Memorandum by the Assistant Economic Adviser (Livesey)

Mr. Chester’ Swain and Mr. Orville Harden of the Standard Oil Company of New Jersey discussed with Mr. Phillips the question of sale of a large supply of petroleum products to Germany which was raised by a British Foreign Office memorandum of November 20. They brought in a further file of telegraphic correspondence with their London office, and received while in Mr. Phillips’s Office a further telegram from London, a copy of which is attached.23

Having to leave on a noon train Mr. Phillips instructed Mr. Livesey to prepare a statement of information to be communicated to the British Foreign Office in reply to the latter’s memorandum of November 20. A draft telegram in this sense prepared in collaboration with Messrs. Swain and Harden is also attached.24

The British memorandum of November 20 was addressed to bringing Standard of New Jersey into line with the desire attributed to the Shell and Anglo-Persian Companies that payments by Germany be made within the two years in which the stock of oil was to be shipped to Germany. The London telegram received by Standard of New Jersey today indicates that the German interests are themselves suggesting these terms of payments, which of course are more satisfactory than any basis of credit to the Standard and other shippers, if available. Barring some hitch, it would appear therefore that the question raised by the British no longer subsists.

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There remains the question as to whether the Department of State would desire to request the Standard Oil of New Jersey to refrain from participating in the pending transaction on grounds other than those suggested by the Foreign Office. The specifications just communicated to the Standard Oil’s representative at London25 indicate that the shipments to Germany are to be largely of aviation-quality gasoline and lubricating oil. The obligation to be taken by the petroleum companies is to supply petroleum products up to a total amount of 1,000,000 tons (about one-fourth of the total annual consumption of Germany) in the calendar years 1935 and 1936, from 60 to 80 percent probably to be taken during the twelve months from July 1935 through June 1936, this quantity being in addition to the quantities normally imported into Germany by these companies. From the point of view of business considerations, this transaction is very much in the interest of the supplying companies, particularly as temporarily decreasing the German pressure for self-sufficiency in petroleum supplies and as enabling them to continue their business in Germany, for the distribution of which they have a very large investment in Germany. In this connection Standard also points out that even if the Anglo-Persian, Shell, Standard and all other American companies decline to participate in this supply arrangement, Germany will have no practical difficulty in obtaining the desired supplies from other sources, notably, Rumania and Russia.

Mr. Swain requested that if the Department has any objection to their consummating an arrangement that is satisfactory from a business standpoint to them, they feel that they ought to be very promptly advised as active negotiations are now under way in London and it is quite impossible considering their business relations with Germany that they attempt to stall the matter.

  1. Not printed.
  2. For telegram as sent, see infra.
  3. Frank A. Howard.