The Secretary of State to the Embassy in China

19. In conference held with Army, Navy, and oil company officials it is apparent that plan of the US Armed Forces to turn over entire military and civilian supply function to oil companies in China is contingent on ability of companies to assure themselves of adequate bulk storage; first in Shanghai area and later in Tientsin and Tsingtao areas. This can be done only if Chinese Govt is agreeable to use by companies of Japanese tankage in Shanghai area now held by US Armed Forces and which latter would relinquish if oil companies assume full responsibility for all petroleum supplies. A similar arrangement would be necessary with respect to Tientsin and Tsingtao tankage now held by Chinese forces. If oil companies are to assume entire supply function they will need this tankage until they can construct their own or until they can come to some permanent arrangement with Chinese Govt for use of Japanese tankage.

Oil Companies have been advised to treat this matter directly with Chinese Govt. Emb is requested to be of such assistance as oil companies and Emb deem advisable.