894.6363/33: Telegram

The Ambassador in Japan (Grew) to the Secretary of State

94. 1. The Department has presumably seen in the Wall Street Journal and other newspapers’ despatches from Japan regarding a [Page 733] tentative proposal to establish either an oil monopoly, under which the Government would buy up the existing properties in Japan of the foreign oil companies, or a system of governmental control through licensing of importation and refining of oil, under which the oil industry and trade could eventually, if desired, be operated exclusively by Japanese companies. The latter plan also contemplates the securing of sources of crude oil other than American and British.

2. These tentative plans were recently given to the press by the Mining Bureau of the Department of Commerce and Industry and according to the newspapers were compiled in response to a resolution passed by the House of Peers in March last, calling upon the Government to develop the domestic oil industry for reasons of national defense. They may conceivably have been announced at the present time to afford a trading point at the forthcoming Economic Conference at London, or even as a trial balloon to gauge foreign reaction. On the other hand the Japanese may desire to discourage further expansion on the part of the foreign oil companies until the Government is in a position to determine its future policy. There is as yet no indication that they will be put into effect or when. The commercial bureau of the Foreign Office disclaims knowledge of those specific plans but does not deny that such plans exist. It further states that it entirely disapproves of any monopoly project but expresses no opinion on the licensing plan.

3. Under either of these plans the foreign oil companies could expect eventually to be driven from the field except for the sale of crude oil. Their distributing plants and organizations in Japan would have to be abandoned. For some time past the two principal foreign companies, the Socony-Vacuum Corporation and the Rising Sun Petroleum Company (British Shell interests) have been endeavoring to obtain some statement of policy from Japanese Government in order to shape their own future plans and to determine whether to make further investments in this country. As their inquiries have met with no satisfactory results, the British Ambassador, the Dutch Minister and I have separately taken occasion to express informally to the Foreign Office the hope that our oil companies might be given some indication as to the outlook for the future of their business in Japan in order to enable them to determine their own plans.

4. The Dutch Minister also pointed out to the Minister and the Vice Minister for Foreign Affairs that the Japanese oil plans as published would create an unfortunate impression abroad, particularly at the present time when Japan is working for international freedom of trade. He believes that any plan to monopolize the oil-refining [Page 734] industry would conflict with the terms of the Dutch-Japanese treaty of commerce.46

5. This general subject is discussed in my despatch No. 366 of April 21, 1933.47 Although the precise text of the plans is not yet available the Department may wish to consider whether along general lines a monopoly or a licensing system could be held to be in contravention of the provisions of our own Treaty of Commerce with Japan.48 It is possible that the future of the American and other foreign oil interests in Japan may be coming to a head in due course, but any definite policy would presumably require sanction by the Diet.

Grew
  1. Treaty of Commerce and Navigation, signed at The Hague, July 6, 1912, British and Foreign State Papers, vol. cvii, p. 966.
  2. Not printed.
  3. Signed at Washington, February 21, 1911, Foreign Relations, 1911, p. 315.