893.6363 Manchuria/241
The Consul General at Mukden (Ballantine) to the Minister in China (Johnson)20
Sir: I have the honor to refer to my despatch No. 127 dated July 8, 193521 regarding the negotiations at Hsinking between the representatives of the foreign oil companies and the “Manchukuo” authorities concerning the disposal of their stocks, and to inform the Legation that these negotiations, according to the representative of the Standard-Vacuum Oil Company, have now reached an impasse.
I am informed that the British Consul General happened to be in Hsinking in connection with some other business at the very juncture when the oil companies’ representatives had reached the point that they felt that no useful purpose could be served by further conversations. After consultation with them, the British Consul General brought up the subject with General Minami and his professed sympathy prompted the representatives to suspend negotiations for the time being in the hope that the General might intercede and bring about some favorable development.
It is the opinion of the representatives that although Mr. Hoshino, Director of the Bureau of General Affairs of the Finance Department, may find it difficult to recede from his position and make direct overtures, there is a possibility that the finance authorities will make an acceptable offer through the Mitsui Bussan Kaisha, and in fact conversations to this end are now taking place between the firm’s Mukden office and the local managers of the Standard-Vacuum Oil Company and the Asiatic Petroleum Company. The Mitsui representative states, however, that his company will not act without written authority from Hsinking.
Yesterday, according to the Standard-Vacuum Oil representative, Katakura’s representative offered to buy the company’s stocks [Page 924] entirely independently of the question of the agency proposal, which has already been reported to the Legation. The American company is not clear what this all signifies, and is adopting a waiting attitude.
I am informed that the Asiatic Petroleum Company representatives have telegraphed London that they propose informing the “Manchukuo” authorities that if the latter fail to agree to accept actual duty, distribution, freight and all usual overhead charges and try to make the companies sell below cost the companies would regard it as confiscation and would withdraw their stocks and file formal claim for losses.
The companies feel that it is essential to maintain a firm attitude towards the Monopoly in view of the effect upon their position vis-à-vis the Japanese Oil Control Law and upon future negotiations with the “Manchukuo” authorities for the liquidation of their property claims.
The companies are also now faced with the question of supplying to the Japanese Army in North China. In view of the probability that the Army contemplates shipment thence into “Manchukuo”, I understand that a decision has been reached that the three companies will not supply their requirements without an undertaking that nothing will be exported. In this way the companies will demonstrate to the Japanese Army the contrast in respect to availability of supplies in monopoly and non-monopoly areas.
Respectfully yours,