On the Strange (and Almost Forgotten) War Between Britain and the USA… and Whose Side Hitler Was On

At first glance, it seemed like just another regional skirmish between two South American countries. But if you dig deeper, the reality turns out to be much more pragmatic and rational. Beneath the surface, it was a hidden struggle between two powerful transnational players—British and American oil interests, which were backed respectively by the United Kingdom and the United States.

Yet, in my opinion, the most intriguing part of this story is not just the interests of the corporations, which the global empires sought to protect, but whose hands they used to do it. Here, unexpectedly, we find in the picture German and Russian officers, sidelined by the aftermath of World War I. Stalin, Roosevelt, Hitler, and a chain of events that likely shaped global politics far more than it seems at first glance.

Background

In July 1932, the Chaco War erupted in South America. Bolivia and Paraguay began fierce fighting over the desert region of Gran Chaco, where experts believed large oil deposits had been discovered.

• January 30, 1933 – Adolf Hitler becomes Chancellor of Germany.
• March 4, 1933 – Franklin Delano Roosevelt takes office as President of the United States, launching his famous New Deal.

Amid the Great Depression and growing competition for natural resources, the war in South America quickly ceased to be a mere local conflict. Behind the scenes, two oil giants clashed:

• Royal Dutch Shell (Britain + the Netherlands) — backing Paraguay.
• Standard Oil (USA) — financing Bolivia, where it had oil concessions and refining facilities.

The British Connection: Paraguay

Britain placed its bets on Paraguay but did not participate directly in the conflict. Instead, arms and ammunition were supplied to the Paraguayan army via mercenaries—Russian officers who had settled in various countries after the Russian Civil War.

Few official documents directly confirm Britain's involvement, but circumstantial evidence and the efforts of Royal Dutch Shell point to London's clear interest in Paraguay’s success.

The American Connection: Bolivia

The United States, or more precisely, Standard Oil, had a direct stake in Bolivia's oil fields but did not intervene directly either. Instead, the Bolivian army received financial backing, and foreign specialists from Germany were brought in to command military units. Like the Russian officers, many German officers had been left jobless after World War I.

Here, we come across some fascinating names:

• Ernst Röhm – The same Röhm whom Hitler would later purge during the "Night of the Long Knives" (June 30–July 2, 1934). Röhm had served as a military advisor in Bolivia from 1928 to 1930, helping modernize the Bolivian army.

• Hans Kundt – A German officer from World War I, who became Commander-in-Chief of the Bolivian Army during the critical phase of the war in 1932–1933.

Hitler’s Intervention: Why Did Germany Withdraw?

At the start of the conflict, Germany was actively involved. German officers fought not only as mercenaries but also as military instructors and commanders. However, in 1933–1934, Hitler ordered the withdrawal of German mercenaries from Bolivia.

Most historians believe Hitler’s decision was driven by his desire to rebuild the Wehrmacht. The argument goes that Berlin suddenly needed experienced specialists at home to accelerate the rearmament of Germany, following the restrictions of the Treaty of Versailles.

In reality, however, the reason lay elsewhere: America lost interest in the war. By 1934, U.S. support for Bolivia had weakened, as investors found it no longer profitable. The war had dragged on without success, and Roosevelt’s domestic policy demanded a shift in focus toward the New Deal.

As a result, Bolivia, left without German mercenaries, began losing battle after battle, suffering even heavier defeats.

The war finally ended on June 12, 1935, with a ceasefire, and in 1938, a peace treaty was signed, in which Bolivia lost most of the disputed region.

The "Awkward" Story: America's Diplomatic Turn Toward the USSR

War is about money and feasibility. We are often told stories about historical justice and national interests, but in reality, the calculations were far more pragmatic.

When it became clear that the cost of war exceeded initial estimates, U.S. interest in the unprofitable Latin American conflict faded. Washington also realized that Bolivia’s oil deposits might not be as lucrative as initially thought.

Whether by coincidence or not, just months after Roosevelt took office, the U.S. established full diplomatic relations with the Soviet Union. This happened on November 16, 1933. By signing an agreement with Stalin, the U.S. gained a new economic partner without needing Latin American oil reserves to compete with British companies. This diplomatic "step toward the USSR" effectively destroyed Britain’s monopoly on global oil markets.

Britain now had a new competitor—one capable of leveraging Moscow’s vast economic potential in favor of the United States.

Why Were Stalin and Hitler Not Seen as Threats?

Looking back, a reasonable question arises: why did the global powers in London and Washington fail to recognize Stalin and Hitler as serious threats?

In large part, they overestimated their ability to control these authoritarian regimes through economic influence. The assumption was that without money, no government machine could function—and at that time, neither Germany nor the Soviet Union had financial independence.

This assumption was correct, but Western elites underestimated the ideological toxicity of socialist doctrines.

Both Russia and Germany ("The Third Rome" and "The Third Reich") in 1933 were ruled by socialist-ideological parties, which openly positioned themselves against London and Washington. Yet, they remained dependent on Western capital. Without access to London's markets, where they could sell goods and raw materials, both Germany and Russia were financially unsustainable.

It is worth noting that, initially, Hitler was viewed favorably in the United States. His rhetoric, ideas, and actions were not seen as toxic or threatening. At that time, Germany was not a danger to the Western world—it had no fleet, no army, and no serious colonial ambitions beyond Europe. On the contrary, many believed Germany’s military revival would check its eastern neighbors rather than threaten maritime powers. No one could have imagined that Germany and the USSR would trigger a global war.

Conclusion

The Chaco War (1932–1935) remains overshadowed by larger events of the 20th century. But when we analyze the economic and political interests of the U.S., Britain, the USSR, and Germany, it becomes clear that this "small" conflict was part of a larger chain of global deals and intrigues.

• Britain, using Russian mercenaries and Hitler's politics, secured victory in Chaco, strengthened Paraguay, and retained Shell’s influence.
• The U.S., abandoning Bolivia, shifted focus to new markets—namely, the Soviet Union.
• The USSR gained a crucial technological investor and began militarizing its colonies, preparing for future conquests.
• Germany, withdrawing its officers, concentrated on building the Wehrmacht, allowing Hitler to dominate Europe until he realized he was only clearing the path for Moscow’s global ambitions.

Thus, an oil war in a forgotten region of Latin America ultimately reshaped global power dynamics, serving as a prelude to World War II.

But the funniest part, which no one wants to remember, is that no oil was ever found in Chaco, despite the fact that rumors of its presence were one of the main reasons for the war between Bolivia and Paraguay!

It turned out that the war, which claimed the lives of 90,000 people, was fought over barren lands that had no oil in their depths!