804.6363/49
The Ambassador in Japan (Grew) to the Acting Secretary of State
[Received August 12.]
Sir: With reference to my despatch No. 399 of May 12, 1933,51 I wish to submit to the Department further information regarding the oil business in Manchuria, which this Embassy has obtained from a source found in the past to be reliable.
It is reported that it has now been definitely decided to form a company for the purpose of building and operating an oil refinery at Dairen, not at Hulutao as reported in the press. In fact, a site opposite the property of the Socony Vacuum Corporation at Dairen has already been selected and the land purchased with funds advanced by the South Manchuria Railway. The company will be capitalized at Yen 5,000,000. The South Manchuria Railway will subscribe to two million yen of this, “Manchukuo” to one million, and the following Japanese oil companies to five hundred thousand each: Mitsui Bussan, Mitsubishi Mining Company, Ogura, and Nippon. At first, the refinery will purchase its crude oil from abroad from the source that gives the most advantageous rate—pending the development of sources within Manchuria. The Nippon Oil Company will supply the skilled labor and technicians for building and starting the operation of the refinery. It is hoped to have the refinery completed during the autumn of this year.
The next problem before the originators of this scheme is that of assuring the refinery of a market in Manchuria without violating the principle of the Open Door. It is understood that they have tentatively decided upon a plan of governmental control under which the refinery would be guaranteed one half of the market and the commercial companies now operating in Manchuria the other half. A “Manchukuo” controlled organization, called a “monopoly”, will be established to purchase the product of the refinery and to market it in “Manchukuo” territory. It is not known whether the commercial companies will be compelled to sell to this so-called monopoly or whether they will be licensed to sell fixed amounts through their own established distributing systems. The private companies will pay duty on what they import whereas the “Manchukuo” monopoly will pay no duty on what it imports from the refinery, even though the latter being in Kwantung Leased Territory is outside the “Manchukuo” customs zone. It would seem to be unimportant whether “Manchukuo” gains its revenue in the form of customs duties or in the form of excess profits, as long as the selling price of petroleum [Page 739] products is sufficiently high to enable the commercial companies to make a profit.
It is understood that throughout the negotiations for the formation of the refining company and the establishment of the “Manchukuo” so-called monopoly the Japanese military and the South Manchuria Railway have been fighting each other for control. The military work through “Manchukuo”.
Respectfully yours,
- Not printed.↩