The Minister in the Netherlands (Tobin) to the Secretary of State

No. 1517

Sir: I have the honor to confirm my telegram No. 20, May 14, 5 p.m., in which I reported the latest developments in the Koloniale concession negotiations.

The telegram was based on a conversation between Mr. Norweb [Page 387]and Mr. Snouck Hurgronje, Secretary General of the Foreign Office, who is the competent official in this matter.

Mr. Snouck first took up the considerations advanced in our memorandum of March 5th and read a communication from the Colonial Department agreeing to our contentions. It was pointed out, however, with reference to our desire for assurances that “the Netherland Government will treat responsible American petroleum interests on a footing equivalent to that accorded to Dutch interests,” that while the Colonial Department is determined to pursue the open door policy and to accord equal opportunity in the Netherland East Indies to American petroleum interests, it could not bind itself to grant in every specific instance absolutely “identical” treatment to American and Dutch interests. It could not undertake, for instance, each time a concession was given a Dutch concern, to grant a concession of like size or importance to American interests. Mr. Snouck was of the opinion that this attitude of the Colonial Department should not occasion any difficulty as he felt that it was not the intention of the Department of State in asking for “equivalent” treatment for American interests to insist on concessions hectare for hectare with the Dutch.

In indicating his willingness to sign the Koloniale Bill, the Minister of Colonies further suggested that it might be desirable for the Foreign Office, in view of the fact that Great Britain is a non-reciprocating country and that indirectly British interests have a share in the Dutch companies operating in the United States, to inquire whether or not the American Government regards the Shell Union Oil Corporation and the Bataafsche Petroleum Company as Dutch companies within the meaning of the reciprocal provisions of the leasing act of 1920. The Colonial Minister went on to point out that the Shell Union Oil Corporation, which is the only Dutch company interested in acquiring leases in the United States, is controlled up to 66% by the Bataafsche Petroleum, the balance being in American hands. However, the Bataafsche Petroleum Company is, in turn, 40% British Shell and 60% Royal Dutch. This division of interests makes the British share in the Shell Union approximately 26%. With the reservation as to a satisfactory answer to this inquiry, the Colonial Minister stated that he was prepared to sign.

Assurances on this point are desired apparently in order that this indirect British interest, and the fact that Great Britain is not a reciprocating country, may not at some future date be used as an argument for refusing a lease to the Shell Union. Mr. Norweb informed Mr. Snouck that he was sure these facts were known at Washington and that because of the predominance of Dutch control the companies were regarded as Dutch. It might be possible to give [Page 388]satisfactory assurances on this point from information in the Legation files but failing that the point would be submitted to Washington.

Mr. Snouck then referred to his conversation with me of a month ago at which time he said he hoped within a few days to be able to reply satisfactorily to the Legation’s memorandum of March 5th. In saying this, he explained, he had not anticipated any delay in hearing from the Dutch Legation in Washington, to which a minor question had been referred for opinion. He said that he had only just received this reply, which was dated Washington, April 24th, and which was of a nature totally different from what he had expected. In this report, said Mr. Snouck, the Dutch Minister at Washington referred to conversations he had held with Mr. Kessler, the Royal Dutch representative in the United States, with Mr. Torchiana, the Dutch Consul General in San Francisco and with the American legal advisers of the Dutch oil interests in the United States, from all of whom he had gathered the distinct impression that because of uncertainties and conflicts in American oil legislation they could not recommend any Dutch company to attempt to obtain a lease to operate in public lands. Mr. van Royen suggested therefore that before the Koloniale Bill was signed an effort might be made to discuss these difficulties with the American Government.

According to Mr. Snouck, the substance of Mr. van Royen’s report was as follows: Even though the public lands in the United States are of a comparatively small area, their oil resources remain untapped, a fact which, under the circumstances, greatly increases their value as future sources of supply. Of the various Dutch companies operating in the United States, the Shell Union Oil Corporation, a subsidiary of the Bataafsche, is the only Dutch company interested in obtaining leases in United States public lands and the legal advisers of this company for various reasons believe it unwise under existing conditions for the Shell Union to attempt to seek a lease in the United States public lands. The objections arise chiefly from the fact that public opinion in the United States with respect to oil, particularly oil controlled by companies other than American, is very uncertain. There is a danger of politics entering into the question to such a degree as to make it of doubtful advisability for foreign companies to undertake to operate in public lands. Specifically the objections are as follows: Any leases on public lands may be jeopardized (1) by a possible conflict between Federal and State laws. Even if the Federal Government recognized the Shell Union as belonging to a reciprocating country the State governments, who have a voice in the disposal of public lands, might not choose to follow suit. In this connection Mr. van Royen pointed to the laws [Page 389]of the State of California which deprived Japanese of the right which had been acquired by treaty to hold land, and that the legality of the State action (as against the treaty entered into by the Federal Government) had been upheld by the American courts; (2) by the possibility of a change, by reason of political pressure, in the administration of the Federal Leasing Act which Congress has left to the discretion of the Secretary of the Interior, and (3) the possibility that even though the lease may be granted it could always be contested before the courts by inimical interests.

Mr. Snouck referred to these objections as difficult of solution except by a change in the American laws or by special treaty and for that reason, he said, the Foreign Office is prepared to disregard van Royen’s suggestion that these factors be taken into consideration by the Dutch Government before signing the Koloniale Bill. He added, however, that he was bringing them to the attention of the Legation in case the American Government should care to express any views in the premises.

As a result of this conversation it was understood that the Legation, at Mr. Snouck’s specific request, would inquire from Washington whether or not the Shell Union and Bataafsche companies, despite British interests therein, are regarded as Dutch companies within the meaning of the reciprocal provisions of the Leasing Act, and that if the Colonial Minister could be satisfied on this point the Foreign Office would then reply to our memorandum of March 5th which reply, he felt, would be in every way satisfactory to us.

Mr. Norweb took occasion to express the disappointment of the Legation and the disappointment which I know will be felt in Washington at this further procrastination upon the part of the Foreign Office, especially after having so recently received assurances that the matter had been accepted in principle and that the delay was simply one of drafting.

Despite these disappointing delays and though it is not possible now to assign any definite period when final action will be taken, I remain hopeful the Bill will be signed. I attribute the dilatory tactics more to a desire to make the best bargain possible than to any disposition to oppose Parliament on this issue, especially after the Bill had received such an impressive majority. It is possible that the Kina incident,13 threatening as it did some of the most important men in Holland, may have had an unfavorable reaction upon the progress of these negotiations.

As Mr. Snouck will be away for three weeks, it is unlikely that any action can be expected during his absence, but I should appreciate an expression of the Department’s views in the premises by [Page 390]telegraph in order that I may again take up the matter with him immediately upon his return.

Mr. Horstmann has been informed of the present status of the negotiations.

I have [etc.]

Richard M. Tobin
  1. Suit instituted by the United States Department of Justice in New York against Netherlands quinine interests.