493.46E9/8–3051: Telegram

The Ambassador in Ceylon (Satterthwaite) to the Secretary of State

secret

130. Managers Stanvac and Caltex called yesterday p. m. to report fol:

Min Transport Kotelawala who left yesterday for London had on previous day sent word to Shell and 2 American oil companies that they must supply bunkers to ships scheduled transport rubber to Chi or he wld take oil from companies and himself furnish it. They had recd this message indirectly thru chairman port commission and mgr Shell. They said they cld not under their instrs furnish oil to any ship except under orders from their head offices and had no intention doing so. Caltex has no contract with govt but Stanvac does have for one or two govt owned industries. Possibility does therefore exist that govt might draw oil under such contract and actually deliver it to ship or ships in question. Min also reportedly talked rather violently about govts seizing companies if they did not comply with his request. However port commission discussed matter with him yesterday morning at airport and reported him much more reasonable on subj. Two American mgrs requested me take no action and gave me foregoing info in desire be helpful. I told them however I wld discuss matter with PriMin at earliest possible opportunity in light previous conversations with him on subj.

I saw PriMin and Vaithianathan together this morning just before former went into Cabinet mtg. I recalled that on June 22 he had told me embargo on rubber shipments to Chi was unnecessary because inability Commies arrange shipping and payment facilities (Embtel 649, June 22) and that I had warned him at time they probably wld become available. Now as he knew this was in fact case except for difficulty in finding bunkers for Polish ships designated transport rubber. I was under clear impression that GOC hoped such facilities wld not be made available and wld do nothing to facilitate shipments. If instead GOC intended insist that bunkers for shipping rubber to Chi be provided my govt wld, I was sure, take extremely serious view any such development.

PriMin Senanayake replied that this info came as complete surprise [Page 2040]to him, that no one had told him about it and that he wld make immed inquiries. He promised inform me result these inquiries as soon as possible. He realized he said this was not proper time insist on normal trade practices, that he was extremely anxious Korean war shld stop and that he imagined it might not stop as long as Chi receives essential mil supplies.

I mentioned fact Min Commerce had last week made statement to effect that “Ceylon wld continue buy in cheapest market and sell in dearest”. This was policy I said with which US wld agree in normal times but at moment we were engaged in war both hot and cold out come which was of most serious consequence to whole world. This was hardly time therefore talk about normal practices. He replied that he agreed, that Min Commerce made statement without clearance from him and that he had remonstrated with him later for doing so.

I also pointed out that our efforts help with various requests GOC was making were made very difficult by Ceylon’s insistence on selling rubber to Chi. As example I reminded him that Amb Corea is making urgent appeal for refined sulphur for use in spraying rubber trees. Neither State nor Commerce Depts I said cld be expected assist Ceylon produce rubber which might go to its enemies. Moreover many countries complying with UN embargo were also in critical need sulphur.

I here remarked that 45 countries had reported compliance with UN embargo. To this observation he replied that Ceylon cld hardly be expected do so in view its recognition Commie Chi Govt. I pointed out that such recognition did not from viewpoint internatl law prevent Ceylon from embargoing rubber shipments and added that in course internatl relations govts often had take certain actions not pleasing to other govts which they recognized.

Other points I made were growing scarcity oil, fact that Polish line had no established route to China and inability American companies furnish bunkers except under orders head office.

As usual PriMin made no direct promises. He was however obviously disturbed by my reps. It seems likely he will take steps prevent threatened action.

In course conversation I also pointed out that GOC shld not expect greater leniency on part US toward rubber shipments to Chi because probability replacement Kem amendment by new act as approved by Senate recently.1 I said it was my understanding that while new [Page 2041]act wld be more satisfactory Dept it wld be equally strict as regards shipment articles such as rubber to Sov bloc. To Vaithianathan I urged that Ceylon take steps furnish statistics previously requested as its failure do so was making it very difficult for Dept defend or explain Ceylon’s position.

Repeated info London 36, New Delhi 17, Karachi 11.

Satterthwaite
  1. H.R. 4550, the Mutual Defense Assistance Control Act, sponsored by Representative Laurie C. Battle of Alabama, was passed by the House on August 2, by the Senate on August 28, and approved by the President on October 26 (P.L. 213, 65 Stat. 644). The Battle Act superseded the Kem Amendment and likewise provided for the suspension of economic aid to nations supplying specified strategic commodities to the Soviet bloc. Rubber was one commodity included in Title II of the Act.