811.24 Raw Materials/321: Telegram

The Minister in the Netherlands ( Gordon ) to the Secretary of State

180. Department’s 87, September 14. I have just had a long conference with Hart whose statements, which he again requested that they be treated as strictly confidential, may be summarized as follows:

He said that 550,000 tons is a conservative estimate of our consumption and that stocks are at too low a level. While he thinks that rubber prices have shown gratifying steadiness in view of the decline in sterling he admits that they might again shoot up at any time as was the case just at the outbreak of hostilities and that this should be prevented.

He said that in view of our last conversation concerning rubber (see my 172, September 13, 9 a.m.) he has again communicated with Batavia and is prepared, if the other governments party to the restriction agreement are in accord, to give an extra fourth quarter 5% release for native holders and an extra 10% release to the estates, which means a 7½% extra release for the Dutch East Indies.

Batavia does not relish this but understands the emergency necessity therefor.

If the British are really in favor of a 10 percent extra fourth quarter release all around—and Hart thinks that they are—he will be prepared to stretch the above proposal to an additional 5 percent extra release for native holders for first quarter of 1940. In practice this should result in something more than 5% production in the fourth quarter and the remainder of the native holders 10 percent production being available within the first few weeks of 1940 or at any rate well before the expiration of the first quarter. This would enable an announcement of a 10 percent increase in the fourth quarter to be made at the meeting scheduled for September 21, even if the total Dutch East Indian production would not be available until some time in the first quarter of 1940.

Campbell does not expect Netherlands delegation to be able to attend this meeting but Hart says that he has every intention of attending and in order to increase his chances of doing so has requested that the meeting be postponed 2 days.

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The foregoing seems to me eminently satisfactory and I trust the Department is of the same opinion.

Copy to London.