893.6363/3–2449: Telegram
The Secretary of State to the Consul General at Shanghai (Cabot)
573. Dept has recently had to consider question supplies petroleum products to Communist-held areas from Hong Kong (urtel 982 Mar 24). Caltex Hong Kong had recd inquiries for 30,000 bbls kerosene and equal quantity mogas10 from sources believed represent Communists, shipment north to undisclosed destination but believed North China or Manchuria. Reports from ConGen Hong Kong indicate both [Page 1003] Shell and Caltex adopted initial policy refusing sell to such inquirers but Stan-Vac accepted business, maintaining question export to northern destination one between exporter and Hong Kong Govt. Shell felt compelled conform its policy Stan-Vac’s, but Caltex refused go along and recently inquired of Dept its attitude.
Dept has informally told both Caltex and Stan-Vac it does not oppose sales kerosene and mogas destined Communist areas China but hopes cos will keep quantities minimum. Dept also informed them it hopes they will discourage far as possible sales or shipments North Korea. Shell has been given same info informal basis, and Dept intends discuss question soonest with Brit to reach formal agreement, after which matter will be discussed more detail with cos.
For your background info Dept believes it desirable (1) cos continue supply Commies sufficient keep them coming back for more, and avoid charges embargo which might lead retaliation American interests. Commie areas (2) quantities supplied not exceed, and preferably be somewhat below, what cos estimate as normal requirements civilian uses, excluding Commies mil requirements or possibility stockpiling or transshipment (3) cos use their bargaining power these deals to reestablish their distributing organizations North China and if possible Manchuria, but avoid any implication of official US policy in this, attempt (4) products supplied under above policy exclude avgas11 or other products specially adapted mil uses (5) so far as cos can control; sales they discourage shipments any products North Korea. Dept will suggest this line to Brit.
Difficulty tracing final destination trade moving in indirect channels via Hong Kong or North Korea makes it preferable in Dept’s eyes: sales and shipments Commie areas China be made direct, but Dept not in position publicly encourage this. Considerations of consignee reliability and info re end-use also make it desirable that wherever possible petroleum products be distributed by cos themselves, and hence Dept wld like see cos reestablished North China but cannot publicly encourage such move.