894.6363/104
Memorandum by the Chief of the Division of Far Eastern Affairs (Hornbeck) of a Conversation With the President of the Standard Oil Company of New Jersey (Walter C. Teagle)
Reference, Tokyo’s telegram 232, October 22, 5 p.m.; Tokyo’s mail despatch 1001, October 5, entitled “American Oil Interests in Japan”; and Peiping’s telegram 478, October 21, 6 p.m.
Mr. Teagle called by appointment. Mr. Hornbeck said that he was very glad to see Mr. Teagle, as we have just received information regarding new developments—discouraging information—with regard to, first, the Japanese in Manchuria. Mr. Teagle replied that he also had received, last evening, from New York, a substantial amount of new information and that his Mr. Parker was sending what they had to the Department. Mr. Teagle took from his pocket a file which he said he supposed contained the same information that we had.
Mr. Hornbeck then said that it was evident that the Japanese authorities are planning to go ahead regardless of the representations which the interested oil companies and the governments concerned have made. He recalled the prediction which had been made on the occasion of the first call of Mr. Teagle and Sir Henri Deterding45 at the Department in connection with this matter, that representations would be of little avail unless it was made evident to the Japanese that disregard of the representations would be likely to result in embarrassment to the Japanese in some concrete form. He said that the demands which the Japanese Government has made for early compliance by the foreign petroleum companies with provisions of the law and the regulations apparently makes it clear that the companies must decide at an early date upon the course of action which they will tell the Japanese Government they intend to follow. He said that we had a memorandum prepared by an officer of the Embassy in Tokyo—which we might conjecture was based in part at least upon a brief supplied by the general manager for Japan of the Standard-Vacuum Oil Company—in which it is pointed out that in relation to supplies of crude oil Japan is very vulnerable; that the major portion of the petroleum and petroleum products now imported into Japan is of American origin; and that “There would seem to be no reason why an American raw material should be supplied in unlimited quantities to assist in closing the market to American finished products.”
There ensued some discussion of commercial factors, in the course of which Mr. Teagle referred to the suggestion which he had originally [Page 747] made to the Department that the American Government take steps toward regulating (restricting or embargoing) exports of oil from the United States to Japan, Mr. Hornbeck said that, speaking unofficially and purely on the basis of a personal impression, he doubted very much whether it could be expected that the Government would take steps in that direction. He said that he had studied the utterances and the acts of the highest officers of the Administration and that it was his impression that the thought of those officers did not run in that direction; he might be mistaken, he was speaking not on the basis of any decision of which he had knowledge or of anything said to him but on the basis of an impression; he felt that this subject was one with regard to which it would be well for Mr. Teagle to talk with the highest authorities; in fact, he felt that the whole problem under discussion should be taken up by Mr. Teagle with the Under Secretary or the Secretary of State—the problems involved being problems of very substantial importance both to the American oil interests involved and the various governments concerned. Mr. Teagle said that he concurred in the view that the matter should be treated as one of unusual importance and that he would expect to discuss it with higher officers, but that at this moment the highest officer of the Standard-Vacuum Company is in London and is waiting to confer with Sir Henri Deterding at a meeting which will take place probably early next week; he, Mr. Teagle, therefore would not be in position to do anything until after that conference. Mr. Hornbeck said that he was glad to hear that such a conference was scheduled to occur, and that it seemed to him that the oil interests should decide upon a course of action for themselves which would not be contingent upon further governmental action: that is, that they should decide whether they intend to comply with the Japanese law and regulations or to tell the Japanese that they cannot and will not comply therewith. Mr. Teagle inquired what would be the result of non-compliance. Mr. Hornbeck replied that it would probably depend in considerable measure on the manner in which the petroleum interests handled the matter in giving notice of such intent—and on the manner in which they “followed up”; it might be that the Japanese would offer some kind of a compromise; it might be that they would endeavor to buy the equipment which the companies have in Japan and thereafter to handle petroleum business in Japan themselves. Mr. Teagle asked what there was to prevent an automatic confiscation by the Japanese Government of this equipment. Mr. Hornbeck said that he did not believe that that question need arise: if it became clearly evident to the Japanese that the companies were prepared to refuse to do business on the conditions thus far laid down by the Japanese and also evident that, in the event of their being frozen out [Page 748] of Japan, the companies would exert themselves toward drying up the sources of petroleum imports to Japan and to Manchuria, the Japanese would probably think very seriously before taking the responsibility of creating such an impasse. Mr. Teagle then referred to the difficulty of bringing independent oil producers into line. Mr. Hornbeck said that he realized that this was a very real problem and he felt it was one to which the industry should address its best thought and effort.
At this point Mr. Hornbeck asked that he be permitted to introduce Mr. Mackay46—and Mr. Mackay was called in. Mr. Hornbeck informed Mr. Mackay that he had suggested to Mr. Teagle that the oil companies come to a decision with regard to the course of action which they would pursue vis-à-vis the Japanese authorities; he said that he had by implication suggested that the companies prepare for a contest; that he believed that the Japanese Government, if it saw that the great producers of petroleum were prepared to exert themselves toward refusal to supply crude petroleum to Japan and that the governments concerned were at least sympathetically disposed toward that effort, would hesitate to force the issue. Mr. Mackay indicated concurrence in that view. Mr. Teagle then said that we might all await with interest the report which would be made to him sometime next week of the conference scheduled to be held in London to which he had earlier referred. Mr. Hornbeck said that we would all continue to give the question our thought. The conversation there ended.