893.50 Recovery/7–2448

Memorandum of Conversation, by the Chief of the Division of Chinese Affairs (Sprouse)

Dr. Wang89 called at 11:30 a.m., July 23, by appointment to present the first Chinese requests for withdrawals from the $125 million grants authorized under Section 404 (b) of the China Aid Act of 1948.

In looking over the requests and supporting documents, I pointed out that the Chinese Request No. 10003, dated July 22, 1948, covering petroleum products and containers in the amount of $3,700,843.50 included the 1 percent discount which, in accordance with Section II (3) of each contract, the Seller “agrees to allow Buyer …90 on the prices set forth herein, such discount to be computed in the same currency in which payment is made by Buyer and to be deducted at the time of payment.” I informed Dr. Wang that the Consulate General at Shanghai had called this provision of the contract to the Department’s attention as representing, in effect, a payment to a Chinese Government agency, Central Trust, for the signing of the contract on behalf of the Chinese Government. I suggested that the Chinese Embassy might wish to reconsider the advisability of including this amount in the request. I further pointed out that the Petroleum Division of the Department had indicated that the China Petroleum Company, Ltd., which had obtained the major share of the petroleum contracted for and represented in these requests, would probably have difficulty in securing approval of allocations for its share in view of the general policy of the Office of International Trade to make allocations to suppliers of the China market in accordance with their historical position in that market.

Dr. Wang said that he would discuss the question of the 1 percent discount with the Chinese Ambassador. With reference to the China Petroleum Company, Ltd., he said that it was still desirable that the request for payment be made and that in the event that allocations could not be granted to the Company, the amount paid could be credited against future Chinese requests for withdrawals.

(Dr. Wang telephoned to me about 30 minutes after his call at the Department and said that he had discussed the question of the discount with Ambassador Koo and that it had been decided to submit another request for payments for the petroleum products, which would not include a request for payment of 1 percent discount. The Chinese [Page 279] Embassy brought the substitute request to the Division of Chinese Affairs shortly after this telephone conversation.)

On July 24 Dr. Wang again called at the Department in connection with the question of allocations of petroleum supplies. He pointed out that the Chinese Embassy had received a message from Nanking indicating the urgent need of the Chinese Air Force for aviation gasoline and said that it was hoped that the Department could exert efforts to ensure that the necessary allocations were granted to cover the contracts for petroleum products submitted with the Chinese requests for withdrawals from the $125 million grants on the previous day. I informed Dr. Wang that we had previously requested the Department of Commerce91 to take appropriate action to facilitate the granting of export licenses covering purchases made by the Chinese Government from the proceeds of the $125 million grants and that the State Department would inform the Department of Commerce of these oil contracts. I pointed out that the Office of International Trade might, however, be unwilling to approve licenses for the amount covered by the contract with the China Petroleum Company, Ltd., in view of its general policy of making allocations in accordance with the historical position of suppliers of the China market. Dr. Wang emphasized the Chinese need of the aviation gas and again expressed the hope that action could be taken to expedite the approval of the necessary allocations.

  1. S. C. Wang, Counselor of the Chinese Embassy.
  2. Omission indicated in the original memorandum.
  3. Letter dated July 2, not printed.