862.6363/158: Telegram

The Ambassador in Great Britain (Bingham) to the Secretary of State

595. I was called to the Foreign Office this morning and handed the following memorandum:

“Some months ago the German Government invited the Anglo-Persian, Shell and Standard Oil Companies to provide all the current [Page 326] petroleum requirements of Germany and to build up a large reserve (4 months’ requirements plus an additional 1,000,000 tons) on credit, with no chance of receiving any appreciable payments in foreign currency for at least 5 years. The three oil companies declared that this proposal was unacceptable; and no more was heard of it.

About 10 days ago a new proposal was received by the three companies emanating from the German Dye Trust, who are almost certainly acting on behalf of the German Government.
The proposal is that the three companies should deliver to the Dye Trust within 5 years oil products to the value of 4,000,000 pounds, the Trust reserving the option of calling for delivery of the whole quantity within 2 years. This figure if taken in motor spirit would represent about 1,000,000 tons. Ten percent of the value of each cargo of oil is to be paid for on arrival at the German port the balance being paid for by 6 monthly installments22 in such a way that the whole would be paid for at the end of 5 years from the commencement of the contract: the whole payment to be guaranteed by first-class United States and London banks.
The Anglo-Persian and Shell Oil companies are understood to be ready to accept this proposal provided that the guarantees mature and that the Trust’s option to demand delivery within 2 years is eliminated; or, if that proves impossible, provided that a clear undertaking is received from the Trust that the period over which payment is to be made should conform to the period of delivery. It is understood that the Standard Oil Company is inclined to accept the Trust’s proposal as it stands, i. e. with the maintenance of the option to call for delivery in 2 years and without any safeguard in such circumstances as regards the period of payment conforming to the period of delivery.
It is considered that objection can be taken on commercial grounds to acceptance of the proposal in this form; and that it may well mean that the oil companies will be building up for Germany an emergency reserve at their own expense. In these circumstances it is hoped that the United States Government will do what they can to advise the Standard Oil Company to conform their attitude to that of the Anglo-Persian and Shell Oil Companies.”

I should be grateful for any comments which the Department may desire the Embassy to make in reply.

  1. Apparently means “semi-annual” installments.