893.6363 Manchuria/185
The Consul General at Mukden ( Ballantine ) to the Minister in China ( Johnson )79
Sir: I have the honor to refer to my despatch No. 71 of March 22, 1935, in regard to the enforcement of the “Manchukuo” Petroleum Monopoly, and to enclose a report80 made by the assistant manager of the Standard-Vacuum Oil Company to the Manager of a conversation with the Chinese agent of the Company at Kirin regarding a meeting of agents called by the Monopoly authorities to meet at Hsinking on March 25.
It is evident from the report that the tactics being followed by the Monopoly authorities are to isolate the foreign oil companies from their agents, the obvious purpose of which is to render the companies [Page 889] so helpless that they would be amenable to disposing of their stocks to the Monopoly without haggling over the prices offered. The companies, however, have apparently not yet received instructions from their head offices on the policy to be followed by them in preparation for the institution of the Monopoly. Naturally, if their agents are interdicted from buying their stocks, there will be no other buyer other than the Monopoly, and it would therefore seem that sooner or later they must make up their mind whether they will sell to the Monopoly or not. If they do not sell, they face the possibility of having stocks left on their hands, since it is barely possible that the railway might refuse to transport them to a port for shipment out of the country.
Three of the major agents of the Standard-Vacuum Oil Company have already resigned. Although none of the agents of the Texas Company have yet taken this step, both companies are apprehensive that resignations will now begin coming in.
There is still some obscurity regarding the status of the Monopoly in the South Manchuria Railway Zone. The British Consul General was told by the Japanese Consul General that the monopoly would be operative in the zone. The former had also received a report from the Asiatic Petroleum Company of a meeting called at Hsinking by the Monopoly authorities at which the latter acquainted the agents with an alleged arrangement whereby only accredited monopoly dealers would be permitted by the Japanese authorities (the Kwantung Bureau) to make sales. The existence of an arrangement between the Railway Company and the “Manchukuo” Government regarding the operation of the monopoly in the zone was confirmed to me by the official army spokesman. I asked him whether this agreement had been implemented by any enactment by the competent agency of the Japanese Government as I did not see how without such enactment the Japanese police would be able to enforce the agreement. He replied that he did not know of any, but would look up the question for me.
I have been told by the representative of the Standard-Vacuum Oil Company that they propose writing their agents in the zone that so far as they are aware there is no legal authority for the enforcement of the Monopoly in the zone and requesting the agents to carry on with the agency so far as zone business is concerned. Such action was already taken yesterday by the Texas Company. If definite evidence is thereby developed that the Japanese authorities are a party to the monopoly it might be of value in connection with possible future representations to the Japanese Government.
In this connection, I refer to my statement in my previous despatch above cited that the Japanese police in the Ssupingkai zone settlement [Page 890] took away the Company’s storage permit on the plea of examining it and failed to return it. The company sent a representative to Ssupingkai and the police promised to return the permit by 1 p.m. of the 28th. This promise, however, was not kept, and a representative is again being sent by the company to Ssupingkai.
I shall not fail to inform the Legation promptly of any further developments in the situation.
Respectfully yours,