Memorandum by the Secretary of State

Memorandum for Cabinet Meeting:

In 1922 the Sinclair Oil Company entered into a contract with the Far Eastern Republic for an oil concession in Northern Sakhalin, being that part of the island claimed by Russia. The Soviet Government insisted that the concession required ratification by it and a supplemental agreement was made on January 23, 1923, confirming the grant but providing certain conditions making the concession dependent upon the attitude of the American Government toward the Soviet regime and toward the concession granted by it. One of these specifically provides that the concession might be cancelled at the end [Page 698] of the fifth year after the date of the signing of the supplemental agreement, to wit, January 23, 1923, if normal official relations had not been resumed between the United States of America and the Far Eastern Republic in the form of a judicial recognition (recognition de jure). It is unnecessary to go into the long history of this matter as presented to the State Department by the Sinclair Oil Company and the State Department’s reply. It is sufficient to say that the Japanese Government, whose military forces have occupied Northern Sakhalin, declined to permit the employees of the Sinclair Oil Company to enter Northern Sakhalin for the purpose of exploration and development. The Sinclair Company appealed to the State Department asking the assistance of the United States Government to carry out its contract. The State Department declined on the ground that this Government had never recognized the Far Eastern Republic or the Soviet Government and, therefore, could not make any representations to that Government in relation to the contract.

The Sinclair Oil Company later claimed that Japan had entered into a treaty with Russia whereby the Japanese troops were to be removed by the fifteenth of May, 1925, and the ownership and control of Northern Sakhalin was conceded to the Soviet Government3 and that the Soviet Government had by a Protocol granted a concession to industries recommended by the Japanese Government for, the exploration of fifty per cent of certain areas. It was provided that as for the other fifty per cent the Soviet Union decided to offer such lots, whole or in part, for foreign concession.4 The Sinclair Company claimed this was in violation of the declaration of the Japanese Delegation at the Washington Conference5 which reads as follows:

“In conclusion, the Japanese Delegation is authorized to declare that it is the fixed and settled policy of Japan to respect the territorial integrity of Russia, and to observe the principle of nonintervention in the internal affairs of that country, as well as the principle of equal opportunity for the commerce and industry of all nations in every part of the Russian possessions.”

There are two answers to these propositions. In the first place, any representations this Government should make would necessitate a support of the contract made between Sinclair Company and a Government which the United States has not recognized, a protest to the Soviet Government which we are not in a position to make. Second, it is extremely doubtful whether the concession is in violation of the declaration of the Japanese Delegation. Under the treaty between the Nine Powers as to China,6 there was a similar provision [Page 699] as to equal opportunity for development in China and yet the State Department approved a contract between an American corporation and China whereby the development or exploration of fifty per cent of the oil bearing territory in a given province in China was granted to the American corporation,7 the opinion of the Secretary being that as the balance was open freely to the nationals of other countries that it was not an exclusive or monopolistic contract. In any event, in my opinion, we cannot support a contract between American nationals and a Government which we have not recognized. The Sinclair Company and all other nationals enter into contracts with the Russian Government with the full knowledge that they take their own risk and that they will not receive the support of this Government.

  1. Treaty of Jan. 20, 1925, Protocol (A), art. iii, League of Nations, Treaty Series, vol. xxxiv, p. 38.
  2. Protocol (B), ibid., p. 40.
  3. Conference on the Limitation of Armament, p. 346.
  4. Foreign Relations, 1922, vol. i, p. 271.
  5. Concession by the Province of Szechwan to the China Petroleum Syndicate, Nov. 3, 1922. The syndicate was dissolved by action of its managers June 27, 1924. The text of the contract is printed as annex xii to List of Contracts of American Nationals With the Chinese Government. (Washington, Government Printing Office, 1925.)