Foreign Relations of the United States Diplomatic Papers, 1941, The Far East, Volume IV

894.24/1853

Memorandum by the Assistant Chief of the Division of Controls (Yost)

[Washington,] April 9, 1941.

The Export of Petroleum Products to Japan

Gasoline

Since the imposition on July 26, 1940 of restrictions on the export of certain petroleum products,⁴⁸ the Department has licensed about 9,200,000 barrels of gasoline for export to Japan and has applications for 2 million additional barrels now pending. The amount already licensed represents more than twice the normal annual pre-war import of Japan from all sources and is nearly three times the quantity of gasoline which the United States exported to Japan in 1940, a most abnormal year.

Of this 9,200,000 barrels, approximately 4 million have already been exported and 5 million remain to be exported. The Department will, moreover, if new restrictions are not shortly imposed, be obliged to grant the pending applications for 2 million additional barrels. When these licenses are issued, Japan will be in a position to obtain in the United States this year 8 million barrels of gasoline (1 million already shipped plus 7 million authorized) in addition to about 4 million barrels which she will obtain from the Netherlands Indies under existing contracts, to say nothing of what might be licensed in this country during the remainder of the year. Her total import from these two sources would, therefore, be at least three times her normal pre-war import and more than twice her extraordinary 1940 import. Such a supply would obviously make her completely self-sufficient in gasoline for an indefinite period of time.

The public is to some degree under the impression, based on the President’s statement of July 26 that no exports of aviation gasoline outside the Western Hemisphere would be permitted,⁴⁹ that gasoline of aviation quality can not go to Japan. This impression is wholly erroneous. Only the very high grade aviation gasoline used by our Army and Navy is under the export ban, and most of the 9,200,000 barrels referred to above is of satisfactory aviation quality or can be made so by a very simple process. In fact a large proportion of the license applications state quite frankly that the gasoline is intended for aviation use by the Japanese Army or Navy.

Lubricating Oil

The lubricating oils subject to license are only the high grades used by our Army and Navy air forces. The Japanese have been and are obtaining here, without having to obtain licenses, large supplies of lubricating oil which is either of satisfactory aviation quality or can be made so by a simple process. Exports to Japan in 1940 were more than twice usual pre-war quantities. Furthermore, reliable reports make it appear practically certain that substantial quantities of this oil are now being transshipped by the Japanese across Siberia to Germany.

Other Petroleum Products

Exports to Japan in 1940 of other petroleum products (except petroleum greases) have not been substantially in excess of usual prewar quantities. New trends in this field, however, arise very suddenly. For example, the British have recently been most alarmed over exports of diesel oil to both Japan and Thailand, in the former case because they fear the oil may be transshipped to Germany for submarine use, in the latter case because they fear it may be used by the Japanese in an attack on Singapore or by German raiders in the Pacific.

Crude oil exports to Japan in 1940 were actually less than in recent years, but on the other hand the Department has since July 26 licensed approximately 22 million barrels of crude for export to Japan. This quantity, of which some three-fourths remains unshipped, is greater than the amount Japan has obtained from the United States in any year of the Sino-Japanese War. It should be noted, moreover, that Japan can and is concentrating her purchasing on those high grade crudes from which high percentages of aviation gas can be easily obtained.

Recommendations

In the belief that in these circumstances prompt action is necessary, the following recommendations are made. The proposed time table is based on the desire of PA/H⁵⁰ and FE to delay most of the suggested steps until Mr. Matsuoka⁵¹ has returned to Tokyo and until the Batavia contract has been renewed.

1. Bequest General Maxwell⁵² at once to furnish the Department with a new and more comprehensive definition of the aviation gasoline the export of which outside the Western Hemisphere and the British Empire^* shall be prohibited. (This definition shall include all gasolines susceptible of aviation use and shall exclude ordinary motor gasoline. The dividing line shall presumably be about 65 octane number without lead and 80 when lead has been added.) On the receipt of this definition inform all holders of valid licenses for exports outside the Western Hemisphere and the British Empire to turn in these licenses and submit new applications stating whether or not the gasoline which it is proposed to export falls under the new definition of aviation gas. If it does, no new license will be issued. No announcement of policy will, however, be made at this time, and no action on the new applications will be taken until the further steps outlined below are announced.

2. At a convenient moment after the receipt of these new applications, presumably at the end of April, announcement will be made that gasoline not falling within the new definition of aviation gas will be licensed in usual or pre-war quantities. It shall be made clear that during the remaining two-thirds of 1941 shipment of two-thirds of the pre-war export of motor gas will be authorized. The base period will be the average of the years 1935–39 inclusive.

3. General Maxwell shall be requested at once to redefine on April 15 the aviation lubricating oil which is subject to license. This redefinition shall extend the scope of the restriction by dropping the viscosity index of the restricted oil from 85 to 60 or 65. Any outstanding licenses authorizing the export of such oils outside the Western Hemisphere and the British Empire shall be revoked and the holders asked to submit new applications. At the end of April announcement will be made that oils falling outside the new definition will be licensed for export outside the Western Hemisphere and the British Empire in usual or pre-war amounts. The same procedure will be followed in granting applications as in the case of gasoline.

4. General Maxwell shall be requested to place all petroleum products under export licensing control and announcement of this step shall be made at the end of April.

5. When diesel oil is subjected to the licensing requirement, its export outside the Western Hemisphere and the British Empire shall be limited to usual pre-war quantities. The same procedure will be followed in granting applications as in the case of gasoline.

6. The export of other petroleum products shall be licensed freely for the moment, but the question of limiting exports of petroleum greases and high grade crudes should be given immediate study.

7. This whole program, as soon as it has been approved, shall be discussed with the British.

Charles W. Yost

48. See Foreign Relations, Japan, 1931–1941, vol. ii, pp. 216 ff.
49. See also press release issued by the White House on July 31, 1940, Foreign Relations, Japan, 1931–1941, vol. ii, p. 218.
50. Office of the Adviser on Political Relations (Hornbeck).
51. Yosuke Matsuoka, Japanese Minister for Foreign Affairs, who was in Europe.
52. Gen. Russell L. Maxwell, U. S. A., Administrator of Export Control.
53. Note: Where reference is made herein to restrictions on exports outside the Western Hemisphere and the British Empire, it is understood that exceptions shall be made for countries resisting aggression. [Footnote in the original.]