The British Embassy to the Department of State

Aide-Mémoire “B”

The background of the situation in Thailand has been given in Aide-Mémoire “A”.56 This Aide-Mémoire contains suggestions for possible action.

2. The most effective way of keeping Thailand from falling completely under Japanese influence would be to take naval and military action which would impress her. Failing the practicability of such action, possible courses are: (1) To exercise such economic and financial pressure on the Thai Government as we can; (2) To offer some economic and financial assistance on suitable conditions.

3. His Majesty’s Government have for their part already considered course (1). They hold some assets, e. g., the importance to Thailand of markets in the adjoining British territories, control over gunny bags and the Thai financial deposits. His Majesty’s Government are instituting control of ore bags, and any severe restriction of gunny bags would seriously affect the market of Thai rice. But economic pressure would be double-edged. It would adversely affect the supply position of Malaya and might only drive Thailand more surely into the arms of Japan, thus accelerating Japanese expansion and facilitating the supply by Japan to Germany of such essential commodities as rubber and tin. His Majesty’s Government feel that while the possibility of pressure should be kept present in the background, i. e., that Thailand should be aware that we can place them in difficulties if we wish, course (2) should be tried first.

4. The Thais have been accustomed to look to London in economic and financial matters, and the Thai Prime Minister recently made a concrete request for a loan and for assistance in the purchase of oil and armaments.

5. As regards armaments, it seems unlikely that any assistance is practicable. His Majesty’s Government are not able to supply them, and it is assumed that the United States, in view of their own rearmament programme and the assistance which they are giving to the Democracies, will hardly be in a position to spare arms for Thailand.

6. As regards a loan, the Thais have asked for £3,000,000 against [Page 123] which they would issue local currency for development expenditure, as follows: (amounts in millions of Ticals)

Irrigation 3.2
Postage 1.8
Highways 11. 
Cotton and Silk 3.4
Port of Bankok 3.6
Abattoirs 1.4

7. Towards the financing of this programme (or the purchase of oil), the Thais could find £1¼ million by reducing the cover now held against their note issue from 111% to 105%.

8. His Majesty’s Government feel that if the United States Government are prepared to cooperate in the offer of a loan on suitable conditions, this would probably be the most effective step that could be taken to keep the Thais from complete absorption in the Japanese new order. The concrete proposal of His Majesty’s Government is that they should find any sterling required for expenditure in the sterling area, plus half the amount required as backing for the new currency to be issued, if the United States would similarly provide the dollar expenditure required for purchases in the United States (it is clear that while the major objects mentioned above could be met by payments in local currency some must involve expenditure abroad on materials, most of which His Majesty’s Government could not in present circumstances supply), and the remaining half of the cover required.

9. As regards oil, a full statement of the position at that time was set out in the memorandum which was handed by Lord Halifax to Mr. Hull on March 3rd.57 In that memorandum His Majesty’s Government urged that supplies of oil to Thailand should be restricted to regular and well-defined limits and invited the United States Government to give the matter their urgent attention. The changes since that date in the military and political situation in the Far East make it possible to use our capacity to regulate the supply of oil reaching Thailand as a means of control which can be made to appear as economic assistance; the British and United States Governments could in conjunction with the oil companies devise practical means of assuring to Thailand balanced supplies of oils of the different types which they are likely to require, having regard to their normal consumption and the position of their stocks at the date of the agreement. Provided that the Thai Government were willing to enter into discussions with appropriate experts of the British and American Governments upon both their stocks and current requirements, His Majesty’s Government would be willing to give them now an assurance that their supply position would be safeguarded so long as there was no evidence [Page 124] that they were re-exporting oil products to dangerous destinations or were building up special oils of a kind that might constitute a strategical reserve for any military operations in or near Thai territories. The Thai Prime Minister has recently made an urgent appeal to His Majesty’s Government for the immediate supply of oil, and as an earnest of their good intentions, provided effective Thai cooperation is forthcoming, His Majesty’s Government are prepared, within the limits imposed by discretion, to supply forthwith to the Thai Government small quantities of petroleum products provided United States Government see no objection. The Thai Government will no doubt recognize that before such a step can be taken His Majesty’s Government and the United States Government will have to be genuinely satisfied about both the character and urgency of Thailand requirements. All these concessions in respect of oil would be contingent upon the acceptance by the Thai Government of the whole of the guarantee suggested by this memorandum.

10. Before making the appeal mentioned in the preceding paragraph, the Thai Prime Minister had returned an unsatisfactory reply to a request from His Majesty’s Minister for an assurance similar to that given to the Japanese Government about the conclusion of agreements aimed directly or indirectly against Japan. The Thai Prime Minister took refuge in the argument that this assurance was part of a specific bargain with Japan. His Majesty’s Government would propose to make it clear that a similar assurance would have to be part of a specific bargain with them over financial and oil supplies. Furthermore, they feel that any help to the Thai Government should be dependent on:

An appropriate guarantee against the diversion of rubber and tin and rice out of the usual trade channels for the benefit of Japan and on the furnishing of information as to Thai’s commitments to Japan in respect of these commodities; and
An undertaking that the development projects to be financed by the loan shall not be undertaken in such a manner as to increase the Japanese hold on Thailand.

  1. Supra.
  2. See memorandum by the Secretary of State, March 3, vol. iv, p. 788.