After heavy combats the Nationalist forces with a crushing material superiority managed to occupy the city of Bilbao and the Biscay province.

[11] Oblivious to foreseeable consequences, the Nationalists resumed ferocious air strikes against the city on 4 January 1937, prompting yet another outcry of indignation and an assault on the prison-ships where right-wingers were being held.

[3][4][5][6][7] Opposing them, the Republicans had General Francisco Llano de la Encomienda's Army of the North, theoretically numbered 150,000, but there were no unity between the Basque Nationalists, the Asturians and the Santaderinos.

[13][3][4][5][6][7] The Nationalist offensive started on 31 March 1937 and Mola threatened to bomb the Basque cities and industries:"I have decided to terminate rapidly the war in the north: those not guilty of assassinations and who surrender their arms will have their lives and property spared.

Then, the Lendakari, Jósé Antonio Aguirre, decided to assume the command of the Basque troops, due to the incompetence of Llano de la Encomienda.

[17] As the Nationalist troops approached Bilbao, the autonomous Basque government made an international plea to save the children of war flocking to the city.

The commander of the Spanish Republican Air Force, Hidalgo de Cisneros, decided to send 50 fighters and bombers to the Basque Country, across the Nationalist-held territory, 45 reached Bilbao.

Meantime, the bad weather stopped again the Nationalist offensive, a new shipment of weapons (55 antiaircraft guns, 30 cannons and two squadrons of Chatos), reached Bilbao, and the General Gámir was sent to Biscay in order to organize the defense of Bilbao and to replace Llano de la Encomienda.

[22] The Basque army temporarily stabilized the front on a line that runs south from the village of Ontón on the coast.

[23] Biscay had the only factory in Spain capable of the manufacture of artillery shells and half of the Spanish production of explosives.

[9][24] Virtually all manufacturing and shipbuilding industry remained intact, since the Basque nationalist authorities' opposed its destruction.