Economic warfare and the northern neutrals
As the British, French and German armies became deadlocked on the western front, both the Entente and the Central Powers were forced to contemplate the prospect of a protracted war and turned increasing attention to means of exerting economic pressure on the enemy. The crisis of August 1914 had shown that none of the belligerents had any immediate interest in drawing the Scandinavian countries into the war. They now had to ensure that, as neutrals, the Scandinavian countries gave the greatest possible assistance to their own war effort and the least possible assistance to the enemy's. The 'adjacent neutrals' - Holland, Denmark, Sweden and Norway - were important to both Britain and Germany as sources of supply, but to Germany and Russia alone as a transit route for goods from overseas. Technically, Britain never mounted an 'effective blockade' of Germany as defined by international law. The Royal Navy was unable to approach close enough to impose a close blockade of the German North Sea ports, though the few submarines that managed to work their way through the Sound and thereafter operated from Russian bases did significant damage to German trade in the Baltic. It was capable, however, of mounting a 'distant blockade' since it controlled the sea routes by which commodities reached Germany through neighbouring neutral states. Britain's task was to ensure its own requirements, while at the same time cutting off the transit trade in contraband to Germany.
Britain had the capacity to exert enormous pressure on the neutrals. All were dependent to varying degrees - Sweden least, Norway most - on imports of food, fodder, raw materials and fuels: above all coal, of which Great Britain was by far the most important supplier. Britain also had much more immediate access than Germany to overseas sources from which to supply its own needs, thanks to the geographical location of the British Isles and the Royal Navy's command of the seas, as well as possession of a world-wide empire and financial resources sufficient - for a time at least - to fund extensive purchases in the United States. However, there were still powerful reasons to keep on good terms with the Scandinavian countries. Many Scandinavian products on which Britain relied could not be replaced easily from overseas sources, and shipping costs would increase if goods were taken from further afield.
Britain also had to worry about Scandinavian political sympathies.
The precarious balance between exerting the maximum pressure on
Germany and conciliating neutral interests was highlighted by
Grey when he spoke to officials of the new Contraband Department
at the Foreign Office in November 1914. After emphasising 'the
vital importance of our relations with America', Grey continued:
He said that our position with Sweden was particularly delicate
since, with Archangel closed by ice, the only means of getting
munitions to Russia was in transit across Sweden, the Russian
government besides was very restive and apprehensive as to Swedish
intentions, and we ourselves depended on Sweden, he was told by
Mr. Runciman [the President of the Board of Trade], for pit-props
and iron-ore, and on Holland and Denmark for margarine and other
supplies which had become very important. The object of our policy
must of course be to cripple the enemy; but if, by a cast-iron
insistence on our maximum claims, we exasperated those neutrals
on whose goodwill we and our Allies were dependent we should simply
lose the war. He wished the department to seek to oil the wheels
of diplomacy in every possible way and to try to establish friendly
relations with neutral traders themselves.
Between 1914 and 1916 Britain's blockade measures were steadily intensified. Although the first contraband lists, issued on 4 August 1914, corresponded closely to the provisions of the Declaration of London, an order in council of 20 August declared foodstuffs to be contraband and applied the doctrine of continous voyage to conditional contraband. The latter could be seized, in other words, even if it was being carried in a neutral ship to a neutral port. By 29 October most of Germany's raw material requirements had been transferred from the conditional to the absolute contraband list. Britain also adopted new methods of inspection. When merchant vessels were intercepted they were not inspected in the open sea but were taken into a British harbour, where they could be detained indefinitely. On 2 November the Admiralty declared the whole of the North Sea a military area and required that all ships heading for Norway, the Baltic, Denmark and Holland must not go to the north of Scotland but proceed through the Channel and along the east coast of England - where they would, of course, be much more readily subject to British naval controls.
In order to reduce friction with neutral states and to achieve a more systematic control of German trade, Britain moved in the autumn of 1914 towards the idea of negotiating war trade agreements with neutral governments. The most urgent priority was to reach agreement with the two neutrals which actually bordered on German territory - Holland and Denmark - through which most of Germany's transit trade was conducted. In this context the agreement concluded between the British government and a group of Dutch merchants, the Netherlands Overseas Trust (NOT) on 26 December 1914 was of great significance. The Dutch government, under intense German pressure, refused to compromise its neutrality by entering into an official agreement with Great Britain. It encouraged, however, the efforts of Dutch businessmen to establish an organisation which would both protect their commercial interests and provide Britain with a trustworthy guarantee against the re-export of contraband to Germany.
Britain's negotiations with with Denmark and Sweden were aimed
at reaching agreements either with groups of merchants on the
model of the NOT or with the governments themselves. In the course
of 1915 the defects of this strategy became evident. Neutral governments
could not be forced far along the path of collaboration with the
British blockade before their neutrality was compromised irretrievably.
Sweden was scarcely prepared to compromise at all. Britain thus
came to adopt a policy of dealing directly with neutral traders
and industrialists, with or without the tacit consent of the governments
concerned. At first the difficulties were not so obvious. The
fact that agreements could be reached with both Denmark (9 January
1915) and even with Sweden (8 December 1914) gave some hope that
the pattern could be repeated. Only with the intensified economic
warfare inaugurated by Germany's declaration of unrestricted submarine
warfare in February 1915 did the British authorities improvise
a new approach.
Just as the German Admiralty Staff had conducted no systematic investigation in peacetime into the possibility of waging economic warfare against Great Britain, so Germany's military authorities had made few economic preparations for a long war even though, according to Ludendorff, 'after the English naval manoeuvres of 1910-11, there were signs that England contemplated an extensive blockade'. In August 1914, however, the implications of Britain's entry into the war for Germany's economic position were immediately grasped by the industrialists Wichard von Moellendorf and Walther Rathenau. Appointed head of a new war raw materials department on 9 August, Rathenau devised a strategy for obtaining and conserving essential supplies, which included purchasing them from neutral countries. An exchange, or compensation, system was instituted by which German licenses for export were issued only in return for an undertaking that goods required by Germany would be exported from the neutral country concerned. Together with the high prices paid by German buyers, the system constituted a significant breach in the Allied blockade and one about which the British authorities had great difficulty in obtaining accurate information.
Germany's early blockade measures were more restrained than those of Great Britain. In October 1914 German patrols began to seize neutral vessels in the Baltic and take them into German ports for search, but Germany's contraband lists were not enlarged to the same extent as Britain's. Dependence on supplies from Denmark prevented the navy from attacking Denmark's trade with Britain as vigorously as it would have wished. Sweden, however, was placed under pressure, despite its pro-German sympathies, partly in order to signal German displeasure with what was regarded as an unduly accommodating attitude towards the Entente in matters of war trade; partly in order to restrict the transit trade through Sweden to Russia. Germany's main instrument of pressure was its treatment of Swedish timber exports as contraband, but by the beginning of 1915 the Germans had come to realise that this was an unwelcome burden on relations with Sweden at a sensitive time. In addition Germany was in desperate need of horses, of which Sweden was a major source of supply. In March 1915 an agreement was reached which allowed free passage of some timber to enemy countries in exchange for a large quota of Swedish horses for Germany.
The spring of 1915 saw a drastic intensification of economic warfare on the part of both Germany and the Entente. Frustrated by the faltering progress of the German and Austro-Hungarian armies on the eastern and western fronts, by the constraints of a largely defensive naval strategy and by the growing effectiveness of British economic pressure, Germany proclaimed a policy of unrestricted submarine warfare on 4 February 1915. There were too few submarines to make the threat an effective deterrent to trade with the United Kingdom, and the policy was soon modified in response to neutral objections. Nevertheless, the German decision marked a new ruthlessness in the waging of war at sea. It also provided the British government with a pretext for going far beyond the measures adopted in the autumn. The order in council of 11 March 1915 was aimed at cutting off Germany's entire overseas trade: exports as well as imports. It abolished the distinction between contraband and non-contraband goods and led to a far more rigorous policy of intercepting and detaining neutral ships. This led to a radical reassessment of Britain's existing agreements with the adjacent neutrals. In effect Britain had to establish a rationing system by which the neutrals would be allowed to import as much as they needed for their own requirements, but which would leave no surplus to be exported to Germany. Rationing required some idea of what normal neutral imports were. If neutral governments were unable or unwilling to provide statistics, Britain would have to do the job itself: it was thus obliged in the course of 1915 to establish a comprehensive system of commercial intelligence in northern Europe. Since neutral governments were naturally unwilling to enter into agreements which favoured one of the belligerents so blatantly, Britain also had to find organisations in neutral countries with which it could do business. The task of identifying and negotiating with such bodies occupied the British blockade authorities for much of 1915.
In the case of Denmark it was possible to negotiate with two groups of manufacturers and merchants, the industrial council (Industriråd) and the merchants' society (Grosserer Societet). Although the British authorities had doubts whether they could exert adequate controls over their members, they were reassured by the commercial attaché in Copenhagen that in such a small country as Denmark everyone knew everyone else's business. After protracted negotiations an agreement was signed on 19 November 1915 by which it was established that imports certified by the two organisations would be consumed in Denmark, while a certain number of specified articles could be re-exported to Norway and Sweden, and a much smaller number to Germany. By allowing the Industriråd and the Grosserer Societet to negotiate with foreign governments, the Danish government managed to maintain a position of balance between Britain and Germany and to avoid extensive interference in Denmark's economic life of the kind established by the British legation in Norway. But there were also disadvantages with this approach. As events in 1916 were to show, the state could not ultimately evade responsibility for agreements reached with foreign powers.
In the case of Norway, the British concentrated on reaching agreements with individual large firms or traders' organisations: first with the whale oil deal concluded between De Norske Fabriker and Lever Bros in April 1915; later through the so-called Branch Agreements with groups of traders or manufacturers, beginning with the Norwegian Cotton Mills Association on 31 August 1915. By the end of the year practically the whole of the transit trade to Germany via Norway had been stopped. Such agreements led to a degree of penetration of Norwegian economic life unequalled in Denmark, let alone Sweden - a success due to Norway's greater dependence on Britain, the vigilance of the British legation and the acquiescence of the Norwegian government.
Unlike Denmark and Norway, Sweden chose openly to defy the validity
of Britain's new blockade measures. In the Anglo-Swedish negotiations
which belatedly began in Stockholm in July 1915, the chief British
negotiator, Robert Vansittart, was under pressure to avoid a breakdown
of negotiations in order to keep the transit trade open and prevent
Sweden siding still more openly with the Central Powers. The draft
agreement secured in early August 1915 was thus clearly favourable
to Sweden. In view of the military situation and strong Russian
representations that the negotiations should not be broken off,
the Foreign Office felt unable to reject the draft agreement outright.
But on 7 October the Swedes were presented with a new draft agreement
containing more severe restrictions on Swedish trade. By the autumn
the slowing of the German advance had made the military situation
seem less alarming. More importantly, the British had come to
realise that Sweden was more dependent on goods imported from
overseas than either the British or the Swedish governments had
hitherto appreciated. The Swedish bargaining position was strong,
but not strong enough. Britain had the means to make life very
difficult for Sweden if it chose.
The constraints which had hampered Britain's conduct of economic warfare in the first eighteen months of the war largely ceased to operate after the beginning of 1916. A new trading with the enemy act was passed in December 1915 to prevent British exports from reaching Germany. Partly in response to widespread criticism of the alleged leniency of the agreement with Denmark of November 1915, a Ministry of Blockade was established on 23 February 1916, with Lord Robert Cecil as the Minister in charge and Sir Eyre Crowe as Superintending Under-Secretary. In two orders in council of 30 March and 7 July 1916 the British government finally repudiated the limitations imposed by the Declaration of London. The battle of Jutland on 31 May 1916 provided further encouragement to those who wished to increase pressure on the northern neutrals, and the success of Brusilov's offensive in the east in June and July reduced the likelihood of Swedish intervention. On the other hand, the Allies failed to achieve a breakthrough at the battle of the Somme, while the intervention of Romania on the side of the Entente in August 1916 was followed in the autumn by a successful campaign by the Central Powers which brought Romania's rich supplies of agricultural produce and oil under their control.
Methods of limiting neutral trade with Germany which had emerged in the course of 1915 were extended and refined. One was the 'black list' of firms accused (not always justly) of trading with Germany - still, of course, a perfectly legitimate activity for the citizens of a neutral country. In March 1916 control of neutral shipping was further refined with the introduction of the 'navicert' system which allowed shipments from the United States to Scandinavia with the minimum of interference to the firms concerned, while ensuring that the goods they carried were not destined for the enemy. Another key means of coercion was coal. The Admiralty took the lead by refusing bunker coal to ships engaged in the iron ore traffic from Narvik, and in July 1915 the system was extended to all ships carrying goods of enemy destination or origin. Control of control for domestic consumption in the Scandinavian countries was more problematic. All were dependent on Britain as a supplier but Norway was known to have large stockpiles, too much pressure on Denmark might drive it into the German orbit, and Germany itself proved capable of replacing Britain's supplies to Sweden when these were cut back.
The most decisive change in British policy in 1916 was the decision to restrict not merely the transit trade to Germany through Scandinavian ports, but also the domestic exports of the Scandinavian countries themselves. Exports to Britain of such products as fish, eggs, butter, meat and lard had fallen sharply, while exports to Germany had risen due to high prices and the workings of the compensation system. Of course Britain had no legal right to control neutral domestic produce; but legal constraints were clearly diminishing in force, while Britain unquestionably possessed, in its control of seaborne supplies to Scandinavia, the leverage necessary to enforce a reduction in exports to Germany.
In the course of 1916 the Danish government became more directly
involved in negotiations with Great Britain and Germany when it
became clear that the merchants' organisation was dangerously
accommodating towards Britain's demands. Its promise to increase
supplies to Britain could be fulfilled only at Germany's expense
and entailed the danger of German reprisals. Scavenius was obliged
to disavow an Anglo-Danish agreement reached in March and was
then faced with the task of repairing relations with Great Britain.
It was fortunate for the Danes that in 1916 both Britain and Germany
feared enemy action against Denmark (see below). Influenced by
rumours of German action, the Foreign Office rejected the option
of coercing Denmark. When negotiations resumed in London in May
1916 the Danish negotiators eventually persuaded their British
counterparts that exports to Britain could not be restored to
the pre-1914 level, but that through raising domestic consumption
and a slight increase in bacon exports to Britain it would be
possible to reduce the amount exported to Germany. The British,
convinced that the Danes were acting in good faith and impressed
by the sinking of a ship on the Esbjerg route in late July, decided
not to insist on a written agreement. They were duly rewarded
with an increase in Danish exports to Britain in the latter half
of 1916. Denmark then had to appease Germany. The Germans wanted
Danish horses, and Scavenius was able to secure Cecil's approval
for an increased monthly quota. Denmark was thus much more successful
in maintaining its balancing act between Britain and Germany than
might have been expected at the beginning of 1916. Neither Norway
nor Sweden was to be so fortunate.
The Norwegian government became much more directly implicated than the Danish government in agreements to limit supplies of domestic products to Germany. It thus aroused German antagonism, while at the same time becoming entangled in disputes with Britain over the precise interpretation of those agreements. An agreement concluded on August 1916 secured 85 per cent of Norwegian fish exports for domestic consumption or for purchase by Great Britain at prices fixed until the end of the war, with only 15 per cent remaining available for export to Germany. The Norwegian goverment, unlike that of Denmark, had engaged itself in a deal which discriminated explicitly against one of the belligerents. Unlike Scavenius, Ihlen did not keep Germany informed of the progress of the negotiations with Britain, and even hoped to keep the existence of the agreement secret. But the Norwegians were exposed to the risk of German anger when the Germans came to hear of the agreement - as they soon did - and, by failing to consider whether Germany might be able to provide supplies for the fishing industry, deprived themselves of leverage in their negotiations with Britain.
A second agreement, aimed at cutting off Norway's exports of copper pyrites to Germany, was concluded on 30 August 1916. Its terms became the subject of misapprehensions which proved nearly catastrophic for Norway's relations with both belligerents. Germany required Norwegian pyrites not only for its copper content but also for its sulphur, which was used in the manufacture of ammunition. Through ambiguities of translation of some technical terms, the British and the Norwegians had different understandings of what categories of pyrites were subject to the export ban. Under pressure from Great Britain the Norwegian government placed an
embargo on the export of all pyrites which came came into effect on 30 October. Having gone so far to appease Britain, and especially in the light of the developing crisis with Germany on the submarine question (discussed below), Ihlen then had to do something to meet Germany's requirements. In November 1916 he allowed exports of pyrites from the German-owned Stordø mines to start again. This produced a further complaint from Findlay, but this time Ihlen refused to give way. Norway's intransigence on the copper question, together with evidence of relatively large fish exports to Germany in the autumn of 1916, led Findlay to recommend on 9 December that an ultimatum should be presented to the Norwegian government threatening drastic action, 'which might include the demand for or even the seizure of a naval base', if Norway persevered in a policy prejudicial to British interests.
As we shall see, Findlay's proposal came at a time when the British government had been actively debating for nearly two months the possibility that Norway might find itself at war with Germany. At one of its first meetings, on 12 December 1916, Lloyd George's new War Cabinet discussed the Norwegian situation. Lord Robert Cecil opposed the idea of taking such extreme measures against a country which Britain was proposing to defend, while Admiral Jellicoe, the First Sea Lord, declared that it would be impracticable to occupy a port in the face of Norwegian opposition. The Cabinet decided instead to make a strong protest, followed if necessary by economic pressure in the form of embargoes on commodities such as copper, fishing supplies and coal. On 18 December Cecil presented the Norwegian minister with two memoranda detailing Norway's alleged violations of the fish and copper agreements. On 22 December, when no reply had been received from the Norwegian government, Cecil ordered an embargo on coal exports to Norway.
The coal embargo came into operation at the beginning of January 1917, during an exceptionally cold winter, and led to widespread suffering throughout the country. The Norwegian government endeavoured to meet Britain's demands on the two main questions at issue while not going so far as to endanger relations with Germany. On fish the British were prepared to accept Norwegian assurances that although there had been certain irregularities, these would not be repeated. On pyrites, however, they would be satisfied with nothing less than a complete cessation of exports to Germany. This was more than Norway could afford to promise at first; but on 12 February 1917 Ihlen was able to convince the German minister that Norway had no choice but to comply with Britain's demands, while holding out the prospect of increased exports of hides and skins - and perhaps even fish - together with a loan of ten million kroner from the Bank of Norway. By now the German declaration of unrestricted submarine warfare had made a settlement of the dispute a matter of urgency to both Britain and Norway. On 14 February Ihlen informed the British government that Norway was prepared to ban all exports of pyrites to Germany; and on 17 February the coal embargo was lifted.
The embargo was probably the severest action undertaken by Britain
against any neutral state during the First World War. It was the
result, as Olav Riste has suggested, of a 'crisis of confidence'
between Britain and Norway: 'a situation had been created in which
each Government felt it was being deliberately misled by the other'.
The British feared that their 'grip over Norway was slipping under
German pressure - a fear which the secretive attitude of the Norwegian
Government did nothing to dispel'; the Norwegians resented being
pushed into a confrontation with Germany as a result of favouring
the Entente - a policy which, however, was evidently still not
favourable enough in British eyes. The crisis could be resolved
only when, on the one hand, Norway managed to achieve some kind
of modus vivendi with Germany and, on the other, 'the British
had achieved a more sober assessment of Norway's position'.
After the failure to conclude a war trade agreement at the end of 1915, commercial relations between Britain and Sweden were conducted on a compensation basis which at first proved satisfactory to Sweden as far as imports from Britain were concerned, but did nothing to protect it from the rigours of the British blockade as applied to imports from overseas. The Swedish government responded to the British-imposed privations with more acts of defiance but faced growing criticism from the Liberal and Social Democratic parties as well as from the business community, where the opposition was led by Marcus Wallenberg, Knut Wallenberg's half-brother. Sweden's antagonistic policy towards Britain culminated in July 1916 with the mining of the Kogrund Channel.
This narrow section of Swedish territorial waters was the means by which British submarines had been able to enter the Baltic. It was also the one remaining route by which British merchant ships trapped in the Baltic since the beginning of the war were able to make their escape. The British shipping shortage made their return a matter of urgency, and several ships got out through the Channel in June 1916. Germany then put pressure on Sweden, threatening to halt its important export trade in timber to the United Kingdom unless the channel was closed. The Swedes had refused earlier German requests but this time they complied. Grohmann suggests that Sweden had begun to contemplate mining the channel because the increased British traffic, combined with a growing number of violations of Swedish neutrality by German warships in pursuit of British ships, was placing an intolerable strain on the resources of the Swedish navy. A minefield, even though in contravention of international law and obviously favouring German interests, thus represented a genuine attempt to preserve Swedish neutrality. There seems little doubt, however, that German pressure gave the decisive push to the closure of the Kogrund Channel, which was announced on 28 July. The Allies lodged a formal complaint and diplomatic exchanges continued until October, but it became clear that they did not wish to enter into a protracted debate on the legality of Sweden's action. The question had also lost some of its urgency since several more British ships had managed to leave the Baltic before the measure came into effect. But the incident served to reinforce Allied suspicion of Sweden and coloured their attitude towards the much more important conflicts over trade which developed in the autumn.
During the summer of 1916 the full force of the British blockade was brought to bear upon Sweden for the first time. By late September the controls had become so severe, and the effects on living standards so far-reaching, that even Hammarskjöld was obliged to accept that negotiations should be begun with the Entente. However, the Swedish delegation was unprepared for the scale of the British demands revealed when it arrived in London in November 1917. In fact the British believed that their terms were quite generous. They had not demanded a halt to the iron ore trade with Germany or demanded Swedish tonnage, but they did want to prevent re-export to Germany and improved conditions for transit to Russia. Britain's resolve was strengthened by the coming to power of the Lloyd George coalition on 5 December 1916. In their reply to the British proposals, given on 7 December, the Swedish delegation went some way towards the British position, but when negotiations were resumed in January 1917 the British, far from moderating their position, constantly added new demands. Reports of the worsening economic position in Sweden - bread rationing had been introduced in December 1916 - and the growing political difficulties of the Hammarskjöld government reinforced Britain's conviction that toughness was the best policy.
The campaign of unrestricted submarine warfare launched by Germany
on 1 February 1917 added a further element of compulsion. Britain
detained all neutral ships in British ports and, with the breaking
off of diplomatic relations between the United States and Germany
on 2 February, the European neutrals were deprived of American
support. On 2 February the Swedish delegation was presented with
a draft agreement which offered no assurance of supplies of cereals
or coal in the event of German reprisals and was couched in the
form of an ultimatum: the draft must be accepted or rejected in
its entirety. 'With those words Cecil precipitated a crisis in
Sweden's foreign policy that ended only after sixteen months of
severe economic hardship for Sweden and the collapse of two Swedish
The German declaration of unrestricted submarine warfare was intended to starve Britain into surrender before America's entry into the war shifted the balance decisively in favour of the Entente. This effect was to be achieved by sinkings - which had already risen dramatically in the last months of 1916 - and by deterring neutral shipowners and sailors from sailing in the service of the Allies. For Britain, the danger was real enough: in April 1917, 25 per cent of the ships leaving British ports failed to return. Together with the Russian revolution of February 1917, the failure of the Nivelle offensive in April and the meagre achievements of the British offensives that followed, the submarine campaign contributed to a growing sense, both within and outside government circles, that the war might prove unwinnable. Fears and frustration about the wider course of the war - compounded in the autumn by the Bolshevik revolution and Germany's victory in the east - were to influence Allied policy towards the northern neutrals throughout the year.
But the submarine campaign created difficulties for Germany too: not merely because it was a gamble that was bound to fail in the long run but, more immediately, because it led to conflict with neutral states on which the German war effort remained crucially dependent. Of course there was little need to worry about neutral sensibilities if, as the navy's expert advisers claimed, Britain would be forced to sue for peace by the summer. But how much reliance could be placed on their predictions? German doubts on this score, together with skilful neutral diplomacy, led to concessions which significantly weakened the effectiveness of the U-boat campaign. In the long run Britain's introduction of convoys was to prove decisive for the failure of the campaign. As long as the outcome remained undecided, however, the attitude of the neutrals was crucial. Could sufficient numbers of shipowners and sailors be deterred from sailing in the service of the Allies? In the short term the measure was certainly effective. Neutral sailings to Great Britain came to a virtual standstill. But how long would the effect last, and how much damage might be inflicted on Germany's relations with the neutrals in the meantime?
The greatest degree of uncertainty surrounded Denmark. Sweden's pro-German sympathies were still relatively firm. Norway's attitude was clearly more suspect, but Norway was reckoned to be so dependent on imports that, as late as June 1917 (when the limitations of the campaign were already evident), the Admiralty Staff stated that it would not long survive their being cut off. It might be possible, however, to inflict significant damage on Denmark's trade with Britain. But the attempt to do so brought the Admiralty Staff into confrontation with all those elements in the German leadership who wished to maintain good relations with Denmark. They included the General Staff, the Copenhagen legation, the Wilhelmstrasse and the Chancellor himself. The U-boat campaign threatened the tacit arrangements which allowed Denmark to maintain its trade with both belligerents. Germany's own supplies were therefore as much at risk as those of Great Britain. Once again, Scavenius employed his diplomatic skill to negotiate a breach in the total blockade of the British Isles which the naval leadership was attempting to impose. By making judicious concessions, Scavenius secured German agreement to the passage of a small number of ships through the prohibited zone (Sperrgebiet) in the North Sea; then, in late February the navy reluctantly agreed to allow Danish ships to use the shorter and safer route from Bergen rather than attempt the crossing direct. Admiral Holtzendorff tried to render the agreement ineffective by ordering that Danish ships should be torpedoed once they entered the prohibited zone. But the first Danish sailings from Bergen, on 18 March, came through unscathed. By May it was becoming clear that the submarine campaign had not deterred neutral shipowners and crews from sailing to England.
In these circumstances, and especially in view of America's entry
into the war in April 1917, the German political leadership and
high command, and even to some extent the Admiralty Staff as well,
came to acknowledge that Germany must take a more conciliatory
line towards the European neutrals. Holtzendorff ordered on 7
April that Holland, Spain and Sweden should be treated 'more mildly'
in order to avoid a breach which might do further damage to Germany's
precarious economic position. The position of Denmark remained
more complicated because in the spring of 1917 both the army high
command and the naval leadership feared British action against
Norway, to which Germany might have to respond by occupying the
Jutland peninsula (see below). Moreover the navy's persistence
in attempting to stop Danish exports to Britain led to a renewed
crisis in late May. Scavenius's threat to resign as Foreign Minister
on 22 May induced a state close to panic in Brockdorff-Rantzau.
Under pressure from the Auswärtiges Amt, the navy
gave way on 7 June. By this time they must have realised that
Germany lacked the means to make the submarine threat credible.
At the beginning of June the Commander in Chief of the U-boat
flotilla was informed that only two Danish ships had been sunk
in the past two months. The Danes had reduced their stockpiles
and were fulfilling their backlog of deliveries to England. Scavenius,
for his part, had demonstrated that there was a point beyond which
he would not be moved, and that Germany must either take action
which would allow him to remain in office, or face the unforeseeable
consequences of his resignation.
The revolution of February 1917 in Russia and the entry of the United States into the war transformed relations between the Scandinavian countries and the Entente powers. With the faltering of Russia's war effort, the Allies became less interested in the transit question. Sweden was thus deprived of one of its main bargaining counters in negotiations with the West at the same time as Germany was achieving a position of preponderance in the Baltic region. When the most powerful neutral in the world became a belligerent, the European neutrals lost the moral support they had derived from American opposition to British and German methods of waging economic warfare. Allied control over their import and export trades became almost total. The first embargo on American exports, proclaimed on 9 July 1917, confirmed neutral fears that the full weight of the United States' economic power would be brought to bear upon their trade with Germany. By the summer America had served notice that it expected the neutrals to come up with proposals to serve as the basis for war trade negotiations.
Although the American embargo increased the pressure on the Scandinavian countries to negotiate, it also made them turn elsewhere for their essential supplies. One solution was to intensify the exchange of goods among the Scandinavian countries themselves. More importantly, they turned to the Central Powers. Through a series of credit agreements negotiated with Germany and Austria-Hungary between August 1917 and the end of the war, Denmark obtained supplies of coal, salt, iron and shipbuilding materials in return for increased exports of pork and butter; similar arrangements, for coal in return for iron ore, cellulose and paper, were negotiated by Sweden in March 1918. As Scavenius pointed out, the more goods Germany sold to Scandinavia, the more its influence would grow. At a time when the military outlook still looked bleak for the Allies (with the Italian defeat at Caporetto, the military collapse of Russia, and the Bolshevik revolution), there was thus pressure on both sides to reach agreements.
The negotiations between the Associated Powers and the northern neutrals were nevertheless protracted. Although a Norwegian mission led by Nansen arrived in Washington in July 1917, an agreement was not signed until 30 April 1918. The Swedish agreement was concluded a month later, on 29 May; the Danish agreement not until 18 September, within two months of the end of the war. All three agreements led to a further constriction of German imports of essential commodities, while in the case of Denmark and Sweden they also enabled the Entente to secure large quantities of shipping (an Anglo-Norwegian tonnage agreement had been signed in April 1917), of which it was in acute need. The delays were caused in part by prolonged disagreement, both within the American administration and between the United States and its allies, about the principles upon which the agreements were to be based. On the whole, the British had a better understanding than the Americans of the difficulties facing the neutrals - though this also made them less sentimental about any special virtues they might claim - while the American authorities charged with enforcing the blockade favoured the toughest possible line.
But the British also intervened on occasion to stiffen the American stance, while President Wilson repeatedly vetoed the more extreme demands of his advisers. This was partly because he was conscious of the discrepancy between the United States' former stance as a neutral and its present belligerency, partly because he believed some neutrals were more deserving than others. At an early stage he made it clear that Norway, presumably because of its shipping services to the Allies, was a special case, letting it be known on 17 July 1917 that 'he drew a distinction between shipments to Norway and other neutral countries of Europe'. Responsibility for delay also lay with the Scandinavian governments. The Scandinavian countries still had reason to fear Germany and, while the outcome of the war remained uncertain, reason to expect that military setbacks might force the Associated Powers to moderate their demands. They also had to worry about the political repercussions if they were seen to take the initiative in negotiations which would result in further hardship for their own peoples. Norway in particular was reluctant to introduce rationing, even though the Americans made it clear at an early stage that it was a precondition for an agreement.
The situation surrounding the negotiations with Sweden was the most complex of all. Sweden was more directly affected than Norway and Denmark by the changing fortunes of the war in the east. Weakened at first by the February revolution in Russia, Sweden's bargaining position with the West was subsequently greatly strengthened by Germany's defeat of Russia at the end of 1917. At the same time, however, the elimination of the Russian counterweight made Sweden more dependent on Germany. Swedish domestic politics in 1917-18 were far more volatile than those of Denmark or Norway. Hammarskjöld's admininstration had fallen in March 1917. Its successor, the weak Swartz-Lindman government, was faced in April 1917 by food riots throughout Sweden and demonstrations in Stockholm in support of the Russian revolution. With a general election pending in September, Swedish politics were dominated by the determination of the left to push through constitutional reform and the failure of the government to reach an agreement with Britain and the United States. Then, on 8 September, in the middle of the election campaign, the United States government published the 'Luxburg telegrams' - despatches from the German minister in Buenos Aires which had been sent via Swedish diplomatic channels to Berlin and intercepted by British intelligence, recommending, among other things, that Argentine ships should be 'sunk without trace'. As the British had hoped, the Luxburg affair discredited the Conservative government and contributed to their electoral defeat. On 19 October 1917 parliamentary government was finally established in Sweden with the formation of a Liberal-Social Democratic coalition, with Professor Nils Edén as Prime Minister, the socialist leader Hjalmar Branting as Finance Minister, and Johannes Hellner as Foreign Minister. Hellner, who stood for cooperation between business interests and the left, had led the negotiations with Britain in 1916-17 and was now looked on as the man who would bring about an agreement with the western powers.
The Swedish-British negotiations had been left in suspense following the presentation of Lord Robert Cecil's 'ultimatum' on 2 February 1917, but Great Britain and the United States did not arrive at a coordinated negotiating position until 8 December 1917. Disagreement centred at first on whether it was possible to achieve a complete stoppage of Swedish iron ore exports to Germany, but by November the Allied shortage of tonnage, made more acute by the need to support Italy in the aftermath of Caporetto, meant that the need to obtain shipping from Sweden had become paramount. However, by the time negotiations began in London on 13 December, the collapse of the eastern front, together with tempting German offers concerning the future of the Åland Islands, had made Sweden far less amenable to Western pressure. For a number of reasons, including the realism of the new Swedish government, the urgency of the tonnage question, and the ominous implications of German supremacy in the Baltic, all three parties worked for a speedy conclusion. A modus vivendi agreement was signed on 29 January 1918 but thereafter the negotiations ran into difficulties. The American authorities tightened their blockade policy with little regard for relations with Sweden. Meanwhile the conservative forces in Sweden became more assertive under the shelter of German military success, and the future of the Åland Islands became an increasingly contentious issue in Swedish politics. The British realised that the government needed a foreign policy success, and were instrumental in bringing about the conclusion of a draft agreement on 16 February which contained a generous figure for grain and fodder imports into Sweden in return for a reduction in ore exports of 2 million tons and 500,000 tons of shipping.
The Swedish government moved cautiously, not wishing to accept the draft agreement until it had been cleared with Germany. In April 1918 Eric Trolle, a former minister to Germany, was sent to Berlin to obtain German approval. His mission was an outstanding success. First, the Germans made it clear that they could not meet Sweden's food requirements: Sweden thus had no alternative to reaching a deal with the West. Secondly they asked for alterations which placed no obstacle in the way of an agreement. They did so, in part, because Germany had sufficient stockpiles of Swedish ore to ensure that it would not be immediately affected by a reduction in exports. By this stage, too, the German authorities had probably 'lost heart about the submarine campaign, and were admitting among themselves that it had failed'. The implications of the Swedish-German agreement of 16 April 1918 were nevertheless far-reaching. As Koblik puts it, 'by sending a delegation to Berlin, Sweden had indicated to Germany that it wished to alter formally its neutrality policy. The German acceptance of that change meant that Sweden would be free to shift its policy to a more even-handed neutrality.' The general agreement of 29 May 1918 was thus 'a decisive victory for Swedish diplomacy'. Sweden had been able to avoid American pressure of the kind that was exerted on Denmark and Norway. It had managed to adjust from a pro-German neutrality to one that was concerned 'solely with protecting the political interests of Sweden and the commercial ties Sweden had with both belligerent groups'. As we shall see, however, this new-found autonomy was immediately to be jeopardised by Sweden's entanglement in the question of the Åland Islands.
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