894.24/1036½
Memorandum by the Adviser on Political Relations (Dunn) to the Under Secretary of State (Welles)
I had two calls at my house over the weekend by members of the British Embassy, sent by the Ambassador to lay before us considerations with respect to the President’s proclamation calling for the licensing of petroleum products and scrap. The Ambassador has asked that these considerations be laid before you as soon as may be possible. I understand that he, himself, is asking for an appointment to see you today.
According to telegrams received by the British Ambassador from the Foreign Office, the British Government feels that the licensing proclamation has had a bad effect in Japan, and may result in bringing matters to a head in the Far East. The British Government point out the vital importance of high octane gas in their present war effort, and state that they are at present taking the whole output of high octane gas from The Netherlands Indies. The British Government are in accord with our desire to prevent large deliveries of gasoline to Japan at this time, but they feel that it is best not to bring about a crisis at this time, nor to have to go back on measures already taken. To sum up, the British are fearful that this licensing measure may result in the Japanese taking steps to insure possession and control of the petroleum products in The Netherlands Indies.
Another point brought up by the British Embassy is with respect to the relationship between the British Government and the American oil producers and exporters. The British officials have been told by American producers with some heat that the British Government is responsible for the placing of restrictions on exports of certain petroleum products from the United States in order to benefit through the sale of these same products to the Japanese from other sources, both British and Dutch. The British officials are extremely apprehensive whether the picture presented as a result of the President’s proclamation will not seem to justify the accusation now being made by the American oil companies along those lines. The British make the statement that the matter of their relationship with the American oil companies is of primary importance to them in the carrying out of the war. They state that if the American oil companies really believe [Page 592] that the British have instigated the President’s action for the purpose of benefiting from the restriction of the sale of American products, the oil companies can greatly hamper British action in defense of the British Isles, not to speak of matters relating to the Far East and other areas. The British Embassy is particularly anxious that we take steps to make known to the American oil companies, both on the Atlantic and the Pacific seaboards that this action of the President was taken entirely without any relationship to the British, and most certainly not at their inspiration or instigation, and that it is entirely based upon a strictly American policy. (This suggestion appears reasonable to me: the oil companies which will be represented at your forthcoming meeting regarding the Spanish Atlantic area could be informed at that time along these lines, and, if you approve of so doing, I could communicate with Mr. Grady, now in San Francisco, and have him drop that word to the oil companies of the Pacific coast, who, no doubt, will all be represented at the meeting of the National Trade Council which Mr. Grady is attending.)
Another matter the British were concerned with was the question of aviation gasoline and aviation lubricating oil which they now draw from the United States for their requirements in Great Britain. I told Mr. Butler, Counselor of the Embassy, both Saturday and yesterday, that I could assure him that there was absolutely no intention whatever of restricting supplies of this kind in the case of British requirements, and that as licenses will be granted for countries in this hemisphere, they could always draw as much as they required through their Canadian companies, and that if any difficulties arose in regard to this question, we were ready to discuss them as they came up.
I cannot too strongly point out the extreme importance the British Embassy give to the points raised above and it appears that (1) the licensing system would have most drastic results in the Far East, and (2) that it would be creating an extremely adverse disposition on the part of the American oil companies toward the British Government and would interfere greatly with the present British war effort.