, or purchasers, an undertaking that none of the said commodities shall be re-exported from Denmark, Norway or Sweden, as the case may be, and substantial and adequate guarantees, which can be legally enforced in the country concerned, to ensure the observance of such undertaking. All undertakings and guarantees shall be communicated to the nearest British consular officer.
8. If on investigation it is established that any lubricants, oils, or paraffin wax have been exported to Germany from the Company's stocks, suitable measures will be taken to penalise the agent or dealer responsible, and to prevent any recurrence of such action to the best endeavours of the company. ...back...
2The whole evidence available is an
interesting illustration of the high efficiency of the commercial intelligence
service; it shows moreover how easily the civil service of a government, which
had not established a similar system could be duped. The official report on the
whole matter ran thus:
(a) His Majesty's government has received information that a syndicate has been
formed in Berlin for the purchase of wool in the Argentine republic, one of the
members being the manager of Engelbert Hardt and company. The purchasers in
Buenos Aires are the General Mercantile company, Staudt and company,
Engelbert Hardt and company and Richard Rhodius and company.
(b) The following is a translation of a circular issued by Altgelt and company of Buenos Aires to their agents, Von Bary and company, of Leipzig:
Consignments via neutral ports for our friends in Germany present difficulties, which are not, however, unsurmountable. Transit via Scandinavia, as well as via Holland, is dangerous, Holland being completely under English control, and consignments having to be made to the Netherlands Oversea Trust.An intercepted letter from Von Bary and company, of Leipzig, to Altgelt, per Videla and company of Buenos Aires, shows that the Forenade Yllefabrikerna A/B, Norrköping, have purchased from the Bremer Woll-Kammerei Blumenthal 200 bales of wool, which the German firm had purchased from Altgelt and company of Buenos Aires. The wool is to be shipped direct to Norrköping in the name of a Spanish shipper. Every care is to be taken that no evidence of German connection appears in the transaction.
The following intercepted cable apparently relates to the above shipment:
Jensen, Copenhagen, to Videla, Buenos Aires. Requests shipment to the royal army clothing factory of 100 bales by the Axel Johnson, and 100 by the Kronprins Gustav Adolf.(c) The following cablegrams show that a shipment of 200 bales of wool for the Malmö Yllefabrik from Tornquist, of Buenos Aires, was insured in the arrangement with the Disconto-Gesellschaft, of Berlin: