Memorandum by the Economic Adviser (Feis)

This cable from London (No. 595 of November 20, 862.6363/158) transmits a request from the British Government that we should advise the Standard Oil Company to go along with the British companies.

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The request probably arises primarily from the fear of the British Government that the contract might be a means by which Germany could, just before some crisis, obtain very large supplies of oil without making payment therefor. Probably in addition there is a commercial calculation that unless payment is coordinated with oil deliveries, should Germany’s exchange difficulties mount up Germany will say it cannot pay for this oil unless Great Britain and the United States take more German goods (the cotton transaction between Czechoslovakia and Germany appears to have had this outcome). Whether any such possibility of commercial loss exists depends on what type of security the London and New York banks would be given for their “guarantee”.

Recent experience has shown that in the event that the German Government turns a commercial agreement to its own advantage, no matter how costly that might be to our trade and interest, this Government has very little powers of protecting itself against it. If the situation remains unchanged, the Standard Oil would be dependent primarily upon the protection given by the British Government. It is likely that no such protection would be forthcoming if the Standard Oil forced the hand of the British companies and the British Government in the matter.

Under all the circumstances, it might be advisable to call in the Standard Oil Company and tell them (a) this Government does not wish to intervene in its business relationships; (b) it does however want to inform it of the communication received from the British Government; (c) it wishes to point out that in the event the question of protection arises it is likely to be dependent upon the good-will of the British Government.

H[erbert] F[eis]