The reference is, of course, to the second of the two memoranda which you
handed to me on April 10.95
[Enclosure]
Memorandum of Oral Statement
There is noted the statement that it has been suggested by the Shell
and the Asiatic Petroleum Companies that the California companies,
[Page 901]
if given a hint by the
United States Government, would be ready to join the British
companies in refusing to supply crude oil for the Manchurian Oil
Company’s refinery; that this would entail expense and difficulty
for the latter and might have as a result a modification of
Manchurian (oil) policy; that the British Government would consider
such a course fully justified; and that it is felt that failure to
show any firmness might have the effect of encouraging the spread of
monopolies in Manchuria, China and even Siam which it is believed
would be as distasteful to the United States Government as to the
British Government.
There is noted the statement that the Department’s views on the whole
situation would be appreciated, especially its views as to the
prospects of its giving such a hint to the American oil companies
and as to the likelihood of such a hint being acted on if given.
At intervals during the past few months, officers of the American
Government have made known to officers of the British Government the
thought of the Department in regard to most of these points, and at
the same time officers of the Department have expressed to
representatives of the American oil interests certain views with the
expectation that those views would be made known by the latter to
their British associates and by them to officers of the British
Government. The Department welcomes the statement and the inquiry
under reference and avails itself of the opportunity thereby
afforded to recapitulate and, in the light of the existing
situation, to make known its views, as follows:
When first approached on the subject of the Japanese Petroleum Law,
by a representative of British and Netherland petroleum interests
and a representative of American petroleum interests, together,
officers of the Department expressed the view that the situation
(problem) in Japan and the situation (problem) in Manchuria, though
separate, were closely related and should be considered together.
Officers of the Department further expressed the view that no
protests of such character as the British and the American
Governments were likely to be able to engage in would be effective
unless it was apparent to the Japanese and the “Manchukuo”
authorities that there stood in the offing some form of a potential
action such as withholding of oil supplies. At that time tentatively
and later with more definiteness, officers of the Department made
known their view that it should not be expected that the American
Government would take formal steps toward influencing American oil
interests toward the setting up in this country of an effective
embargo upon exports of oil. The suggestion was made and has at
intervals been repeated, to the American companies most directly
concerned, that they confer with the other companies whose action
along with theirs would affect this
[Page 902]
situation and endeavor to bring about
cooperation in dealing with the situation along lines which might be
agreed upon between them and the British and Netherland interests.
It is understood that efforts have been made, with some show of
progress, toward that end.
It is not clear from the British Embassy’s memorandum whether the
suggestion therein communicated envisages refusal to supply crude
oil only; and, whether it envisages refusal in relation to the
Manchurian Oil Company’s refinery only. The Department would welcome
further information on these points.
The Department doubts whether the withholding of petroleum supplies,
even in their entirety and from the whole of Manchuria, would,
unless the embargo be extended so as to comprehend also Japan, have
the effect of causing a modification of the Manchurian (oil) policy.
To whatever extent refusal is made to supply oil to Manchuria, so
long as oil is supplied to Japan it should and probably would be
possible for the Japanese Government and Japanese interests to take
care of the needs for oil in Manchuria: toward the procuring and the
delivery of oil to Manchuria Japan probably would act as a
middleman. The Department doubts the advisability of an effort by
governmental action to attempt at this time to coerce Japan through
and by an embargo on the supplying of oil to that country. The
procuring of oil is a matter of comparatively great importance to
Japan. Denial to Japan of petroleum supplies would probably be
regarded by the Japanese military element, especially their Navy, as
a very serious step on the part of foreign governments party thereto
toward coercing Japan.
At the same time, the Department shares the view of the British
Government that refusal to supply oil for the Manchurian Oil
Company’s refinery would be fully justified and that show of
firmness would probably serve a useful purpose toward discouraging
the spread of monopolies in Manchuria, China and even Siam. It
shares the view of the British Government that such spread of
monopolies would be highly undesirable and should be discouraged. It
feels, however, that refusal to supply oil, whether to the refinery
or to Manchuria as a whole or to these and Japan, and whether crude
oil or all oil, would be a step the taking of which should be left
to the oil interests.
The Department has repeatedly expressed its views to leading
representatives of outstanding American oil companies, has recently
reviewed the matter with those representatives, and will continue to
keep in close touch with them. It believes that the question of
action which may be taken by the American oil interests in
cooperation with the British and Netherland oil interests may best
be worked out between and among those interests. It is the
Department’s present understanding that the American oil companies
most concerned have
[Page 903]
reason
to expect friendly cooperation from certain other important American
oil companies but that these interests, while extending their
efforts in the matter, are not yet in position to affirm with any
degree of certainty that an effective embargo on the shipment of
American oil to Manchuria would thus be attained.
[Washington,] April 16,
1935.
