892.6363/138
The British Minister (Hall) to the
Assistant Secretary of State (Acheson)
Washington, June 4,
1941.
Dear Mr. Acheson: I am sending you the
Memorandum on Financial and Economic Assistance to Thailand concerning
which I spoke to you yesterday and which Mr. Butler and I referred to
when we saw Mr. Hull yesterday and left with him an Aide-Mémoire on political relations with Thailand.
The Memorandum enclosed deals more particularly with the vital importance
of denying supplies of rubber and tin to Japan and, through Japan, to
Germany, and I am also attaching a note26 which gives in more detail the present position with
regard to supplies of these commodities in the Far East.
The Annex26 to the
Memorandum sets out the specific proposals which have been sent to Sir
J. Crosby for transmission to the Thai Government. These proposals
embody an offer to provide Thailand with stated monthly supplies of oil
in return for delivery of stated proportions of the total rubber and tin
production of the country.
You will note that Sir J. Crosby is instructed to put forward these
proposals without prejudice to the negotiations between the Oil
Companies and the Thai Government regarding their longstanding dispute
over the marketing of oil in Thailand. (A further note26 is attached giving a brief
history of this dispute.) At the same time, as is emphasised in the
Memorandum, His Majesty’s Government consider that it is necessary to
keep this dispute in its true perspective and that the vital importance
of denying rubber and tin to Japan must be the more important objective
to be won by the use of the bargaining counter of oil supplies. The
United States Oil Companies will, no doubt, be guided in their attitude
towards this by the advice which they receive from the State Department.
His Majesty’s Government hope that the United States Government will
appreciate the reasons which have led them to regard this as an issue
which is likely to be settled satisfactorily only after working
arrangements have been made to promote the economic independence of
Thailand. If we are in agreement on this point it would be of great
assistance to His Majesty’s Government if the State Department could
advise the Oil Companies as to the line which they may have to adopt in
order to co-operate in securing the desired results.
This question of rubber and oil in Thailand is closely paralleled with
the similar problem in Indo-China and I should welcome a further talk
with you on the position there. In both cases, this particular commodity
aspect, though of vital importance in itself, forms only
[Page 170]
one side of the whole question of
countering the spread of Japanese influence in the Far East and of
stabilizing the situation there. This, I am sure you will agree, can
only be satisfactorily achieved by a close cooperation between the
United States and the British Empire.27
Yours sincerely,
[Enclosure—Memorandum]
Thailand: Financial and Economic
Assistance28
The principal developments in this question since Lord Halifax’s
letter to Mr. Hull of May 6th have been as follows.
- 2.
- Sir J. Crosby saw the Thai Prime Minister on May 8th to carry
out the instructions mentioned in Lord Halifax’s letter of May
6th. The Prime Minister’s reaction was friendly but
non-committal. He expressed gratitude for the statement that on
suitable terms His Majesty’s Government would be willing to help
Thailand as regards regular supplies of oil and a loan. As
regards the proposal to make immediate delivery of aviation
spirit, the Prime Minister said that he had sufficient stocks of
this at present but that Thailand needed diesel oil and motor
spirit very urgently.
- 3.
- His Majesty’s Government, on receiving the report of this
interview, decided to make two immediate and unconditional
shipments of oil products of the type requested by the Prime
Minister. Arrangements are being made for one shipment of a
mixed cargo of a gas oil and diesel oil to take place shortly,
to be followed by a further cargo of motor spirit and kerosene.
The size of each cargo will depend on the vessels available but
will probably amount to between six and seven thousand tons
each.
- 4.
- These shipments are being made to meet Thailand’s urgent
needs, and no quid pro quo is being
demanded. As regards the future, Sir J. Crosby has been
instructed to initiate detailed negotiations with the Thai
Government for financial assistance and for a regular supply of
oil in return for the delivery, in whole or in part, of
Thailand’s production of rubber and tin to Great Britain or to
approved destinations, which would of course include the United
States.
- 5.
- His Majesty’s Government regard the limitation of supplies of
rubber and tin to Japan, and through Japan to her Axis partners,
as a matter of vital importance. Rubber is one of Germany’s
chief deficiencies; it is believed that to meet her requirements
in 1941 she will
[Page 171]
need
to consume the whole of her existing stocks of some 21,000 tons
and to import about 40,000 tons. Practically the whole of these
imports must reach her via Japan, and there is ample evidence of
the intention of the Japanese Government to supply her, as far
as they can do so without endangering their own domestic
position. It is calculated that Japan’s current requirements of
rubber are about 50,000 tons, and therefore any rubber that she
may obtain in excess of this figure is likely to be transmitted
to Germany. She is likely to obtain at least 40,000 tons from
Indo-China alone, and it is therefore evident that the
destination of Thailand’s production amounting to some 45,000
tons is of vital importance. If it goes to Japan it is likely to
meet practically the entire German deficiency. The British
Government venture to hope that the United States Government
will for their part take into urgent consideration all means of
increasing their pressure on the Thai Government to sell as much
as possible of their rubber to the United States. They believe
indeed that an early approach by the United States Government on
these lines would greatly assist the British in their
negotiations.
- 6.
- Similarly, tin holds a high place amongst Axis deficiencies,
and there is evidence of a consistent policy of blockade running
via Vladivostok and Dairen in the interest of Germany. Japan’s
own requirements are estimated about 10,000 tons of metal per
annum of which she needs to import about 8,000 tons. Of this she
is likely to obtain this year some 5,000 tons from sources other
than Thailand, so that her ability to purchase a sufficient
amount to enable her to send further quantities to Germany in
addition to maintaining her own supplies will turn largely on
her success in buying from Thailand.
- 7.
- In view of the above considerations it becomes of essential
importance that supplies of rubber and tin from Thailand to
Japan should be reduced to a minimum. To secure such limitation
His Majesty’s Government consider that they must make all
possible use of the only bargaining weapons available to them,
viz., financial assistance, and supplies of oil, and to a lesser
extent of jute. It is against this background that they feel
that the dispute which has arisen between the Oil Companies and
Thailand in regard to the method of supplying oil must be
judged. The Oil Companies have expressed the hope that advantage
would be taken of this occasion to induce the Thai Government to
agree to a settlement of their long standing dispute with the
Companies about the internal distribution of oil in Thailand.
The Thai Government when this was put to them, refused to agree
and His Majesty’s Government, though sensible of the
desirability of settling this dispute in favour of the
Companies, consider that the over-riding importance of dealing
with the rubber and tin situation necessitates the full use of
the oil weapon to achieve this objective, rather than that its
force should be weakened by attempting
[Page 172]
to secure other objectives, however
desirable in themselves. His Majesty’s Government trust that the
United States Government will support them in this view, should
the Companies continue to try and make the settlement of their
dispute with the Thai Government a condition for resuming
supplies of oil.
- 8.
- The precise instructions in regard to the negotiations over
oil, rubber and tin which have been sent to Sir J. Crosby are
set out, very confidentially, in the Annexe to this
Memorandum.30
These instructions involve proposals under which supplies of oil
will be made available to Thailand, but only insofar as she
makes and continues to make deliveries of rubber and tin to
Great Britain or to approved destinations. If some agreement can
be reached under which a definite relationship can be
established on a short term basis between stipulated quantities
of these commodities, this would form a test of the Thai
Government’s desire and ability to resist Japanese pressure, and
no commitment would have been entered into which would involve
support of the Thais if failure to deliver the stipulated
quantities of tin and rubber showed that they had passed under
Japanese influence. There is reason to hope that if the United
States Government would associate itself with a proposal along
these lines and would press the Thai Government to sell as much
as possible of the Thai output of tin as well as rubber to the
United States, a Satisfactory agreement might still be
reached.
- 9.
- To put the matter quite briefly, His Majesty’s Government
foresee the imminent possibility of Thailand agreeing to supply
Japan with two essential war commodities in which Germany is
very short, in such quantities as would enable Japan to supply
in addition to her own needs a large part of those of Germany.
This is of course an immensely serious danger. To avert it the
British Government have little except finance, the procedure of
friendly negotiation and the promise to Thailand of an assured
supply of oil. These offer a prospect of at least gaining time.
Purchase by the United States Government would, if effected,
constitute a complete denial of these Thailand commodities to
the Axis. To this end the United States Government have some
additional bargaining counters; for instance His Majesty’s
Government are informed that the Thai Government contemplate
sending a mission to the United States in order to buy aircraft
and oil. The issues being so vital, the United States Government
will readily comprehend that the British Government are keenly
desirous of obtaining their cooperation in preventing or at
least hindering the Thais supplying indirectly two of Germany’s
most important and hopeful deficiencies.
Washington,
June 2,
1941.
