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THIS DOCUMENT IS THE PROPERTY OF HIS BRITANNIC MAJESTY'S GOVERNMENT
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Printed for the Cabinet. March 1946Page 382 of 488
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SECRET
C.P. (49) 65
15th March, 1949
Copy No.31
CABINET
SALE OF H.M.S.“ AJAX " TO CHILE
MEMORANDUM BY THE FIRST LORD OF THE ADMIRALTY
When, in D.O. (48) 41 of 5th July, 1948, I invited my colleagues on the Defence Committee to consider the sale of H.M.S. A jár to the Government of Chile, no firm offer had been made for the ship. I asked for agreement to negotiate the sale for a sum of approximately £710,000, inclusive of stores and refit..
2. On 21st July, 1948, the Committee agreed (D.O. (48) 12th Meeting, Minuite 4) that the proposal should be reconsidered in the near future (because it was then hoped that a new situation in the Antarctic would shortly eliminate some of the objections that had been raised by the Opposition in the House of Commons the previous day (Hansard, 20th July, 1948, columns 361-364)). This proved impracticable because the political situation did not clarify quickly enough and also for the reasons explained below.
3. It became clear that the work of refitting the ship could not be undertaken in the Royal Dockyards. Without prejudice to the eventual decision of the Government, the Chilean Naval Attaché was therefore informed in September last that the ship would have to be sold "as she lies"; that the Chilean Govern- ment would have to make arrangements for the refit themselves, either in this country or elsewhere; and that the refit could not be expected to take less than two years or to cost less than £500,000. The sale price of the ship under this arrange- ment was put (after correspondence with the Treasury) at £200,000.
4. On the Chilean side, a rather complex situation arose. Discussion of the purchase of H.M.S. Ajax was to have taken a décisive step forward in the latter part of October 1948, but a serious financial scandal in the Ministry of Marine caused this to be postponed. During November and December, however, the Chilean Naval authorities succeeded in persuading their Government to instruct their Ambassador in London to ask His Majesty's Government "whether they will sell the ship or not the reason for this form of approach was an under- standable reluctance to waste time and money on survey of the ship, and prepara- tion of estimates for refit, if the projected sale were eventually to be cancelled by His Majesty's Government.
5. Further consideration of the matter in London was deferred while experi- ence could be gained of Chilean Naval activities in the Antarctic during the current season. As the Chileans appear to be honouring satisfactorily their agreement not to make "demonstrations," the way now seems clear for at least a decision whether to sell the ship or not-a decision which cannot, I consider, reasonably be delayed any longer.
6. The arguments in favour of this sale appear to me to be as follows.
7. First, in the words I used last July (D.O. (48) 41, paragraph 4 (a)) "our relations with the Chilean Navy are uniformly good. My colleagues are probably aware that the small Chilean Navy is patterned on the Royal Navy; we have had a friendly interest in the Chilean Navy for over a hundred years and would wish this interest to continue. Nothing could affect these relations more favourably than the transfer of such an historic warship, particularly as the victory for which she is mosprenowged tool place in South American watersp'agThis Nafalson- nection has been allowed considerable weight in the past. After the First World
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War, when the pro-German tendencies of the Chilean Government were, poli- ticallyga 3 grefsgious objection than the Antartic trouble is to-day, His Majesty's Government nevertheless offered to sell to Chile two of the battle cruisers, in addition to the battleship and destroyers which were bought by that country in substitution for warships under construction for them here in 1914.
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8. Second, from the economic point of view, the "dollar-earning capacity” of H.M.S. Ajax is not limited to the £200,000 that may be paid for her as she lies." It is virtually impossible for Chile to have her refitted outside the United Kingdom for her passage into the Pacific, and every indication of Chilean intentions in this matter points to a British firm. The initial refit may well cost £million. Again, the sale of stores for dollars to the value of £4 million is an important consideration. Finally, the sale of H.M.S. Ajax to Chile must mean a continuing demand here for spares and services, all of which will be paid for in hard currency.
9. The arguments that could be brought to bear against the sale are also twofold.
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10. First, the strategic importance of the Chilean Navy is admittedly almost negligible to us in peace or in war. On the other hand, the maintenance of British influence in that service is of potential value in respect of possible future orders for warships or Naval material. This factor is the more significant since the Chilean Government are under continual temptation to accept United States guidance and help, rather than British-a temptation which, however, they appear determined to resist so long as they can. This has very recently been confirmed by our Ambassador (Santiago telegrams Nos. 58, 59 and 61 of 21st and 23rd February, 1949).
11. Second, although the Chileans have shown some restraint in the Antarctic this summer," they are still in occupation of British territory. (This, however, is territory in respect of which American proposals for some form of internationalisation have already been accepted by Ministers as a satisfactory basis for discussion. While the sale of H.M.S. Ajax to Chile would, of course, be no condonement or encouragement of any illegalities in the Antarctic, a public refusal to sell the ship-which could only be based on a supposed connection between this transaction and Antarctic policy-might cause a worsening of Anglo-Chilean relations and consequently increase the difficulty of reaching a reasonable solution of outstanding differences.)
12. The question has to be decided in the light of the fact that in answer to a public announcement that H.M.S. Ajax is to be sold to Chile, the Opposition in the House of Commons will undoubtedly revert to the line taken in the Adjourn- ment Debate on 20th July, 1948 (Hansard, columns 361 and following), which is substantially the argument which I have dealt with in the preceding paragraph, namely, the impropriety of selling a famous British warship to a foreign Power which is "illegally in occupation of British territory.' As indicated, I consider that there is a sound answer to this line of argument, but it is apparent that there is quite strong feeling in the matter in both Houses; moreover, when the subject was mentioned again in Parliament as recently as the Debate in the House of Commons on the Navy Estimates on 8th March, there was evidence that this feeling existed not only on the Opposition side but among Government supporters too.
13.
I invite my colleagues therefore to consider, in the light of the possible political difficulty here at home, whether the balance of advantage lies in selling H.M.S. Ajax to the Chilean Government. It will, of course, be understood that the vessel will be scrapped if not sold.
Admiralty, S.W. 1,
15th March, 1949.
H.