Memorandum of Conversation, by the Chief of the Division of Far Eastern Affairs (Hamilton)

Mr. Walden97 called on Mr. Grady,98 Mr. Dunn,99 and Mr. Hamilton to discuss the situation confronting the Standard-Vacuum Oil Company in connection with Japan’s endeavors to cause the Netherlands East Indies to agree to furnish Japan large quantities of crude oil. Mr. Walden left for our information the attached three cablegrams.1 He said that the Netherland officials wished the Standard-Vacuum Oil Company to supply from their wells in the Netherlands East Indies 27 percent of the total asked for by Japan, the Dutch Shell interests to supply the remainder, and, if the Dutch Shell interests could not supply the remainder from its wells in the Netherlands East Indies, the Dutch Shell interests would make up the deficit by obtaining supplies from Persia. Mr. Walden said that this reference to obtain supplies from Persia indicated to him very definitely that the British Government was aware of the request made by Japan of the Netherlands East Indies and was willing to cooperate with the Netherlands East Indies in seeing that Japan was furnished with the supplies it wished to obtain. Mr. Walden said that the percentage of 27 percent represented the Standard-Vacuum Oil Company’s percentage of total production in the Netherlands East Indies for last year. He pointed out that, if his company declined to agree to furnish a share, as requested by Netherland officials, the Netherland authorities could force [Page 56] the Standard-Vacuum Oil Company to comply or the Dutch Shell interests, with the assistance of Persian interests, could agree to supply what Japan was asking for. Mr. Walden said that ordinarily his company did not ship to Japan crude oil from the Netherlands East Indies. He said that, if Japan succeeded in getting from the Netherlands East Indies the quantity of crude oil which it was requesting, Japan would no longer need to purchase crude oil from the United States.

Mr. Walden several times expressed the view that, if measures should be taken which would make it impossible for Japan to purchase its requirements of petroleum products, the result would be that Japan would move into the Netherlands East Indies.

Mr. Grady, Mr. Dunn, and Mr. Hamilton made various comments, the gist of which was as follows: In general, we did not look with favor upon Japan’s obtaining unusually large quantities of petroleum products. It was pointed out that a net result of any such arrangement with regard to the Netherlands Indies as that under discussion would be to divert to the Netherlands Indies that proportion of Japan’s oil supply which Japan had previously purchased from the United States. It was pointed out also that in general we would look with favor upon the concerned companies’ proceeding, if practicable, in a way which would not assist in making it possible for Japan to obtain unusually large quantities of petroleum products. With specific reference to the Netherlands East Indies situation, it was pointed out that we realized the difficulties of the situation confronting the American company, and there was raised for consideration by the company the question whether, if the company felt that it had to go along in the Netherland proposal, any arrangement entered into might not be of a temporary character for a limited period of time.

During the conversation Mr. Walden mentioned the fact that the Standard-Vacuum Oil Company has a plant in the Netherlands East Indies for the production of aviation gasoline and that the output of the plant was under contract for sale for the next three years to Great Britain. He said that the Dutch Shell interests also had an aviation gasoline plant in the Netherlands East Indies.

M[axwell] M. H[amilton]
  1. George S. Walden, of the Standard-Vacuum Oil Company, New York.
  2. Henry F. Grady, Assistant Secretary of State.
  3. James 0. Dunn, Adviser on Political Relations.
  4. None printed.