A ‘blank cheque'? P ortuguese Second W orld W ar sterling balances, 1940–73

The B ritish effort in the S econd W orld W ar required massive external financing which depended on L end‐ L ease and the accumulation of sterling balances. Indebtedness in sterling balances corresponded to almost 38 per cent of this total at the end of the war. P ortuguese sterling balances, although a small share of the total, were important because of pre‐emptive purchases, especially of wolfram, and because of the ‘gold clause’ which was to be applied to outstanding balances. P ortugal's willingness to finance B ritish purchases contrasts with the requirement of G erman payments in goods or cash for their purchases in P ortugal. The settlement of P ortuguese sterling balances in A ugust 1945 was singular as it preceded the A nglo‐ A merican settlement of D ecember 1945 which had important consequences for sterling balance holders, as the US insisted that the US$3.75 billion loan should not be used to settle B ritish war debts. Postwar settlement of B ritish debt through a long‐term loan from P ortugal to B ritain contrasts with settlements that involved the sale of B ritish assets. Salazar's concerns about the postwar international position of P ortugal, the P ortuguese E mpire, and the survival of the P ortuguese regime are relevant in explaining his pro‐British stance during and after the war.