Memorandum by the Assistant Economic Adviser (Livesey)

Mr. Swain telephoned from New York, referring to his conversation of July 17 with Mr. Phillips and stating that his purpose was to bring the Department up to date with the development of the German proposal that the Royal Dutch, the Anglo-Persian and Standard Oil of New Jersey should keep, in addition to the present four months storage supply in Germany, 1,000,000 tons in storage and must leave the proceeds of all sales in Germany for a period of five years.

Mr. Swain said that the Anglo-Persian and the Standard Oil of [Page 321] New Jersey are entirely opposed to the German proposal but that the Shell interests which had had some prior discussions with the Germans, are less opposed. At a meeting of the three companies in London, the Shell people said that they were willing to go ahead with the proposal subject to modifications, namely, they would store their pro rata of the million tons and would leave the proceeds of all sales in Germany for a period of three years on condition that the German Government guarantee that they should then be transferred in dollars or guilders or sterling at a guaranteed rate of exchange and should bear interest meanwhile. The amount involved for the Royal Dutch would be about $60,000,000.

The representative of the Standard Oil of New Jersey had stated that his company would be unwilling to go into the project. The three companies are to have another meeting Friday. The Standard Oil man had informed the others that his company had acquainted the Department of State with the project and suggested that the others might wish similarly to advise their governments. The Anglo-Persian representative had said his company would probably not take the matter up with the British Foreign Office which he was sure would oppose the proposal. I asked Mr. Swain whether the Shell people would be regarded as a Dutch interest in this matter. He said that there is, of course, a divided Dutch and British interest while the Anglo-Persian is in part directly owned by the British Government.

Mr. Swain asked whether the Department had received any information on the matter and I said that I had observed nothing coming into the Department either with reference to the proposal concerning oil or with reference to the subject treated in the Journal of Commerce article before me under the headlines “British Credit Aid For Germany Seen—Shift in Sources of Raw Materials Purchases Held to Be Involved.”

I thanked Mr. Swain for his information and said I had no comment to make on it. He said he would keep the Department informed of further developments and asked that any information the Department received be communicated to him.