SPANISH SAHARA: PHOSPHATES AND SOVEREIGNTY

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP85T00875R001600030125-0
• Release Decision: RIPPUB
• Original Classification: C
• Document Page Count: 17
• Document Creation Date: December 22, 2016
• Document Release Date: October 31, 2011
• Sequence Number: 125
• Publication Date: September 1, 1970
• Content Type: IM

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-Cunfidentist-
DIRECTORATE OF
INTELLIGENCE
Intelligence Memorandum
Spanish Sahara: Phosphates And Sovereignty
Genf identool
ER IM 70-125
September 1970
Copy No. .3
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WARNING
This document contains information aifecUng the national
dclei so of the United States, within the meaning of Title
18, sections 793 and 7U1, of the US Code, as amended.
Its transmission or revelation of its contents to or re-
ceipt by an unauthorized person is prohibited by law.
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CENTRAL INTELLIGENCE AGENCY
Directorate of Intelligence
September 1970
Spanish Sahara:
Phosphates And Sovereignty
Introduction
The political as well as economic future of
Spanish Sahara hinges on the exploitation of its
phosphate mineral resources. Were it not for these
deposits, Spain might have relinquished control of
the area as it has many of its other North African
possessions. Morocco views the exploitation of
Spanish Saharan phosphates as a large potential
source of foreign exchange if it could acquire con-
trol of the area, and as a threat, to its own impor-
tant phosphate industry if Spain retains control.
The planned start of mining operations in 1971
appears to have stimulated an intensification of
diplomatic maneuvering. Rabat has obtained the
cooperation of Algeria and Mauritania in exerting
pressure on Madrid to relinquish control over
Spanish Sahara. This memorandum examines Spanish
Sahara's nascent phosphate industry and the eco-
nomic basis for Morocco's fear of Saharan compe-
tition.
Note: This memorandum was produood ooZeZy by CIA.
it was prepared by the Offioo of Economic Rooearoh
and was ooordinatod with the Offioo of Current In-
toZZigonoo.
CONFIDENTIAL
25X1
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Background
1. The sovereignty of Spanish Sahara, a barren
wasteland at the western end of the Sahara Desert,
is the subject of a growing dispute between Spain
on the one hand and Morocco, Mauritania, and Algeria
on the other (see Figure 1). Madrid has relin-
quished much of its colonial territory in Africa
but wants to retain control over Spanish Sahara
primarily because of its mineral resources, partic-
ularly phosphates.
2. Madrid has attempted to maintain sovereignty
over Spanish Sahara in several ways. In 1958, fol-
lowing incursions by Moroccan irregulars, the ter-
ritory was declared a province of Spain. In the
early 1960s, Spain took advantage or Morocco's addi-
tional territorial claims to Mauritania and to parts
of Algeria by encouraging Mauritania to stake its
own claim to Spanish Sahara. Algeria, as a state
bordering Spanish Sahara, was encouraged to assert
its right to a voice in the disposition of the ter-
ritory.
3. Frustrated by Spain, Morocco turned to the
United Nations. The General Assembly adopted sev-
eral resolutions affirming the right of self-
determination for the people of Spanish Sahara.
it called upon Spain, in consultation with the
Mauritanian and Moroccan governments and other
interested parties, to set a date and procedures
for a referendum under the auspices of the United
Nations. Until 1969, Spain regarded the United
Nations resolutions as tolerable and in fact voted
for them. Spain apparently felt reasonably secure
in the absence of any time limit in the resolutions
and, above all, was confident in its ability to
manipulate mutual antagonisms among rival African
claimants.
4. By agreeing to drop its border claims
against Algeria and by recognizing the sovereignty
of Mauritania over its own territory, Morocco now
has obtained a semblance of a- united front against
Spain. A number of high-level talks in the first
part of 1970 have led to joint statements by North
African leaders in favor of immediate self-
determination, and u tripartite summit has been
scheduled for September before the United Nations
General Assembly meets. Pressures have been pri-
marily diplomatic, but use of the news msdia to
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SPANISH SAHARA: Phosphate Rock and Iron Deposits
OpAN
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Figure 1
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1 CONFIDENTIAL
portray the Spanish as imperialist suppressors of
the Saharan people has not been ignored. While the
timing and objectives of the UN-recommended refer-
endum have not been established, Rabat's -- and to
a lesser extent Nouakchott's -- objective is the
end to Spanish ruts and the extension of their own
rule to Spanish Sahara; Spain's objective is to
retain its control, and Spanish officials seem to
be thinking along the lines of asking for a vote
in support of a political system tied to Spain.
5. The timing of the resolution of Spanish
Sahara's political future has now become a prin-
cipal issue and is the major point of conflict
between Spain and Morocco. Spain, stating that
Spanish Sahara should be "economically viable"
before submitting to a referendum, is trying to
postpone the referendum for at least another two
years. Morocco, recognizing that exploitation of
Saharan phosphates by Spain will hurt its own
phosphate exports, is trying to force the issue
before mining operations begin in 1971.
Resources
6. Spanish Sahara is almost completely arid,
and the sparse, impoverished population, estimated
at 30,000 to 40,000, is largely nomadic. Because
of the lack of natural harbors, most of the fishing
along the coastline is carried out by Canary islands
fishermen. The only crop that can be grown success-
fully is barley, and that only occasionally in low-
lying areas after rain. Recently discovered under-
ground water sources have led to some experimental
farming and an end to importing water from the
Canary Islands.
7. In the late 1950s and throughout the 1960s,
the Spanish believed that the territory held siz-
able petroleum deposits. They awarded concessions
to several foreign companies for large-scale ex-
ploration but with negative results. By mid-1969
the possibility of finding onshore oil was dis-
carded, although the search for offshore oil con-
tinues.
8. Substantial iron deposits (20 million tons
to 70 million tons) arc located in the south at
Agracha, but the economic feasibility of exploita-
tion has yet to be determined. The deposits con-
sist of titaniferous (titanium-bearing) iron ore
I CONFIDENTIAL
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containing 54% hematite (iron oxide) and 14% titanic
dioxide. Currently, titaniferous ores are shunned
by most steel producers because they cannot easily
be smelted in a blast furnace without excessive
operating difficulties and high feel consumption.
Economically profitable processes for handling such
ores, however, appear imminent, as evidenced by
Japanese interest in titaniferous ores in Alaska.
9. Spanish Sahara's greatest mineral asset is
a large deposit of high-grade phosphate rock dis-
covered in 1963 at BuCraa, some 60 miles from the
coast near Morocco. Reserves, estimated at 1.4
billion tons to 1.7 billion tons of minerals, are
much smaller than Morocco's 44 billion tons -- the
world's largest -- but are sufficient to put Spanish
Sahara among the world's leading producers for many
years. The phosphate content of the mineral is 70%
to 72%, and with processing it can be increased to
78% to 80%, a quality comparable with the best grades
of other producers. The phosphate ;.s exposed on the
surface and can be worked by open-pit mining methods.
Thus, although the initial investment requirements
are large, operating costs should be low.
Exploitation of Phosphates
10. The deposits are being developed by the
Spanish state mining company Fosbucraa (Fosfacos
de BuCraa S.A.). By mid-1970, Fosbucraa had in-
vested more than $192 million to provide facilities
for mining, processing, and transportation. Total
investment, including funds from several Westc4m
sources, may reach between $360 million and $480
million. Facilities and methods for handling the
phosphate ore will be among the most modern in the
world. The entire mining complex is expected to
be operational by mid-1971, producing 3.3 million
tons in the first year and placing Spanish Sahara
in fourth or fifth place among world producers
behind the United States, the USSR, Morocco, and
possibly Tunisia (see Figure 2) . By 1975, produc-
tion is expected to reach 10 million tons annually,
an output nearly equal to that of Morocco in 1969
and worth approximately $100 million at current
pricos.
11. Several components of the phosphate complex
have been completed, and construction is progress-
ing well on the remainder. At BuCraa, a pilot
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Figure 2
Production 'and Export of Phosphate ...
MILLION METRIC TONS
20
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crushing and concentrating plant is in operation.
By 1971, the first of three identical processinq
plants will be operational and will process 1,000
tons of ore per hour. Near El Aaiun, finishing
touches are being made-on a 2.2-mile breakwater
and ore-loading pier. Each of five loading machines
on the pier is able to load ore at the rate of
4,000 tons per hour, and a storage silo with a
capac~.ty of 300,000 tons has been completed. The
port is capable of servicing 100,000-ton ore car-
riers. A completely automated belt conveyor sys-
tem, which will transport the concentrates over
the 62 miles between BuCraa and El Aaiun, is under
construction. Built by the Krupp Machinery and
Steel Construction Company of West Germany at a
cost of about $50 million, the system includes 10
six-mile-long conveyors. When completed in mid-
1971, the system will be able to carry a steady
flow of ore at the rate of ",000 tons per hour.
Marketing Saharan Phosphates
12. Spanish Sahara's phosphate industry will
enter an expanding but highly competitive world
market. World exports reached a record 37.4 mil-
lion tons in 1968 but declined slightly in 1969
because of oversupply. By 1975, new mining ca-
pacity being developed by Spanish Sahara, Morocco,
Tunisia, Jordan, Syria, and Egypt will be able to
produce an additional 18 lion tons of phosphate
rock for export annually, a,rsd other phosphate ex-
porters also will expand their operations. Thus
export capacity will increase about 50%. Moreover,
export capacity probably will grow more than import
demand, which is unlikely to meet the record 9%
annual growth of the 1960-68 period.
13. In this kind of market, intrusion of a
large new exporter is bound to cut into the sales
of some of the tr'ditional exporters. Spanish
Sahara is in a favorable position to carve out a
major role in the phosphate market because of an
assured market in Spain, a possible inside track
in France, and probably lower costs than most com-
petitors. The Spanish market currently stands at
1.3 million tons, perhaps all of which will be
supplied by'Spanish Sahara in the future. Spanish
consumption of phosphate fertilizers has been
growing, and Spain is developing a substantial
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CONFIDENTIAL
chemical complex at Huelva, including several large
phosphoric acid projects, many of which will be
operational when Saharan phosphates become avail-
able. The proposed phosphoric acid projects would
provide a demand for phosphate rock at Huelva alone
in excess of one million tons annually.
14. French participation in the Saharan opera-
tion would ensure Spanish Saharan penetration of
the French market, at present dominated by Morocco.
Negotiations are in progress involving a possible
Phareholding by a group of French companies. The
French group consists of the five largest phosphate
rock consumers in France and accounts for 75% of
total French phosr)hate rock imports; which amounted
to 3.4 million tons in 1969. Spain and France
together could provide markets for nearly all of
Spanish Sahara's initial phosphate rock output of
3.3 million tons a year.
15. Spanish Sahara will have to penetrate mar-
kets all over the world to dispose of its projected
annual production of 10 million tons by 1975. The
characteristics of the Spanish Saharan operation
indicate, however, that phosphates will be produced
at a relatively low cost and will be able to com-
pete favorably in those markets that do not afford
them preferential treatment. The deposits are
locoed near the surface and can be extracted by
relatively inexpensive open-pit methods. The belt
conveyor system is perhaps the least expensive
method available for shipping the ores overland.
Moreover, the capability of its port facilities
to handle ships of up to 100,003 tons gives Spanish
Sahara a distinct advantage by enabling it to use
bulk carriers at a time when ocean freight rates
are increasing and most other producers are just
beginning to develop and use port facilities for
handling bulk carriers.
16. The most likely markets are Western Europe
(besides Spain and France), Eastern Europe, and
Japan (see the table). Morocco is the dominant
supplier to Western Europe, but vigorous penetra-
tion by the United States, Togo, Senegal, and
Israel in recent years has reduced Morocco's
overall share of the market. Morocco and Tunisia
already have captured a sizable portion of the
East European market, and both countries consider
Eastern Europe a good market opportunity for
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Summary of World Phosphate Rock Trade a/
1969 Estimate
Eastern
~-Europe
i North
America
Latin
America
Asia
Australasia
z'otaZ
Nc_rn Africa
West Africa
Middle East Nauru, Ocean,
All
United
and Christmas
Suppliers
States
Morocco Tunisia Algeria Togo
Senegal Jordan Israel
Egypt
Islands
USSR
Other -
_
17,14i
3,849
7,407 1,029 62
1,306
761
78
510
3 28
2,098
11
6,355
--
1,470 754 170
--
--
292
295
74 --
3,300
--
2,479
2,354
-- -- --
--
--
--
--
-- --
--
125
1,123
991
81 36
5,851
2,921
1,232 27 128
158
149
557
32
309 257
--
81
3,689
116
50 - --
--
--
--
--
-- 3,523
--
36,6P2
2/
10, 10,230
10, 262 c; 1, 850 c/ 360
1, 464
910
925
852
386 3,808
5,398
217
Destination
Western
Q Europe
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offsetting the decline in their shares of the West
European market. Jordan, Israel, and Egypt also
anticipate larger sales to Eastern Europe. Japan
now purchases phosphates from the United States,
Morocco, Togo, Senegal,, and Pacific suppliers.
The North American and Latin American markets are
dominated overwhelmingly by the United States, and
Spanish Sahara is unlikely to attempt to penetrate
them on a large scale. The Australasian market,
similarly, is supplied exclusively by Nauru and
other Pacific islands.
Cause for Moroccan concern
17. Morocco's phosphate industry, owned by the
state and managed by the Office Cherifien des
Phosphates (OCP), is an important factor in the
country's economy. It accounts for almost 25% of
total export earnings and the major part of the
traffic of Moroccan railroads and of the ports of
Casablanca and Safi. Moreover, numerous enter-
prises depend on the phosphate industry as a ctas-
tomer for equipment, supplies, and maintenance
service.
18. Morocco is implementing an ambitious $113
million expansion program intended to enable the
country to regain a portion of the world market
lost to competitors during the 1960s. Morocco
continues to be the world's major phosphate rock
exporter,* but its share of the market has dropped
from 37% in 1964 to 28% in 1969 (see Figure 3).
Failure to obtain markets for the planned 6-million-
ton increment in mining capacity would be a set-
back to economic development.
19. The introduction of Saharan phosphate rock
on the world market is almost certain to hinder
the expansion of Morocco's phosphate exports.
Spanish preference for Saharan phosphate will mean
a loss in Moroccan sales to Spain alone of perhaps
as much as 900,000 tons annuuall French
y; partici-
pation in the Saharan development could lead to
even larger losses in exports to France, currently
Morocco's largest market. Spanish Sahara could
probably undercut Morocco's price for phosphate
rock in other countries because much of Morocco's
extraction involves higher cost underground mining
See the- _Appendi'x,
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Figure 3
PERCENT
not
Morocco's Share of World
and West European Phosphate Markets...
701
001
WEST EUROPEAN MARKET
001
40
20,
1984
and shipment by rail. Spanish Sahara will have a
further pricing edge by being able to make use of
larger bulk carriers for ocean shipment than
Morocco's improved port facilities will be able
to handle.
Conclusions
20. The impending exploitation of Spanish
Sahara's phosphate deposits has stimulated the
recent intensification of diplomatic maneuvering
by Morocco to pressure Madrid into relinquishing
control over this area. Morocco considers compe-
tition from Saharan phosphates a major economic
threat, It has been willing to forgo territorial
claims to Mauritania and sections of Algeria, in
part to achieve a united front with these two coun-
tries for exerting pressure on Spain.
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21. With the start of operations in 1971,
Spanish Sahara will become one of the world's top
phosphate producers, rising quickly to the world's
fourth or fifth ranking producer behind the United
States, the USSR, Morocco, and perhaps Tunioia.
The necessary facilities for processing and trans-
porting the ore are being constructed and, when
completed, will be among the mo:.t modern and effi-
cient in the warld. With assured markets in Spain
and possibly France, and low production and trans-
port costs, Spanish Saharan phosphate is in a strong
competitive position. Both the first year's produc-
tion goal of 3.3 million tons of high-grade concen-
trates and the 10 million tons per year to be pro-
duced by 19' thus appear to have ready buyer
abroad.
22. A genuine basis exists for Morocco's fear
of competition from Saharan phosphate. Morocco's
phosphate industry is an important factor in the
development of its economy. Spanish Sahara may
reduce substantially or eliminate a 900,000-ton
Moroccan market in Spain and could delay or deny
the full utilization of Mcrocco's new capacity
by penetrating other markets in which Morocco has
a significant stake. If Morocco could acquire con-
trol over Spanish Sahara, it could expect a sub-
stantial increase in foreign exchange earnings
and government profits. However, the chances
appear slim that Spain will soon surrender its
control over so profitable an asset.
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World Phosphate Rock Trade a'
1969 Estimate
North Africa
West Africa
Middle East
Nauru, Ocean,
anti Chris tags
Destination
Suppliers States
Morocco Tunisia
Algeria Togo
Senegal Jordan Israel Egypt
Islands
USSR
Otter b/
17,141
3,848
7,407
1,029
62
1,336
761
78
510
3
28
2,098
11
Austria
329
126
11
42
--
--
--
90
-
-
60
-
Belgium
1,743
250
1,139
16
93
31
-
8
--
-
195
11
Denmark
326
--
229
25
--
--
-
--
--
-
72
-
Finland
490
--
67
--
8
-
-
-
-
415
-
France
3,445
283
1,612
491
13
737
186
-
123
--
-
-
-
West Germany
2,706
1,219
251
70
--
139
67
--
--
--
--
960
-
Greece
443
16
101
227
--
--
81
--
18
--
--
-
--
Ireland
327
1
326
Italy
1,985
1,233
444
88
26
9
31
--
119
-
-
35
Netherlands
1,273
275
392
328
207
--
--
-
-
71
-
Norway
132
15
54
--
3
--
-
---
--
-
-
60
--
Portugal
298
--
295
--
3
--
-
-
-
Spain
1,352
313
994
IS
17
5
--
5
3
-
-
-
Sweden
517
--
422
4
--
-
-
--
91
-
United Kingdom
1,662
108
1,056
44
2
140
--
145
-
28
139
-
Other
109
4
15
12
--
--
78
--
-
-
-
-
Eastern Europe
6,355
Bulgaria
483
--
21
92
Czechoslovakia
904
--
276
so
53
43
-
32
-
450
East Germany
1,382
--
57
14
--
-
11
-
1,300
Hungary
437
--
--
57
-
--
380
Poland
1,710
--
950
310
--
--
450
Romania
671
--
--
29
20
--
272
--
--
350
Yugoslavia
718
--
114
260
40
249
24
31
--
-
Other
52
--
52
North America
2,479
2,354
Canada
2,354
2,354
United States
125
--
Latin America
1L1,3
991
81
36
15
Brazil
2117
235
44
5
3
Mexico
704
695
9
Other
132
61
28
31
12
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