The Sinclair Exploration Company to the Secretary of State

Sir: 1. On January 7, 1922, the Sinclair Exploration Company signed a contract27 with duly authorized representatives of the F.E.R.28 which gives this company the right to prospect and develop the Russian half of the Island of Sakhalin for oil.

2. To this contract was attached a supplementary agreement of political import, article 1 of which reads as follows:

“The Government has the right to cancel the concessional agreement at any time during the first year from the day of signing of this Supplementary agreement (January 7, 1922) in the following cases:

If the Government is convinced from any acts or declarations of the Government of the United States of America that the latter will not give support to the Company in its execution of said concessional agreement.
If the Government finds that the courts of the United States of America will not accept for trial matters which the Government or its citizens may in a proper manner bring against the agents of the Company or the Company itself in the territory of the United States of America.
If the Government is forced to declare that the existence or fulfillment of the concessional agreement carries with it a manifest threat to the integrity of territory or a threatening of the sovereignty of the Far Eastern Republic or the Russian Socialistic Federative Soviet Republic.

“The Government is obliged to inform the Company by telegraph as to the existence of said cases which call forth the necessity of cancellation of the concessional agreement, in which connection the concessional agreement is counted as cancelled from the day of receipt by the Company of said telegraphic communication.”

3. In view of this article above quoted naturally the Sinclair Exploration Co. could take no steps towards active development during this period.

4. In November of 1922, the F.E.R. amalgamated with the R.S.F.S.R. and on January 6, 1923, we received the following cable from Mr. Litvinoff, Acting Commissar of Foreign Affairs in Moscow:

“In view amalgamation Far Eastern Republic with Russian Federated Soviet Republic your agreement concerning Sakhaline oil exploration needs ratification by Russian Soviet Government. There [Page 803] is no objection in principle to ratification but Soviet Government requires some time for examination agreement before giving final sanction. Soviet Government proposes prolong term of article one of supplementary agreement for four weeks and will give final decision not later February fourth. Please acknowledge.”

5. To this cable, on January 8th, we replied as follows:

“Litvinoff, Acting Commissar Foreign Affairs Moscow. Your cable January sixth received. It is our understanding that on the amalgamation of the F.E.R. with the R.S.F.S.R. the contractual obligations entered into by the former automatically passed to the latter. With this in view we have already started preparation for beginning the exploration work in Sakhalin this summer. We would however be pleased to have formal endorsement by the R.S.F.S.R. of our agreement for reasons of publicity in the United States which would redound to the benefit of the R.S.F.S.R. in this country. Concurrent with this endorsement would you please indicate the bank into which you desire us to pay the deposit called for by article 36 of the agreement. We would be glad to discuss further with you the modifications of the original agreement proposed by us which have already been discussed between your representatives and ours and which will in the long run be beneficial to both parties. Please address any further communications to 45 Nassau Street, Sinclair Exploration Company.”

6. On January 29th we received from Mr. Litvinoff a reply to our cable in the following terms, which we considered satisfactory:

“Agreement between former Far Eastern Republic your company concerning Saghalin exploration signed January seventh 1921 as well as Supplementary Agreement same date ratified by Government of Russian Federative Republic January 23. Deposit according clause 36 should be paid Lloyds Bank London account Russian State Bank.”

7. Under our contract we are obliged to commence exploration work in a year and within sixty days after the termination of this year—that is, by March 7, 1924—we must reduce our exploration area to 20,000 square versts for further examination during the second year. By article 23 we are required to start drilling within two years—that is, January 7, 1925—and further to make a deposit of 200,000 gold rubles before we commence exploration work.

8. In view of the foregoing and the climatic conditions of the Island of Sakhalin which prevent communication with the outside world during many months of the year, it will be necessary for us to commence our exploration work during the present summer.

9. At the present moment the territory covered by our concession is under military occupation by Japanese forces which according to their public statements is merely an occupation pending settlement of their claim for reparation against the Russian Government arising out of the Nikolaievsk massacre.

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10. We naturally assume that an occupation of this kind would place some of the administrative and all of the police powers in the hands of the Japanese authorities for the time being.

11. A geological party, such as we intend to send to Sakhalin with the opening of the navigation season, going into a territory under a military control of this nature would have much greater freedom of movement and would accomplish its work with greater dispatch if the authorities in temporary control offered all facilities as we can only assume they will, if duly notified of the nature of the company’s contract and the status of its representatives.

12. It might prove of decided assistance to the Sinclair Company in carrying out its contractual obligations if the State Department were to notify the Imperial Japanese Government of the expected early arrival of the Sinclair party on the Island this summer and request from them the usual courtesies and considerations which as American citizens they would expect from a nation with whom we maintain the friendliest relations.

Yours very truly,

Sinclair Exploration Company
R. Crandall
  1. Not found in Department files.
  2. Far Eastern Republic.