894.24/1371½

Memorandum Prepared in the Department of State46

[Extract]

Control of Gasoline Exports to Japan

. . . . . . . . . . . . . .

Conclusions.

Gasoline is of primary importance at this time because of: (1) recent increased concentration of Japanese petroleum purchases on that product, especially from the United States (the decline in crude [Page 804] exports to Japan in 1940 was offset by increased gasoline shipments); (2) the effect of the manner in which existing export restrictions on “aviation” gasoline are administered; and (3) the dangerous extent to which Japanese stocks of gasoline capable of being raised to aviation grade may continue to expand because of (1) and (2). Ample evidence before the officers of the Department substantiates the foregoing.

Japan is at present dependent almost entirely upon the United States for gasoline which can be raised to aviation grade. The amount of gasoline for which export licenses have been issued in recent months suggests the possibility, on the basis of past experience, that Japan is preparing for a new major military operation. (The possibility exists also that some of this gasoline may be reaching Germany by way of the U. S. S. R.)

Japanese statistics show gasoline imports of all types of about 4,300,000 barrels in 1936, which may perhaps be considered as a “normal” year. The present arrangements with producers in the N. E. I. provide for supplies to Japan at an annual rate almost equal to Japanese imports of gasoline from all sources in 1936. Any attempt to reduce total Japanese gasoline imports of all types to the 1936 level would thus involve almost complete cessation of exports from the United States or a scaling downward of the Batavia contracts, which does not appear feasible. In any case, it is apparently of greater importance that United States exports be curtailed, due to the higher quality of the gasoline involved. If the aim is to reduce to the 1936 level Japanese imports of aviation gasoline only, about 1,000,000 barrels of this type could still be exported from the United States—a figure which is slightly larger than 1937 exports and roughly twice the amount of the exports from the United States to Japan in each of the years 1938, 1939 and 1940.

The present discussion is concerned only with exports to Japan proper. The critical nature of the problem is intensified if consideration is given to gasoline exports to all areas under Japanese control.

If it is decided that immediate action should be taken by the United States (as a first step in a broader cooperative program with the British and Dutch Governments involving company control, tanker control, etc.) to limit Japanese imports of gasoline to the 1936 level, the following line would seem appropriate:

a)
Immediate restrictions on shipments to Japan of gasoline at present permitted to be exported, to not more than 500,000 barrels per year. This would have the effect of reducing total Japanese gasoline imports to approximately 1936 levels, assuming no other substantial source of supply exists which cannot be controlled; or
b)
Lowering of present octane rating of permitted exports of gasoline to Japan to a maximum of 70. This would not necessarily have [Page 805] the effect of curtailing total Japanese imports as in (a) above, but would effectively eliminate exports to Japan of gasoline which could be raised to aviation grade.

Either of the foregoing, however, would reduce Japanese imports of aviation gasoline below the 1936 level. This would be the case if plan (a) were adopted even though all permitted exports from the United States were to consist of the grades labelled as “aviation gasoline”* in the 1936 export figures.

  1. Drafted in the Division of Commercial Policy and Agreements and in the Office of the Adviser on International Economic Affairs.
  2. There are several possible definitions of “aviation” gasoline. This reference is to such gasoline as defined in Department of Commerce export statistics, that is, gasoline declared to be for aviation purposes. [Footnote in the original.]