Foreign Affairs: 100 Years
A New Americanism
Why a Nation Needs a National Story
THE civil war in Spain has bared the relentless struggle being waged by the Great Powers for essential raw materials. Not oil but iron ore is now the chief issue. As part of the hugest armaments race in history an unprecedented iron and steel crisis has broken out, and the industrial nations of Europe are fighting for possession of every lump of ore, every piece of scrap. When gold is no longer at hand to secure the precious mineral, bombs or the threat of bombs are used to make the owner yield it up. This lust for iron to turn into arms may at any moment lead to a repetition elsewhere of Bilbao's tragedy.
Luckily in Sweden, the possessor of vast reserves of iron ore, there is as yet no sign of a coming "civil war." The chances that there ever will be one are small. At present the country is experiencing the "mixed feelings" of a rich man counting his treasure while a gang of desperadoes looks on. Today, iron ore is a main source of national wealth; tomorrow it may become the prime cause of national sorrow. For there are already, as a leading Swedish paper recently put it, "rumors about foreign speculation as to how to secure the iron ore one needs by means other than a contract of delivery." The tragic example of the Basques is a bad omen for Sweden -- and she knows it.
Sweden is the world's biggest exporter of iron ore. True, three other countries -- France, Russia and the United States -- each produces more iron ore; but each consumes a much larger portion of its own output than Sweden does. True, also, that France is ahead from the standpoint of the actual number of tons shipped abroad. In 1936, French iron ore exports amounted to around 18 million tons, while Swedish shipments were about 11.2 million. But this mode of reckoning is misleading for it takes no account of the different percentages of iron content in the various ores. Swedish export ore contains on the average exactly twice as much iron as the "minette" of Lorraine (66 percent as against 33 percent). Last year Sweden surpassed France in value of exported ore, and her superiority is likely to become greater in coming years.
Sweden's outstanding rôle in the world iron ore market is due primarily to her immense mineral riches lying north of the Arctic Circle. In Northern Lapland is a mining district which is estimated to possess more than two billion tons of ore, or over nine-tenths of the total high-percentage iron ore in Europe. The Lapland deposits are also unusually accessible. At Kiruna, for example, the ore is not obtained from underground mines; it is simply stripped from the mountainside. About 750 million tons are thus available for easy extraction.
Sweden possesses other important deposits of iron ore but none of them is so important as the Lapland deposits, either in size or quality. Of these secondary fields the most important are those of Bergslagen in central Sweden. The ore available here is estimated to total 200 million tons, three-quarters of it owned by the Grängesberg Ore Trust. The remainder belongs to several private companies, many of them affiliated with the German steel industry. The Bergslagen ore is less rich in iron than the Lapland ore (52-55 percent as against 60-70 percent), but has the advantage of greater purity. It seldom contains more than 0.02 percent of phosphorus, whereas in Lapland the proportion ranges from 0.012 to 2.5 percent. The Kiruna-Gällivare ore is almost all shipped abroad, but much of the Bergslagen output goes into home consumption. Swedish steel manufacturers have always aimed at a very high quality and hence employ only the purest ores. The more phosphorus-bearing grades are exported, especially to Germany, where the basic Bessemer process is in wide use.
Operations have lately been resumed in a number of mines in central and southern Sweden which had been abandoned as unprofitable, some of them over a century ago. British and German prospectors, particularly the latter, are inundating the country, eager to reopen half-forgotten, low-grade mines that no Swede with any business sense would dare to touch. So great is the ore famine among the Great Powers that expense hardly seems to count.
The Swedish output of iron ore has been growing rapidly in recent years, as follows (in millions of tons): 1933 -- 2.7; 1934 -- 5.2; 1935 -- 7.9; 1936 -- 11.2. Exactly two-thirds of the 1936 total was mined in Lapland. Exports have fluctuated widely, as the following figures (in millions of tons) show: 1929 -- 10.9; 1932 -- 2.2; 1934 -- 6.8; 1936 -- 11.2. The 1929 peak thus was exceeded by last year's figure. By the end of September 1937, Sweden had shipped abroad 10.3 million tons, 25 percent more than during the same period of 1936. In all probability exports will this year exceed 13 million tons. Before the armaments race really got under way Sweden was mining more ore than she could dispose of through domestic consumption and foreign exports combined. She therefore accumulated large stocks. The last four years have seen these supplies dwindle to almost nothing, under the demand from abroad.
More than half the ore exported from Sweden is shipped through the Norwegian port of Narvik, on the Atlantic Ocean. The remainder of the Lapland ore is shipped from Luleå on the Gulf of Bothnia, where the harbor is blocked by the ice for four or five months a year. The major part of ore from the mines in central Sweden is shipped from Öxelösund, the rest from Gävle.
Roughly 85 percent of the total iron ore exported is in the hands of Trafikaktiebolag Grängesberg-Öxelösund (T. G. O.), the famous trust which is the world's biggest producer and exporter of iron ore. The company's capital and funds at present total 175 million kronor. In addition to mines, railways, factories, power stations and so forth, the T.G.O. operates its own ore transport fleet of 25 ships aggregating 173,000 tons. An all-important subsidiary of this Trust is Luossavaara-Kirunavaara Aktiebolag (L.K.A.B.), the company that owns practically all the mines in the Lapland district. This company also holds a majority of the shares in a firm called A. B. Hematit, the owner of large mining interests in Tunis and Algeria. However, only half of L.K. A.B.'s share capital (110 million kronor) is in the hands of T.G.O. The other half has been owned since 1907 by the Swedish state. On September 30, 1947, the State can redeem at a fixed value the L.K.A.B. shares now held by T.G.O. The bulk of Sweden's ore mining industry may therefore be nationalized ten years hence. What is more, the state also has a contractual right to carry out this nationalization forthwith (with compensation) in case "foreign influences are found to exert an improper hold on the company."
Late in September 1937 a deputation from Norrland, headed by two members of the Riksdag, asked Herr Wigforss, Minister of Finance, for immediate nationalization on the ground that "private interests" should no longer be allowed "to influence, outside the government, the policies of our country." In plain English this meant that German influences were being exerted on the management of T.G.O. in an attempt to enforce an ore policy different from that favored by the Swedish Government. But even without the threat of nationalization the state possesses several means for keeping such influences in check, principally through its right to appoint half the directors of T.G.O. Effective control is further ensured by means of taxes, royalties, railway freights and, most important, the imposition of a legal export limit.
For many years Sweden shipped, on the average, three-quarters of her total iron ore exports to Germany. The rest went to Britain, Belgium and the United States. Of late, however, Germany's share has decreased slightly (from 73 percent in 1934 to 71 percent in 1935 and 1936) and in the future will drop still further, while Britain's proportion will rise. This incipient reversal of relative positions is a direct consequence of the civil war in Spain. In using their superior financial resources to snatch away this Swedish ore the British are merely giving the Germans tit for tat.
Before the civil war, Spain was the largest supplier of the British ore market; her share in it in 1935 amounted to 26 percent. After the outbreak of the war General Franco did his best to divert the ore under his control in Spain and Morocco to his allies. The fall of Bilbao faced British industry with an almost complete interruption of ore shipments from Spain. Hitler had foreshadowed this development in his speech at Nuremberg on June 26, 1937, when he frankly admitted that the war in northern Spain was being waged primarily to secure ore supplies for the Third Reich.
Defeated in Spain, Great Britain took her revenge in Sweden. Here was the one place where she could make good the loss of the Spanish ores. Late in 1936, negotiations were started with the Swedish Ore Trust and early in 1937 sensational rumors began to circulate to the effect that for the ten-year period beginning in 1938 Sweden was committed to sell all her iron ore exports to Britain. This was of course a wild exaggeration. For Sweden brusquely to cut off all shipments to Germany would practically amount to a declaration of war and would surely be met by immediate and drastic retaliation.
Germany, it must be remembered, obtains more than 50 percent of her total ore imports (by value) from Sweden. What is still more important, the very backbone of Germany's armaments industry is Swedish ore, whereas the less martial branches of the German steel industry largely consume domestic and French low-grade ores. Swedish ore exports to Germany in recent years are as follows (in thousands of tons): 1929 -- 7,382; 1932 -- 1,578; 1934 -- 4,965; 1936 -- 7,990. Such wide fluctuations naturally markedly affect certain sections of Sweden's economic life, a fact deplored by farseeing Swedish economists. At first the ore magnates did not share this sentiment. They regarded their preponderance in the German market as axiomatic and sacred. Only three years ago, a Swedish newspaper launched a campaign against T.G.O.'s onesided sales policy, urging the company to open up new markets in England and the United States. The Ore Trust was indignant at such heresy and requested the editors to stop their "damaging" interference.
But though Germany still has devoted advocates within the Ore Trust it is Great Britain who today enjoys the greater political sympathy of the Swedish people. The Swedish Government has become keenly aware of the risks, political as well as economic, inherent in Germany's preponderant interest in Swedish ore. In the event of another war, the strain on Sweden's neutrality might become unbearable, the more so since Soviet Russia, though not herself interested in getting ore from Sweden, might nevertheless seek to cut off the supplies of someone else. Of late the Soviet authorities have been busily adding to Russia's potential strength for war in the Far North. Great Britain's desire for ore to replace the losses in Spain therefore appeared to the Swedish Government as a godsend. They felt it almost equivalent to a British guarantee of Sweden's neutrality and independence.
There was, however, one serious hitch. Under an agreement made in 1927 between the Swedish Government and T.G.O. (and ratified by the Riksdag), exports of ore had been limited to 9 million tons from Lapland and to 1.5 million tons from the Grängesberg field. Since the remaining fields supplied at best one million tons a year, the average maximum limit of Swedish shipments was around 11 million tons annually. With Germany at present taking about 8 million tons (this year probably 9), and other countries receiving minor fixed deliveries, there was not much left for increasing the British share. It was a serious dilemma, with two equally unpleasant horns: either to say "no" to Britain, thereby annoying a good friend and losing a valuable guarantee, or to reduce the German quota and risk the worst.
Wisely, the Stockholm government decided to avoid this alternative by raising the export limit. A proposition to this effect was recently submitted to the Kommerskollegium (Board of Trade) and will shortly be placed before the Riksdag. It has the almost undivided support of public opinion and will doubtless become law. The bill permits an extension of the present export limit from 9 to 11 million tons a year for the Lapland district and from 1.5 to 1.7 million tons for the Grängesberg field during the period ending in the fall of 1940. Within this period, the Ore Trust is given full license to adapt its annual deliveries to the conditions of the market. It therefore will be enabled -- if its mining, railway and shipping facilities permit -- to satisfy the British demand to the tune of several million tons a year. (In 1935 and 1936, British imports of Swedish ore amounted to 773,478 and 1,231,520 tons respectively.) Shipments to Germany are not to be increased beyond this year's level. At most a small "symbolical" addition to the German allotment will be made to offset the very substantial increase in Britain's share. For some time, as long-term contracts with Germany have expired they have been renewed only from year to year. The possibility of later progressive cuts in the amount of ore delivered to Germany therefore remains open, whereas Britain is authoritatively reported to have secured a five-year contract for Swedish supplies.
It remains to be seen whether the present solution will satisfy all parties concerned. Repeated grumblings in the German press, some more or less openly voiced threats, and in particular the desperate efforts of German agents to prevent the British "intrusion" in Sweden, seem to denote that peace on the iron ore front is remote.