894.24/1262

Memorandum of Conversation, by the Secretary of State

The British Ambassador called at his request. He handed me the attached documents regarding Japan’s purchases of strategic materials, and particularly relating to oil. He brought up the question of an embargo on exports of gasoline to Japan. I said to him that we had already been giving the matter full attention and then proceeded to call attention to the Persian Gulf oil area to which Japan would probably turn if and when the United States should impose such an embargo against Japan. He said he would look into that phase and see [Page 789] what his country was prepared to do along similar lines. I reminded him that fifty percent of the Persian Gulf fields were owned by British. I stated finally that we were considering embargoes on lubricating oils and certain fats; that this related to mineral, vegetable and animal oils.

C[ordell] H[ull]
[Annex 1]

The British Embassy to the Department of State

1.
One of the main weapons which the Democracies hold against Japan is her dependence on them for many of the materials without which she would be unable to maintain her war effort.
2.
The power of this weapon has already been seriously weakened since Japan has been able over the last twelve months to import quantities of these materials far in excess of her current consumption needs. A large proportion of these excessive imports has undoubtedly gone to build up strategic reserves which if allowed still further to increase will shortly render Japan independent.
3.
The policy of avoiding provocation to Japan is thus having the direct result of enabling her to make war on us at the moment most favourable to herself. As long as she has not sufficient reserves she is unlikely to risk a war which must cut her off from further supplies.
4.
The first step required therefore is that a decision in principle should immediately be taken as to whether Japan is to be prevented from accumulating further stocks, by restricting her future imports from controllable sources to quantities not in excess of her estimated current consumption needs. There is no need to force Japan into war by a policy of complete economic encirclement. The denial of excess supplies, which would enable her to build up strategic reserves, may well suffice as a deterrent, while in any case it will weaken her if she decides to embark upon war.
5.
If this decision in principle can be taken, it becomes necessary to proceed immediately with discussions as to the means by which it can be put into practice.
6.
The means we have at hand are:—
(a)
Export Licence Control
(b)
Restriction of shipping facilities
(c)
Preemption of key materials in Latin America
(d)
Restriction of purchasing power by limitation of imports from Japan.
7.
The co-ordination of these various methods and the extent to which they are to be put into practice in the various countries concerned so as to avoid the risk that the stoppage of one leak does not [Page 790] lead to the opening up of another, requires detailed examination by experts.
8.
As the second step, the United States Government might perhaps be willing to consider the establishment of a centralized unit, representative of the several Departments concerned, and empowered to examine the above problem and to make recommendations for the action necessary to carry out the basic policy.
9.
In particular, it would seem of the first importance if possible to establish such a body for the examination of the oil problem. The danger of Japan accumulating stocks of oil is vital since this is her most serious deficiency and is essential to her war effort.
In view of the paramount importance of this question, it is dealt with separately in the attached memorandum.25
10.
The need for action on economic policy towards Japan is urgent. His Majesty’s Government hope therefore that the United States Government will be prepared without delay,—
(a)
to make the decision in principle as outlined in paragraph 4 above,
(b)
to set up the centralized unit for the purpose of expert discussions as set out in paragraph 8 above.
[Annex 2]

The British Embassy to the Department of State

1.
The position with regard to oil supplies to Japan is of particular urgency; in the last six months of 1940 more than one million barrels of aviation grade spirit went to Japan, compared with 560,000 barrels in the twelve months of 1939. In 1941, 180,000 barrels have already gone, and orders for an additional 250,000 barrels are reported. In Thailand stocks of aviation grade gasoline are equal to from two to three years supply on the basis of consumption prior to 1940, and these stocks may well be available for use by Japan against the Burma Road or as a reserve for use against Malaya.
2.
We are not proposing a complete embargo; the suggestions, which we originally submitted on November 10th [20th?], 194026 but to which we have been unable to obtain a reply, involve co-operative action with the United States to prevent Japan accumulating excessive stocks by curtailing her use of non-Japanese tankers. The effect of this would be to cut shipments by some seven and a half million barrels per year and this, it is believed, would reduce Japanese imports to current consumption needs.
3.
Such measures would meet the problem of quantity but not that of quality; i. e. of the grades of oil which Japan takes. This is a problem for U. S. licencing control, for it is only from the United States and the Netherlands East Indies that Japan can draw the varied qualities of oil, many of which we consider dangerous and in the case of the Netherlands East Indies, quantities and qualities are already temporarily fixed by an agreement with which the United States Government is thoroughly familiar.
4.
The main issue is, does the United States Government agree in principle to a policy designed to curb imports of oil to Japan to an extent which will prevent her accumulating further stocks?
5.
If this policy is agreed upon, does the United States Government accept our figures? If our figures are accepted, does the United States Government agree to our proposed methods and will they introduce supplementary measures to cover the ground which is beyond our reach? (See paragraph 3 above).
6.
These are matters of complicated detail for expert examination and we regard it as an immediate and urgent essential that we should be able to discuss them with a centralized committee representing the Departments in the United States Administration who are concerned with this problem.

Detailed memoranda on the oil position in Japan and Thailand are submitted27 to form a basis for such discussions.

  1. Printed as Annex 2, below.
  2. Not printed.
  3. None printed.