The Consul General at Hamburg (Erhardt) to the Ambassador in Germany (Dodd)20

Serial No. 6

Sir: I have the honor to report that on August 5, I was informed, confidentially, by the vice president of one of the smaller American oil importing firms, then in Hamburg on business, that the Reich Government was supposed to have proposed to the Deutsch-Amerikanische Petroleum Gesellschaft and the German Shell interests that these two companies should leave the c. i. f. value of their oils, plus any eventual profits, in Germany for a period of five years, with the exchange risk for the account of these companies, and furthermore that they should, at all times, maintain a stock of products equal to six months’ national requirements, the amounts to be apportioned equally between the two concerns. In return, a virtual monopoly of oil and gasoline sales in the Reich was rumoured as the consideration to be received. The vice president of the American concern and his local American manager desired me to refute or corroborate what he had heard since, if it were true, he would have to consider the closing of his office here.

Upon my discreet inquiries, the chief executives of the two oil concerns denied any such offer. Leading local bankers, in close touch with the affairs of the oil firms, one of whom had recently spoken to Sir Henri Deterding21 in London, had no information that any such monopoly contract had been signed or that its signing was contemplated. They did assert, however, that it was possible that arrangements would be made with the Standard and Shell interests whereby a large percentage of their sales proceeds would be left in blocked reichsmarks for a period of years and that other oil companies who did not agree to pursue a similar course would, for all practical purposes, find this market closed.

The next day, a leading oil executive called on Vice Consul Steyne, with whom he is especially friendly, regarding an appointment with the Embassy on another matter. Mr. Steyne referred to these rumours and received from him the following version.

. . . . . . . . . . . . . .

Dr. Kruspeg, the head executive of the German Shell interests …drafted, with the collaboration of several leading government officials, the following plan which received the approval of his chief.

[Page 324]

The Shell interests, the Deutsch-Amerikanische Petroleum Gesellschaft and the “Olex” Deutsche Benzin und Petroleum G. m. b. H. (Anglo-Persian Oil Company) were to sell the Reich Government one million tons of petroleum, payment for which would be made over a certain period of time in blocked reichsmarks. This stock was not to be drawn upon, but to be maintained as a “National Reserve” in case of emergency, or, in other words, war. Furthermore, these three concerns were to maintain, constantly, four months’ supply in the Reich. As the storage space for such large quantities does not exist in Germany, the oil companies, in question, were to pay for the erection of the necessary tanks upon land granted by the government, the cost of the tanks being amortized by the Reich over a period of five years.

The current oil imports, outside of the million tons and the supplementary four months’ stocks, were to be paid for from the foreign exchange received by the companies for their exports. As the Shell concern is the only one doing a large export business, the major share of the “devisen” wherewith to pay for imports would accrue to that firm, which would gradually monopolize the greater part of Germany’s oil business though the Standard and Anglo-Persian would be bearing an equal share of the costs of inaugurating Dr. Kruspeg’s scheme.

Naturally, the plan would virtually eliminate other firms now exporting petroleum products to Germany unless they were willing to receive payment in blocked reichsmarks with no assurance of their eventual transfer.

Dr. Kruspeg’s ideas are asserted to have been presented to high governmental authorities who were favorably impressed with the plan to maintain a huge emergency reserve and a supply equal to four months’ demand, but feared the repercussions of such an agreement abroad at the present time. In addition, while it was believed that the Standard and Anglo-Persian could be forced into an arrangement by which their chief competitor would be the main beneficiary, it was felt certain that these firms would make vigorous protests to their respective home governments who would be reluctant to approve of the extension of further large credits to Germany—which the payment in blocked reichsmarks really would be—after her several defaults and for essentially military purposes.

For these reasons the scheme was provisionally rejected by the German Government, though should a more propitious moment arrive, a variation of Dr. Kruspeg’s plan may be considered.

Should the plan be adopted, the smaller importers such as the Atlantic Refining Company and the Tidewater Oil Company would perhaps be offered the opportunity to operate under the same requirements. However, if I read correctly the anxiety of the vice-president who sought the assistance of the Consulate General as mentioned in [Page 325] my first paragraph, it is doubted that they could agree to such terms as the volume of their German business would not warrant the risks involved.

Whether this tale is true or not, it may indicate a trend of policy which the present government is considering, i. e., to enter into agreements with the three or four larger companies whereby (1) the major proportion of petroleum imports will be paid for in reichsmarks which could not be transferred for a period of years, (2) the requirement that four to six months’ stocks be kept on hand and (3) the insistence that as large quantities of petroleum as possible be obtained from Roumania and other countries with which Clearing Agreements are in effect.

Respectfully yours,

John G. Erhardt
  1. Copy transmitted to the Department by the Consul General without covering despatch; received August 31.
  2. Head of the Shell interests.