893.24/10–946: Telegram

The Consul General at Shanghai (Davis) to the Secretary of State

1947. 1. Kiang informed in writing October 8 our present position Standard–Vacuum contract as set forth paragraph 5 mytel 1929 [bis], October 7, to Nanking as 1099 and Manila as 89. He declined to give assurances that first shipload of Standard–Vacuum surplus property now en route would be cleared but said he would take matter under consideration bearing in mind our views.

2. Kiang informed at same time of reference basic issues to Washington for decision. Following points which he brought up in this connection appear relevant: [Page 1087]

Kiang maintains that submission to Chinese Government of copy of Vogelback memo June 22, and wording of same clearly indicate definitiveness of agreements reached.
He argues that first paragraph of this not subject to further concurrence by other agencies than FLC; that Howard and Vogelback were prepared to have full authority to make final commitments on behalf FLC though perhaps not other agencies; and that Chinese Government definitely understood first exception of first paragraph Vogelback memo meant that no new sales would be made subsequent to June 22 by FLC without knowledge of Chinese and their waiver of same.
Kiang states that freeze order subsequently issued by Marshall under paragraph 2 [of] Vogelback memo was only necessary to control actions of agencies other than FLC, and that date of freeze order substantiates Chinese position that FLC was obligated to cease all sales at conclusion of Nanking discussions.
He stated unequivocally that he did not know of any contracts signed by FLC Shanghai during July and August and that he would have protested same had he been informed. (See paragraph 5 reference telegram). He added there were some instances where he felt FLC had proceeded contrary to agreements reached but that he had not made issue of these because he felt they were unintentional exceptions rather than the indication of FLC intent to ignore Nanking agreements.

3. Impression was gained during interview with Kiang that he intends to adhere to his position vigorously. He referred several times to his own anticipation and that of Dr. Soong that Washington would support Chinese contentions fully. While not stated directly, inference was clearly made that Kiang would use import ban to expedite satisfactory settlement with FLC, and to protect BOSEY if US did not make reasonable acknowledgement of Chinese position.

Sent Department 1947, repeated Nanking 1110 and Manila for Vogelback FLC as 83.