893.6363/151: Telegram

The Consul General at Shanghai ( Gauss ) to the Secretary of State

548. Following from Tokyo

“248, April 15, 11 a.m. Some days ago the Standard Oil Company’s representatives called at the Embassy and stated that they feared some sort of quota system was about to be established in North China with the formation of a North China oil company and asked us to make appropriate inquiries at the Foreign Office. We have made such inquiries orally and informally. In the meanwhile the British Commercial Counselor took up the question on behalf of the British oil interests in North China with the Chief of the Commercial Section [Page 14] of the Foreign Office. He pointed out the effects of the ‘Manchukuo’ oil monopoly,20 and expressed the hope that any new project in North China would not cause trouble just for want of a little foresight in meeting the reasonable requirements of foreign oil suppliers. When asked what those requirements were, the British Commercial Counselor replied (1) protection of the present trade of the foreign companies and (2) a fair share of any natural increase. He left with the Chief of the Commercial Section a memorandum reading as follows:

‘His Majesty’s Embassy have received reports to the effect that arrangements are now being made for the formation of a North China oil company, in which Japanese oil interests will hold a majority of shares, and which will operate under a system of official control involving import quotas and sales quotas.

In view of difficulties lately experienced by British oil interests as a result of monopolistic control of the oil business in Manchuria, His Majesty’s Embassy view with misgiving the prospect that similar methods may be adopted in North China; and therefore beg to enquire of the Imperial Ministry of Foreign Affairs whether there is any truth in the reports in question.’

Does the Department perceive any objection to our leaving with the Foreign Office a memorandum along the same lines as the British?

Please repeat to Hankow and Peiping as our No. 248, April 15, 11 a.m. Grew.”