World War II
Unlike in the case of Portuguese Timor which was occupied by the Japanese in 1942 along with Dutch Timor, the Japanese respected Portuguese neutrality in Macau, but only up to a point. As such, Macau enjoyed a brief period of economic prosperity as the only neutral port in South China, after the Japanese had occupied Guangzhou (Canton) and Hong Kong. In August 1943, Japanese troops seized the British steamer Sian in Macau and killed about 20 guards. The next month they demanded the installation of Japanese "advisors" under the alternative of military occupation. The result was that a virtual Japanese protectorate was created over Macau. Japanese domination ended in August 1945.
When it was discovered that neutral Macau was planning to sell aviation fuel to Japan, aircraft from the USS Enterprise bombed and strafed the hangar of the Naval Aviation Centre on 16 January 1945 to destroy the fuel. American air raids on targets in Macau were also made on 25 February and 11 June 1945. Following Portuguese government protest, in 1950 the United States paid US$20,255,952 to the government of Portugal.
Because Portugal stayed neutral in the Second World War, Goa was too. As a result, at the outbreak of hostilities a number of Axis ships sought refuge in Goa rather than face the likelihood of interception by the British Royal Navy. There were three German ships, the Ehrenfels, the Drachenfels and the Braunfels, as well as an Italian ship. The British discovered that the Ehrenfels was transmitting information on Allied ship movements to U-boats in the Indian Ocean, with extremely damaging consequences for British shipping.
Because Portugal was neutral the British was unable to take any official action against these ships, however the SOE Indian mission organised a covert raid using members of the Calcutta Light Horse, a part-time unit made up of civilians who were not eligible for normal war service. The Light Horse embarked on an ancient Calcutta riverboat, the Phoebe, and sailed round India to Goa, where they sunk the Ehrenfels, and the other ships scuttled themselves, fearing that they were about to be seized.
The story of this raid was the subject of James Leasor's book, Boarding Party, which in turn was made into a film, The Sea Wolves, starring Gregory Peck, David Niven and Roger Moore in 1980. Because of the potential political ramifications of the fact that Britain had violated Portuguese neutrality, the raid remained secret until James Leasor's book was published in 1978.
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