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  4. Document 954

693.94244/188

The British Embassy to the Department of State

His Majesty’s Government in the United Kingdom have been impressed by the serious deterioration in the general situation as regards smuggling by Japanese into North China and have accordingly issued instructions to His Majesty’s Ambassador in Tokyo to make representations on this subject to the Japanese Government.

His Majesty’s Government are more especially concerned at the situation regarding smuggled kerosene and Sir R. Clive has been instructed to consult the United States Ambassador in Tokyo as to the possibility of making joint representations on this subject.

It is felt that from a political point of view it would be valuable if the United States Government could see their way to instruct their Ambassador at Tokyo to make with Sir R. Clive joint protest to the Japanese Government against this smuggling, on the grounds of the damage inflicted thereby upon legitimate United States and British interests.

His Majesty’s Government would be grateful if the United States Government would urgently consider this question of joint representations about kerosene, and if they could send early instructions in the matter to Mr. Grew. His Majesty’s Government appreciate that it [Page 850] is not to be expected that any substantial improvement would be likely to result from such representations, but they consider that a joint démarche of this kind might be of value in demonstrating that as a result of a policy of consistently ignoring the well-established interests of other countries, the latter are bing driven to combine in self-defence against such attacks. A table is annexed giving figures for legitimate foreign sales of oil and estimates of smuggled oil, sold in the Tientsin area.

Washington , January 22, 1937.
[Annex]
Legitimate Foreign Sales
(Total Tientsin Area)		 Estimated Smuggled Oil.
American Gallons (Tientsin Area.)
Asiatic Petroleum American Companies Total American Gallons
April 578,740 1,213,710 1,792,450 178,980
May 437,940 873,560 1,311,500 693,300
June 372,330 653,270 1,025,600 214,940
July 384,690 663,280 1,047,970 246,800
August 471,960 881,070 1,283,030 178,520
September 568,050 963,300 1,531,350 300,270
October 1,962,430 3,008,060 4,970,490 776,632
Total 4,776,140 8,186,250 12,962,390 2,589,442

For the purpose of comparison it was thought advisable to show the legitimate sales in contrast to smuggled oil, as the companies’ imports which are made by tanker fluctuate tremendously in individual months, whereas the smuggled oil comes into the area in smaller quantities and goes almost directly into consumption.

As regards the figures for October, it is understood that they were undoubtedly swollen by a speculative turn in the market quite apart from the fact that the winter consumption of kerosene had begun.