Office of the Historian

894.6363/210: Telegram

The Chargé in Japan (Neville) to the Secretary of State

Tokyo, September 28, 1935—noon.
[Received September 28—3:37 a.m.]

187. Embassy’s 152, July 18, 4 p.m.

1.
At a meeting yesterday between the Vice Minister for Commerce and Industry, Kurusu, and the representatives of the Standard and Shell interests, the Vice Minister explained the present status of the oil problem as follows:
(a)
The 6 months’ oil storage requirements will be postponed from October 1, 1935, to June 30, 1936, but this is only a postponement and the Government will insist on the storage of 6 months’ stocks for reasons of national defense and to provide for emergencies.
(b)
The Government will endeavor to provide compensation, amounting to the carrying charges of 3 months’ stocks, but it is questionable whether or to what extent the Finance Ministry and the Diet will approve such expenditure.
(c)
In view of the fact that some Japanese oil companies are already storing 6 months’ supplies they will be compensated for their extra expenditure by receiving quotas providing for larger shares of the natural increase for 1936. The foreign oil companies will therefore receive very little or possibly no share of the natural increase for 1936 unless they signify their intention to fulfill the 6 months’ storage requirement in the near future.
(d)
For social reasons, no price advance will be granted in the immediate future but next year a price advance covering both advance on economic grounds and advance as compensation for storage will be considered.
2.
The local representatives of the foreign oil interests do not consider the above to be in accordance with the informal agreement [Page 927] reached last April between the Japanese officials and the special representatives of the oil interests and so informed the authorities yesterday. The authorities replied that their change of attitude was due to the fact that they are contemplating compensation for part of the cost of storage.
3.
Referring to the last paragraph of the Embassy’s despatch number 1060, dated November 16, 1934.23 In view of the fact that the Vice Minister for Commerce and Industry stated definitely that the storage requirements are a national defense measure, it appears possible that those requirements might be considered as contravening the last paragraph of Article 1 of the American-Japanese Treaty of 1911.24 ff, in the opinion of the Department, no action can be taken on treaty grounds, there appears to be no further step for the American oil company but to withdraw from Japan or drastically to curtail its operations here.
Neville
  1. For extract, see Foreign Relations, 1934, vol. iii, p. 758.↩
  2. Ibid., 1911, p. 315.↩