The Mercury Cartel and the Postwar World

In late July 1946, Mercurio Europeo, the international mercury cartel, was formally brought to life again after a three-year hiatus. The cartel had been established in 1928, but had slowly withered away during World War II, and the last meeting had been held in August 1943. Now the cartel partners were eager to once again cooperate to regulate the international markets for mercury for their common good. In general, a cartel is a voluntary, private contractual arrangement among independent enterprises to regulate the market.Footnote ¹² The aim of the mercury cartel had been to control the price of the product by governing the output of the producers and by allocating markets between the cartel members. The cartel consisted of two partners: the Spanish Minas de Almadén y Arrayanes (hereafter Almadén) and an Italian group of three mercury-mining companies, dominated by Monte Amiata. The Italian junior partners in the cartel were Siele and Società Mercurifera Italiana. Almadén was a wholly owned state enterprise, while Monte Amiata was controlled by its majority owner, Istituto per la Ricostruzione Industriale (IRI), a state holding company. Accordingly, this cartel, although a private contractual arrangement between two producer groups, was fused with national politics, as the Spanish and Italian states controlled the main cartel participants.

The cartel was important for a number of reasons, not least because mercury was a vital component in a wide range of specialized metallurgical, electrical, and electrochemical products, many of which had military applications: pressure-sensing devices, navigational equipment, seals, valves, infrared sensors, semiconductors, security sensors, fulminate for munitions and blasting caps, catalysts in the manufacture of materials for chemical warfare, and from 1944 onward, dry-cell batteries.Footnote ¹³ Mercury was by all accepted standards a strategic material, and it was included on the list of strategic raw materials set up by the U.S. authorities in 1920, 1940, and 1953.Footnote ¹⁴

The political nature of mercury is thus evident at two levels. First, state interests dominated the domestic industries in both Spain and Italy, and the two countries could therefore use the cartel as an additional arena to interact with each other. Second, given that mercury could only be found a few places in the world and was needed for a number of different products with military applications, it was an attractive export product that gave the producer countries access to sorely needed hard foreign currency and, as we will see, also opened the door to using this material for political gains.

Monte Amiata was the main driver behind the first cartel agreement. In fact, the Italian producer had approached Almadén on a number of occasions from 1905 onward to create a cartel, until the Italian company finally succeeded in convincing the Spanish company of the advantages of the proposal.Footnote ¹⁵ The reason why Monte Amiata was so eager to sign an agreement with its largest competitor was that the Italian mercury was of a lower grade than the Spanish, and the operating costs of the Italian producers were higher than those of Almadén. The Italian producers had much to gain from an agreement that stabilized prices at a high level and divided the market between the two producer countries. In the original agreement of 1928, the Spanish and Italian groups set up a cartel office in Lausanne, Switzerland. Yet the cartel proved to be rather disappointing to the members during the first few years, mostly because of the general international economic situation, but also partly because the producers had offloaded all their stocks to trading companies just before creating the cartel. The traders got their hands on about one year of normal world consumption of mercury and subsequently went on to undersell the cartel, with the result that the Spanish and Italian producers were outcompeted by their own production. The Great Depression only augmented the problem, and after several years of very low demand for mercury, the majority of Monte Amiata’s shares in 1933 were taken over by the Italian State through IRI.Footnote ¹⁶

The cartel continued to operate through the Spanish civil war, even though the mines remained under the control of the Spanish Republican government until nearly the end of the conflict. After Franco had taken control in Spain, the cartel agreement was renegotiated, and Italy received a larger share of the market. This agreement accurately reflected the new status of bilateral relations once the civil war in Spain was over: Mussolini was willing to make political concessions to the Francoist regime in exchange for economic benefits that would consolidate the Italian companies operating in Spain. After the outbreak of World War II, the cartel partners continued to meet regularly in Switzerland until August 1943, when the Mussolini regime collapsed, and the instability of the Italian situation led the authorities in Madrid to suspend most economic operations between the two countries.Footnote ¹⁷

Representatives of the Italian and the Spanish mercury producers had already convened in Madrid in the summer of 1945. They knew that the war had changed the industry. Before 1939, they had dominated the markets, but the wartime demand for the material and the disruption of regular market channels had created the opportunities for new entrants into the industry. This was especially perceptible in the United States, where mercury production during the war years increased impressively as a number of new mines came on stream to replace the loss of supplies from Italy and Spain (see Figure 1). Mexican output also grew rapidly during the war, especially after the United States signed an agreement with the Mexican government in July 1941 to purchase the greater part of Mexican mercury.Footnote ¹⁸ The European producers were therefore eager to find a modus operandi with their North American competitors, and they discussed the possibility of establishing an agreement with the U.S. producers. The Spanish group had plans to go to the United States to investigate the markets, talk with U.S. mercury-mining companies, and find a selling agent, and they invited the Italians to tag along.Footnote ¹⁹

Figure 1 World mercury production 1930–1955 in tonnes.

Source: Schmitz, World Non-ferrous Metal Production and Prices, 1700–1976, pp. 131–133.

Although the two groups met in Madrid to discuss market regulation, the meeting was in reality about far more than mercury prices and market shares. During World War II, Franco’s Spain had been a nonbelligerent, but ideologically the regime sided with Nazi Germany. Well aware of the potential difficulties that an Axis defeat in the war could create for the Francoist regime, authorities in Madrid had already begun work to improve its relations with the Western powers in 1943. However, the success of the political reorientation was rather limited. In the immediate aftermath of the war, Spain was treated as an international outcast by the allied victors, and the country was kept out of important international institutions. In March 1946, the U.S. government, in a joint statement with France and the United Kingdom, condemned the Spanish regime and declared that as long as Franco was in power, they could not have cordial relations with Spain. In December 1946, the UN General Assembly passed a resolution urging the withdrawal of all members’ ambassadors from Spain.Footnote ²⁰ Furthermore, Spain was the only Western European power not allowed to join the Organization of European Economic Cooperation (OEEC) when it was established in April 1948.Footnote ²¹

While the Western powers shunned Spain after the war, its Mediterranean neighbor was seen as a potential exception. At the beginning of 1945, Spanish diplomats identified the young Italian democracy as one of the few European countries with which it was possible to have normal diplomatic relations.Footnote ²² From that moment onward, the improvement of diplomatic relations with the Kingdom of Italy would become one of the main priorities of the postwar Spanish foreign policy.Footnote ²³ In that juncture, the fostering of economic relations (including the possible revival of the mercury cartel) appeared as a perfect vehicle for establishing friendly relations with Italy.Footnote ²⁴

For the diplomats in the Kingdom of Italy, revitalizing relations with Spain was also of paramount importance. Already in the autumn of 1943, the Badoglio government had realized that the position of neutral states like Spain was crucial to recover part of its sovereignty lost with the signing of the armistice with the Allies. That is why the Italian Kingdom hurried to appoint a new ambassador to Spain during the summer of 1944 in an attempt to normalize diplomatic relations between the two countries. Specifically, the authorities in Rome decided to send to Madrid one of the main exponents of the Italian Catholic world, Tommaso Gallarati Scotti, thus evidencing the seriousness of the Italian plans concerning Franco’s Spain.Footnote ²⁵

With the end of World War II, the new Italian government decided to keep the policy toward the Francoist regime unaltered. Even though political cooperation was not contemplated as an option, both the Parri and the De Gasperi governments understood that the country still had important interests in Spain that needed to be defended and, if possible, fostered. Let us not forget that, before the signing of the Peace Treaty in February 1947, Italy had a weak international position as a defeated country.Footnote ²⁶ Accordingly, if the authorities in Rome wanted to regain the prestige lost during the war and again play a significant role in the international sphere, it was necessary to mobilize all assets at their disposal, even if this involved maintaining diplomatic relations with a dictatorship like Franco’s. Ultimately, the main factor behind this general policy was the fostering of industrial cooperation as a way to ensure that the Italian companies, much more advanced technologically, would eventually benefit from the process of modernization that Spain would have to undergo sooner or later. This conjunction of interests between Madrid and Rome materialized through the January 1946 commercial agreement, which inaugurated a new phase in the bilateral relationship.Footnote ²⁷

The two mining groups took advantage of this positive political climate between Madrid and Rome. After a number of preparatory meetings held in Zürich during the summer of 1946, a new cartel agreement was finally signed in July. In the agreement, Spain regained the part of the cartel quota that it had lost in 1939. The cartel appointed different selling agents for all the important international mercury markets. In the United States, the two groups trod very carefully, but in the end chose to appoint Philipp Brothers of New York as their agent, not the least because this agency would use a London-registered company to carry out the sales in the United States, which meant that Washington would avoid having direct dealings with the cartel.Footnote ²⁸

The cartel partners had every reason to be careful in their U.S. operations. The Truman administration had from the outset shown a general hostility toward cartels, and in June 1946, the U.S. government sent official notes to the Italian and Spanish ministries of foreign affairs to express its concern about a possible reconstitution of the mercury cartel. The note combined a powerful mix of anti-cartel ideology and domestic regional politics: the U.S. authorities argued that if the cartel was reconstituted and this led to a period of lower prices, it would jeopardize the future of the U.S. mercury producers. At the time, there were 146 mercury mines operating in the United States, 14 of which were defined as large mines.Footnote ²⁹ Although these mines did not produce as much quality mercury as their Spanish and Italian counterparts, and at greater expense, they were very important to the economy of the western part of the country and were supported by a powerful mining lobby.Footnote ³⁰

It is only natural that the U.S. mercury producers should worry about the potential for a dumping price policy by the cartel. The mercury deposits in the United States were of a significantly lower quality than the European deposits, and production could only be increased in tandem with operating costs. In 1933 the average production cost for U.S. mercury producers was $59.48 per flask, by 1943 the operating costs had increased to $192 per flask. At the same time, Spain and Italy were cutting their production costs.Footnote ³¹ According to the Spanish ambassador in Rome, the Italian Monte Amiata had managed to reduce the production costs by $100 per flask during 1945. Sangróniz found this particularly impressive, considering the damages suffered by the Italian mercury mines during the war.Footnote ³²

The U.S. démarche provoked serious concerns in Madrid and Rome, to the extent that the countries issued a joint memorandum in an attempt to reassure the U.S. government. The aim of the document was to convey three main ideas. First, the recent agreement signed between the two parties did not reconstitute the cartel, because it had never ceased to exist since its foundation in 1928. Second, the goal of the cartel was neither to compress the markets nor to tamper with the price, but to “frustrate the manoeuvres conducted by big speculators who, before 1928, obtained enormous and unfair amounts of money out of the mercury commerce, thus damaging both the companies and the consumers.” Precisely because of that, and this was the third idea, the cartel did not work as a proper cartel but as a mere sales office. In this way, mercury was not sold by the cartel itself, but through different representatives around the world who had been chosen after a public tender. Accordingly, the producers argued rather ingeniously, the mercury prices were not established by the cartel, but by the representatives and the buyers.Footnote ³³ The arguments put forward by Mercurio Europeo did not convince the U.S. government about the great benefits of the cartel, but Washington did not take any immediate steps against it.

In all truth, the cartel partners did not need the U.S. government to create difficulties for them, they were able to do that perfectly well on their own. The first years after the re-formation of the cartel were ripe with tensions, mistrust, and examples of miscommunication. But the biggest problem that the cartel had to face in this period was to fix a price that would benefit producers in both countries. Throughout 1946, the Spanish group complained repeatedly that the Italian independent mercury producers (the mercury mines not controlled by the Italian state) undercut the official cartel prices, especially on the U.S. market. The first serious complaint had already been issued by Minister Artajo himself on January 15, 1946.Footnote ³⁴ In cartel meetings, the Spanish representatives backed up their claims with reports from different journals and from news agencies. Exasperated by the Italian practice, the Almadén representatives threatened to disband the cartel if the practice did not end.Footnote ³⁵

At the same time, the demand for mercury on the world market during 1947 and 1948 was very weak, and the cartel, after hefty internal debates, lowered the official selling price. During the war, the price of mercury had often fluctuated around $200–$250 per flask, but by 1948 it was down to $76 (for price developments see Figure 2). By the end of 1948, nearly all the mercury mines in the United States and Mexico had been forced to close down because of the low prices. The Idria mines, which after World War II had become a part of Yugoslavia, did not export to the Western world in this period, which meant that the cartel had little competition (see Figure 1).Footnote ³⁶

Figure 2 Average price per flask in U.S. dollars, New York, 1940–1954.

Source: Bureau of Mines, Minerals Yearbook, 1945–1954.

The low mercury prices from 1947 onward created a new backlash against the cartel in the United States, where the mining lobby argued that the Spanish–Italian cartel had succeeded in eliminating outside competition by deliberately depressing the price of mercury to a point that no other producers in the Western world could compete.Footnote ³⁷ In a number of articles accusing the “ruthless” Spanish–Italian cartel of putting U.S. mercury mines out of business, U.S. mining interests argued that there was a Spanish–Italian intrigue or master plan by which the “cartel was selling its product in this country at an artificially low price in order to eliminate American competition.”Footnote ³⁸

The Italian and Spanish producers were aware that a low-price policy could force competitors out of the industry, something the Spanish group was especially eager to do. The Spanish representatives in the cartel wanted to utilize Almadén’s lower production cost to create demand through lower prices, while the Italian group argued that they would lose money if they dropped the price. The Italians also feared that lower prices on the U.S. market would lead to the cartel being prosecuted for breaking the U.S. antidumping law. These fears were exemplified in an article published in 1947 by the prestigious Italian financial newspaper Il Globo, which acted as an unofficial mouthpiece for the Italian businessmen linked to the Christian Democrats. In this article, the author wondered about the convenience of continuing to lower the mercury prices and warned about a possible U.S. reaction. In particular, the author feared that if the cartel did not change its price policy, Washington could be tempted to raise the import tariffs, which at the time were at $19.25 per flask. This increase in the import tariffs could be, according to said article, detrimental to the interests of the Spanish–Italian cartel, which at the time was selling, through local agents, at the prize of $60 FOB per flask. The author of the article is unknown, although it is said that it came from a source in Washington. A copy of the article can be found in a letter sent by Sangróniz to Artajo on October 27, 1947,Footnote ³⁹ thus showing that the Italian warning had reached the highest echelons of the Francoist regime. The article constituted an open warning to the Spanish group, but the latter dismissed it by arguing that because the company was government owned, it could not risk breaking any U.S. laws.Footnote ⁴⁰

During 1948 and 1949, the cartel partners struggled with two interlinked questions: the behavior of the smaller privately owned Italian mercury mines on the U.S. market and the challenges of finding a sales representative for the cartel in the United States. In meeting after meeting, the Spanish group complained that the smaller Italian producers were undercutting the official sales price, and while the Italian group promised to take the matter up with the free riders, the practice continued. The Spanish group also complained regularly that they did not receive full reports of how much mercury the different Italian producers had exported in 1947 and 1948, making it impossible to know whether or not the participants had respected the quotas that they were allocated in the cartel contract.

The problem was that even though the Italian group wanted to keep a higher price than the Spanish group desired, they obviously still wanted to maintain freedom to maneuver for their smaller producers, thus undercutting the effectiveness and cohesion of the cartel. The price policy was also the main factor behind the cartel’s problem with its U.S. agent Philipp Brothers. The U.S. trading company insisted that the prices should be lowered significantly, and the contract with the cartel was terminated when the producers refused. Instead Mercurio Europeo negotiated with a competing metal trader, Grace & Co. Yet, Grace & Co. eventually withdrew from the negotiations, arguing fears of the U.S. antitrust regulations.Footnote ⁴¹ Being the exclusive agent of a cartel was obviously not without its problems in a country where cartels were illegal. However, the problem with agents and (relatively) small-scale cheating paled compared with the challenge that the cartel was confronted with in the spring of 1949.

The Cartel Breakdown

In April 1949, the fortunes of the cartel thoroughly changed when representatives of the U.S. government approached both the Spanish and the Italian groups for the delivery of eighty thousand flasks of mercury. This was a huge order, nearly as high as the total annual output of the two groups combined, aimed at fulfilling the U.S. stockpiling program for mercury. At the same time, though, this was not an unusual practice in Washington. After the close of World War II, large quantities of mercury had been held by the government as war surplus. These holdings were transferred to the permanent stockpile under the Strategic and Critical Materials Stock Piling Act approved on July 23, 1946. The 1946 law became the basis for building up a large stockpile of strategic and critical materials.Footnote ⁴² In a public report dated July 23, 1948, the Munitions Board, which administered the stockpile, listed mercury among Group A materials, that is, those for which stockpiling could insure adequate supply for a future emergency. Subsequently, various additions were made to the inventory, which would culminate with this proposed operation with Mercurio Europeo.Footnote ⁴³

The U.S. order was connected to the implementation of the Marshall Plan in Europe, under the provisions of the Economic Cooperation Act of 1948, to assure adequate supplies of mercury for both military and essential civil use in case of national emergency. Nevertheless, it is also possible to advance an ulterior motive for the operation. It should be noted that in May 1947, the cartel had received an order from the Soviet Union for twenty thousand flasks that was never fulfilled.Footnote ⁴⁴ In 1948, during the Italian–Soviet negotiations for Italian war reparations, the Soviet negotiators asked for mercury to be included among the goods the Italian state should provide. According to Segreto, this worried U.S. authorities.Footnote ⁴⁵ Although there are no definitive archival sources on this, it seems reasonable to assume that, by making a huge purchase of European mercury, the U.S. government would make sure that this strategic material would not end up behind the Iron Curtain. This strategy was typical in the stockpiling programs created and implemented by the Truman administration, as Mats Ingulstad has shown.Footnote ⁴⁶

The cartel dealt with the initial request from the U.S. authorities in accordance with the internal cartel regulations. In cartel meetings, the two partners decided to offer one hundred thousand flasks to the U.S. authorities and split the order according to the existing cartel quotas.Footnote ⁴⁷ However, the Italian group soon broke ranks. In April 1949, Giovanni Montagna, the president of the government-owned Monte Amiata entered in agreement with Joseph Zellerbach, representative of the ECA, the agency set up to administer the Marshall Plan, for the sale of eighty thousand flasks of mercury from Italy to the U.S. government stockpile. Sixty-thousand flasks were to be delivered from Monte Amiata, the other twenty thousand were divided between the smaller Italian producers. The purchase would be paid for by the counterpart funds of the ECA.Footnote ⁴⁸

This blatant breach of contract (and trust) might appear surprising. After all, why would the Italians take the risk of antagonizing their Spanish partner on account of one operation, even if it was a substantial one? Unfortunately, there are no archival records elucidating the reasons behind Monte Amiata’s deal with the U.S. government. However, it is possible to better understand this arrangement if one places it in the international context of the time, especially in light of Italy’s stronger international role. By the spring of 1949, Italy was already a member of the OEEC, the Council of Europe, and the Atlantic Pact, whereas Spain had been excluded from most international institutions. It is therefore plausible to posit that the Italian officials overplayed their hand in the belief that, because of the country’s regained international prestige and closer ties with the United States (in the framework of the ECA), they would be able to keep their Spanish partner in the dark.Footnote ⁴⁹ In fact, during the next cartel meeting in June 1949, the Italian group did not reveal that an agreement had been made with the ECA. Instead, Montagna told his Spanish partners that he had submitted a bid to ECA in the name of Mercurio Europeo, but that the deadline to answer the offer, which the cartel had set for fifteen days, was not enough for a government agency. However, there were some indications that something was going on, as the Italian secretary of the cartel, who had been a principal member of all cartel meetings since the late 1930s, was unable to attend the encounter, because he was away in the United States on a question related to his newly appointed role as the Italian government’s mining expert for the execution of the Marshall Plan. Of course, the Italian representative in the meeting assured the Spanish group that this absence was unrelated to the business of Mercurio Europeo.Footnote ⁵⁰

The Italian plan seems to have been to try to keep the agreement under wraps, with the hope that it would not come to the notice of their Spanish partners. Consequently, the Italian authorities requested that the U.S. authorities keep the transfer secret in order not to jeopardize the future of the cartel. The petition was immediately rejected by the U.S. authorities for two main reasons. On one hand, the U.S. authorities argued that the secrecy of the operation “presumably would only serve to protect the inviolability of the cartel agreement,” which was clearly harming the interests of American producers. And on the other hand, this request was “contrary to the U.S. foreign economic policy,” which aimed at maximum transparency.Footnote ⁵¹ Accordingly, the U.S. government decided not only to refuse the Italian request for secrecy, but also to advertise the deal in an official bulletin, as well as in financial newspapers. After all, why would the Americans do anything to help a cartel that was harming so many of their interests? At the end of World War II, there had been 146 active mercury mines in the United States, by mid-1948 that number was down to two, and one of these would close in July 1948. Of course, it was unrealistic to think that the dissolution of the Spanish–Italian cartel would reactivate this sector of the U.S. economy, but it is easy to understand why Washington did everything it could to harm a partnership that was perceived to have had such a negative impact on the U.S. quicksilver producers.Footnote ⁵²

Before the next cartel meeting could take place in Zürich, barely a month later, the news was already out. Consequently, the meeting turned out to be a very tense affair. The Spanish representatives started the encounter with a straightforward j’accuse, claiming that the U.S. media had published information based on official reports that forty-five thousand flasks of Italian mercury had been unloaded in Philadelphia. When the Almadén company found out, they immediately telegraphed Rome to ask for an explanation from their Italian colleagues, but none had been forthcoming. The Italian representatives answered that they did not respond because they waited for this reunion. Montagna claimed, rather deceitfully, that the Italian producers had only learned about this affair from foreign newspapers. The delivery had not been made by the Italian mines, but by the Italian government as part of a wider operation in connection with the Marshall Plan. The Italian government had made an official statement to the Spanish government about this, and the Italian representatives claimed that these deliveries were outside the regulations of the cartel agreement. Not surprisingly, the explanations given by the Italian group did not convince the Spanish delegation, who decided to break off the meeting with the parting message that they reserved the option to exercise their rights in this affair.Footnote ⁵³

What this meant soon became clear, as the Spanish group took steps to end the cartel contract with the Italian group in August 1949 effective from January 1950. The Almadén directors also initiated a lawsuit in the Italian court system against the Italian producers to sue them for reparations for breaking the terms of the cartel agreement. The Spanish reaction seems to have taken the Italian producers by surprise, and they tried to maintain business as usual. In November and December 1949, the Italian group repeatedly tried to engage Almadén in discussions about how much the Spanish group had exported during the year, with the aim of establishing the size of cartel quotas, but the Spanish representatives pointed to the fact that the cartel was over and that they would not respond to this question until the issue of the Italian deception had been settled.Footnote ⁵⁴

While Monte Amiata tried to patch things up again, the Spanish group made plans for a post-cartel existence. In late November 1949, the Spanish Ministry of Finance gave the order to set up a new sales committee for Almadén that would take over the responsibilities from the Spanish committee of Mercurio Europeo. This new committee would also be responsible for pursuing the liquidation of the cartel contract and the question of reparations for the breach of the agreement. The committee quickly took steps to set up a new commercial organization by entering into contracts with the former sales agents for the cartel to market Almadén’s mercury in different markets. According to these contracts, the agents would not be allowed to deal in Italian mercury, thus leaving the Italian producers without agents in all the main markets.Footnote ⁵⁵

The Almadén company also stepped up its sales activity by starting a price war with the Italians. By lowering the prices, the Spanish group made important sales both to the U.S. trading company Philipp Brothers (a total amount of seven thousand flasks) and to the British Imperial Chemical Industries (twenty thousand flasks).Footnote ⁵⁶ The source material from Almadén also implies that the company sold forty thousand flasks of mercury to the Soviet Union through an unnamed Swiss trading company in 1950, but it is difficult to ascertain whether this politically explosive deal went through.Footnote ⁵⁷

Living Without the Cartel

The Mercurio Europeo debacle came at a difficult time in Spanish–Italian relations. Even though both countries had managed to establish friendly relations after the end of World War II, the atmosphere started to deteriorate at the end of 1946, when the Italian authorities decided to follow the UN condemnatory resolution against the Francoist regime and withdrew the country’s ambassador from Madrid. Although the departure of the Italian ambassador did not alter the essence of the relationship, it created a feeling of unease among the Spanish authorities who had expected a friendlier gesture from a country that was not even a part of the United Nations. And while Madrid and Rome managed to momentarily patch up their differences and in 1947 signed a new commercial agreement, diplomatic relations continued to erode, reaching their lowest point during the spring and summer of 1948.Footnote ⁵⁸

The Italian group was determined to utilize all existing channels to try to repair the cartel. Because this was an issue in which the economic aspects were deeply entangled with the political dimension, it should be addressed accordingly. As the impasse showed, it was almost impossible to negotiate with the Spanish competitor without making a gesture of goodwill toward the Francoist regime. It was thus necessary to involve the Italian government in the negotiations; only the Italian authorities could bargain with their Spanish counterpart in the context of an improvement in the bilateral relations. Accordingly, from December 1949 until 1954, the Italian government launched a series of diplomatic initiatives aimed at the settlement of the legal dispute and the eventual resurrection of Mercurio Europeo. Those included the sending of diplomatic notes to the Spanish authorities, the discussion of the topic in different meetings to address the evolution of bilateral relations, and even mediation by the highest levels of the ruling Italian Christian Democratic party.

The first peak of this strategy was reached between the months of December 1949 and March 1950. The triggering event was the visit of Minister Artajo to Rome on the occasion of the inauguration of the Holy Year. Although the main aim of the visit was to foster relations between Madrid and the Vatican, it had already been decided that the Spanish minister would also meet with some of members of the De Gasperi government. Montagna, the president of Monte Amiata, seized the opportunity and sent a letter to De Gasperi’s right-hand man, Giulio Andreotti, asking him to mediate with Artajo in favor of the resumption of the cartel.Footnote ⁵⁹ Andreotti accepted the mission, but his attempts failed, mainly because Artajo had been instructed by the minister of the treasury, Joaquin Benjumea, to avoid any formal arrangements if the topic was raised.Footnote ⁶⁰ It was clear that the Spanish authorities were not ready yet to find a solution to the mercury dispute.

The Italian authorities then raised the stakes by directly involving the Italian minister of foreign affairs, Carlo Sforza, in the negotiations. On February 15, 1950, Sforza, sent an official letter to his Spanish colleague, Alberto Martín Artajo. This letter is very important for two main reasons. First, because Sforza hinted that, in case this problem was satisfactorily solved, Italy was willing to consider a serious improvement in diplomatic relations between Madrid and Rome, especially in the area of industrial cooperation. And second, the letter constituted a crucial political gesture in itself, as it represented the first time since the end of World War II that an Italian minister of foreign affairs directly addressed a Spanish minister of foreign affairs. Furthermore, this letter shows the extent of the economic interests at stake for Italy in this case.Footnote ⁶¹ In fact, Carlo Sforza had since his arrival to the Palazzo Chigi been delaying the possibility of normalizing diplomatic relations with the Francoist regime in the absence of previous agreement with Britain and the United States.Footnote ⁶²

Despite Sforza’s initiative, the Spanish position remained unaltered. The rationale behind this firmness can be found in the fact that the Spanish government was not really interested in resuming the cartel, at least if the main conditions of the agreement were not modified. Being the partner with the lower production costs, the officials in Spain knew that in the long term it would be more profitable to lower the price set by the mercury cartel to remove competitors, which had been the ultimate goal of Almadén since the end of 1946. In this way, the U.S. scandal had given the Spanish party an opportunity to impose its views. As Artajo explained in his reply to Sforza’s letter, if the Italians wanted to keep the cartel alive, they had to agree to lower the price of quicksilver. If the Italians refused, Almadén had a legal excuse to end the partnership without any consequences and, free from any constraints, establish a price as it saw fit according to the rules of the free market. After all, Spanish mercury was more competitive than Italian mercury and, therefore, had more chances of victory in a price war.Footnote ⁶³

After the failure of Sforza’s démarche, the Italian authorities decided that it was better to take things slowly and give the Spanish authorities some time to reflect upon the recently altered situation. External events also contributed to delay the settlement of the dispute. Initially, the Spanish price war had driven down the prices for mercury to an all-time low, but with the outbreak of the Korean War, demand skyrocketed and prices went through the roof. The Spanish group grudgingly realized that they were only hurting themselves with their price war. After a short while, the prices for Spanish and Italian mercury started to converge, and the former cartel members were soon informally following each other’s prices. As a result of this, both parties gained considerable monopoly profits during the early 1950s.Footnote ⁶⁴ With the record prices that mercury was fetching from the last half of 1950 onward, both the Spanish and the Italian producers could sell as much mercury as they wanted, and it became less urgent to solve the cartel crisis (see Figure 2).

Nevertheless, the issue continued to be in the agenda of Monte Amiata, which decided to wait for a better moment to raise the issue again. The moment came at the beginning of 1952, when Spain and Italy started negotiations to sign a new commercial agreement. The person appointed to head those negotiations on the Italian side was Senator Cesare Merzagora. Merzagora was one of the most important figures not only in the Italian financial world, but also in Italian politics; he was also particularly well known in Spain, as he had publicly defended a pro-Spanish policy in different newspaper articles. There was little doubt that the appointment of Merzagora responded to an Italian ambitious plan that went beyond mere trade: the real goal was to sign a treaty that would lay the groundwork for future industrial cooperation, the long-term ambition of Rome’s policy toward Spain since the end of World War II.Footnote ⁶⁵

Furthermore, it is worth noting that these negotiations coincided with the period when the United States had started to change its policy toward the Francoist regime, opening the door for the concession of substantial loans and military aid to modernize the country. Although the new U.S. policy would not crystallize until September 1953 with the signing of the Pact of Madrid, Italian diplomats had been studying how to benefit from that development since 1951.Footnote ⁶⁶ In other words, officials in Rome considered that the recent improvement in U.S.–Spanish relations provided the perfect opportunity to sign a new commercial treaty that sought to accomplish three objectives: strengthen economic ties between Madrid and Rome, settle the mercury contention, and also allow the Italians to benefit from the U.S. economic and military aid that was probably forthcoming.Footnote ⁶⁷

Well aware of these circumstances, Monte Amiata asked Merzagora whether he could mediate with the Spanish authorities for a quick resumption of the cartel. The main idea would be that the Italian government took care of the bulk of the negotiations with Spain and would include the resolution of the dispute between the two mining groups within the new protocol of industrial cooperation.Footnote ⁶⁸ Merzagora agreed to the request and brought up the issue during several meetings. However, and despite the senator’s efforts, no advances were made.Footnote ⁶⁹ At the same time, though, Merzagora’s trip should not be regarded as a complete failure, as the ensuing commercial treaty included an additional protocol that for the first time officially acknowledged the possibility of fostering some type of industrial cooperation between the two countries. Despite the vagueness of the commitment, it was still a relevant development, especially if it is considered that the Francoist regime and the United States had just started negotiations to regulate their relations in the economic and the military spheres.

In sum, the issue of Mercurio Europeo was now more than an economic affair between two mining companies. Since the United States purchase of eighty thousand flasks in 1949, the mercury cartel had become deeply entangled with international politics and the evolution of diplomatic relations between Spain and Italy. This was very clear to the officials in Monte Amiata, who immediately involved the highest echelons of the De Gasperi government in the resolution of the legal dispute. As a result, their Spanish counterparts also became involved. In other words, it was clear by the end of 1952 that the resolution of the mercury dispute could not be achieved through technical meetings between the representatives of the two mining companies. Instead, the only possible solution entailed the direct intervention of the governments in Madrid and Rome. And for them, the issue was not just about mercury. While the Italian authorities wanted to solve the dispute as a means of driving economic relations to the next level, with the ultimate goal of achieving industrial cooperation, for Spain the issue was more complicated. In the eyes of Minister Artajo, the main goal was political cooperation. However, he was well aware that Italy needed some extra incentives to take the lead in that particular sphere; in that sense, the possibility of preparing the ground for proper industrial cooperation seemed like a reasonable intermediate step. That scenario would become more likely with the beginning of the negotiations in the autumn of 1952 between the United States and the Francoist regime to integrate the latter in the Western security system.

Solving the Mercury Dispute

Despite the advances achieved through the 1952 commercial treaty, the truth of the matter was that, by the end of 1953, the rapprochement between Spain and Italy in the economic field was still hindered by the legal battle between the mercury groups. At the same time, though, the Italian authorities realized that the commercial treaty had created a positive momentum in the bilateral relationship that needed to be seized upon to solve as quickly as possible all previous disagreements between Monte Amiata and Almadén. This task was mainly assumed by the Italian embassy in Madrid and the General Direction of Economic Affairs in Rome, in the context of the visit of an Italian mission to Spain in April 1954 with the purpose of revising the existing commercial treaties to further facilitate exchanges between the two countries. Once again, the main idea was to address the issue of mercury in the larger context of Spanish–Italian economic relations.Footnote ⁷⁰

This time the Italian strategy yielded the desired results. In connection with the signing of a new protocol to be added to the existing commercial treaty and signed on May 7, 1954, the Italians finally managed to convince the Spanish authorities to consider withdrawing the lawsuit and start negotiations to find alternative friendly solutions to the mercury dispute. Given this new Spanish predisposition, the Italian Ministry of Foreign Affairs informed Monte Amiata, which sent its president, Giovanni Montagna, to Madrid in May 1954 to iron out the difficulties with Manuel Ocharán, the president of Almadén.Footnote ⁷¹ In this meeting, the two parties signed an agreement that put an end to the dispute.Footnote ⁷² For the Italian side, the price for a new agreement was to pay the Spanish group a compensation of $1.3 million for the unilateral sales made to the United States in 1949, in addition to $37,000 that the Italian companies owed the Almadén company for sales in 1947 and 1948.Footnote ⁷³ The Italians would also have to refrain from selling to the United States for a period of at least a year or at maximum eighteen months, unless the value of Spanish exports exceeded a given amount. In the end, the Italian group conceded to more or less the same terms that Almadén had presented in January 1950.

However, the final settlement of the dispute raises the question as to why the cartel partners were able to patch up their differences only in 1954. The main answer must be found in the political dimension of the affair, more than in the economic factors behind the cartel. Indeed, it needs to be considered that the demand for mercury had remained high even after the end of the Korean War. As technological advances linked to the development of atomic energy made mercury an even more important raw material, as it could be used as a cooling agent, the main economic actors at the time shared the conviction that demand would remain strong at least for the near future.Footnote ⁷⁴ In practice, this meant that both the Spanish and the Italian mining groups were selling as much as they wanted and at the prices that they wanted. For them there was no real urgency to renew the cartel.

In reality, the Italian group was not so much interested in resuming the cartel as in resolving the legal dispute initiated in 1949, which had ever since brought up “harmful repercussions for all our economic relations.”Footnote ⁷⁵ The main goal was to eviscerate the conflict between the two mining groups as a gesture of goodwill for the benefit of the Spanish authorities. Ideally, the resolution of the mercury conflict would then pave the way for the real objective of Italian foreign policy in Spain: industrial cooperation. This long-term goal had become even more pressing after the signing of the Pact of Madrid in 1953, a treaty in which the United States pledged to furnish economic and military aid to Spain in exchange for permission to construct and utilize air and naval bases on Spanish territory. These agreements, together with the signing of the Concordat with the Vatican, also in 1953, helped provide a patina of international respectability to the Francoist regime.Footnote ⁷⁶

The Italian authorities quickly saw the potential benefits of the Pact of Madrid and became determined to take advantage of the opportunity in order to adopt a more ambitious economic policy toward Spain. For the first time since the end of the war, it was possible to sit down with Spanish diplomats and discuss issues that went beyond the usual commercial agreements.Footnote ⁷⁷ Indeed, the U.S.–Spanish agreement implied the concession of substantial aid, both economic and military, to the Francoist regime, a circumstance that could be seized by Italian industry to obtain important benefits. The idea was that a substantial portion of the U.S. dollars destined to modernize the Spanish economy would be spent buying Italian technology and setting projects of bilateral industrial cooperation in motion. However, if the government in Rome wanted the Italian companies to benefit from the U.S. investments, it needed to act quickly. After all, there were many other countries in Europe, like France, the United Kingdom, and West Germany, whose companies also wanted to profit from U.S. loans.Footnote ⁷⁸

The Spanish side, on the other hand, saw the bilateral relationship in a slightly different light. For the diplomats in Madrid, the ultimate goal was a rapprochement with Italy that would eventually crystallize in the form of political cooperation between the two countries. In a context in which the Francoist regime was struggling to end its period of international isolationism, the Spanish authorities, and especially Minister Artajo, became convinced that Italy was one of their most valuable allies. In this regard, some sort of political partnership with Rome was seen as an extremely beneficial development that could yield results in international arenas such as the United Nations, NATO, the ECSC, or a potential Mediterranean Pact. At the same time, though, the Spanish authorities realized that the political rapprochement could only happen gradually in order to avoid the Christian Democratic government running into direct opposition from the left-wing parties in the Italian Parliament. They were aware that the Italian government should be able to present a narrative to justify the Spanish–Italian rapprochement; in that regard, the industrial cooperation provided all parties with a reasonable story to justify why the countries were coming together.

Minister Artajo understood that the Italian attempts in the spring of 1954 to solve the mercury dispute in the context of the commercial agreement constituted a perfect occasion to implement his plans. That is why Artajo became so active in trying to find a solution for the legal dispute. Indeed, between April and June 1954, Artajo, together with the minister of the treasury, Francisco Gómez de Llano, became paramount in exerting pressure on Almadén to put aside the legal contention, thus favoring a friendly resolution to the disagreement between the two mercury groups. It is noteworthy that sources from both the Spanish and the Italian government emphasized the crucial role that Artajo played for the resolution of a conflict that had hindered economic relations for almost five years.Footnote ⁷⁹

After the politicians had laid the groundwork and cleared away the question of litigation and compensation, Giovanni Montagna and Manuel Ocharán, the directors of Monte Amiata and Almadén, met in Madrid in early August 1954 to sign a new cartel treaty. The two parties agreed to renew the cartel agreement and to have a joint sales organization internationally. The new agreement was to last until the end of 1957, and after that it would be automatically renewed unless one of the partners did not actively end it. The two groups also decided to meet every three months to discuss issues.Footnote ⁸⁰

On November 4, 1954, the Italian and Spanish mercury producers assembled for the first time since the cartel breakup in 1949. In the splendor of the Grand Hotel in Paris, the representatives of the two groups cordially greeted one another and professed their friendship. However, despite the opening pleasantries, the meeting quickly descended into recriminations. The Spanish representatives accused the Italian producers of breaking the agreed price policy, and the Italian directors countered by claiming that they had heard that Spanish mercury was offered to prospective buyers at prices below the accepted level. Although they managed to end the meeting in a more conciliatory manner, the trust between the cartel partners was clearly gone.Footnote ⁸¹

Mercurio Europeo, the international mercury cartel, would never have any cartel meetings again after 1954. In February 1955, Manuel Ocharán wrote to Giovanni Malvezzi of Monte Amiata to say that in light of continued Italian violations of the agreement, the Spanish producer had decided to regain its complete freedom when it came to pricing and sales and to refrain from having any meetings in the near future with the Italian group. This did not, Ocharán reassured Malvezzi, imply that the Spanish group wanted to start a price war with the Italians, and in no way should it hurt the good relations between the two producer groups.Footnote ⁸² What it did mean, though, was that the cartel was dead, and despite the claims in the existing literature on the mercury cartel, Mercurio Europeo would never be revived. During the rest of the 1950s and 1960s, the two groups would occasionally discuss potential cooperation, but nothing came of it.Footnote ⁸³