446G.119/6–2051
Memorandum of Conversation, by the Officer in Charge of Economic Affairs in the Office of Chinese Affairs (Barnett)
Subject: Suspension of Caltex Operations at Hong Kong
| Participants: | Colonel Kavanaugh—Washington Representative Caltex |
| Mr. Barnett—CA |
Colonel Kavanaugh called this morning to inform Mr. Barnett that Mr. Pinckard, Chairman of Caltex, had instructed him to inform the Department that Caltex will suspend immediately further shipments of petroleum products to Hong Kong. Pressure from stockholders on the parent companies (Standard Oil of California and the Texas Company) caused Rogers and Follis (chairmen respectively of the two companies) to recommend that the Caltex Board make this decision.
Stockholder pressure was generated largely by news stories published in the Scripps-Howard press. These stories contained accusations that Caltex was shipping oil through Hong Kong to Communist China. Caltex challenged the accusations and Scripps-Howard admitted its error. The headlines had done their damage, however, and the parent companies are currently receiving a considerable volume of mail protesting Caltex operations at Hong Kong.
Kavanaugh believes that Pinckard, himself, regrets the decision. Kavanaugh opposed it strongly on the following grounds:
The decision, in effect, imposes a company embargo on a friendly territory;
It exposes Caltex to the charge that it has been engaged in objectionable operations since the outbreak of the Korean war and is only now correcting its error;
It may create serious difficulties for the British whose oil position in the Far East is vitally affected by Iranian developments;
Its impact psychologically at Hong Kong will be bad, and may produce a chain reaction.
Colonel Kavanaugh said that he was at the disposal of the Department if it desired to pursue the matter, by receiving and communicating to Pinckard the Department’s views, inviting Pinckard to come to Washington, or otherwise.1
- In a letter of June 21 to William H. Pinckard (not printed), Assistant Secretary Rusk stated that the national interest would be served if, prior to the announcement of the decision of the California Texas Oil Company, Ltd. to terminate its operations at Hong Kong, the company could arrange to notify confidentially the British authorities at Hong Kong and representatives of the petroleum trade in that colony of its intentions. This should be done in a manner which would minimize the economic impact of the decision upon the local economy of Hong Kong and the adverse political and psychological consequences which might otherwise be produced in this friendly territory. Mr. Rusk further requested the Company, prior to announcing its decision, to consult with the Department of Defense for an opinion regarding the effect, if any, of the Company’s decision upon the security interests of the United States in the Far East. (446G.119/6–2151)↩