765.84/3032½
The British Embassy to the Department of State
Oral Communication
The situation as described in the earlier communication of November 30th came up for discussion in the Cabinet on December 2nd and the position was confirmed. The policy and purposes of the United States Administration met with warm appreciation and it was decided to carry on further with the policy hitherto followed, of full participation in the collective action, including of course an oil embargo. At the same time it is the part of candour not to conceal the fact that the Cabinet was gravely perturbed by one element of the situation, namely that according to their information a large increase in American exports of oil to Italy had taken place during the last three months.
If peace negotiations make it necessary to adjourn the application of sanctions for a further period, it is to be expected that in the interval frantic efforts will be made by Italy to supply herself with all the oil obtainable. Measures are being taken with the British companies to avoid an inflation of British oil exports to Italy in this period, but it is feared that the increase of American exports would be greatly accentuated. Can any effective action be taken to avert this situation?
Similarly if the peace negotiations come to nothing and an oil embargo is imposed, can the Secretary of State feel confident that, without further legislation by Congress, it will be possible to keep American exports to the normal figure? While the difficulties of the United States Administration’s position are appreciated it may [Page 872] be fair to remember also those of League Governments if they impose an oil sanction and face the risk and loss that it entails, while increased American trade continues. Their oil companies must represent to them that inevitably their whole Italian market must be lost to them for ever to the advantage of American traders; and the Governments receiving these representations would find it difficult to maintain their position.