Office of the Historian

894.6363/247: Telegram

The Ambassador in Japan (Grew) to the Secretary of State

Tokyo, February 24, 1936—8 p.m.
[Received February 24—10:10 a.m.]

34. Embassy’s 12, January 15, 11 a.m., American oil interests in Japan.

1.
Kurusu informed the Embassy on February 22 that the Vice Minister for Commerce and Industry had just called on him and had stated that:
(a)
It would be impossible to change the law and regulations and consequently the 6 months’ storage provisions would have to stand.
(b)
It might be feasible to place a maximum on the amount of oil to be stored but any proposal to this effect must come from the foreign oil interests. The Vice Minister could then discuss the proposition with the military and other interests.
(c)
The quotas for the second quarter of this year must soon be considered and if the foreign companies definitely and finally refuse to store 6 months’ stocks, it will be necessary to reduce their quotas.
(d)
Mitsubishi and Nippon Oil have applied for permission to add to their refining facilities, probably having in mind an eventual refusal of the foreign oil interests to comply with the law and consequent reduction of their quotas. The Vice Minister is now holding up these applications but will be compelled to grant them if the foreign oil companies do not agree to carry 6 months’ stocks.
(e)
Therefore, the Vice Minister recommends that the foreign oil interests present a concrete proposal offering to store 6 months’ stocks under the following or somewhat similar conditions:
(1)
that 6 months of 1934 or 1935 be taken as the maximum storage requirement;
(2)
that adequate compensation be paid by the Government;
(3)
that adequate guarantees of future business be given.
(f)
If the Vice Minister has some such proposal, he can continue the present quotas, at least until June 30, 1936, and can refuse the applications for additional refining capacity, on the ground that the foreign oil companies have not refused to comply with the law but on the contrary have agreed to store the oil under certain conditions. The foreign oil companies’ objections to the establishment of a precedent of 6 months’ storage will be overcome by the fact that they have agreed only to store a fixed quantity in gallons and not half of their previous year’s sales.
2.
The local representatives of the foreign oil interests have telegraphed the substance of the above to their respective head offices, [Page 789] recommending that the suggestion of the Vice Minister be adopted and that some scheme of Government financing of the non-commercial stocks be embodied in the concrete proposal.
Grew